1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
SPANISH BROADCASTING SYSTEM, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Not Applicable
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the formForm or scheduleSchedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
2
[SBS LOGO]
2601 SOUTH BAYSHORE DRIVE, PH II
COCONUT GROVE, FLORIDA 33133
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
AND PROXY STATEMENT
February 12, 2001May 20, 2002
Dear Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
Spanish Broadcasting System, Inc. (the "Company"("SBS"). The Annual Meeting, which will be held on Monday, March 5, 2001,Tuesday, June
11, 2002, at 11:3010:00 a.m., in the Continental Ballroom of the Wyndham Grand Bay,
2669 South Bayshore Drive, Miami, Florida 33133.
At the meeting, stockholders of the CompanySBS will be asked to consider and act upon
the election of directors and ratification of auditors.independent public accountants.
These matters are described in detail in the attached Proxy Statement and Notice of Annual Meeting
of Stockholders.Stockholders and Proxy Statement.
We recommend that you vote in favor of each proposal. Your vote is
important regardless of the number of shares you own. Weown, and we strongly encourage
you to participate by voting your shares whether or not you plan to attend the
meeting. Please complete, sign, date and return the accompanying proxy card in
the enclosed postage-paid envelope. Returning the proxy card does NOT deprive
you of your right to attend the meeting and to vote your shares in person for
the matters acted upon at the meeting.
Included with the attached Proxy Statement is a copy of the Company'sSBS's Annual Report
on Form 10-K for fiscal year 2000.2001. We encourage you to read the Annual Report.
It includes information on the Company'sSBS's operations markets and services,markets, as well as the Company'sSBS's
audited consolidated financial statements.
We look forward to seeing you at the Annual Meeting.
Sincerely,
/s/ Raul Alarcon, Jr.
Raul Alarcon, Jr.
Chairman of the Board of Directors,
President and Chief Executive Officer
3
[SBS LOGO]
2601 SOUTH BAYSHORE DRIVE, PH II
COCONUT GROVE, FLORIDA 33133
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
MARCH 5, 2001JUNE 11, 2002
Dear Stockholders:
The Annual Meeting of Stockholders of Spanish Broadcasting System, Inc.
(the "Company"("SBS") will be held on Monday, March 5, 2001,Tuesday, June 11, 2002, at 11:3010:00 a.m., in the
Continental Ballroom of the Wyndham Grand Bay, 2669 South Bayshore Drive, Miami,
Florida 33133 (the "Annual Meeting"), for the following purposes:
1. To elect the boardsix members of directorsthe Board of Directors to serve for the current fiscal year.until our
next annual meeting of stockholders or until their respective successors
are elected and qualify.
2. To ratify the appointment of KPMG LLP as independent public accountants
for the CompanySBS for the current fiscal year.year ending December 29, 2002.
3. To transact any other business that may properly come before the meeting.Annual
Meeting or any adjournment thereof.
Stockholders of record at the close of business on January 9, 2001May 3, 2002 are entitled
to notice of, and to vote at, the Annual Meeting and at any continuation or
adjournment thereof.
By Order of the Board of Directors
/s/ Joseph A. Garcia
Joseph A. Garcia
Chief Financial Officer,
Executive Vice President and Secretary
Coconut Grove, Florida
February 12, 2001May 20, 2002
4
PROXY STATEMENT
February 12, 2001
The accompanying proxyMay 20, 2002
This Proxy Statement is solicited on behalf offurnished in connection with the solicitation by
the Board of Directors of Spanish Broadcasting System, Inc., a Delaware
corporation (the "Company" or
"SBS"("SBS"), of proxies for use at the Annual Meeting of Stockholders of
the CompanySBS (the "Annual Meeting"). All references in this Proxy Statement to "we",
"our", or "us" refer to SBS.
The Annual Meeting will be held on Monday, March 5, 2001,Tuesday, June 11, 2002, at 11:3010:00 a.m.,
in the Continental Ballroom of the Wyndham Grand Bay, 2669 South Bayshore Drive,
Miami, Florida 33133. All holders of record of our Class A Common
Stock,common stock, par
value $0.0001 per share (the "Class A Common Stock"common stock") and Class B Common Stock,common stock,
par value $0.0001 per share (the "Class B Common Stock"common stock"), at the close of
business on January 9, 2001May 3, 2002 (the "Record Date") will be entitled to vote at the
Annual Meeting. At the close of business on the Record Date, the
Company had 36,856,305there were
37,033,055 shares of Class A Common Stockcommon stock outstanding and entitled to vote and
27,801,90027,638,750 shares of Class B Common Stockcommon stock outstanding and entitled to vote. A majority of the aggregate votes entitled to be cast by the Class A
Common Stock and Class B Common Stock, voting together as a single class, will
constitute a quorum for the transaction of business at the Annual Meeting.
This Proxy Statement, the accompanying proxy card, and the Company'sour Annual Report on
Form 10-K for the fiscal year ended September 24, 2000,30, 2001, containing audited
financial statements, for such
year, wereare first being mailed to stockholders on or about February 12, 2001. The
Company'sMay 20,
2002. Our Annual Report contains the information required by Rule 14a-3 of the
Securities Exchange Act of 1934, as amended, (the "Exchange Act").and is not a part of the proxy
soliciting materials.
VOTING RIGHTS AND SOLICITATION OF PROXIES
Stockholders are entitled to one vote for each share of Class A Common
Stockcommon
stock they hold and ten votes for each share of Class B Common Stock held,common stock they hold,
on each matter presented. Shares of Class A Common Stockcommon stock and Class B Common Stockcommon
stock may not be voted cumulatively.
The presence, in person or represented by proxy, of the holders of a
majority of the aggregate votes entitled to be cast by the Class A Common Stockcommon stock
and Class B Common Stock,common stock, voting together as a single class, shallwill constitute a
quorum for the transaction of business at the Annual Meeting. If a quorum is not
present, the stockholders entitled to vote who are present in person or
represented by proxy at the Annual Meeting have the power to adjourn the Annual
Meeting from time to time withoutuntil a quorum is present or represented. Unless the
adjournment is for more than thirty days or unless a new record date is set for
the adjourned meeting, no notice of the adjourned meeting must be given other
than by announcement at the Annual Meeting, untilMeeting. At an adjourned meeting at which a
quorum shallis present, any business may be transacted that could have been
transacted at the original Annual Meeting.
Shares represented by proxies that reflect abstentions or "broker
non-votes" (i.e., shares held by a broker or nominee which are represented at
the Annual Meeting, but with respect to which such broker or nominee is not
empowered to vote on a particular proposal) will be counted as shares that are
present or represented.and entitled to vote for purposes of determining the presence of a
quorum. The proposals concerning the election of directors and the ratification
of the selection of independent auditors each require a majority of the votes
cast at the Annual Meeting. Abstentions will count as a vote against a proposal,
and broker non-votes will not count toward the vote on a proposal.
Stockholders are requested to complete, date,sign, and signdate the accompanying
proxy card and return it promptly to SBS so that it is received by the Company.date of
the Annual Meeting. A stockholder may revoke a proxy that is properly submitted to the Company may be revokedSBS at any
time before it is exercisedvoted at the Annual Meeting by (1) sending written notice of
revocation to the Company. Any stockholderSBS addressed to: Spanish Broadcasting System, Inc., 2601 South
Bayshore Drive, PH II, Coconut Grove, Florida 33133, Attention: Joseph A.
Garcia, Chief Financial Officer, (2) executing and submitting a proxy bearing a
later date, or (3) attending the Annual Meeting may voteand voting in person and by doing so revokes any proxy previously submitted by him or her.person. Subject to
such revocation, all proxies duly executed and received prior to or at the time of,during the
Annual Meeting will be voted in
1
accordance with the specification on the proxy card. If no specification is
made, proxies will be voted in favor of the proposals therein.listed on the proxy card.
As to other matters, if any, to be voted upon at the Annual Meeting, the persons
designated as proxies, who were selected by the Board of Directors, will take
such actions as they, in their discretion, may deem advisable.
The persons named
as proxies were selected by the Board of Directors of the Company.
The CompanyWe will bear the cost of the solicitation of proxies, including the charges
and expenses of brokerage firms and others forwarding the solicitation material
to beneficial owners of the Company'sSBS common stock. In addition to the solicitation of
proxies by mail, solicitation may be made by directors, officers, and other
employees of the CompanySBS in person or by personal interview, telephone or facsimile. No additional compensationfacsimile, but these individuals
will not be paidseparately compensated for such solicitation. The Company hassolicitation services. We have
retained Morrow & Co., Inc. to aidassist in the solicitation of proxies from
brokers, nominees and institutional holders for a fee of $1,500,approximately $2,000,
plus out-of-pocket expenses.
INFORMATION TO RELY UPON WHEN CASTING YOUR VOTES
You should rely only on the information contained in this Proxy Statement
when casting your votes. We have not authorized anyone to give any information
or to make any representations in connection with this proxy solicitation other
than those contained in this Proxy Statement. You should not rely on any
information or representation not contained in this Proxy Statement as having
been authorized by us. You should not infer that there has not been a change in
the facts set forth in this Proxy Statement or in our affairs since the date on
this Proxy Statement. This Proxy Statement does not constitute a solicitation by
anyone in any jurisdiction in which the solicitation is not authorized or in
which the person making the solicitation is not qualified to do so or to anyone
to whom it is unlawful to make a solicitation.
2
5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information concerning the beneficial
ownership of the Company'sour Class A Common Stockcommon stock and our Class B Common Stockcommon stock as of January 9, 2001,May 15,
2002, by:
- each person known by the Companyus to beneficially own more than 5% of any class of
our common stock;
- each director and each executive officer named in the Summary
Compensation Table; and
- 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.
CLASS A SHARES CLASS B SHARES
------------------------- ---------------------------------------------- ----------------------- PERCENT OF PERCENT OF
PERCENT OF PERCENT OF TOTAL TOTAL
NUMBER OF CLASS A NUMBER OF CLASS B ECONOMIC VOTING
NAME AND ADDRESS(1)(2) SHARES SHARES SHARES SHARES INTEREST POWER
---------------------- --------- ---------- ---------- ---------- ------------- ----------
Raul Alarcon, Jr. .................. 200,000(3)(3)............... 300,000 * 26,156,750 94.1% 40.8% 83.1%26,000,000 94.2% 40.5% 83.0%
Pablo Raul Alarcon, Sr..............Sr.(4)......... -- 0% 1,070,000(15) 3.85% 1.65%-- 1,070,000 3.9% 1.7% 3.4%
Jose Grimalt....................... -- -- 501,650 1.8% * 1.6%
Joseph A. Garcia.................... 130,000(3)Garcia(5)................ 230,000 * -- 0%-- * *
Juan A. Garcia...................... 18,000(3)(4)William B. Tanner(6)............... 160,701 * -- 0%-- * *
Luis Diaz-Albertini................. 35,470(3)Diaz-Albertini................ 13,520 * -- 0% * *
Roman Martinez IV................... 20,000(16) * -- 0% * *
Jason L. Shrinsky................... 35,000(3)(5)Shrinsky(7)............... 45,000 * -- 0%-- * *
Castor Fernandez(8)................ 10,000 * -- -- * *
Carl Parmer(9)..................... 81,100 * -- -- * *
All named executive officers and
directors as a group.............. 438,470(3) 1.2% 27,226,750 97.9% 42.8% 86.6%
The Marcos and Sonya Rodriguez
Family Trust(7)group(10)......... 840,321 2.2% 27,571,650 99.9% 43.4% 88.1%
TCW entities(11)................... 2,958,844 8.0%4,589,895 12.4% -- 0% 4.57% *
Massachusetts Financial Services
Company(9)(14).................... 2,038,370(13) 5.53% -- 0% 3.15% *
Putnam Investments,7.1% 1.5%
T. Rowe Price Associates,
Inc. (10)(12)... 3,695,000 10.0%......................... 3,120,600 8.4% -- 0% 5.71% 1.17%
TCW Group,-- 4.8% 1.0%
Dimensional Fund Advisors
Inc.(11)(14)............. 2,496,800 6.8%(13)......................... 2,474,700 6.7% -- 0% 3.86% *
James L. Anderson(8)................ 3,445,586(6) 9.3% -- 0% 5.32% 1.1%
Awad Asset Management, Inc.(17)..... 2,997,150 8.13% -- 0% 4.64%3.8% *
- ---------------
* Indicates less than 1%.
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 II, Coconut Grove, Florida 33133.
2.(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 60sixty days after that date. 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 60sixty 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.(3) Includes 300,000 shares of Class A Common Stockcommon stock issuable upon the exercise
of options that the holder has the right to exercise within sixty days
of the Record Date.
4. Includes 4,500 shares owned indirectly through Fraga Incorporated Profit
Sharing Plan, an incentive plan of Fraga, Inc., a Florida subchapter S
corporation (Mr. Juan A. Garcia shares voting and investment power relating
to such shares with his brother, David R. Garcia), 2,750 shares owned
jointly with Mr. Juan A. Garcia's spouse (Mr. Juan A. Garcia shares voting
and investment power relating to
4
6
such shares with his spouse) and 750 shares owned by Mr. Juan A. Garcia's
spouse (Mr. Juan A. Garcia shares voting and investment power relating to
such shares with his spouse).
