<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 29, 1998.
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
TELEMUNDO HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
<TABLE>
<S> <C> <C>
DELAWARE 4833 13-3993031
(STATE OR OTHER JURISDICTION
OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION)
CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
2290 WEST 8TH AVENUE
HIALEAH, FLORIDA 33010
(305) 884-8200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
OSVALDO F. TORRES, ESQ.
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
TELEMUNDO HOLDINGS, INC.
2290 WEST 8TH AVENUE
HIALEAH, FLORIDA 33010
(305) 884-8200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
PATRICK J. DOOLEY, ESQ.
EDWARD D. SOPHER, ESQ.
AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
590 MADISON AVENUE
NEW YORK, NEW YORK 10022
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
If any of the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
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- --------------------------------------------------------------------------------------------
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING PRICE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT (1) (1) FEE(2)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11 1/2% Senior Discount Notes
Due 2008...................... $218,838,000 58.0% $126,837,075 $37,417
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 of the Securities Act of 1933, as amended.
(2) Calculated pursuant of Rule 457(f)(2) based upon the book value on
September 29, 1998 of the Notes to be received by the Registrant in the
exchange described herein.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES
AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION DATED SEPTEMBER 29, 1998
OFFER TO EXCHANGE
11 1/2% SENIOR DISCOUNT NOTES DUE 2008, SERIES B
FOR AN EQUAL PRINCIPAL AMOUNT AT MATURITY OF
11 1/2% SENIOR DISCOUNT NOTES DUE 2008, SERIES A
OF
TELEMUNDO HOLDINGS, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1998, UNLESS EXTENDED
Telemundo Holdings, Inc., a Delaware corporation ("Holdings"), hereby offers,
upon the terms and subject to the conditions set forth in this Prospectus and
the accompanying letter of transmittal (the "Letter of Transmittal" and,
together with this Prospectus, the "Exchange Offer"), to exchange $1,000
principal amount at maturity of its 11 1/2% Senior Discount Notes due 2008,
Series B (the "New Notes") for each $1,000 principal amount at maturity of its
outstanding 11 1/2% Senior Discount Notes due 2008, Series A (the "Old Notes")
of which $218,838,000 principal amount at maturity is outstanding. The New
Notes will be obligations of Holdings issued pursuant to the indenture under
which the Old Notes were issued (the "Indenture"). The form and terms of the
New Notes are identical in all material respects to the form and terms of the
Old Notes except (i) the New Notes will have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement (as defined) of which this Prospectus is a part, and
thus will not bear legends restricting their transfer pursuant to the
Securities Act, (ii) the holders of the New Notes will not be entitled to
certain rights of holders of the Old Notes under the Registration Rights
Agreement (as defined) which rights will terminate upon the consummation of the
Exchange Offer and (iii) for certain contingent provisions relating to
additional interest. See "The Exchange Offer." The New Notes and the Old Notes
are collectively referred to herein as the "Notes."
The New Notes will mature on August 15, 2008. The New Notes will be issued at
a substantial discount from their principal amount at maturity. The New Notes
will accrete at a rate of 11 1/2%, compounded semiannually, to an aggregate
principal amount of $218,838,000 at August 15, 2003. The New Notes will begin
to accrue cash interest at a rate of 11 1/2% per annum commencing on August 15,
2003, and cash interest will be payable thereafter on February 15 and August 15
of each year, commencing February 15, 2004. The New Notes will be redeemable at
the option of Holdings, in whole or in part, on or after August 15, 2003, at
the redemption prices set forth herein. In addition, at any time and from time
to time prior to August 15, 2001, Holdings may redeem the Notes with the net
cash proceeds of one or more Public Equity Offerings (as defined), at a
redemption price equal to 111 1/2% of the aggregate Accreted Value (as defined)
thereof at the date of redemption; provided that not less than 65% of the
aggregate principal amount at maturity of the Notes originally issued remains
outstanding after any such redemption. See "Description of the Notes--Optional
Redemption." In addition, upon a Change of Control (as defined), each holder of
the Notes will have the right to require Holdings to purchase all or any part
of such holder's Notes at a purchase price equal to 101% of the aggregate
Accreted Value thereof at the date of purchase, if such purchase occurs prior
to August 15, 2003, or 101% of the aggregate principal amount plus accrued and
unpaid interest, if any, to the date of purchase, if such purchase occurs
thereafter. See "Description of the Notes--Change of Control." There can be no
assurance that in the event of a Change of Control, Holdings will have, or will
have access to, sufficient funds or will be contractually permitted under the
terms of outstanding indebtedness, including the New Credit Facilities (as
defined), to pay the required purchase price for any Notes. See "Risk Factors--
Change of Control."
(Continued on next page)
-----------
SEE "RISK FACTORS" BEGINNING ON PAGE 17 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS PRIOR TO TENDERING
THEIR OLD NOTES IN THE EXCHANGE OFFER.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is , 1998
<PAGE>
The New Notes will be general unsecured obligations of Holdings ranking
senior in right of payment to all future indebtedness expressly subordinated
to the New Notes and pari passu in right of payment with all other existing
and future unsecured indebtedness and other obligations of Holdings. The New
Notes will be effectively subordinated to all indebtedness and other
obligations (including trade payables) of Holdings' subsidiaries, including
the New Credit Facilities. As of June 30, 1998, on a pro forma basis after
giving effect to the Transactions (as defined), Holdings would have had no
indebtedness other than the Notes, and Holdings' subsidiaries would have had
$304.9 million of indebtedness outstanding (excluding trade payables). See
"Description of the Notes--Ranking."
The New Notes are being offered hereunder in order to satisfy certain
obligations of Holdings contained in the Registration Rights Agreement. The
Old Notes were originally issued and sold on August 12, 1998 in transactions
not registered under the Securities Act in reliance upon the exemption
provided in Section 4(2) of the Securities Act. Accordingly, the Old Notes may
not be reoffered, resold or otherwise pledged, hypothecated or transferred in
the United States unless so registered or unless an applicable exemption from
the requirements of the Securities Act is available. Based upon
interpretations by the staff of the Securities and Exchange Commission (the
"SEC" or the "Commission") set forth in no-action letters issued to unrelated
third parties, Holdings believes that New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold or
otherwise transferred by holders thereof (other than any "Restricted Holder,"
being (i) a broker-dealer who purchases such Old Notes directly from Holdings
to resell pursuant to Rule 144A or any other available exemption under the
Securities Act or (ii) a person that is an affiliate of Holdings within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act,
provided that such New Notes are acquired in the ordinary course of such
holders' business and such holders are not participating, do not intend to
participate and have no arrangement or understanding with any person to
participate, in a distribution of such New Notes. Eligible holders wishing to
accept the Exchange Offer must represent to Holdings that such conditions have
been met. Each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. The Letter of
Transmittal relating to the Exchange Offer states that by so acknowledging and
by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "Underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of New Notes received in
exchange for Old Notes where such Old Notes were acquired by such broker-
dealer as a result of market-making activities or other trading activities.