5. Mr. Shrinsky holds options to purchase 20,000 shares of Class A Common Stock
for the benefit of his law firm, Kaye, Scholer, Fierman, Hays & Handler,
LLP. Mr. Shrinsky shares ownership of, and voting and investment power for,
15,000 shares of Class A Common Stock with his spouse.
6. James L. Anderson has sole voting power and sole dispositive power with
respect to 2,961,494 shares and shared voting power with respect to 484,092
shares.
The Marcos and Sonya Rodriguez Family Trust has the right to receive
dividends relating to and the proceeds from the sale of 2,958,844 shares of
the Company's Class A Common Stock for which Mr. Anderson has sole voting
and dispositive power resulting from his serving as Trustee of the Trust.
A company of which Mr. Anderson is president has the right to receive
dividends relating to and the proceeds from the sale of 484,092 shares of
the Company's Class A Common Stock for which Mr. Anderson has shared voting
power.
7. The address of The Marcos and Sonya Rodriguez Family Trust is 8828 North
Stemmons Freeway, Suite 106, Dallas, Texas 75247.
8. The address of James L. Anderson is 8828 North Stemmons Freeway, Suite 106,
Dallas, Texas 75247.
9. The address of the Massachusetts Financial Services Company is 500 Boylston
Street, Boston, MA 02116.
10. The address of Putnam Investments, Inc. is One Post Office Square, Boston,
MA 02109.
11. The address of the TCW Group, Inc. is 865 South Figueroa Street, Los
Angeles, CA 90017.
12. Putnam Investments, Inc. ("Putnam") is a wholly-owned subsidiary of Marsh &
McLennan Companies, Inc. Putnam wholly owns two registered investment
advisers: Putnam Investment Management, Inc., which is the investment
adviser to the Putnam family of mutual funds and The Putnam Advisory
Company, Inc., ("PAC"), which is the investment adviser to Putnam's
institutional clients. Both subsidiaries have dispository power over the
shares as investment managers, but each of the mutual fund's trustees has
voting power over the shares held by each fund, and The Putnam Advisory
Company, Inc. has shared voting power over the shares held by the
institutional clients.
Putnam and PAC have shared voting power with respect to 192,273 shares.
13. The Massachusetts Financial Services Company has sole voting power with
respect to 1,946,545 shares.
14. The Company obtained this information from Form 13F filed November 1, 2000.
15.after May 15, 2002.
(4) Mr. Pablo Raul Alarcon, Sr.'s shares are held in a Flint Trust with Mr.
Alarcon, Sr. as sole beneficiary.
16.(5) Includes 220,000 shares of Class A Common Stockcommon stock issuable upon the exercise
of options that Mr. Martinezthe holder has the right to exercise within sixty days
after May 15, 2002.
(6) Shares of Class A common stock issuable upon the exercise of options that
the holder has the right to exercise within sixty days after May 15, 2002.
(7) Includes 30,000 shares of Class A common stock issuable upon the exercise
of options that the holder has the right to exercise within sixty days
after May 15, 2002. Mr. Shrinsky holds these options for the
3
benefit of his 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) Shares of Class A common stock issuable upon the exercise of options that
the holder has the right to exercise within sixty days after May 15, 2002.
(9) Includes 71,100 shares of Class A common stock owned indirectly through
Henry Carlson Parmer, Jr. Living Trust and 10,000 shares of Class A common
stock issuable upon the exercise of options that the holder has the right
to exercise within sixty days after May 15, 2002.
(10) Includes 730,701 shares of Class A common stock issuable upon the exercise
of options that the holders have the right to exercise within sixty days
after May 15, 2002.
(11) Represents shares held by Trust Company of the Record Date.
17.West, TCW Asset Management
Company and TCW Investment Management Company (together, the "TCW
Entities"). The address of Awad Asset Management,the TCW Entities is 865 South Figueroa Street,
Los Angeles, California 90017. The parent holding company of the TCW
Entities is The TCW Group, Inc. Societe Generale S.A., a company
incorporated under the laws of France, may be deemed to control The TCW
Group, Inc. and its direct and indirect subsidiaries. We obtained this
information from a Form 13F filed by The TCW Group, Inc. on May 15, 2002.
(12) The address of T. Rowe Price Associates, Inc. is 250 Park100 East Pratt Street,
Baltimore, Maryland 21202. T. Rowe Price Associates, Inc. has sole voting
power with respect to 699,300 shares and sole investment power with respect
to all the shares. We obtained this information from a Form 13F filed by T.
Rowe Price Associates, Inc. on May 14, 2002.
(13) Represents shares owned by advisory clients of Dimensional Fund Advisors
Inc. for which Dimensional Fund Advisors Inc. possesses sole voting and
investment power. The address of Dimensional Fund Advisors Inc. is 1299
Ocean Avenue, New York,
N.Y. 10177.11th Floor, Santa Monica, California 90401. We obtained this
information from a Form 13F filed by Dimensional Fund Advisors Inc. on May
3, 2002.
4
PROPOSAL 1
ELECTION OF DIRECTORS
FiveSix directors, constituting the entire Board of Directors, are to be
elected at the Annual Meeting to hold office until the next Annual Meeting of
Stockholdersannual meeting or
until their respective successors have been elected and shall qualify. The Board of
Directors has designated Raul Alarcon, Jr., Pablo Raul Alarcon, Sr., Jose
Grimalt, Roman Martinez IV and Jason L. Shrinsky, Castor Fernandez and Carl Parmer as nominees, each
of whom currently serves as a member of the Board of Directors. It isUnless
instructed to the intention ofcontrary, the persons named in the enclosed proxy tocard will
vote the shares covered by each proxy for the election of all the nominees named
above. Although the Board of Directors does not anticipate that any nominees
will be unavailable for election, in the event of such occurrence, the proxies
will be voted for such substitute, if any, as the Board of Directors may
designate.
5
7
The election of directors requires a majority of the votes cast at the
Annual Meeting. Votes withheld will count as votes against the election of a
director, and broker non-votes arewill not countedcount toward a
nominee's total.the vote on this proposal.
There is no cumulative voting for the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT EACH HOLDER OF CLASS A COMMON STOCK
AND EACH HOLDER OF CLASS B COMMON STOCK VOTE "FOR" THE ELECTION OF EACH OF THE
NOMINEES LISTED BELOW.
NOMINEES FOR DIRECTOR AND EXECUTIVE OFFICERS
The following table sets forth information concerning the six nominees for
director.director, followed by information concerning executive officers who are not
nominees. Each of our directors and executive officers serves until his
successor is elected and qualifies.
NAME AGE POSITION WITH SBS
- ---- --- -----------------
NOMINEES FOR DIRECTOR
Raul Alarcon, Jr. ................... 44........................ 46 Chairman of the Board of Directors, Chief
Executive Officer and President
Member of Compensation Committee
and Executive Committee
Pablo Raul Alarcon, Sr. ............. 74.................. 75 Chairman Emeritus and Director
Jose Grimalt......................... 72Grimalt.............................. 73 Secretary Emeritus and Director
Roman Martinez IV.................... 53 Director, Member of Audit Committee, Compensation
Committee, Executive Committee and Options Committee
Jason L. Shrinsky.................... 63Shrinsky......................... 64 Director
MemberCastor Fernandez.......................... 58 Director
Carl Parmer............................... 43 Director
EXECUTIVE OFFICERS WHO ARE NOT NOMINEES
Joseph A. Garcia.......................... 56 Chief Financial Officer, Executive Vice
President and Secretary
William B. Tanner......................... 57 Executive Vice President of Audit Committee, Compensation
Committee, Executive Committee and Options CommitteeProgramming
RAUL ALARCON, JR. has been our President and a director since October 1985
and Chief Executive Officer since June 1994. On November 2, 1999, Mr. Alarcon,
Jr. became Chairman of the Board of Directors and continues as our Chief
Executive Officer and President. Mr. Alarcon, Jr. joined SBS as a sales manageris one of the original members
of our senior management team and, along with Mr. Alarcon, Sr., has been one of
our key executives since our founding in 1983. Mr. Alarcon, Jr. is responsible
for our long-range strategic planning and wasis instrumental in the acquisition and
financing of each of our radio stations, as well ashe was in our initial public
offering. Mr. Alarcon, Jr. is the son of Mr. Alarcon, Sr. and the son-in-law of
Mr. Grimalt.
PABLO RAUL ALARCON, SR. was our Chairman of the Board of Directors from
March 1983 until November 2, 1999, when he became Chairman Emeritus. Mr.
Alarcon, Sr. continues to be a member of our Board of Directors. Mr. Alarcon,
Sr. has been involved in Spanish-language radio broadcasting for much of his
life. He started his broadcasting career in Cuba insince the early
1950's when he established ahis first radio station chain in Camaguey, Cuba. Upon his
arrival in the United States, Mr. Alarcon, Sr. continued his career in radio
broadcasting and was an on-air personality for a New York radio station before
being promoted to programming director. Mr. Alarcon, Sr. subsequently owned and
operated a recording studio and an advertising agency. In 1983, he purchasedagency before purchasing our
first radio station.station in 1983. Mr. Alarcon, Sr. is Raul Alarcon, Jr.'s father.
5
JOSE GRIMALT has been a member of our Board of Directors since 1986 and was
our Secretary since 1986. Onfrom 1986 until November 2, 1999, Mr. Grimaltwhen he became Secretary
Emeritus. From 1969 to 1986, Mr. Grimalt owned and operated Spanish-language
radio station WLVH-FM in Hartford, Connecticut. In 1984, Mr. Grimalt became a stockholder and the
President of SBS's California subsidiary which operated KXMG-AM in Los Angeles. Mr. Grimalt is Mr. Alarcon,
Jr.'s father-in-law.
ROMAN MARTINEZ IV became one of our directors on November 2, 1999. Mr.
Martinez is a Managing Director for the investment banking firm of Lehman
Brothers Inc. where he has held this title since 1978. Mr. Martinez has been an
investment banker advising corporations on financings, mergers and acquisitions
and related financial matters since 1971. Mr. Martinez sits on the Board of
Governors of New York Presbyterian Healthcare System, Inc. and on the Board of
Directors of the International Rescue Committee. Lehman Brothers Inc. acts and
has acted as financial advisor to us in connection with our financings and one
of our acquisitions in fiscal year 2000. An affiliate of Lehman Brothers Inc.,
Lehman Commercial Paper Inc., acted as administrative agent in connection with
the Company's senior credit facilities.
6
8
JASON L. SHRINSKY became one of our directors on November 2, 1999. Mr.
Shrinsky is a partner of the law firm of Kaye Scholer Fierman, Hays & Handler, LLP, where he has been a
partner since 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 Fierman, Hays & Handler, LLP has served as the
Company'sour counsel for more than 1617 years.
CASTOR FERNANDEZ became one of our directors on August 9, 2001. Mr.
Fernandez has over forty years of experience in advertising. He was the founder
and President of Castor Advertising Florida Corp., which was founded in 1968 and
was the oldest Hispanic-owned advertising agency in the country. On December 31,
2001, Castor Advertising Florida Corp. was dissolved. Mr. Fernandez is also a
founder and director of First BankAmericano, a minority-owned bank.
CARL PARMER became one of our directors on August 9, 2001. Mr. Parmer has
an extensive background in the ownership and management of radio and television
companies throughout the United States. Mr. Parmer was the President and
co-Chief Executive Officer of Heftel Broadcasting Corporation (predecessor of
Hispanic Broadcasting Corporation) from 1991 to 1996. Mr. Parmer has been
President and CEO of Broadcasting Management, Inc. since 1996. Mr. Parmer began
his career in broadcasting in 1991 after several years of experience on Wall
Street, including a position as Vice President and shareholder of Kidder Peabody
& Co., Inc.
JOSEPH A. GARCIA has been Chief Financial Officer since 1984, Executive
Vice President since 1996 and Secretary since November 2, 1999. Mr. Garcia is
responsible for the financial affairs of SBS, day-to-day operational matters and
investor relations, and he has been instrumental in the acquisition of our radio
stations. Before joining SBS in 1984, Mr. Garcia spent thirteen years in
international financial planning positions with Philip Morris Companies, Inc.
and Revlon, Inc., where he was Manager of Financial Planning for Revlon -- Latin
America.
WILLIAM B. TANNER has served as our Executive Vice President of Programming
since August 31, 2000. Prior to joining us, Mr. Tanner was the Vice President of
Programming at Hispanic Broadcasting Corporation for six years. Mr. Tanner began
his career in the radio broadcasting industry as a disc jockey and radio
programmer.
See "Certain Relationships and Related Transactions."
6
INFORMATION CONCERNING THE BOARD OF DIRECTORS
AND CERTAIN COMMITTEES THEREOF
TheOur Board of Directors has an Audit Committee and a Compensation Committee.
The Compensation Committee has a subcommittee, the Stock Option Committee. There
is no Nominating Committee of the Board of Directors.
The members of the Audit Committee are Jason L. Shrinsky, Castor Fernandez
and Carl Parmer. Messrs. Fernandez and Parmer became members of the Audit
Committee on August 9, 2001. Mr. Roman Martinez IV was a member of the Audit
Committee until his resignation from the Board of Directors on May 7, 2001. Each
member of the Audit Committee is independent as defined by Rule 4200(a)(15) of
the National Association of Securities Dealers' listing standards. The primary
function of the Audit Committee is to provide advice with respect to the Company'sour
financial matters and to assist the Board of Directors in fulfilling its
oversight responsibilities by reviewing (i) the financial reports and other
financial information which willto be provided by the CompanySBS to any governmental body or the
public, (ii) the Company'sour systems of internal controls that management and the Board of
Directors have established, and (iii) the Company'sour auditing, accounting and financial
reporting processes generally. The membersBoard of Directors has adopted a written
charter for the Audit Committee are Roman Martinez IV and Jason L. Shrinsky.which was included as an appendix to our Proxy
Statement last year. The Audit Committee held twofour meetings during the last fiscal year.year
2001.
The current members of the Compensation Committee are Jason L. Shrinsky,
Castor Fernandez and Carl Parmer. Raul Alarcon, Jr., resigned as a member of the
Compensation Committee effective December 31, 2001. Although Mr. Alarcon, Jr.
was a member of the Compensation Committee during the fiscal year ended
September 30, 2001, he did not attend any meetings during such fiscal year
through the effective date of his resignation. Messrs. Fernandez and Parmer
became members of the Compensation Committee on November 6, 2001. Mr. Roman
Martinez IV and Jason L. Shrinsky. Mr. Alarcon, Jr. is our Chairmanwas a member of the Compensation Committee until his resignation
from the Board of Directors Chief Executive Officer and President.on May 7, 2001. The functions of the Compensation
Committee are to (i) approve policies, plans and performance criteria concerning
the salaries, bonuses and other compensation of the executive officers of the Company,SBS,
(ii) review and approve the salaries, bonuses and other compensation of the
executive officers of the Company,SBS, (iii) review the compensation programs for other key
employees, including salary and cash bonus amounts, (iv) establish and review
policies regarding executive officer perquisites, (v) engage experts on
compensation matters, if and when the members of the Compensation Committee deem
it proper or advisable to do so, and (vi) perform such other duties as shall
from time to time be delegated by the Board of Directors. The Compensation
Committee met twice on November 13, 2000, to review compensation items for
fiscal years 2000 and 2001, and on December 27, 2001 and January 16, 2002, to
review certain compensation items for fiscal years 20002001 and 2002.
The members of the Stock Option Committee are Jason L. Shrinsky, Castor
Fernandez and Carl Parmer. Messrs. Fernandez and Parmer became members of the
Stock Option Committee on November 6, 2001. Arrangements forMr. Roman Martinez IV was a member
of the Company's keyStock Option Committee until his resignation from the Board of Directors
on May 7, 2001. The Stock Option Committee reviews and approves stock option
grants to executive officers and employees forof SBS. The Stock Option Committee
held two meetings during fiscal year 2000 were determined prior to the
creation of the Compensation Committee, which was organized after the completion
of our initial public offering on November 2, 1999.2001.
The Board of Directors held fourfive meetings during the last fiscal year.year 2001. Each
incumbent director who was a director of the CompanySBS during the fiscal year ended September 24, 2000,2001 attended
allmore than 75% of the aggregate number of meetings of the Board of Directors and
the committees of which he was a member that were held during the period such director was a member of his
membership on the Board of Directors.Directors and such committee(s), respectively, except
that Raul Alarcon, Jr. did not attend any meetings of the Compensation Committee
during fiscal year 2001.
7
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by or
paid for services rendered to the CompanySBS and its subsidiaries by, in all capacities
during the fiscal years 2001, 2000 1999 and 1998, by1999, our Chief Executive Officer and
President and our next fourthree highest paid executive officers at
September 24, 2000,during fiscal year
2001, whose total annual salary and bonus exceeded $100,000. On
November 2, 1999, Mr. Alarcon, Sr. ceased being a salaried executive of SBS and
retired effective December 31, 1999. He remains as a member of our Board of
Directors.
7
9
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
AWARDS
------------ANNUAL COMPENSATION -------------
-------------------------------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING
SALARY BONUS COMPENSATION OPTIONS/SARS
NAME PRINCIPAL POSITION YEAR ($) ($) ($) (#)
- ---- -------------------- ---- ---------- ---------- ------------ -------------------------
Raul Alarcon, Jr. ......Jr......... Chief Executive 2001 $1,000,000 $ 792,864 $155,531(a) 100,000
Officer, President 2000 $1,000,000 $1,000,000 $201,829(1)1,000,000 1,000,000 201,829(a) 100,000
and Chairman of 1999 1,985,768 1,265,857 202,452(1)202,452(a) --
Officer, President
1998 1,633,743(2) 215,000 63,624(1) --
and Chairman of
the Board of
Directors
Joseph A. Garcia........Garcia......... Executive Vice 2001 $ 379,615 $ 100,000(b) $ --(c) 100,000
President, Chief 2000 300,000 150,000 (3)--(c) 250,000
Financial Officer 1999 296,298 385,000 (3) --
President, Chief
1998 266,346 27,500 (3)(c) --
Financial Officer
and Secretary
Luis Diaz-Albertini.....William B. Tanner........ Executive Vice President/ 2000 225,000 80,000 (7) 50,000
1999 225,053 210,000 (3) --
Group Sales
1998 200,000 25,000 (3) --
Juan A. Garcia(4)....... Vice2001 $ 530,058 $ 18,000 $156,572(d) 15,000
President of 2000 136,500 70,000 (3) 100,000-- -- -- 218,552
Programming 1999 -- -- -- --
Finance and
1998Luis Diaz-Albertini...... Vice President/ 2001 $ 234,477 $ -- $ -- -- --
Strategic Planning
Pablo Raul Alarcon, Director (formerly
Sr. ..................(c)(e) 12,500
Group Sales 2000 124,923(5)225,000 80,000 -- 56,955(6)(c) 50,000
1999 225,053 210,000 --
1999 481,846(5) 362,368 59,291(6)(c) --
Chairman of the
1998 492,577(2) 25,000 50,745(6) --
Board of Directors)
- ---------------
1.(a) Excludes amounts paid by us in connection with our lease of an apartment in
Manhattan owned by Mr. Alarcon, Jr. which is used primarily by Mr. Alarcon,
Jr. while on SBS business in New York. Mr. Alarcon, Jr. received personal
benefits in addition to his salary and bonus, including use of automobiles.
We paid an aggregate of $123,611, $85,329, and $96,512 in fiscal years
2001, 2000 and $62,691 in each of 2000, 1999,
and 1998, respectively, for automobiles used, including driver's
salary, by Mr. Alarcon, Jr. In fiscal year 2000,2001, Mr. Alarcon, Jr. received
total personal benefits estimated at $201,829,$155,531, including living quarters
for the
Raul Alarcon, Jr.him and his family in Key Biscayne, Florida pending completion of the
construction of their familyresidential home in Miami, Florida. As a result of
Mr. Alarcon, Jr.'s relocation to his newly constructed home, our last rent
payment for his apartment in Key Biscayne was made on November 30, 2000.
2. Excludes the payment of a dividend to our stockholders(b) Reflects bonus earned for performance in 1998, offiscal year 2001 which Mr. Alarcon, Jr.Garcia
received $3.1 million and Mr. Alarcon, Sr. received $0.2
million. Excludes reimbursement of Mr. Alarcon, Jr.'s relocation expenses
incurred in connection with the relocation of our headquarters.
3.January 2002.
(c) Excludes perquisites and other personal benefits, securities or property
which aggregate the lesser of $50,000 or 10% of the total of annual salary
and bonus.
4. Juan A. Garcia served as our Vice President(d) Includes a payment of Finance and Strategic Planning
from February 1, 2000$154,742 that we made to November 24, 2000.
5. Mr. Alarcon, Sr. received compensation as an officer of SBS through December
31, 1999. He is also entitled to reimbursement of his out-of-pocket expenses
as a member of the Board of Directors. Pursuant to his retirement agreement,
upon completion of the Company's initial public offeringWilliam Tanner on November
2, 1999,
we purchased an annuity for his retirement30, 2001, pursuant to a side letter agreement to Mr. Tanner's employment
agreement which became effective on January
2, 2000.
6. In additionrequired us to his salary and bonus,make a payment to Mr. Alarcon, Sr. received personal
benefits includingTanner if the useprice of
automobiles. We paid an aggregate of $56,955,
$57,451 and $49,812our Class A common stock had not reached a specified level by August 30,
2001. Such amount was accrued in each of 2000, 1999 and 1998, respectively, for
automobiles used by Mr. Alarcon, Sr., including driver's salary.
8
10
7.our financial statements in fiscal year
2001.
(e) Excludes a $50,000 loan made by SBS to Mr. Diaz-Albertini which, isduring the
time of Mr. Diaz-Albertini's employment at SBS, was to be repaid over two
years with amounts withheld from Mr. Diaz-Albertini's salary. The loan is subject to forgiveness if Mr.
Diaz-Albertini meets certain sales
targets.terminated his employment with SBS on August 10, 2001 and
currently owes SBS a portion of the loan. Mr. Diaz-Albertini has agreed to
repay his loan in monthly installments.
8
STOCK OPTIONS
The following table sets forth information concerning the grant of stock
options to each of the named executive officers in fiscal year 2000:2001:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
---------------------------------------------------
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE POTENTIAL REALIZABLE ------------------------------------------------------------ -----------------------
PERCENT OF
TOTAL
NUMBER OFVALUE
OPTIONS/SARS SECURITIES GRANTED TO VALUEEMPLOYEES IN OR BASE AT ASSUMED UNDERLYING EMPLOYEES IN EXERCISE OR ANNUAL RATES
GRANTED FISCAL YEAR PRICE EXPIRATION OF STOCK OPTIONS/SARS FISCAL YEAR BASE PRICE EXPIRATION PRICE APPRECIATION
FOR
NAME GRANTED(#)(1) 2000(#)(A) 2001 ($/SH) DATE FOR OPTION TERM
- ---- ------------- ------------ ----------------------- -------- ---------- --------------------------------------------------
5%($) 10%($)
---------- --------------------- -------------
Raul Alarcon, Jr. ............. 100,000(2) 6.3% $20.00Jr........ 100,000(b) 20.8% $9.4687 10/27/04 $1,257,789 $3,187,48510 $595,481 $1,509,067
Joseph A. Garcia............... 250,000 15.7 $20.00 10/27/09 3,144,473 7,968,712Garcia........ 100,000(c) 20.8 $4.813 12/07/10 302,687 767,068
William B. Tanner....... 15,000(d) 3.1 $9.20 8/31/06 86,787 219,936
Luis Diaz-Albertini............ 50,000 3.1 $20.00 Diaz-Albertini..... 12,500(e) 2.6 $5.50 11/10/27/09 628,895 1,593,742
Juan A. Garcia................. 100,000(3) 6.3 $20.8125 02/16/10 1,308,887 3,316,976
Pablo Raul Alarcon, Sr......... -- -- -- -- -- --01(e) 56(e) 110(e)
- ---------------
1.(a) Each option was granted under our 1999 Stock Option Plan and, other than as
noted in footnote (2) or (3), vests 20% immediately, and 20% on the
anniversary date of the completion of our initial public offering on November
2, 1999 for the following four consecutive years.Plan. The options that
are not otherwise exercisable prior to a change in control of the Company shallSBS will
become exercisable on the date of a change in control of the CompanySBS and shallwill
remain exercisable for the remainder of the term of the option, as
discussed in the Company'sour 1999 Stock Option Plan.
2.(b) Raul Alarcon, Jr.'s optionsoption vested immediately upon the granting of such
option on October 27, 2000.
(c) Twenty percent of Joseph A. Garcia's option vested immediately on December
7, 2000 and became exercisablethe rest vests ratably over a four-year period.
(d) William B. Tanner's option vested immediately upon completionthe granting of such
option on August 31, 2001.
(e) Twenty percent of Luis Diaz-Albertini's option vested immediately on
February 23, 2001. Mr. Diaz-Albertini terminated his employment at SBS on
August 10, 2001. Pursuant to the terms of the Company's initial public offering on November 2, 1999.
3. Juan A. Garcia served as1999 Stock Option Plan (i) the
unvested portion of Mr. Diaz-Albertini's option with respect to 10,000
shares of our Vice President of Finance and Strategic Planning
from February 1, 2000 to November 24, 2000. Of Mr. Juan A. Garcia's options,
10,000 vested on February 16, 2000, and became immediately exercisable and
the remainder were forfeitedClass A common stock expired upon the termination of his
employment and (ii) his option with respect to the Companyremaining 2,500 shares of
our Class A common stock expired on November 24, 2000.10, 2001. The calculation of
the potential realizable value at assumed annual rates of stock price
appreciation for the option term, with respect to Mr. Diaz-Albertini's
option holdings, is based on options to purchase 2,500 shares exercisable at
fiscal year end.