Holdings has agreed that, for a period of 180 days after the Expiration Date
(as defined), it will make this Prospectus available to any broker-dealer for
use in connection with any such resale. See "The Exchange Offer" and "Plan of
Distribution."
Any Old Notes not tendered and accepted in the Exchange Offer will remain
outstanding. To the extent that Old Notes are tendered and accepted in the
Exchange Offer, a holder's ability to sell untendered Old Notes could be
adversely affected. Following consummation of the Exchange Offer, the holders
of Old Notes will continue to be subject to the existing restrictions on
transfer thereof and Holdings will have no further obligation to such holders
to provide for the registration under the Securities Act of the Old Notes. See
"Risk Factors--Consequences of the Exchange Offer on Non-Tendering Holders of
the Old Notes."
There is no public market for the Old Notes or the New Notes and there can
be no assurance that an active trading market for the New Notes will develop
or be sustained. Although the Initial Purchasers (as defined) have advised the
Company that they currently intend to make a market in the New Notes, they are
not obligated to do so and any market making may be discontinued at any time.
The Company does not intend to list the New Notes on any national securities
exchange or apply for quotation through any automated quotation system. See
"Risk Factors--No Prior Public Market; Possible Volatility of New Note Price.
Holdings will not receive any proceeds from the Exchange Offer. See "Use of
Proceeds." Holdings will accept for exchange any and all Old Notes that are
validly tendered on or prior to the Expiration Date (as defined). The exchange
of New Notes for Old Notes will be made promptly following the Expiration
Date.
i
<PAGE>
Tenders of Old Notes may be withdrawn at any time prior to the Expiration
Date. The Exchange Offer is not conditioned upon any minimum principal amount
of Old Notes being tendered for exchange. However, the Exchange Offer is
subject to certain conditions which may be waived by Holdings. See "The
Exchange Offer." Holdings has agreed to pay the expenses of the Exchange Offer
(which shall not include the expenses of any holder of the New Notes in
connection with resales of the New Notes).
The New Notes will be issued in the form of one or more fully registered
Global Notes (as defined), which will be deposited with, or on behalf of, The
Depository Trust Company ("DTC" or the "Depositary") and registered in the
name of the Depositary or its nominee. Beneficial interests in the Global
Notes will be shown on, and transfers thereof will be effected through,
records maintained by the Depositary or its nominee, and its participants.
After the initial issuance of the Global Notes, New Notes in certificated form
will be issued in exchange for the Global Notes only under limited
circumstances as set forth in the Indenture. See "Book-Entry, Delivery and
Form."
----------------
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL HOLDINGS ACCEPT SURRENDERS
FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH THE
EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
----------------
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THIS EXCHANGE OFFER COVERED BY THIS PROSPECTUS OR THE
ACCOMPANYING LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY HOLDINGS.
THIS PROSPECTUS AND THE ACCOMPANYING LETTER OF TRANSMITTAL DOES NOT CONSTITUTE
AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE NEW NOTES IN ANY
JURISDICTION WHERE OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE
ACCOMPANYING LETTER OF TRANSMITTAL, NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE
IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF HOLDINGS SINCE
THE DATE HEREOF.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). All statements, other than
statements of historical facts, included in this Prospectus, including without
limitation, certain statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" and "Business" and located elsewhere herein regarding the Company's
operations, financial position and business strategy, may constitute forward-
looking statements. In addition, forward-looking statements generally can be
identified by the use of forward-looking terminology such as "may," "will,"
"expect," "intend," "estimate," "anticipate," "believe" or "continue" or the
negative thereof or variations thereon or similar terminology. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable at this time, it can give no assurance that such
expectations will prove to have been correct. Important factors that could
cause actual results to differ materially
ii
<PAGE>
from the Company's expectations ("cautionary statements") are disclosed in
this Prospectus, including without limitation, in conjunction with the
forward-looking statements included in this Prospectus and under "Risk
Factors" and "Management's Discussion and Analysis of Results of Operations
and Financial Condition." All subsequent written or oral forward-looking
statements attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by the cautionary statements.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (the "Registration Statement") under the Securities Act with respect to
the New Notes being offered by this Prospectus. This Prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules thereto, certain portions of which have been omitted
pursuant to the rules and regulations of the Commission. Statements made in
this Prospectus as to the contents of any contract, agreement or other
document are not necessarily complete. With respect to each such contract,
agreement or other document filed or incorporated by reference as an exhibit
to the Registration Statement, reference is made to such exhibit for a more
complete description of the matter involved, and each such statement is
qualified in its entirety by such reference.
The Registration Statement and the exhibits and schedules thereto may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and will also be available for inspection and copying at the
regional offices of the Commission located at 7 World Trade Center, New York,
New York 10048 and at 500 West Madison Street (Suite 1400), Chicago, Illinois
60661. Copies of such material may also be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. The Commission maintains a web site (http://www.sec.gov)
that contains reports, proxy statements and other information regarding
registrants that file electronically with the Commission. Under the terms of
the Indenture, Holdings has agreed that, whether or not it is required to do
so by the rules and regulations of the Commission, for so long as any of the
Notes remain outstanding, it will furnish to the Trustee and file with the
Commission (unless the Commission will not accept such a filing) (i) all
quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if Holdings
was required to file such forms, including a "Management's Discussion and
Analysis of Results of Operations and Financial Condition" and, with respect
to the annual information only, a report thereon by the Company's certified
independent auditors and (ii) all reports that would be required to be filed
with the Commission on Form 8-K if Holdings was required to file such reports.
In addition, for so long as any of the Notes remain outstanding, Holdings has
agreed to make available to any prospective purchaser of the Notes or
beneficial owner of the Notes in connection with any sale thereof the
information required by Rule 144A(d)(4) under the Securities Act.
iii
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and consolidated financial
statements, including the notes thereto, included elsewhere in this Prospectus.
Telemundo Holdings, Inc. ("Holdings") was formed as a holding company for the
acquisition of Telemundo Group, Inc. ("Telemundo") and its subsidiaries through
the Merger (as defined), which was consummated on August 12, 1998. References
in this Prospectus to the "Company" include Holdings, the issuer of the New
Notes offered hereby, and Telemundo and its subsidiaries. For purposes of this
Prospectus, unless the context requires otherwise, (i) references to the United
States exclude Puerto Rico and (ii) "Market Area" or "DMA" refers to Designated
Market Area, a term developed by Nielsen Media Research, Inc. ("Nielsen TV")
and used by the television industry to describe a geographically distinct
television market.