9
11
The following table sets forth certain information regarding stock options
exercised, if any, by the named executive officers during the fiscal year ended September
24, 2000,2001,
including the aggregate value of gains, if any, on the date of exercise. In
addition, the table sets forth the number of shares covered by both exercisable
and nonexercisable stock options as of September 24, 2000.30, 2001. Also reported are the
values of "in the money" options which represent the positive spread between the
exercise price of any existing stock options and the Class A Common Stockcommon stock price
as of September 24, 2000.30, 2001.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/OPTIONS/SAR VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISABLE IN-UNEXERCISED
OPTIONS/SARS AT FISCAL THE-MONEYIN-THE-MONEY OPTIONS
YEAR END(#) AT FISCAL YEAR END($)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
ACQUIRED ON VALUE
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ----------- ----------- ------------- ----------- -------------
Raul Alarcon, Jr.........Jr. ..... -- -- 100,000 0200,000 -- -- --
Joseph A. Garcia.........Garcia....... -- -- 50,000 200,000120,000 230,000 $45,540 $182,160
William B. Tanner...... -- -- 160,701 72,851 -- --
Luis Diaz-Albertini......Diaz-Albertini.... -- -- 10,000 40,00022,500 -- --
Juan A. Garcia........... -- -- 10,000 90,000* -- --
Pablo Raul Alarcon,
Sr. ................... -- -- -- -- --$ 3,975 --
- ---------------
* Upon the termination of Mr. Juan A. Garcia's employment with the Company on
November 24, 2000, Mr. Garcia's unexercisable options to purchase 90,000
shares of Class A Common Stock were forfeited.10
EMPLOYMENT AGREEMENTS AND ARRANGEMENTS
Raul Alarcon, Jr.
We have an employment agreement with Raul Alarcon, Jr. dated as of October
25, 1999, pursuant to which Mr. Alarcon, Jr. serves as our Chairman of the Board
of Directors, Chief Executive Officer and President. The agreement became
effective on October 27, 1999, expires on December 31, 2004 and renews for
successive one-year periods after December 31, 2004 unless notice of
termination is deliveredif not terminated by either
party 90 days prior to the termination date.party. The agreement provides for a base salary of not less than $1.0 million
for each year of the employment term, which may be increased by the Board of
Directors. Under the terms of the agreement, Mr. Alarcon, Jr. will be paidis entitled to
receive an annual cash performance bonus determined by the Board of Directors
based on annual same station broadcast cash flow growth. Mr. Alarcon, Jr. also
has the right to receive options to purchase 100,000 shares of Class A Common Stockcommon
stock on October 27 of each year of employment. The initial grant of options to purchase 100,000 shares was made on
October 27, 1999 and vested on November 2, 1999 at an exercise price equal to
$20.00 per share. The additional grants will be made on each anniversary of
October 27, 1999the employment term at an exercise price
equal to the then fair market value of our Class A Common Stock.common stock on the respective
grant date. Mr. Alarcon, Jr. is also entitled to participate in our employee benefit
plans and to receive other non-salary benefits, such as health insurance, life
insurance, reimbursement for business related expenses and reimbursement for
personal tax and accounting expenses. The agreement provides that Mr. Alarcon,
Jr.'s employment may be terminated at the election of the Board of Directors
upon his disability or for cause (as defined in the agreement). Pursuant to the
agreement, Mr. Alarcon, Jr. is entitled to the use of one automobile and driver
at our expense.
Joseph A. Garcia
During fiscal yearPrior to December 7, 2000, we had an employment agreement with Joseph A.
Garcia dated as of October 25, 1999 (the "1999 Employment Agreement"), pursuant
to which Mr. Garcia served as our Chief Financial Officer, Executive Vice
President and Secretary. This employment
agreementThe 1999 Employment Agreement became effective on
October 27, 1999 and was to terminate on October 27, 2002 and was to automatically renew for successive one-year periods after
October 27, 2002, unless notice of termination was delivered by either party
within 90 days prior to the termination date or any succeeding October 27.2002. Mr. Garcia received
an annual base salary of $300,000 which could be increased by
10
12
the Board of Directors.$300,000. In addition, Mr. Garcia was entitled to
receive (a) an annual cash bonus to be determined by the Board of Directors,
based on performance, and (b) optionsan option to purchase 250,000 shares of Class A
Common Stock,common stock, with 20% vesting immediately and the rest vesting ratably over a
four-year period at an exercise price equal toof $20.00 per share, for past performance. The
options were granted on October 27, 1999, with options to purchase 50,000 shares
vesting on November 2, 1999 and the remaining options to purchase 200,000 shares
to vest ratably over the ensuing four-year period.
Mr. Garcia was also entitled to receive standard employee benefits provided to
all of our executives, such as health, life and long-term disability insurance
and reimbursement for business related expenses.
On December 7, 2000, we entered into a new employment agreement with Mr.
Garcia pursuant to which he continues to serve as our Chief Financial Officer,
Executive Vice President and Secretary. This new employment agreement became
effective as of December 7, 2000, and has similar terms to his employment
agreement signed in fiscal year 2000,the 1999 Employment
Agreement, including a discretionary bonus, except that the new employment
agreement has a term expiring on December 7, 2005, (with a
similar automatic renewal term to the October 25, 1999 employment agreement) and provides for an annual
base salary of $400,000. Under his new agreement, Mr. Garcia is entitled to
receive options to purchase 100,000 shares of Class A common stock, with 20%
vesting immediately and the rest vesting ratably over a four-year period at an
exercise price of $4.81 per share. The grant of options to Mr. Garcia pursuant
to the 1999 Employment Agreement remains effective.
William B. Tanner
We have an employment agreement with William B. Tanner dated as of August
31, 2000, pursuant to which Mr. Tanner serves as our Executive Vice President of
Programming. The term of the agreement is from August 31, 2000 to August 31,
2005. The agreement provides for an annual base salary of $475,000, with an
annual 10% increase over the prior year's base salary. Mr. Tanner is entitled to
receive quarterly bonuses based on SBS radio stations achieving certain
Arbitron(R) ratings. Under the terms of the agreement, Mr. Tanner has the right
to receive (1) an option to purchase 218,552 shares of Class A common stock,
with 33% vesting immediately and the rest vesting ratably over a two-year
period, and (2) an option to purchase an aggregate of 75,000 shares of Class A
common stock to be granted ratably over a five-year period, at an exercise price
equal to the closing price of our Class A common stock on the Nasdaq National Market on
December 7, 2000. Optionsimmediately
preceding business day of each respective grant date. Mr. Tanner is also
entitled to purchase 20,000 shares vested on December 7, 2000receive standard employee benefits provided to all of our similarly
situated executives, such as health, life and the remaining options will vest ratably over the next four years.long-term disability insurance and
reimbursement of
11
business related expenses. He is also entitled to reimbursement of power and
telephone bills for a Los Angeles residence as well as a monthly automobile
allowance.
Luis Diaz-Albertini
Luis Diaz-Albertini's employment with SBS terminated on August 10, 2001. We
havehad an employment agreement during fiscal year 2001 with LuisMr. Diaz-Albertini
dated as of October 25, 1999, pursuant to which Mr. Diaz-Albertini servesserved as our
Vice President/Group Sales. The employment agreement became effective on October
27, 1999 terminatesand was to terminate on October 27, 2002 and automatically renews for successive
one-year periods after October 27, 2002, unless notice of termination is
delivered by either party within 90 days prior to the termination date or any
succeeding October 27.2002. Mr. Diaz-Albertini receivesreceived
an annual salary of $225,000
which may be increased by the Board of Directors.$225,000. In addition, Mr. Diaz-Albertini iswas entitled to
receive (a)(1) an annual cash bonus to be determined by the Board of Directors,
based on performance, and (b) options(2) an option to purchase 50,000 shares of Class A
Common Stock for past performance. The options were
granted on October 27, 1999,common stock, with options to purchase 10,000 shares20% vesting on
November 2, 1999immediately and the rest vesting ratably over a
four-year period at an exercise price equal toof $20.00 per share, and options to
purchase 40,000 shares to vest ratably over a four-year period.for past performance.
Mr. Diaz-Albertini iswas also entitled to receive standard employee benefits
provided to all of our executives, such as health, life and long-term disability
insurance and reimbursement for business related expenses. Juan A. Garcia
We had an employment agreement with Juan A. Garcia during fiscal year 2000
pursuant to which Mr. Garcia served as our Vice President of Finance and
Strategic Planning. This employment agreement became effective on February 16,
2000, was to terminate on February 16, 2003 and automatically renew for
successive one-year periods after February 16, 2003, unless notice of
termination was delivered by either party within 90 days prior toUpon the termination
date or any succeeding February 16.of Mr. Garcia received an annual
base salary of $210,000 which could be increased by the Board of Directors. In
addition, Mr. Garcia was entitled to receive (a) an annual cash bonus based on
SBS meeting projected consolidated broadcast cash flow for each fiscal year, and
(b) options to purchase 100,000 shares of Class A Common Stock with an exercise
price of $20.8125 per share. The options were granted effective as of February
16, 2000 with options to purchase 10,000 shares vesting on February 16, 2000,
options to purchase 10,000 shares to vest on February 16, 2001 and options to
purchase 20,000 shares to vest on each of the next four anniversaries of
February 16, 2001. Mr. Garcia was also entitled to receive standard employee
benefits provided to all of our executives. Mr. Garcia'sDiaz-Albertini's employment with the
Company terminatedSBS on November 24, 2000, at which timeAugust 10, 2001, his unvested
options were forfeited.
11
13forfeited immediately and his vested options expired on November
10, 2001.
DIRECTOR COMPENSATION
Directors who are officers or who were formerly officers do not receive any
compensation for serving on our Board of Directors. Our non-employee directors
are eligible to receive options under the Company'sour Non-Employee Director Stock Option
Plan. All directors are reimbursed for their out-of-pocket expenses incurred in
connection with their service as directors.
In connection with their election to theour Board of Directors on November 2,
1999, we granted each of Messrs. Roman Martinez IV and Jason L. Shrinsky options
foran
option to purchase 50,000 shares of Class A Common Stock exercisablecommon stock at the public offeringan exercise price of
which, options for 10,000 shares vested$20.00 per share, with 20% vesting immediately options for
10,000 shares vested on November 2, 2000 and the rest will vestvesting ratably over
the
next three years.a four-year period. Mr. Shrinsky holds his options for the benefit of his law
firm, Kaye Scholer Fierman, Hays & Handler, LLP. Arnold Sheiffer, who servedMr. Martinez resigned as a director from 1996 until August 1999,
received a cash payment of $250,000, which was accrued inSBS on May 7,
2001, and all his unvested and vested options terminated during fiscal year
1999,2001. See "Stock Plans -- Non-Employee Director Stock Option Plan."
Effective as of October 29, 2001, in connection with the election of Castor
Fernandez and wasCarl Parmer to our Board of Directors on August 9, 2001, we
granted each of Messrs. Fernandez and Parmer options to purchase 250,00050,000 shares
of Class A Common Stock
exercisablecommon stock at $20.00an exercise price of $7.50 per share, which vested on November 2, 1999,with 20%
vesting immediately and the rest vesting ratably over a four-year period.
During fiscal year 2001, Pablo Raul Alarcon, Sr. and Jose Grimalt each
received a payment in the amount of $20,000 in recognition of certain consulting
services rendered to SBS. We also paid for his past
services as a director.the use of automobiles by Mr.
Alarcon, Sr. in the amount of approximately $28,723.
ANNUITY
Upon the completion of our initial public offering on November 2, 1999, we
purchased an annuity for $10.2 million from The Canada Life Assurance Company as
a retirement vehicle for the benefit of our retired officers, Pablo Raul
Alarcon, Sr., our Chairman Emeritus and a director, and Jose Grimalt, our
Secretary Emeritus and a director. Messrs. Alarcon, Sr. and Grimalt for $10.2 million.
Messrs. Alarcon, Sr. and Grimalt will receive
annual payments of approximately $700,000 and $300,000, respectively, from The
Canada Life Assurance Company, and will continue to do so for the rest of their
lives. Mr. Alarcon, Sr.'s wife and Mr. Grimalt's wife are joint annuitants with
their husbands. Should Mrs. Alarcon, Sr. or Mrs. Grimalt survive their husbands, theyher husband, she would receive
annual payments of $350,000 and $150,000, respectively, for the rest of their lives.her life. Should Mrs. Grimalt
survive her husband, she would receive annual payments of $150,000 for the rest
of her life.
12
STOCK PLANS
1999 Stock Option Plan
We have adopted an option plan to incentivize our present and future
executive, managerial and other employees through equity ownership. The option
plan provides for the granting of stock options to individuals selected by the
Compensation Committee of the Board of Directors or a subcommittee of the
Compensation Committee (or by the Board of Directors if such committee iscommittees are not
appointed). The function of the Compensation Committee in reviewing and
approving stock option grants is currently delegated to a subcommittee, the
Stock Option Committee. An aggregate of 3,000,000 shares of Class A Common Stockcommon stock
have been reserved for issuance under this option plan. The option plan allows
us to tailor incentive compensation for the retention of personnel, to support
corporate and business objectives, and to anticipate and respond to a changing
business environment and competitive compensation practices. As of
September 24, 2000,During fiscal year
2001, options to purchase 1,593,552480,000 shares of Class A Common Stock
have beencommon stock were granted
under this plan at exercise prices ranging from $10.00$4.81 to $24.63$9.69 per share.