THE COMPANY
The Company is one of two national Spanish-language television broadcast
companies currently operating in the United States. The Company owns and
operates seven full-power UHF stations serving the seven largest Hispanic
Market Areas in the United States--Los Angeles, New York, Miami, San Francisco,
Chicago, San Antonio and Houston. Four of these markets are among the five
largest general Market Areas in the United States. The Company also owns and
operates the leading full-power television station and related production
facilities in Puerto Rico. The Company's stations broadcast a wide variety of
network programming, including movies, telenovelas (soap operas), talk shows,
entertainment programs, national and international news, music and sporting
events. In addition, the Company supplements its network programming with local
programming focused on local news and community events.
Prior to the Merger, the Company produced and acquired its network
programming through its network operations (the "Telemundo Network"), which
provided programming 24-hours a day to Telemundo's owned and operated stations
and network affiliates. In connection with the Merger, the Company sold (the
"Network Sale") its network operations, which consisted of substantially all of
the programming and production assets of the Telemundo Network, to Telemundo
Network Group LLC (the "Network Company"), a recently formed company which is
equally owned by a subsidiary of Sony Pictures Entertainment Inc. and a
subsidiary of Liberty Media Corporation. The Network Company also entered into
an affiliation agreement with the Company and related affiliation agreements
with the Company's owned and operated stations (collectively, the "Affiliation
Agreement"), pursuant to which the Network Company provides network programming
to the Company, and the Company and the Network Company have agreed to pool and
allocate local, national spot and network advertising revenues on a
predetermined basis. See "Business--Affiliation Agreement." The Network Company
currently serves 62 markets in the United States, including the 37 largest
Hispanic markets, and reaches approximately 85% of all U.S. Hispanic
households.
The Company believes that it will benefit significantly from the global
production, programming and distribution expertise of Sony Pictures
Entertainment Inc. ("Sony Pictures") and the diverse programming and cable
distribution capabilities of Liberty Media Corporation ("Liberty"). The Company
expects that Sony Pictures and Liberty will provide (i) a source of high-
quality network programming, the expenses associated with which will be borne
entirely by the Network Company, (ii) access to significant national sales and
marketing resources, (iii) a favorable revenue sharing arrangement pursuant to
the Affiliation Agreement and (iv) greater market penetration through increased
cable television coverage. As a result of the reduction in operating costs due
to the Network Sale and the favorable effect of the revenue sharing
arrangement, for the twelve months ended June 30, 1998, after giving pro forma
effect to the Merger, the Network Sale and the related transactions, the
Company would have had net revenue of $154.8 million and EBITDA after minority
interest (as defined) of $52.8 million, as well as substantially improved
operating margins as compared to historical levels.
1
<PAGE>
TELEVISION STATIONS
The Company owns and operates eight full-power and 15 low-power Spanish-
language television stations in the United States and Puerto Rico. The
following table sets forth certain information about the Company's owned and
operated full-power Spanish-language television stations.
<TABLE>
<CAPTION>
NUMBER OF
RANKING OF RANKING OF OTHER SPANISH-
NUMBER OF MARKET AREA MARKET AREA LANGUAGE
HISPANIC HISPANICS BY NUMBER BY NUMBER TELEVISION
TELEVISION AS A PERCENTAGE OF HISPANIC OF TOTAL STATIONS
MARKET AREA STATION HOUSEHOLDS IN OF TOTAL TELEVISION TELEVISION OPERATING IN
SERVED AND CHANNEL MARKET AREA(1) POPULATION(2) HOUSEHOLDS(1) HOUSEHOLDS(1) MARKET AREA(3)
- ----------------- ------------- -------------- --------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Los Angeles, CA KVEA (Ch. 52) 1,351,000 37% 1 2 2
New York, NY WNJU (Ch. 47) 1,023,000 18% 2 1 1
Miami, FL WSCV (Ch. 51) 451,000 37% 3 16 3
San Francisco, CA KSTS (Ch. 48) 301,000 18% 4 5 1
Chicago, IL(4) WSNS (Ch. 44) 293,000 13% 5 3 1
San Antonio, TX KVDA (Ch. 60) 283,000 52% 6 38 2
Houston, TX KTMD (Ch. 48) 278,000 23% 7 11 1
San Juan, PR WKAQ (Ch. 2) 1,145,000(5) -- -- -- 6
</TABLE>
- --------
(1) Estimated by Nielsen TV as of January 1, 1998.
(2) Claritas, Inc., 1997, derived from U.S. Census Bureau data and other
government statistics.
(3) The Company and each of its Spanish-language competitors broadcast over
UHF, except in Puerto Rico, where WKAQ and its three major competitors
broadcast over VHF.
(4) The Company owns a 74.5% interest in WSNS through a joint venture.
(5) Mediafax, Puerto Rico Market Data, December 1997.
In addition to its 15 owned and operated low-power television stations
("LPTVs"), the Company has received permission from the Federal Communications
Commission ("FCC") to build two additional LPTVs. LPTVs and "translator
stations" generally operate at significantly lower levels of power than full-
power stations. In addition, their signals generally cover smaller areas than
those covered by full-power stations and may not cover the full Market Area in
which they are located. LPTVs extend the Company's and the Network Company's
coverage in areas where the Company does not own a full-power television
station or where the Network Company does not have a network affiliate. The
Company's low-power television stations operate with minimal staff and
generally do not originate programming or have their own sales forces. See
"Risk Factors--Impact of New Technologies" and "Business--FCC Regulation."
HISPANIC MARKET OVERVIEW
The Hispanic population in the United States, the fifth largest Hispanic
population in the world, is growing at approximately five times the rate of the
non-Hispanic U.S. population. By the year 2010, the Hispanic population in the
United States is projected by the U.S. Census Bureau to reach approximately
41.1 million people, accounting for approximately 13.8% of the total population
of the United States, which would represent the country's largest minority
group. Hispanics in the United States historically have tended to retain
Spanish as their dominant language. The 1997-1998 Nielsen Enumeration Study
indicates that approximately 48% of U.S. Hispanic households speak
predominantly Spanish. Consequently, many Hispanics in the United States rely
on Spanish-language media as an important, and often the exclusive, source of
news and information as well as entertainment.
Management believes that, in addition to the market's growth and the unique
characteristics of the population, several factors make the U.S. Hispanic
market attractive to advertisers. First, the Hispanic population in the United
States is already a large market segment, with annual purchasing power in
excess of $260 billion. Second, U.S. Hispanic households on average tend to be
larger and younger and to spend a greater percentage of
2
<PAGE>
their total household income on consumer products than non-Hispanic households.
Furthermore, the U.S. Hispanic population is more concentrated geographically,
with over 50% of all Hispanics residing in the seven largest Hispanic Market
Areas.
According to Hispanic Business Magazine, total advertising expenditures
directed towards Spanish-language media were estimated to have increased from
approximately $830 million in 1993 to approximately $1.4 billion in 1997,
representing a compounded annual growth rate of 14% over the four-year period.
More recently, total advertising expenditures directed towards Spanish-language
media increased approximately 17% from 1996 to 1997, with over half of these
expenditures spent on Spanish-language television. Despite the rapid growth,
advertising expenditures directed to the Hispanic television market still
represent less than 1.7% of all television advertising in the United States.
However, based on Nielsen TV data, the Company estimates that approximately 4%
of total television viewing is of Spanish-language television. Approximately
80% of U.S. Hispanic television households view Spanish-language television,
and aggregate viewing of Spanish-language television increased by approximately
33% from 1993 to 1997, as compared to a decrease of approximately 13% for the
general market English-language television broadcast networks during the same
period. As a result, the Company believes that major advertisers such as The
Procter & Gamble Co., AT&T Corp., Sears, Roebuck & Co., General Motors
Corporation and McDonald's Corporation have found that Spanish-language
advertising is a more cost-efficient means to target this growing audience than
English-language broadcast media. See "Business--Sales and Marketing."
AFFILIATION WITH SONY PICTURES AND LIBERTY
The Company is owned by Sony Pictures, Liberty and Station Partners, LLC
("Station Partners"). Each of Sony Pictures and Liberty have made significant
investments to acquire their interests in the Company and the Network Company
and have agreed to make additional significant contributions of capital and
other resources to the Network Company. Sony Pictures, a subsidiary of Sony
Corporation, is a global entertainment company whose operations include motion
picture production and distribution, television channels, production and
syndication and home entertainment. Sony Pictures has demonstrated its
expertise in television programming and marketing and currently has ownership
interests in 24 international television channels, nine of which are in Latin
America. The Company has been advised that Sony Pictures expects its Telemundo
investment to be an integral part of Sony Pictures' strategy to serve domestic
and international Spanish-language markets.
Liberty is the programming unit of Tele-Communications, Inc. ("TCI"), one of
the leading cable and telecommunications companies in the United States, and
owns interests in numerous globally branded entertainment and electronic
retailing networks. Liberty invests in and manages entities engaged in the
production, acquisition and distribution of branded entertainment and
informational programming and software, including multimedia products. On June
24, 1998, TCI and AT&T Corp. ("AT&T") announced that they had entered into an
Agreement and Plan of Restructuring and Merger pursuant to which TCI will
become a wholly owned subsidiary of AT&T (the "AT&T/TCI Merger"). See
"Business--Affiliation with Sony Pictures and Liberty."
The Company expects that Sony Pictures and Liberty will provide (i) a source
of high-quality network programming, (ii) access to significant national sales
and marketing resources, (iii) a favorable revenue sharing arrangement pursuant
to the Affiliation Agreement and (iv) greater market penetration through
increased cable television coverage.
SOURCE OF HIGH-QUALITY PROGRAMMING. Pursuant to the Affiliation Agreement,
the Network Company provides all network programming to the Company, the
expenses associated with which are borne entirely by the Network Company. The
Company believes that with the support of Sony Pictures' vast production
resources and library, which contains over 3,500 movie titles and 35,000 series
episodes, together with Liberty's access to programming, the Network Company
will be a valuable source of innovative and high-quality programming.
3
<PAGE>
Sony Pictures is one of the premiere producers of network and syndicated
television programming in the world, and has produced or distributed such
programs as Seinfeld, Mad About You, Party of Five, Days of Our Lives, Wheel of
Fortune and Jeopardy. Sony Pictures has also recently produced such movies as
The Mask of Zorro, Men In Black, Air Force One, As Good As It Gets and Jerry
Maguire. In addition, Liberty will provide access to sports and other
programming from its numerous investments in cable channels, including Fox
Sports Americas and Discovery Channel.
The Network Company is expected to produce original and innovative
programming, as well as utilize Sony Pictures' production resources and library
and Liberty's access to programming to supplement and enhance the Company's
schedule. The Network Company is also expected to adapt certain proven sitcom,
game-show and drama formats to create original Spanish-language programming
which will be more culturally relevant to Hispanics in the United States than
currently available Spanish-language programming.
NATIONAL SALES AND MARKETING RESOURCES. Pursuant to the Affiliation
Agreement, the Network Company is responsible for the sale of all network
advertising time, as well as the sale of national spot advertising time on
behalf of network affiliated stations (including the Company's owned and
operated stations). While the Network Company conducts its own sales and
marketing activities, Columbia Television Advertiser Sales, Sony Pictures'
national advertising sales and marketing affiliate, is expected to provide
advertising assistance to the Network Company. The Company believes that the
Network Company will be able to leverage such national and international
experience, relationships and other advertising and marketing resources to
enhance the Network Company's sales and marketing efforts.
REVENUE SHARING. Pursuant to the Affiliation Agreement, the Company and the
Network Company have agreed to pool and allocate local, national spot and
network advertising revenues on a predetermined basis. As a result, the Company
receives a formula-based percentage of the revenues that are generated by the
Network Company from the sale of advertising time on its network of affiliated
stations (including the Company's owned and operated stations). The revenue
sharing arrangement, together with the reduction in programming and other
operating expenses resulting from the Network Sale, significantly improves pro
forma operating margins and should permit the Company to apply greater cash
resources to improve its local programming, marketing and advertising efforts.
See "Business--Affiliation Agreement."
CABLE CARRIAGE. Pursuant to a carriage agreement (the "Carriage Agreement"),
a subsidiary of TCI will agree to provide incremental cable carriage to the
Network Company through its extensive cable distribution infrastructure. The
Company expects that the Carriage Agreement, together with Liberty's
comprehensive cable experience and relationships, will increase the market
coverage of the Network Company. See "Business--Carriage Agreement."
BUSINESS STRATEGY
The Spanish-language television market in the United States is currently
served by only two national television broadcast companies, Univision
Communications, Inc. ("Univision") and the Company. The Company believes that
since 1993, it has lost market share to Univision due to the Company's limited
programming, production and financial resources, and as a result of certain
exclusive programming relationships Univision has with Televisa and Venevision
(each as defined). See "Risk Factors--Competition." The Company has developed
an operating strategy that is designed to improve ratings and audience share
and result in increased revenue and EBITDA. The key components to the Company's
strategy include the following:
LEVERAGE RELATIONSHIP WITH SONY PICTURES AND LIBERTY. The Company intends to
fully leverage its relationship with Sony Pictures and Liberty in order to gain
access to a source of high-quality network programming and significant national
sales and marketing resources and to obtain greater market penetration through
increased cable television coverage.