The CompensationStock Option Committee or such other committees as the Board of
Directors shall determine, has discretion to select the participants, to
determine the type, size and terms of each award, to modify the terms of awards,
to
determine when awards will be granted, and paid, and to make all other determinations which
it deems necessary or desirable in the interpretation and administration of the
option plan. The option plan terminates ten years fromafter September 27, 1999, the
date that it was approved and adopted by the stockholders of SBS. Generally, a
participant's rights and interest under the option plan are not transferable
except by will or by the laws of descent and distribution.
Options, which include non-qualified stock options and incentive stock
options, are rights to purchase a specified number of shares of Class A Common
Stockcommon
stock at a price fixed by the CompensationStock Option Committee. The option price may be
less than, equal to or greater than the fair market value of the underlying
shares of Class A Common Stock,common stock, but in no event will the exercise price of an
incentive stock option be less than the fair market value on the date of grant.
Options will expire no later than ten years after the date on which they are
granted (five years in the case of incentive stock options granted to 10%
stockholders). Options will become exercisable at such times and in 12
14
such installments
as the CompensationStock Option Committee or other designated committee
shall determine.determines. Notwithstanding this, any
nonexercisable options shallwill immediately vest and become exercisable upon a
change in control of SBS. Upon termination of a participant's employment with
SBS, options that are not exercisable will be forfeited immediately and options
that are exercisable will remain exercisable for twelve months following any
termination by reason of an optionholder's death, disability or retirement. If
termination is for any other
reason other than the preceding and other than for cause,
exercisable options will remain exercisable for three months following such
termination. If termination is for cause, exercisable options will not be
exercisable after the date of termination. Payment of the option price must be
made in full at the time of exercise in such form (including, but not limited
to, cash or common stock of SBS) as the CompensationStock Option Committee may determine.
In the event of a reorganization, recapitalization, stock split, stock
dividend, combination of shares, merger, consolidation, distribution of assets,
or any other change in the corporate structure of shares of SBS, the CompensationStock
Option Committee will have the discretion to make any adjustments it deems
appropriate in the number and kind of shares reserved for issuance upon the
exercise of options and vesting of grants under the option plan and in the
exercise price of outstanding options.
Non-Employee Director Stock Option Plan
We have also adopted a separate option plan for our non-employee directors.
The terms of the plan provide that the Board of Directors has the discretion to
grant stock options to any non-employee director. An aggregate of 300,000 shares
of Class A Common Stockcommon stock have been reserved for issuance under this option plan.
The plan terminates ten years after September 27, 1999, the date that it was
approved and adopted by the stockholders of SBS. The plan is administered by the
Board of Directors. In connection with their
election as directors, on November 2, 1999, we grantedTo date, each of Messrs. Shrinsky
and Martinezour non-employee directors has been granted
an option under this plan to purchase 50,000 shares of Class A Common Stock exercisablecommon stock at $20.00 per share. Of these options to purchase
50,000 shares, options to purchase 10,000 shares vested immediately and options
to purchase 10,000 shares vested on November 2, 2000. Options to purchase 10,000
shares vest each year over the next three years on the anniversarymarket price
of the Class A common stock as of the respective grant so long as Messrs. Shrinsky and Martinez remain directors. Mr. Shrinsky holds
his options fordate.
13
Under the benefit of his law firm, Kaye, Scholer, Fierman, Hays &
Handler, LLP. Anyplan, any non-exercisable options shallwill immediately vest and
become exercisable upon a change in control of SBS. If a non-employee director
ceases to be a member of the Board of Directors due to death, retirement or
disability, all his unvested options will terminate immediately and all his
exercisable options on such date will remain exercisable for their term. If a
non-employee director's service as a director is terminated for any reason other
than the preceding, all his unvested options held by the
non-employee director which have not then vested shallwill terminate automatically.immediately and all
his exercisable options on such date will remain exercisable for thirty days.
401(K) PLAN
We offer a tax-qualified employee savings and retirement plan (the "401(k)
Plan") covering our employees. Pursuant to the 401(k) Plan, an employee may
elect to reducecontribute to the 401(k) Plan 1%-15% from his annual salary, by 1%-15%, not to
exceed the statutorily prescribed annual limit, which iswas $10,500 for 2000, and have the amount of such
reduction contributed to the 401(k) Plan.2001. We
may, at our option and in our sole discretion, make matching and/or profit
sharing contributions to the 401(k) Plan on behalf of all participants. To date,
we have not made any such contributions. The 401(k) Plan is intended to qualify
under Section 401(a) of the Internal Revenue Code so that contributions by
employees or by us to the 401(k) Plan and income earned on plan contributions
are not taxable to employees until distributed to them and contributions by us
will be deductible by us when, and if, made. The trustees under the 401(k) Plan,
at the direction of each participant, invest such participant's assets in the
401(k) Plan in selected investment options.
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 13
15
Law, which
generally authorizes indemnification as to all expenses incurred or imposed as a
result of actions, suits or proceedings if the indemnified parties actacted in good
faith and in a manner they reasonably believebelieved 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 have obtained insurance for the benefit of our directors and officers
that provides for coverage of up to $100.0 million.
There is noa pending litigation or proceeding involvingclaim against us and certain of our directors
and officers concerning which such directors and officers may seek
indemnification. On November 28, 2001, a director or
officerclass action lawsuit was filed in the
United States District Court for the Southern District of New York on behalf of
purchasers who acquired shares of our Class A common stock pursuant to the
registration statement and prospectus (collectively, the "Prospectus") relating
to our initial public offering which closed on November 2, 1999 (the "IPO"). The
lawsuit was filed against SBS, eight underwriters of the IPO (collectively, the
"Underwriters"), two members of our senior management team, one of which is our
Chairman of the Board of Directors, and an additional director. The claims being
made under the complaint are similar to claims currently being made under
hundreds of class action suits filed against companies with recent initial
public offerings and their underwriters. We believe that we would have a valid
claim against the Underwriters for indemnification in the event that the
plaintiffs were to be awarded damages as a result of this lawsuit. Discovery in
the lawsuit has been stayed while motions to which indemnification isdismiss the complaint are being
sought.prepared.
14
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Our Board of Directors maintains a Compensation Committee whoseand a Stock
Option Committee, which is a subcommittee of the Compensation Committee. The
current members consist of both the Compensation Committee and the Stock Option
Committee are three non-employee directors of SBS: Jason L. Shrinsky, Castor
Fernandez and Carl Parmer. Mr. Shrinsky was a member of the Compensation
Committee and Stock Option Committee during all of fiscal year 2001. Messrs.
Fernandez and Parmer became members of the Compensation Committee and Stock
Option Committee on November 6, 2001. Raul Alarcon, Jr., Roman Martinez IVour Chief Executive
Officer, President and Jason L. Shrinsky. Mr.
Alarcon, Jr. is our Chairman of the Board of Directors, Chief Executive Officer
and President.resigned as a member
of the Compensation Committee effective December 31, 2001. Although Mr. Alarcon,
Jr. was a member of the Compensation Committee during the fiscal year ended
September 30, 2001, he did not attend any meetings during such fiscal year
through the effective date of his resignation. Mr. Roman Martinez IV was a
member of the Compensation Committee and Jason L. Shrinsky are directors.Stock Option Committee during fiscal
year 2001 until his resignation from the Board of Directors on May 7, 2001. Mr.
Martinez was a non-employee director. The Compensation Committee met twice on
November 13, 2000, to review certain compensation items for fiscal years 2000
and 2001. Arrangements for the Company's key
employees2001, and on December 27, 2001 and January 16, 2002, to review certain
compensation items for fiscal years 2001 and 2002. The Stock Option Committee
held two meetings during fiscal year 2000 were determined prior to the creation of the
Compensation Committee, which was organized after the completion of our initial
public offering on November 2, 1999.2001. See "Certain Relationships and
Related Transactions."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following transactions were entered intosets forth certain relationships between the Company, certainSBS and current
directors and nominees for election as directors,director and executive officers, and
beneficial
owners of five percent or more of the Company's common stock.certain transactions entered into between SBS and such individuals.
Upon the completion of our initial public offering on November 2, 1999, we
purchased an annuity for $10.2 million from The Canada Life Assurance Company as
a retirement vehicle for the benefit of Mr.our retired officers, Pablo Raul
Alarcon, Sr., our Chairman Emeritus and a member of our Board of Directors,director, and Mr.Jose Grimalt, our
Secretary Emeritus and a member of our Board of Directors.director. Messrs. Alarcon, Sr. and Grimalt will
receive
annual payments of approximately $0.7 million$700,000 and $0.3 million,$300,000, respectively, from The
Canada Life Assurance Company, and will continue to do so for the rest of their
lives. Mr. Alarcon, Sr.'s wife and Mr. Grimalt's wife are joint annuitants with
their husbands. Should Mrs. Alarcon, Sr. or Mrs. Grimalt survive their husbands, theyher husband, she would receive
annual payments of $350,000 and $150,000, respectively, for the rest of their lives.
On February 2, 2000, SBS completedher life. Should Mrs. Grimalt
survive her husband, she would receive annual payments of $150,000 for the salerest
of WVMQ-FM in Key West, Florida
and WZMQ-FM in Key Largo, Florida to South Broadcasting System, Inc., a company
owned by Mr. Pablo Raul Alarcon, Sr., our Chairman Emeritus and a member of our
Board of Directors, for total cash consideration of $0.7 million.her life.
We lease a two-bedroom furnished condominium apartment in midtown Manhattan
from Mr. Alarcon, Jr., our Chief Executive Officer, President and Chairman of
the Board of Directors, for a monthly rent of $9,000. The lease commenced in
August 1987 and will expire in August 2007. During fiscal years 1999 and 1998,
we renovated the apartment and incurred approximately $0.2 million in renovation
expenses. We made no renovations in fiscal year 2000. Generally, the apartment is used by
Mr. Alarcon, Jr. while on SBS business in New York. We believe that the leaserent for
this apartment is at the market rate.
For the year ended September 26, 1999, SBS paid operating expenses
aggregating $0.1 million for a boat owned by CMQ Radio, an entity owned equally
by Messrs. Alarcon, Sr. and Alarcon, Jr. The boat was used by SBS for business
entertainment. For the year ended September 26, 1999, the amount paid by SBS for
our use of the boat owned by CMQ Radio was comparable to amounts we would have
paid had we leased the boat from an unaffiliated party. In November 1999, we
discontinued our arrangement with respect to this boat. We have not made any
further payments to CMQ Radio, Inc.
14
16
Effective July 1993, Messrs. Alarcon, Sr. and Alarcon, Jr. executed
promissory notes to SBS for the principal amounts of $0.5 million and $1.6
million, respectively. These promissory notes evidenced loans made by SBS to
Messrs. Alarcon, Sr. and Alarcon, Jr. over several prior years. The notes were
to mature in 2001 and bore interest at the rate of 6% percent per annum until
July 19, 1994 and after that at the lesser of 9% percent per annum or the prime
rate charged by the Chase Manhattan Bank, N.A. Interest on the unpaid principal
amount of the notes was payable annually. In December 1995, SBS exchanged these
promissory notes for amended and restated notes in the principal amounts of $0.6
million and $1.9 million due from Messrs. Alarcon, Sr. and Alarcon, Jr.,
respectively. The amended and restated notes bore interest at the rate of 6.36%
per annum, were to mature on December 30, 2025, and the interest was to be
payable in 30 equal annual installments of $43,570 and $143,158, respectively,
on December 30th of each year starting December 30, 1996. As of September 26,
1999, $0.6 million and $1.9 million, plus accrued and unpaid interest of $0.1
million and $0.4 million to date, was outstanding, respectively, on these
promissory notes. Upon completion of our initial public offering, Messrs.
Alarcon, Sr. and Alarcon, Jr. paid all remaining amounts outstanding under these
notes.
In 1992, Messrs. Alarcon, Sr. and Alarcon, Jr. acquired a building in Coral
Gables, Florida, for the purpose of housing the studios of WCMQ-AM and WCMQ-FM.
In June 1992, Spanish Broadcasting System of Florida, Inc., a subsidiary of SBS,
entered into a 20-yeartwenty-year net lease with Messrs. Alarcon, Sr. and Alarcon, Jr.
for the Coral Gables building which provides for a base monthly rent of $9,000.
Effective June 1, 1998, the lease on this building was assigned to SBS Realty
Corp., a realty management company owned by Messrs. Alarcon, Sr. and Alarcon,
Jr. This building currently houses the offices and studios of all of our Miami
stations. The lease on the stations' previous studios expired in October 1993,
was for less than half the space of the stations' present studios and had a
monthly rental of approximately $7,500. Based upon our prior lease for studio
space, weWe believe that the leaserent for the current studiostudios is at the market
rates.
In 1992, Mr. Alarcon, Jr. and other investors organized Nuestra Telefonica,
Inc., a New York corporation, to operate long distance telephone service in
Spanish aimed at the Hispanic population in the markets served by our radio
stations. In February 1993, Nuestra Telefonica entered into an access agreement
with a common carrier and commenced operations. Nuestra Telefonica advertised
its Spanish-language long distance telephone service on our radio stations in
Los Angeles and New York and purchased this air time at standard station rates.