4
<PAGE>
Improve Programming. For over 30 years, the U.S. Spanish-language
television market has followed the traditional programming format
originated in Mexico, which involves broadcasting primarily telenovelas
throughout the day and almost exclusively during prime time. This
programming format offers largely imported programming from Mexico and
other Latin American countries, which has the effect of ignoring large
segments of U.S. Spanish-language viewers, primarily younger and male
audiences. Independent research confirms that U.S. Hispanic audiences are
seeking a more varied and culturally relevant alternative to the
telenovela.
The Company believes that as a result of the Network Company's
relationship with Sony Pictures and Liberty, the Network Company will be
able to provide the Company with a more diverse and compelling product that
is tailored specifically for Hispanics in the United States. The Company
expects that the Network Company will offer new categories and formats of
high-quality programming, in addition to the telenovela, that have not
previously been available to the Hispanic audience, focusing on programming
that both reflects and impacts the lifestyles of Hispanics in the United
States. Examples of such new Spanish-language programming include action
and adventure programs such as Angeles and Reyes & Rey and game shows such
as Buscando Parejas (The Dating Game) and Los Recien Casados (The
Newlyweds). The Company also expects that the Network Company will
broadcast in the Spanish language major motion picture releases from Sony
Pictures' library. These programming initiatives will be initially focused
on prime time slots, which the Company believes represent the greatest
growth opportunity and generate the majority of advertising revenues.
Enhance Marketing Efforts and Advertising Presence. The Company believes
that the Telemundo brand name is well known and well respected in the
Hispanic community. The Company and the Network Company intend to enhance
Telemundo's image by repositioning Telemundo as a more contemporary
network. This marketing strategy includes committing greater resources to
its marketing efforts, creating a new and distinct brand identity,
developing and investing in strategic advertising and promotion and
improving overall public relations. In addition, the Company and the
Network Company have identified key advertising sales initiatives,
including cultivating new accounts, offering competitive packages and
services and creating program sponsorships and product integration
programs. The Company believes that both the Network Company and the
Company could increase their respective shares of the advertising market by
simply increasing their visibility in the market.
Increase Market Penetration. The Carriage Agreement, which will provide
for incremental cable carriage of the Network Company's programming over
TCI's extensive cable systems, is expected to increase the market
penetration of the Network Company. The Company believes that the increased
market penetration, together with the new programming and marketing
initiatives, will result in increased audience share and revenues for the
Network Company and the Company.
STRENGTHEN LOCAL IDENTITY. The Company believes that local programming,
particularly strong coverage of news and community affairs, enhances local
presence, builds viewer loyalty and ultimately increases viewership levels.
Accordingly, the Company plans to increase spending on local programming and
produce new local programming, as well as enhance coverage of local news and
community affairs. In addition, the Company intends to reduce the level of paid
programming (infomercials), which the Company believes will also result in
improved viewer loyalty and further increase viewership.
THE MERGER AND RELATED TRANSACTIONS
On August 12, 1998, the Merger was consummated in accordance with the
Agreement and Plan of Merger (the "Merger Agreement"), dated November 24, 1997,
among Holdings, TLMD Acquisition Co. ("TLMD Acquisition"), a wholly owned
subsidiary of Holdings, and Telemundo. Pursuant to the Merger Agreement, TLMD
Acquisition was merged with and into Telemundo (the "Merger"), with Telemundo
being the surviving corporation and becoming a wholly owned subsidiary of
Holdings.
5
<PAGE>
The aggregate consideration paid in connection with the Merger (based on a
purchase price of $44.12537 per share, inclusive of interest for the period
commencing on July 30, 1998 and ending on August 11, 1998, and including the
refinancing of certain existing indebtedness of Telemundo and transaction fees
and expenses), was approximately $777.6 million. Of this amount, $300.0 million
was provided by borrowings under the New Credit Facilities, $125.0 million was
provided from the proceeds of the offering of the Old Notes (the "Offering"),
$274.0 million was provided by the Equity Contributions (as defined) and $74.0
million was provided from the proceeds of the Network Sale. See "--Sources and
Uses of Funds" and "Certain Relationships and Related Transactions--
Transactions Related to the Merger--Equity Contributions."
Holdings owns 100% of Telemundo's outstanding capital stock. The common stock
of Holdings is owned 24.95% by Sony Pictures, 24.95% by Liberty and 50.1% by
Station Partners. Station Partners is owned 68% by Apollo Investment Fund III,
L.P. ("Apollo Investment"), which may be deemed to be an affiliate of TLMD
Partners II, L.L.C. ("TLMD II"), a significant stockholder of Telemundo prior
to the Merger, and 32% by Bastion Capital Fund, L.P. and/or its affiliates
("Bastion"), a significant stockholder of Telemundo prior to the Merger.
New Credit Facilities. Telemundo has entered into new credit facilities (the
"New Credit Facilities") providing for aggregate borrowings of up to $350.0
million, which are guaranteed by Holdings and substantially all of Telemundo's
wholly owned domestic subsidiaries. In connection with the New Credit
Facilities, Telemundo terminated its revolving credit facility that was
existing prior to the Merger (the "Old Credit Facility"). See "Description of
Certain Indebtedness--New Credit Facilities."
Equity Contributions. In connection with the Merger, Holdings received equity
contributions (the "Equity Contributions") aggregating $274.0 million in cash
from Sony Pictures, Liberty, Apollo Investment and Bastion. The Equity
Contributions were contributed by Holdings to TLMD Acquisition to fund a
portion of the consideration paid in the Merger. See "Certain Relationships and
Related Transactions--Transactions Related to the Merger--Equity
Contributions."
Network Sale. The Company also sold its network operations which consisted of
substantially all of the programming and production assets of the Telemundo
Network to the Network Company for $74.0 million. The Network Company and the
Company have entered into the Affiliation Agreement pursuant to which the
Network Company provides network programming to the Company, and the Company
and the Network Company have agreed to pool and allocate local, national spot
and network advertising revenues on a predetermined basis. See "Business--
Affiliation Agreement" and "Certain Relationships and Related Transactions--
Transactions Related to the Merger--Network Sale and Affiliation Agreement."
Tender Offer. On August 12, 1998, TLMD Acquisition purchased approximately
$191.7 million aggregate principal amount of Telemundo's 10 1/2% Senior Notes
due 2006 (the "10 1/2% Notes") pursuant to an offer to purchase (as amended on
July 20, 1998, the "Tender Offer").
The Offering was consummated substantially contemporaneously with the Merger,
the Equity Contributions, the Network Sale, the Tender Offer and initial
borrowings under the New Credit Facilities (the Offering, the Merger, the
Equity Contributions, the Network Sale, the Tender Offer, the New Credit
Facilities and the related transactions are collectively referred to herein as
the "Transactions").