Since early 1994, Nuestra Telefonica has not utilized any air time on our radio
stations. As of September 26, 1999 Nuestra Telefonica owed SBS $0.4 million
related to unpaid air time and $0.3 million related to certain expenses paid by
SBS on Nuestra Telefonica's behalf. The amounts due were recorded on our books
as a receivable and due from related party asset, respectively. Mr. Alarcon, Jr.
personally guaranteed the payment of $0.5 million of Nuestra Telefonica's
obligations to SBS. Mr. Alarcon, Jr. is Nuestra Telefonica's Chairman and
majority shareholder. Joseph A. Garcia, our Executive Vice President and Chief
Financial Officer and Secretary, is Nuestra Telefonica's President and a
minority shareholder. Nuestra Telefonica is no longer an operating entity and,
therefore, upon the completion of our initial public offering on November 2,
1999, we forgave the loans and canceled the guarantees described above. The
unreserved portion of these receivables was written-off by SBS at September 26,
1999 and is included in our financial statements for the year ended September
26, 1999 under the line item "Other income (expense), net".rate.
Mr. Grimalt's son is employed by SBS as an operations manager. He was paid
$129,419$145,530 and a bonus of $5,000 for the fiscal year ended September 24, 2000.2001. As part of his
compensation, we also paid the leasing costs for an automobile in the amount of
$8,028.$12,621. Mr. Grimalt's daughter is employed by SBS as a sales researcher and was
paid $41,827 for fiscal year 2001. Mr. Alarcon, Jr.'s uncle is currently employed by usSBS
as an operations manager and his salary is $76,500.
Roman Martinez IV, one of our directors, is a Managing Directorwas paid $76,500 for Lehman
Brothers Inc. which acts and acted as financial advisor to us in connection with
our financings and one of our acquisitions in fiscal year 2000.2001.
15
Jason L. Shrinsky, one of our directors, is a partner of Kaye Scholer Fierman, Hays &
Handler, LLP,
which firm has regularly represented us as our legal counsel for more than 17 years
and will continuecontinues to do so.
15
17
On November 30, 2000, we loaned Luis Diaz-Albertini, our Vice
President/Group Sales, $50,000 which is to be repaid over two years with amounts
withheld from Mr. Diaz-Albertini's salary. The loan is subject to forgiveness if
Mr. Diaz-Albertini meets certain sales targets.
Our new corporate headquarters isare located on one floor of a 21-story office
building in Coconut Grove, Florida 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 Mr. Alarcon, Jr. As of
November 1, 2000, we are leasing our office space under a 10-yearten-year lease, with
the right to renew for two consecutive five-year terms. We are currently paying
a base rent of approximately $36,000 per month for this office space. We believe
that the monthly rent we pay foris at the market rate.
During fiscal year 2001, we had sales of approximately $0.2 million to
Castor Advertising Florida Corp., a company owned by Castor Fernandez, one of
our new office space is below market rate.directors. On December 31, 2001, Castor Advertising Florida Corp. was
dissolved.
See "Security Ownership of Certain Beneficial Owners and Management."
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company'sour directors and executive officers and persons who own more than 10% of a
registered class of the Company'sour equity securities (collectively, "Reporting Persons") to
file reports of ownership and changes in ownership of the Company'sour securities with the
SEC.Securities and Exchange Commission (the "SEC"). Reporting Persons are required
by the SEC to furnish the Companyus with copies of all Section 16(a) forms they file.
Based solely on itsour review of the copies of such forms received or written
representations from the Reporting Persons, the Company believeswe believe that with respect to
the fiscal year ended September 24, 2000,2001, all the Reporting Persons complied with all applicable filing
requirements, except that: (1) on November
8, 1999,one report covering one transaction by Joseph A.
Garcia was filed late; (2) one report covering one transaction by Raul Alarcon,
Jr. was filed late; (3) one report covering one transaction by Luis
Diaz-Albertini was filed a Form 3 due on October 27, 1999 to report
his ownershiplate; (4) the Initial Statement of options to purchase sharesBeneficial Ownership
of Castor Fernandez was filed late; and (5) the Company's Class A Common
Stock; (2) on January 10, 2000, Mr. Diaz-AlbertiniInitial Statement of Beneficial
Ownership of Carl Parmer was filed a Form 4 due on
November 10, 1999 to report his purchase of shares of the Company's Class A
Common Stock; (3) on January 9, 2001, Mr. Diaz-Albertini filed an amended Form 4
for October 1999 to report his ownership of options to purchase shares of the
Company's Class A Common Stock and to correct the reported vesting schedule for
such options reported on his Form 3 filed on November 8, 1999; (4) on January 9,
2001, Mr. Diaz-Albertini filed an amended Form 3 to redact his prior report of
ownership of options to purchase shares of the Company's Class A Common Stock
reported on Form 3 filed on November 8, 1999; (5) on January 19, 2001, Jason L.
Shrinsky filed an amended Form 3, to amend his Form 3 filed on November 12,
1999, to report his ownership of 15,000 shares of the Company's Class A Common
Stock which he owns jointly with his spouse and to correct the reported vesting
schedule for his options to purchase shares of the Company's Class A Common
Stock; (6) on January 10, 2001, William Tanner filed a Form 3 due on September
10, 2000 and (7) on January 10, 2001, William Tanner filed a Form 4 due on
September 10, 2000, to report, among other transactions, his ownership of
options to purchase 218,552 shares of the Company's Class A Common Stock which
were not granted by the Compensation Committee of the Board of Directors until
January 2001, but which Mr. Tanner was entitled to receive as of August 31,
2000, pursuant to his employment agreement.
BOARD OF DIRECTORSlate.
16
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee reviews and approves the performance and salariescompensation of the
Company'sSBS's
executive officers, managers and key employees. In its deliberationsThe Compensation Committee
currently consists of three non-employee directors: Jason L. Shrinsky, Carl
Parmer and Castor Fernandez. Raul Alarcon, Jr., SBS's Chief Executive Officer
("CEO"), President and Chairman of the Board of Directors, resigned as a member
of the Compensation Committee overseeseffective December 31, 2001. Although Mr. Alarcon,
Jr. was a member of the Company'sCompensation Committee during the fiscal year ended
September 30, 2001, he did not attend any meetings during such fiscal year
through the effective date of his resignation. Mr. Alarcon, Jr. has served as an
advisor on all compensation matters before the Compensation Committee, other
than those relating to his own compensation, and continues to do so. The Stock
Option Committee, a subcommittee of the Compensation Committee currently
comprised of Messrs. Shrinsky, Parmer and Fernandez, reviews and approves all
stock option grants to executive officers, managers and employees.
Messrs. Parmer and Fernandez became members of the Compensation Committee
and the Stock Option Committee on November 6, 2001, after the end of fiscal year
2001. During fiscal year 2001, Roman Martinez IV was a member of the
Compensation Committee and the Stock Option Committee until his resignation from
the Board of Directors on May 7, 2001. During the period after the departure of
Mr. Martinez and prior to the appointment of Messrs. Parmer and Fernandez to the
Compensation Committee and the Stock Option Committee (May 7, 2001 -- November
6, 2001), the Board of Directors met three times in the place of the Stock
Option Committee to approve stock option grants to certain non-employee
directors and certain employees, none of whom were executive officers. During
such period, the Compensation Committee and the Stock Option Committee were
inactive.
The objectives of SBS's executive compensation program including salariesare to (1) set
levels of compensation that will attract and cash bonuses. The Compensation Committeeretain superior executives in the
highly competitive radio broadcasting environment, (2) emphasize
performance-based compensation that reflects the executive officer's individual
contribution to SBS's financial performance and (3) provide equity-based
compensation to align the interests of executive officers with those of
stockholders. In order to achieve these objectives, the executive compensation
program consists of Chief Executive Officer (the "CEO")three primary components: salary, bonuses and stock options.
EXECUTIVE OFFICER COMPENSATION
During fiscal year 2001, SBS had an employment agreement with each
executive officer. The employment agreements of Raul Alarcon, Jr. and two outside directors,
Roman Martinez IV and Jason L. Shrinsky.
The executive officers and managersLuis
Diaz-Albertini were entered into prior to the creation of the Company have the responsibility
to direct our current and future operations in order to continue the historic
financial and operating success of the Company. The Compensation Committee is
committed to assisting the executive officers and managers in achieving the
Company's continued growth by actively participating in salary, bonus and option
plan decisions for all current and future Company employees. The Compensation
Committee recognizes the need to provide incentives to and reward the executive
officers and key management employees who direct the day-to-day operations of
the
16
18
Company. It is axiomatic that financial rewards based upon performance are the
best motivational tools available to provide incentives to management to achieve
the Company's financial and operational goals thereby achieving maximum
shareholder value in keeping with the Company's mandate.
The Compensation Committee employs a policy of awarding cash bonuses and
stock options based upon performance. Base salaries are also increased from time
to time as an extra incentive and/or reward for future or past performance. In
its deliberations on compensation the Compensation
Committee, takeswhich was established on November 2, 1999 upon the completion of
SBS's initial public offering. William Tanner's employment agreement and Joseph
A. Garcia's current employment agreement were entered into account
a number of factors including, but not limitedon August 31, 2000
and December 7, 2000, respectively, prior to the marketplace, achieving
budget goals, performance vis-a-vis competitors, performance relativeappointment of Messrs. Parmer
and Fernandez to overall
business conditionsthe Compensation Committee. Salary, salary increase and the Company's results.
Executive officer base salaries are established pursuant to historical
wages and in relation to salaries for individuals in comparable positions paid
by other broadcast companies. Executive officer cash bonuses are also based upon
performance and provide the requisite incentive to meet annual performance
goals. The performance bonuses are based upon the Company's and/or individual
station results consistent with the annual operating budget presented to
management and the Board of Directors. Cash bonus
recommendations for executive officers other than the CEO are proposed by the
CEO, and are then reviewed and, when appropriate, revised by the Compensation
Committee, which has final approval of all such compensation. The base salaries
of executive officers are determined by reference to the officer's experience
level, length of employment, level of responsibility, historical salary paid and
salaries for individuals in comparable positions paid by other companies in the
radio broadcasting industry. Salary increases and bonuses are intended to reward
performance and provide executive officers with financial incentives to meet
annual performance targets. In reviewing salary increases and bonuses that are
discretionary under the employment agreements, the Compensation Committee
considers length of employment, individual performance and SBS's performance,
including performance relative to its competitors, performance relative to
business conditions, and SBS's success in meeting its financial objectives. The
relative weight given to each factor may vary by individual in the Compensation
Committee's discretion.
SBS employs equity-based compensation for executive officers, managers and
other employees in order to provide incentives to build stockholder value and
align the interests of these executive officers and employees with the interests
of stockholders. Stock options are granted at the market price of SBS's Class A
common
17
stock as of the date of grant and therefore have value only if the price of the
Class A common stock increases over the exercise price. Proposals for stock
option grants to executive officers, managers and other employees, other than
the CEO, are presented to the CompensationStock Option Committee by the CEO and following a revieware then
reviewed and, discussion are eitherwhen appropriate, revised or approved by the Compensation Committee. Any bonus for the CEO is determined by the Compensation
Committee or is consistent with existing employment contracts.
Equity ownership in the Company by executive officers, managers and key
employees of the Company establishes a co-partnership with stockholders. Equity
ownership by executive officers, managers and key employees is the most direct
method to align employee interest with stockholders. Each Company employee
awarded stock options has an incentive to increase stockholder value thereby
benefitting all stockholders. When the Company hires executive officers,
managers and other key employees, theStock Option Committee, a subcommitteewhich has
final approval of the
Compensation Committee comprised of Roman Martinez IV and Jason L. Shrinsky, is
presented by the CEO with a proposed stock option plan consistent with the 1999
Stock Option Plan, subject to the Company's vesting periods. On all other
occasions, the Option Committee is presented a plan by the CEO for review,
comment, revision or approval for additional option grants to existing managers
and employees, traditionally on an annual basis, under the 1999 Stock Option
Plan. The Option Committee, in its deliberation, makes the necessary
determination as to whether the recommended additional annual grants will in
fact provide incentives for executive officers, managers and key employees of
the Company.such grants. In many instances, the additional option grants are necessary in
order to insure continuity of management and operations. Options are granted at
the current market price of the Company's Class A Common Stock and, as a
consequence, have value to the optionholder only if the Company's Class A Common
Stock increases in price over the exercise price. The amount of the initial and
periodic grants to employees other than the CEO and the executive officers are
proposed by the CEO for review, discussion and action by the Option Committee.
The Option Committee establishes, when not governed by employment contract,reviewing stock option grants, to the CEO,Stock
Option Committee considers the Chief Financial Officersame factors noted above for the granting of
salary increases and other executive
officers.
On October 27, 1999,bonuses as well as whether the Company entered into an employment agreement withgrants will provide the
intended incentives.
CHIEF EXECUTIVE OFFICER COMPENSATION
Raul Alarcon, Jr., CEO, President and Chairman of the Board of Directors,
President and CEOhas not participated as a member of the Company,Compensation Committee with regard to
the review and approval of his own compensation. On October 25, 1999, SBS
entered into an amended and restated employment agreement with Mr. Alarcon, Jr.,
which providesexpires on December 31, 2004 and renews for successive one-year periods
unless terminated by either party, pursuant to which he is entitled to receive
an annual base salary of $1,000,000not less than $1,000,000. In fiscal year 2001, Mr.
Alarcon, Jr. received a base salary of $1,000,000. Under the employment
agreement, Mr. Alarcon, Jr. is also entitled each year of his employment to
receive options to purchase 100,000 shares of SBS's Class A common stock and an
annual bonus based on same station annual broadcast cash performance bonus determined byflow growth or a
greater amount granted at the discretion of the Board of Directors. In fiscal
year 2001, the Board of Directors based on annual sameand the Compensation Committee exercised their
discretion to grant Mr. Alarcon, Jr. a bonus of $792,864 in consideration of his
instrumental role in the successful launch of radio station broadcast cash flow growth.KXOL-FM in Los
Angeles, his success in the pursuit of strategic objectives such as
acquisitions, SBS's financial performance in 2001, the progress made by SBS's
radio stations in Puerto Rico and Mr. Alarcon, Jr.'s employment agreement andoverall management
performance in a very difficult economic environment.
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code of 1986, as amended, provides
that a public company may not deduct compensation paid to its chief executive
officer or the company's other four most highly compensated executive officers
which exceeds $1,000,000 for any such officer in a given taxable year unless the
compensation arrangements for other Company key employees for fiscal year
2000 were determined priorqualifies as "performance-based." SBS may pay its executive
officers compensation that is not deductible pursuant to the creation ofSection 162(m) if the
Compensation Committee which
was organized afterdeems such compensation to be necessary to meet SBS's
executive compensation objectives, and to be in the completionbest interest of
our initial public offeringstockholders. SBS has made such non-deductible payments in the past and reserves
the right to do so in the future.
Respectfully submitted,
Compensation Committee:
Jason L. Shrinsky
Carl Parmer
Castor Fernandez
18
AUDIT COMMITTEE REPORT
The Audit Committee currently consists of three independent directors:
Jason L. Shrinsky, Carl Parmer and Castor Fernandez. Mr. Shrinsky has been a
member of the Audit Committee since its creation on November 2, 1999. The Compensation Committee on a going forward basis reviews the
performance of the CEO of the Company annually in addition to the other
executive officers of the Company.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
Notwithstanding anything to the contrary set forth in any of the Company's
previous or future filings under the Securities Act or the Exchange Act that
might incorporate this Proxy Statement or future filings with the SEC, in whole
or in part, the following report shall not be deemed to be incorporated by
reference into any such filing.
17
19
MembershipMessrs.
Parmer and Role of the Audit Committee
The Audit Committee consists of the following members of the Board of
Directors: Roman Martinez, IV and Jason L. Shrinsky. BothFernandez became members of the Audit Committee are independent as defined underon August 9, 2001.
Roman Martinez IV was a member of the National Association of
Securities Dealers' listing standards. The Audit Committee operates under a
written charter adopted byfrom November 2, 1999
until his resignation from the Board of Directors which is included in this
proxy as Appendix A.on May 7, 2001.
The primary function of the Audit Committee is to provide advice with
respect to the Company's financial matters and to assist the Board of
Directors in fulfilling its oversight responsibilities by reviewing (i) the
financial reports and other financial information which willto be provided by the CompanySBS to any
governmental body or the public, (ii) the Company'sSBS's systems of internal controls that
management and the Board of Directors have established and (iii) the Company'sSBS's auditing,
accounting and financial reporting processes generally. The Audit Committee's
primary duties and responsibilities are to: i)(i) serve as an independent and
objective party to monitor the Company'sSBS's financial reporting process and internal
control system, ii)(ii) review and appraise the audit efforts of the Company'sSBS's independent
accountants and iii)the internal auditing process and (iii) provide an open avenue
of communication among the independent accountants, financial and senior
management the internal auditing department and the Board of Directors.
ReviewManagement is responsible for SBS's internal controls and the financial
reporting process. SBS's independent public accountants are responsible for
performing an independent audit of the Company's Audited Financial Statements for the Fiscal Year ended
September 24, 2000SBS's consolidated financial statements in
accordance with generally accepted auditing standards and issuing a report
thereon.
The Audit Committee has reviewed and discussed with management the audited
consolidated financial statements of the CompanySBS for the fiscal year ended September 24, 2000 with the
Company's management.30,
2001. The Audit Committee has discussed with KPMG LLP, the
Company'sSBS's independent public
accountants, the matters required to be discussed by Statement on Auditing
Standards No. 61, (CommunicationCommunication with Audit Committee).Committees.
The Audit Committee has also received the written disclosures and the letter
from KPMG LLP required by Independence Standards Board Standard No. 1,
(Independent
DiscussionIndependence Discussions with Audit Committees)Committees, and the Audit Committee has
discussed with KPMG LLP the latter's independence. The Audit Committee has
reviewed the provision of all non-audit services by KPMG LLP and has concluded
that the provision of these services is compatible with maintaining KPMG LLP's
independence.
Based on the Audit Committee's review and discussions noted above, as well
as the representations of management and the written report and representations
of KPMG LLP, the Audit Committee recommended to the Board of Directors that
the Company'sSBS's audited consolidated financial statements be included in the Company'sSBS's Annual
Report on Form 10-K for the fiscal year ended September 24, 200030, 2001 for filing with
the SEC.
Roman Martinez, IVRespectfully submitted,
Audit Committee:
Jason L. Shrinsky
18Carl Parmer
Castor Fernandez
19
20
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
The graph below compares the cumulative total stockholder return on the
Company'sour
Class A Common Stockcommon stock with the cumulative total return on the Standard & Poor's
500 Index and the Standard & Poor's Broadcasting Index for TV, Radio and Cable
from October 27, 1999, the date on which the Company'sour Class A common stock began trading
on the Nasdaq National Market, to December 30, 2001. Because we have changed our
fiscal year end from the last Sunday in September 24, 2000.to the last Sunday in
December, beginning with December 2002, we have included stockholder return
information for both September and December in the graph. The data set forth
below assumes that the value of an investment in the Company'sour Class A Common
Stockcommon stock and in
each Index was $100 on October 27, 1999 was $100, and assumes the reinvestment of
dividends.
The comparisons in the graph below are based upon historical data and are
not indicative of, nor intended to forecast, future performance of the Company'sour Class A
Common Stock.common stock.
COMPARISON OF CUMULATIVE TOTAL RETURN* FROM OCTOBER 27, 1999 TO
SEPTEMBER 24, 2000DECEMBER 30, 2001 AMONG SPANISH BROADCASTING SYSTEM, INC.,
THE S&P 500 INDEX AND THE S&P BROADCASTING (TV, RADIO, CABLE) INDEX
COMPARISON CHART
SBSA S&P BROADCAST MEDIA S&P 500
---- ------------------- -------
Oct-99 100.00 100.00 100.00
Nov-99
Dec-99 110.13 125.23 114.90
Jan-00
Feb-00
Mar-00
Apr-00
May-00
Jun-00
Jul-00
Aug-00
Sep-00 32.15 92.31 114.24
[COMPARISON CHART]
- ---------------
* $100 INVESTED ON OCTOBER 27, 1999 IN STOCK OR INDEX INCLUDING REINVESTMENT OF
DIVIDENDS
CUMULATIVE TOTAL RETURN
[CUMULATIVE RETURN TABLE]
19
- ------------------------------------------------------------------------------------
10/27/99 12/26/99 9/24/00 12/31/00 9/30/01 12/30/01
- ------------------------------------------------------------------------------------
SBSA $100.00 $188.75 $58.75 $ 25.00 $35.45 $48.45
S&P 500 $100.00 $114.03 $114.24 $104.44 $83.14 $93.06
S&P Broadcasting
Index $100.00 $127.04 $91.80 $ 90.44 $74.13 $87.15
20
21
PROPOSAL 2
RATIFICATION OF SELECTION
OF INDEPENDENT AUDITORS
The Company'sOur consolidated financial statements for the fiscal year ended September
24, 200030, 2001 have been audited by KPMG LLP, independent certified public
accountants. Representatives of KPMG LLP are expected to be present at the
Annual Meeting to respond to appropriate questions and will have an opportunity
to make a statement if they so desire.
The Board of Directors has appointed KPMG LLP as independent auditors to
audit theour consolidated financial statements of the Company for the fiscal year ending September 30,
2001.December
29, 2002. Unless otherwise directed, the persons named in the accompanying proxy
card will vote in favor of the ratification of the appointment of KPMG LLP.
The ratification of the selection of independent auditors requires a
majority of the votes cast at the Annual Meeting. Abstentions will count as a
vote against the proposal, and broker non-votes will not count toward the vote
on the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT EACH HOLDER OF CLASS A COMMON STOCK
AND EACH HOLDER OF CLASS B COMMON STOCK VOTE "FOR" THE RATIFICATION OF THE
SELECTION OF KPMG LLP AS INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING
SEPTEMBER 30,DECEMBER 29, 2002.
AUDIT AND NON-AUDIT FEES
The following table sets forth the aggregate fees billed to us for
professional audit services rendered by KPMG LLP for the audit of our annual
consolidated financial statements for fiscal year 2001 and review of the
consolidated financial statements included in our Quarterly Reports on Form 10-Q
for such year and fees billed for other services rendered by KPMG LLP for fiscal
year 2001.
Audit Fees, excluding Audit-Related Services................ $ 300,000
==========
Financial Information Systems Design and Implementation
Fees...................................................... $ --
==========
All Other Fees:
Audit-Related Services(1)................................. $ 589,000
Other Non-Audit Services(2)............................... 523,000
----------
Total All Other Fees........................................ $1,112,000
==========
- ---------------
(1) Audit-related services consisted principally of audits of statutory
financial statements, audits of financial statements of employee benefit
plans, review of registration statements and other filings and the issuance
of consents.
(2) Other non-audit services consisted of tax compliance and internal audit
services.
The Audit Committee reviewed the provision of all non-audit services by
KPMG LLP and concluded that the provision of these services was compatible with
maintaining KPMG LLP's independence.
21
STOCKHOLDER PROPOSALS FOR NEXT
ANNUAL MEETING
In order for a stockholder proposal to be included in the Proxy Statementproxy statement
for theour next Annual Meetingannual meeting of Stockholders,stockholders to be held in 2003, such proposal
must be submitted in writing and received by the Companyus at 2601 South Bayshore Drive, PH
II, Coconut Grove, Florida 33133, Attention: Joseph A. Garcia, Chief Financial
Officer, no later than the close of business on October 15, 2001.January 20, 2003. In order to
avoid controversy as to the date on which the Companywe received a proposal, stockholders
should submit proposals by certified mail, return receipt requested. The deadline for delivering aShareholder
proposals must comply with Rule 14a-8 under the Securities Exchange Act of 1934,
as amended.
If we have not received notice by the close of business on April 5, 2003 of
any other stockholder proposal which does not seek to nominate a director(s) of the Company or is not to be included in the proxy
materials for theour next Annual Meeting of stockholders will
be December 31, 2001. Theannual meeting but which a stockholder intends to propose
for a vote at such meeting, then the persons named as proxies in the proxy
materials for theour next Annual Meeting of Stockholdersannual meeting may exercise discretionary voting
authority with respect to any matter that is not submitted to the Company by
such date. Additionally, even if proper notice is received on or prior to
December 31, 2001, the individuals named as proxies on the proxy card for that
meeting may nevertheless exercise their discretionary authority in voting such
proxies with respect to such proposal by advising the stockholders of the
proposal and how they intend to exercise their discretion to vote on such
proposal, unless the stockholder making the proposal solicits proxies with
respect to the proposal to the extent required by Rule 14a-4(c)(2) under the
Exchange Act, as amended.matter.
ANNUAL REPORT
The Company'sOur Annual Report on Form 10-K containing its financial
statements for the fiscal year ended September 24, 200030,
2001, containing our consolidated financial statements, has been mailed
concurrently with the mailing of this Proxy Statement.Statement to all stockholders
entitled to notice of and to vote at the Annual Meeting. The Annual Report to
Stockholderson
Form 10-K is not incorporated in this Proxy Statement and is not deemed to be a
part of the proxy solicitation material.
Any stockholder who does not receive
a copy of such Annual Report on FormANY BENEFICIAL OR RECORD OWNER OF OUR SECURITIES ON THE RECORD DATE OF MAY
3, 2002 MAY REQUEST AND RECEIVE WITHOUT CHARGE A COPY OF OUR ANNUAL REPORT ON
FORM 10-K may obtain one by writing to the
Company.
REPORT FILED WITH SECURITIESFOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2001, INCLUDING THE
CONSOLIDATED FINANCIAL STATEMENTS AND EXCHANGE COMMISSION
Any beneficial owner of securities of the Company whose proxy is hereby
solicited may request and receive without charge a copy of the Company's Annual
Report on Form 10-K, including the financial statements and financial statement
schedules thereto, filed with the SEC. Such request should be addressed
20
22
to: Spanish Broadcasting System, Inc.FINANCIAL STATEMENT SCHEDULES THERETO.