6
<PAGE>
The following table sets forth the approximate sources and uses of funds in
connection with the Transactions on a pro forma basis as if the Transactions
had been consummated on June 30, 1998.
SOURCES AND USES OF FUNDS
(DOLLARS IN MILLIONS)
<TABLE>
<S> <C>
SOURCES OF FUNDS
----------------
New Credit Facilities..... $300.0(a)
Assumed Capital Leases.... 4.6
Old Notes................. 125.0
Equity Contributions...... 274.0
Network Sale.............. 74.0
------
Total Sources........... $777.6
======
</TABLE>
<TABLE>
<S> <C>
USES OF FUNDS
-------------
Merger Consideration....... $538.4 (b)
Option and Warrant
Proceeds.................. (20.1)(c)
------
518.3
Refinance 10 1/2% Notes.... 191.7
Assumed Capital Leases..... 4.6
Repay Other Indebtedness... 0.5 (d)
Fees, Expenses and Other... 62.5 (e)
------
Total Uses............... $777.6
======
</TABLE>
- --------
(a) Excludes additional availability of up to $50.0 million under the Revolving
Credit Facility (as defined).
(b) Includes interest on the purchase price for the equity of Telemundo for the
period commencing on July 30, 1998 and ending on August 11, 1998, the day
before the date on which the Merger was completed. See "Certain
Relationships and Related Transactions--Transactions Related to the
Merger--Merger Agreement" and "--Equity Contributions."
(c) The merger consideration was reduced by the exercise price of options and
warrants converted in connection with the Merger.
(d) Reflects amounts outstanding and termination fees under the Old Credit
Facility as of June 30, 1998 and the refinancing of approximately $200,000
principal amount of Telemundo's 10 1/4% Senior Notes due 2001 (the "10 1/4%
Notes") which were outstanding prior to the Merger.
(e) Includes fees and expenses incurred in connection with the Transactions,
including premiums paid in connection with the Tender Offer.
7
<PAGE>
[OWNERSHIP OF THE COMPANY CHART APPEARS HERE]
- --------
(a) Station Partners is owned by Apollo Investment (68%) and Bastion (32%).
Station Partners owns 50.1% of Holdings with Apollo Investment indirectly
owning 34.06% and Bastion indirectly owning 16.04% of Holdings.
(b) Liberty has granted Station Partners a proxy to vote all of its shares of
Holdings' common stock. As a result, Station Partners has the right to vote
75.05% of the shares of Holdings' common stock.
8
<PAGE>
SUMMARY OF TERMS OF THE EXCHANGE OFFER
The Exchange Offer relates to the exchange of up to $218,838,000 aggregate
principal amount at maturity of Old Notes for up to an equal aggregate
principal amount at maturity of New Notes. The form and terms of the New Notes
are identical in all material respects to the form and terms of the Old Notes
except (i) the New Notes will have been registered under the Securities Act,
(ii) the holders of the New Notes will not be entitled to certain rights of
holders of the Old Notes under the Registration Rights Agreement and (iii) for
certain contingent provisions relating to additional interest.
The Exchange Offer.......... $1,000 principal amount at maturity of New Notes
will be issued in exchange for each $1,000
principal amount at maturity of Old Notes validly
tendered pursuant to the Exchange Offer. The
exchange of New Notes for Old Notes will be made
with respect to all Old Notes validly tendered
and not withdrawn on or prior to the Expiration
Date promptly following the Expiration Date. As
of , 1998, the Accreted Value of the
Old Notes was $ .
Resale...................... Based upon interpretations by the staff of the
Commission set forth in no-action letters issued
to unrelated third parties, Holdings believes
that New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered
for resale, resold or otherwise transferred by
holders thereof (other than any Restricted
Holder) without compliance with the registration
and prospectus delivery provisions of the
Securities Act, provided that such New Notes are
acquired in the ordinary course of such holders'
business and such holders are not participating,
do not intend to participate and have no
arrangement or understanding with any person to
participate, in a distribution of such New Notes.
See "Shearman & Sterling," SEC No-Action Letter
(available July 2, 1993); "Morgan Stanley & Co.,
Incorporated," SEC No-Action Letter (available
June 5, 1991); and "Exxon Capital Holdings
Corporation," SEC No-Action Letter (available May
13, 1988). Each broker-dealer that receives New
Notes for its own account in exchange for Old
Notes, where such Old Notes were acquired by such
broker-dealer as a result of market-making
activities or other trading activities, must
acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. See
"Exchange Offer" and "Plan of Distribution."
If any person were to participate in the Exchange
Offer for the purpose of distributing securities
in a manner not permitted by the preceding
paragraph, such person could not rely on the
position of the staff of the Commission and must
comply with the prospectus delivery requirements
of the Securities Act in connection with a
secondary resale transaction. Therefore each
holder of Old Notes who accepts the Exchange
Offer must represent in the Letter of Transmittal
that it meets the conditions described above. See
"The Exchange Offer--Purpose and Effects of the
Exchange Offer."
Expiration Date............. 5:00 p.m., New York City time, on ,
1998, unless the Exchange Offer is extended, in
which case the term "Expiration
9
<PAGE>
Date" means the latest date and time to which the
Exchange Offer is extended. See "The Exchange
Offer--Expiration Date; Extensions; Amendments."
Conditions to the Exchange
Offer...................... The Exchange Offer is subject to certain
customary conditions, which may be waived by
Holdings in whole or in part and from time to
time in its sole discretion. See "The Exchange
Offer--Conditions." The Exchange Offer is not
conditioned upon any minimum aggregate principal
amount of Old Notes being tendered for exchange.
Procedure for Tendering Old
Notes...................... Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile,
together with the Old Notes (unless such tender
is being effected pursuant to the procedures for
book-entry transfer described below) to be
exchanged and any other required documentation to
the Exchange Agent (as defined herein) at the
address set forth herein and therein. See "The
Exchange Offer--Procedure for Tendering."
Special Procedures for
Beneficial Owners.......... Any beneficial owner whose Old Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender in the Exchange Offer
should contact such registered holder promptly
and instruct such registered holder to tender on
such beneficial owner's behalf. If such
beneficial owner wishes to tender on his or her
own behalf, such beneficial owner must, prior to
completing and executing the Letter of
Transmittal and delivering his or her Old Notes,
either make appropriate arrangements to register
ownership of the Old Notes in such holder's name
or obtain a properly completed bond power from
the registered holder. The transfer of record
ownership may take considerable time and may not
be able to be completed prior to the Expiration
Date. See "The Exchange Offer--Procedure for
Tendering."