SUCH REQUEST SHOULD BE IN WRITING AND ADDRESSED TO: SPANISH BROADCASTING SYSTEM,
INC., 2601 South Bayshore Drive, Coconut Grove,
FloridaSOUTH BAYSHORE DRIVE, PH II, COCONUT GROVE, FLORIDA 33133, Attention: JosephATTENTION:
JOSEPH A. Garcia, Chief Financial Officer.GARCIA, CHIEF FINANCIAL OFFICER.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors does not
know of any other matter which will be brought before the Annual Meeting.
However, if any other matter properly comes before the Annual Meeting, or any
adjournment thereof, the person or persons voting the proxies will vote on such
matters in accordance with their best judgment and discretion.
By Order of the Board of Directors
/s/(/S/ Raul Alarcon, Jr.)
Raul Alarcon, Jr.
Chairman of the Board of Directors,
President and Chief Executive Officer
Coconut Grove, Florida
February 12, 2001
21May 20, 2002
22
23
APPENDIX A
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
I. PURPOSE
The primary function of the Audit Committee (the "Audit Committee") of the
Board of Directors (the "Board") of Spanish Broadcasting System, Inc., a
Delaware corporation (the "Corporation") is to assist the Board in fulfilling
its oversight responsibilities by reviewing (i) the financial reports and other
financial information which will be provided by the Corporation to any
governmental body or the public, (ii) the Corporation's systems of internal
controls that management and the Board have established; and (iii) the
Corporation's auditing, accounting and financial reporting processes generally.
The Audit Committee's primary duties and responsibilities are to:
- Serve as an independent and objective party to monitor the Corporation's
financial reporting process and internal control system.
- Review and appraise the audit efforts of the Corporation's independent
accountants and internal auditing department.
- Provide an open avenue of communication among the independent
accountants, financial and senior management, the internal auditing
department and the Board.
II. COMPOSITION
The Audit Committee shall be comprised of two or more directors before June
14, 2001 and three or more directors after June 14, 2001 as determined by the
Board.
Prior to June 14, 2001. Prior to June 14, 2001, a majority of the members
of the Audit Committee shall be "independent directors" and the term
"independent director" shall mean a person other than an officer or employee of
the Corporation or its subsidiaries or any other individual having a
relationship which, in the opinion of the Board, would interfere with the
exercise of independent judgment in carrying out the responsibilities of a
director.
On and Subsequent to June 14, 2001. On and subsequent to June 14, 2001,
except as provided herein, all members of the Audit Committee shall be
"independent directors" as defined below. The Audit Committee will primarily
fulfill these responsibilities by carrying out the activities enumerated in
Section IV. of this Charter. A member of the Audit Committee shall be considered
to be an "independent director" if he or she is not an officer or employee of
the Corporation or its subsidiaries or an individual having a relationship
which, in the opinion of the Board, would interfere with the exercise of
independent judgement in carrying out the responsibilities of a director. The
following persons shall not be considered "independent":
- a director who is employed by the Corporation or any of its affiliates
for the current year or any of the past three years;
- a director who accepts any compensation from the Corporation or any of
its affiliates in excess of $60,000 during the previous fiscal year,
other than compensation for board service, benefits under a tax-
qualified retirement plan, or non-discretionary compensation;
- a director who is a member of the immediate family of an individual who
is, or has been in any of the past three years, employed by the
Corporation or any of its affiliates as an executive officer. Immediate
family includes a person's spouse, parents, children, siblings,
mother-in-law, father-in-law, brother-in-law, sister-in-law, son-in-law,
daughter-in-law and anyone who resided in such person's home.
- a director who is a partner in, or a controlling shareholder or an
executive officer of, any for-profit business organization to which the
Corporation made, or from which the Corporation received, payments (other
than those arising solely from investments in the Corporation's
securities) that exceed
A-1
24
5% of the Corporation's or business organization's consolidated gross
revenues for that year, or $200,000, whichever is more, in any of the
past three years;
- a director who is employed as an executive officer of another entity
where any of the company's executives serves on that entity's
compensation committee.
Notwithstanding the foregoing, one director who is not "independent" (as
defined above) and is not a current employee of the Corporation or its
subsidiaries or an immediate family member of such an employee may be appointed
to the Audit Committee, if the Board, under exceptional and limited
circumstances, determines that membership on the Audit Committee by that
director is required by the best interests of the Corporation and its
shareholders, and the Board discloses in the next proxy statement subsequent to
such determination, the nature of the relationship and the reasons for that
determination.
All members of the Audit Committee shall be able to read and understand
fundamental financial statements, including a company's balance sheet, income
statement, and cash flow statement or be able to do so within a reasonable
period of time after his or her appointment to the Audit Committee, and at least
one member of the Audit Committee shall have past employment experience in
finance or accounting, requisite professional certification in accounting, or
any comparable experience or background which results in the member's financial
sophistication, including being or having been a chief executive officer, chief
financial officer or other senior officer with financial oversight
responsibilities.
The members of the Audit Committee shall be elected by the Board at each
annual organizational meeting of the Board and each member shall serve on the
Audit Committee until the next succeeding annual organizational meeting of the
Board and his or her successor shall have been elected and qualified. Unless a
Chairman is elected by the full Board, the members of the Audit Committee may
designate a Chairman by majority vote of the full Audit Committee membership.
III. MEETINGS
The Audit Committee shall meet as frequently as the Audit Committee deems
appropriate. As part of its job to foster open communication, the Audit
Committee should meet at least annually with management, the head of the
internal auditing department and the independent accountants in separate
executive sessions to discuss any matters that the Audit Committee or each of
these groups believes should be discussed privately. In addition, the Audit
Committee or at least its Chairman should meet with the independent accountants
and management quarterly to review the Corporation's financials. See item IV.6
below.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
1. Recognize that the independent accountants are ultimately accountable to
the Board and the Audit Committee, as representatives of the
Corporation's shareholders.
2. Recommend to the Board the nomination of the independent accountants,
considering independence and effectiveness of the independent
accountants, to be proposed for shareholder approval, and approve the
fees and other compensation to be paid to the independent accountants.
3. Confer with the independent accountants concerning the scope of their
examinations of the Corporation's books and records directing their
special attention to specific matters or areas deemed by the Audit
Committee or the independent accountants to be of special significance.
4. Review the Corporation's annual financial statements and any reports or
other financial information submitted to any governmental body, or the
public, including any certification, report, opinion, or review rendered
by the independent accountants.
5. Review with financial management and the independent accountants the
Corporation's Form 10-Q prior to its filing or prior to the release of
earnings. The Chairman of the Audit Committee may represent the entire
Audit Committee for purposes of this review.
A-2
25
6. At least annually receive from the independent accountants a formal
written statement delineating all relationships between the independent
accountants and the Corporation consistent with Independence Standards
Board Standard 1. Actively engage in a dialogue with the independent
accountants with respect to any disclosed relationship or services which
may impact the independent accountants' objectivity and independence and
recommend that the full Board take appropriate action to oversee the
independence of the independent accountants.
7. Review the performance of the independent accountants and approve any
proposed discharge of the independent accountants when circumstances
warrant.
8. Periodically consult with the independent accountants out of the
presence of management about internal controls and the fullness and
accuracy of the Corporation's financial statements.
9. In consultation with the independent accountants and the internal
auditing department, review the integrity of the Corporation's financial
reporting processes, both internal and external.
10. Consider and approve, if appropriate, major changes to the
Corporation's auditing and accounting principles and practices as
suggested by the independent accountants, management, or the internal
auditing department.
11. Following completion of the annual audit, review separately with each
of management, the independent accountants and the internal auditing
department any significant difficulties encountered during the course
of the audit, including any restrictions on the scope of work or access
to required information.
12. Review any significant disagreement among management and the
independent accountants or the internal auditing department in
connection with the preparation of the financial statements.
13. Review with the independent accountants, the internal auditing
department and management the extent to which changes or improvements
in financial or accounting practices, as approved by the Audit
Committee, have been implemented. (This review should be conducted at
an appropriate time subsequent to implementation of changes or
improvements, as decided by the Audit Committee.)
14. Review activities, organizational structure, and qualifications of the
internal auditing department.
15. Review, with the Corporation's counsel, any legal matter that could
have a significant impact on the Corporation's financial statements.
16. Perform any other activities consistent with this Charter, the
Corporation's Certificate of Incorporation, the Corporation's By-laws
and governing law, as the Audit Committee or the Board deems necessary
or appropriate.
V. ANNUAL REVIEW
The Board will review and update this charter at least annually, as
conditions dictate.
A-3
26 TO VOTE BY MAIL, PLEASE DETACH THE PROXY CARD HERE -
--------------------------------------------------------------------------------
SPANISH BROADCASTING SYSTEM, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR 2001THE ANNUAL MEETING OF STOCKHOLDERS SOLICITED BY THE BOARD OF DIRECTORS
March 5, 2001TO BE HELD ON
JUNE 11, 2002
The undersigned, having receivedacknowledging receipt of (1) notice of the 2001 annual meeting of
stockholders to be held on March 5, 2001June 11, 2002 at 11:3010:00 a.m., Eastern time, atin the
Continental Ballroom of the Wyndham Grand Bay, 2669 South Bayshore Drive, Miami,
Florida 33133, and(2) the Proxy Statement relating to the meeting and (3) the 2001
Annual Report on Form 10-K, hereby revokes all prior proxies and appoints Raul
Alarcon, Jr., and Joseph A. Garcia, and each of them acting singly, with full
power of substitution, as proxies to represent and vote on behalf of the
undersigned, as designated below,herein, all shares of Class A common stock, par value
$0.0001 per share, and all shares of Class B common stock, par value $0.0001 per
share, of Spanish Broadcasting System, Inc., a Delaware corporation, that the
undersigned would be entitled to vote if present in person at the 2001 annual meeting
of stockholders and any adjournment or adjournments thereof. These proxies are
authorized to vote in their discretion upon such other matters as may properly
come before the annual meeting.meeting or any adjournment(s) thereof.
When properly executed, this proxy will be voted in the manner directed herein
by the undersigned.
If a choice is not specified with respect to any proposal,
this proxy will be votedIF A CHOICE IS NOT SPECIFIED WITH RESPECT TO ANY PROPOSAL, THIS PROXY WILL BE
VOTED FOR such proposal.SUCH PROPOSAL.
Attendance of the undersigned at the annual meeting will not be deemed to revoke
this proxy unless the undersigned shall revoke this proxy in writing andor shall
vote in person at the annual meeting.
EACH STOCKHOLDER SHOULD SIGN THIS PROXY PROMPTLY AND RETURN IT IN THE ENCLOSED
ENVELOPE. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF SPANISH
BROADCASTING SYSTEM, INC.
HAS YOUR ADDRESS CHANGED?
DO YOU HAVE COMMENTS?_______________________________________________________
_______________________________________________________
- --------------------------------------- ------------------------------------
- --------------------------------------- ------------------------------------
27 TO VOTE BY MAIL, PLEASE DETACH THE PROXY CARD HERE - --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES LISTED IN PROPOSAL 1
AND "FOR" PROPOSAL 2.
PROPOSAL 1: Election of Directors. For Raul Alarcon, Jr., Pablo Raul Alarcon,
Sr., Jose Grimalt, Roman Martinez IV, and Jason L. Shrinsky.Shrinsky, Carl Parmer and Castor
Fernandez.
(INSTRUCTION: To withhold authority to vote for any individual
nominee, mark theTO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, MARK THE "FOR ALL NOMINEES EXCEPT" box and write that nominee's
name in the space provided.BOX AND WRITE THAT
NOMINEE'S NAME IN THE SPACE PROVIDED.) Exceptions:__________________________
[ ] FOR ALL NOMINEES LISTED [ ] WITHHOLD AUTHORITY TO VOTE FOR ALL [ ] FOR ALL EXCEPT
EXCEPTIONS:
______________________________________________________________
[ ] For All Nominees [ ] Withhold Authority [ ] For All Nominees
Listed To Vote For All Except
IF AUTHORITY TO VOTE FOR THE ELECTION OF ANY NOMINEE, OR FOR ALL
NOMINEES, IS NOT WITHHELD, OR IF NONE OF THE BOXES ABOVE IS CHECKED,
THIS PROXY WILL BE DEEMED TO GRANT AUTHORITY TO VOTE FOR ALL
NOMINEES.
PROPOSAL 2: Ratification of appointment of KPMG LLP as independent auditors for
the fiscal year ending September 30, 2001.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Signature(s)December 29, 2002.
[ ] For [ ] Against [ ] Abstain
SIGNATURE(S):__________________________________________________________________
____________________________________
Please sign name(s) exactly as appearing on
your stock certificate.hereon.
If shares are held jointly, each joint owner
should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give
full title as such. If a corporation, please sign
full corporate name by president or other
authorized officer. If a partnership, please sign
in partnership name by authorized person.
Dated: ______________________________, 2001DATED: __________________________________ , 2002
Mark, sign and date the attached proxy card and return it
in the postage-paid envelope enclosed.