Guaranteed Delivery
Procedures................. Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes,
the Letter of Transmittal or any other documents
required by the Letter of Transmittal to the
Exchange Agent prior to the Expiration Date must
tender their Old Notes according to the
guaranteed delivery procedures set forth in "The
Exchange Offer--Guaranteed Delivery Procedures."
Withdrawal Rights........... Tenders of Old Notes may be withdrawn at any time
prior to the Expiration Date. See "The Exchange
Offer--Withdrawal of Tenders."
10
<PAGE>
Acceptance of Old Notes and
Delivery of New Notes...... Holdings will accept for exchange any and all Old
Notes which are validly tendered in the Exchange
Offer prior to the Expiration Date. The New Notes
issued pursuant to the Exchange Offer will be
delivered promptly following the Expiration Date.
See "The Exchange Offer--Terms of the Exchange
Offer."
Consequence of Failure to
Exchange................... Holders of Old Notes who do not exchange their
Old Notes for New Notes pursuant to the Exchange
Offer will continue to be subject to the
restrictions on transfer of such Old Notes as set
forth on the legend thereon. In addition, if the
Exchange Offer is consummated, Holdings does not
intend to file further registration statements
for the sale or other disposition of the Old
Notes. See "Risk Factors--No Public Market for
the Notes; Possible Volatility of New Note Price"
and "--Consequences of the Exchange Offer on Non-
Tendering Holders of Old Notes."
Registration Rights
Agreement; Effect on
Holders.................... The Old Notes were sold by Holdings on August 12,
1998 to Credit Suisse First Boston Corporation
and CIBC Oppenheimer Corp., as the initial
purchasers (the "Initial Purchasers") pursuant to
a Purchase Agreement dated August 7, 1998 between
Holdings and the Initial Purchasers (the
"Purchase Agreement"). The Initial Purchasers
subsequently sold the Old Notes to qualified
institutional buyers in reliance on Rule 144A
under the Securities Act. Pursuant to the
Purchase Agreement, Holdings and the Initial
Purchasers entered into a Registration Rights
Agreement dated as of August 12, 1998 (the
"Registration Rights Agreement") which grants the
holders of the Old Notes certain exchange and
registration rights. The Exchange Offer is being
made to satisfy this contractual obligation of
Holdings. The holders of New Notes are not
entitled to any exchange or registration rights
with respect to the New Notes. See "The Exchange
Offer--Purpose and Effects of the Exchange
Offer."
Certain U.S. Federal Income
Tax Consequences........... The exchange of Old Notes for New Notes by
tendering holders will not be a taxable exchange
for federal income tax purposes, and such holders
will not recognize any taxable gain or loss or
any interest income for federal income tax
purposes as a result of such exchange. See
"Certain U.S. Federal Income Tax Consequences."
Exchange Agent.............. Bank of Montreal Trust Company, the Trustee under
the Indenture, is serving as exchange agent (the
"Exchange Agent") in connection with the Exchange
Offer. The address of the Exchange Agent is: Bank
of Montreal Trust Company, Wall Street Plaza, 88
Pine Street, New York, New York 10005, Attention:
Reorganization Department. For information with
respect to the Exchange Offer, call (212) 701-
7624.
11
<PAGE>
Use of Proceeds............. Holdings will not receive any cash proceeds from
the exchange of the New Notes for the Old Notes
pursuant to the Exchange Offer. The proceeds to
Holdings from the sale of Old Notes of
approximately $119.0 million (after deducting
discounts and fees and expenses of the Offering)
were applied, together with the Equity
Contributions, borrowings under the New Credit
Facilities and the proceeds of the Network Sale,
to fund the Merger, refinance existing
indebtedness of Telemundo and pay fees and
expenses related to the Transactions. See "--The
Merger and Related Transactions--Sources and Uses
of Funds" and "Use of Proceeds."
12
<PAGE>
SUMMARY DESCRIPTION OF THE NEW NOTES
Securities Offered.......... $218,838,000 aggregate principal amount at matu-
rity of 11 1/2% Senior Discount Notes Due 2008,
Series B.
Maturity Date............... August 15, 2008.
Yield to Maturity;
Interest................... 11 1/2% per annum (computed on a semiannual bond
equivalent basis). The New Notes will accrete at
a rate of 11 1/2%, compounded semiannually, to
100% of the principal amount at maturity byAugust
15, 2003. Except as described herein, no cash in-
terest will accrue on the New Notes prior to Au-
gust 15, 2003. The New Notes will begin to accrue
cash interest at a rate of 11 1/2% per annum com-
mencing on August 15, 2003, and cash interest
will be payable thereafter on February 15 and Au-
gust 15 of each year, commencing February 15,
2004.
Original Issue Discount..... The New Notes are being offered at an original
issue discount for U.S. federal income tax pur-
poses. Thus, although no cash interest will ac-
crue on the New Notes prior to August 15, 2003,
the accretion of original issue discount will be
includible, periodically, in a holder's gross in-
come for U.S. federal income tax purposes in ad-
vance of the receipt of cash payments to which
such income is attributable. See "Certain U.S.
Federal Income Tax Considerations."
Optional Redemption......... The New Notes will be redeemable at the option of
Holdings, in whole or in part, on or after August
15, 2003, at the redemption prices set forth
herein. In addition, at any time and from time to
time prior to August 15, 2001, Holdings may re-
deem the New Notes with the net cash proceeds of
one or more Public Equity Offerings, at a redemp-
tion price equal to 111 1/2% of the aggregate Ac-
creted Value thereof at the date of redemption;
provided that not less than 65% of the aggregate
principal amount at maturity of the New Notes
originally issued remains outstanding after any
such redemption. See "Description of the Notes--
Optional Redemption."
Ranking..................... The New Notes will be general unsecured obliga-
tions of Holdings ranking senior in right of pay-
ment to all future indebtedness expressly subor-
dinated to the New Notes and pari passu in right
of payment with all other existing and future
unsecured indebtedness and other obligations of
Holdings. The New Notes will be effectively sub-
ordinated to all indebtedness and other obliga-
tions (including trade payables) of Holdings'
subsidiaries, including the New Credit Facilities
of Telemundo. As of June 30, 1998, on a pro forma
basis after giving effect to the Transactions,
Holdings would have had no indebtedness other
than the Notes, and Holdings' subsidiaries would
have had $304.9 million of indebtedness outstand-
ing (excluding trade payables). See "Description
of the Notes--Ranking."
13
<PAGE>
Change of Control........... Upon a Change of Control, each holder of the
Notes will have the right to require Holdings to
purchase all or any part of such holder's Notes
at a purchase price equal to 101% of the aggre-
gate Accreted Value thereof at the date of pur-
chase, if such purchase occurs prior to August
15, 2003, or 101% of the aggregate principal
amount plus accrued and unpaid interest, if any,
to the date of purchase, if such purchase occurs
thereafter. See "Description of the Notes--Change
of Control."
Certain Covenants........... The Indenture contains certain covenants that,
among other things, limit the ability of Holdings
and the Restricted Subsidiaries (as defined) to
incur additional indebtedness, make investments
and certain other restricted payments, consummate
asset sales, enter into certain transactions with
affiliates, incur liens, effect asset swaps, or
merge or consolidate with any other person or
sell, assign, transfer, lease, convey or other-
wise dispose of all or substantially all of the
assets of Holdings and the Restricted Subsidiar-
ies taken as a whole. The Indenture also limits
restrictions on the ability of a Restricted Sub-
sidiary to pay dividends or effect certain other
transactions. These covenants are subject to a
number of important qualifications and limita-
tions. See "Description of the Notes--Certain
Covenants."
RISK FACTORS
Holders of Old Notes should carefully consider the specific matters set forth
under "Risk Factors" beginning on page 17, as well as all other information and
data included in this Prospectus, before tendering Old Notes in exchange for
New Notes.
14
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The following presents summary historical consolidated financial data of
Telemundo for the three years ended December 31, 1997, and for the six months
ended June 30, 1997 and 1998, which have been derived from Telemundo's audited
consolidated financial statements for the three years ended December 31, 1997
and the unaudited consolidated financial statements for the six months ended
June 30, 1997 and 1998, respectively. In the opinion of management, the
unaudited consolidated financial data presented herein reflect all adjustments
(consisting of normal recurring accruals only) necessary to fairly present the
information for such periods. The historical financial statements do not
reflect the consummation of the Transactions or the capital structure of the
Company following the Transactions and may not be indicative of results that
would have been reported had the Transactions occurred, nor may it be
indicative of the Company's future financial position or operating results.
Also included is unaudited summary pro forma statement of operations data for
the year ended December 31, 1997 and the six and twelve months ended June 30,
1998, prepared as if the Transactions had occurred on January 1, 1997.
Unaudited summary pro forma balance sheet data as of June 30, 1998, which is
also included, has been prepared as if the Transactions had occurred on such
date. The summary pro forma data does not purport to represent what the
Company's results of operations or financial position would have been if any of
the Transactions had actually occurred at any date, nor does such data purport
to represent the results of operations for any future period. The pro forma
adjustments are based upon available information and certain assumptions that
the Company believes are reasonable.
The summary historical and pro forma consolidated financial data should be
read in conjunction with "Unaudited Pro Forma Condensed Consolidated Financial
Statements," "Selected Historical Consolidated Financial Data," "Management's
Discussion and Analysis of Results of Operations and Financial Condition" and
the historical financial statements of Telemundo and the notes thereto included
elsewhere herein.
15
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
TELEMUNDO HISTORICAL COMPANY PRO FORMA
------------------------------------------------ --------------------------------------
SIX MONTHS YEAR SIX TWELVE
YEAR ENDED DECEMBER 31, ENDED JUNE 30, ENDED MONTHS ENDED MONTHS ENDED
---------------------------- ------------------ DECEMBER 31, JUNE 30, JUNE 30,
1995 1996 1997 1997 1998 1997 1998 1998(A)
-------- -------- -------- -------- -------- ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue............. $169,148 $202,713 $197,588 $ 90,781 $101,536 $148,836 $74,684 $154,806
Operating income
(loss)................. 14,379 29,292 16,114 (91) 1,845 36,973 15,116 39,292
Merger related
expenses............... -- -- (1,707) -- (2,812) -- -- --
Interest expense--net... (14,489) (18,920) (20,849) (10,210) (10,681) (40,000) (20,600) (40,800)
Loss from investment in
and disposal of
TeleNoticias........... (6,355) (5,561) -- -- -- -- -- --
Minority interest....... -- (2,125) (2,808) (1,404) (1,542) (2,808) (1,542) (2,946)
Loss before
extraordinary item..... (10,088) (1,179) (13,444) (13,788) (15,527) (10,036) (9,363) (8,909)
Extraordinary item--
extinguishment of
debt................... -- (17,243) -- -- -- -- -- --
Net loss................ (10,088) (18,422) (13,444) (13,788) (15,527) (10,036) (9,363) (8,909)
OTHER FINANCIAL DATA:
Cash interest expense... $ 12,978 $ 13,855 $ 14,696 $ 7,211 $ 7,389 $ 23,600 $11,800 $ 23,600
Capital expenditures.... 6,719 9,125 11,156 6,424 5,589 4,927 2,341 5,062
Depreciation and
amortization........... 11,642 13,311 13,938 7,043 7,478 16,491 8,245 16,491
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1998
--------------------
HISTORICAL PRO FORMA
---------- ---------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital............................................ $ 35,966 $ 33,918
Broadcast licenses and other intangible assets............. 126,133 569,576
Total assets............................................... 284,985 703,004
Long-term debt (including capital leases).................. 192,882 429,946
Minority interest.......................................... 5,380 5,380
Common stockholders' equity................................ 17,729 203,000
</TABLE>
- --------
(a) Pro forma data for the twelve months ended June 30, 1998 is calculated by
adding the pro forma data presented for the six months ended June 30, 1998
to the pro forma data for the six months ended December 31, 1997.
16
<PAGE>
RISK FACTORS
Key factors affecting current and future operations of the Company include
the factors discussed below. Holders of Old Notes should carefully consider
the following factors in addition to the other information set forth in this
Prospectus before tendering Old Notes in exchange for New Notes.
SUBSTANTIAL LEVERAGE; RESTRICTIVE COVENANTS
The Company has substantial indebtedness. After giving pro forma effect to
the Transactions, the Company's aggregate principal amount of total
indebtedness (including capital leases) at June 30, 1998 would have been
approximately $429.9 million and total stockholders' equity at June 30, 1998
would have been approximately $203.0 million. In addition, on a pro forma
basis after giving effect to the Transactions, earnings would have been
insufficient to cover fixed charges by $4.5 million for the 12 months ended
June 30, 1998. The Indenture and the New Credit Facilities contain various
financial and operating covenants that, among other things, require the
maintenance of certain financial ratios and restrict the ability of the
Company to incur indebtedness, make investments, sell assets and certain other
restrictions. These restrictions, in combination with the leveraged nature of
the Company, could limit the ability of the Company to respond to market
conditions or meet extraordinary capital needs, or could adversely affect the
Company's ability to finance its future operations or capital needs, or engage
in other business activities which could be in the interest of the Company.
See "Description of Certain Indebtedness--New Credit Facilities."
The Company has significant cash interest expense relating to borrowings
under the New Credit Facilities, and a significant amount of the Company's
consolidated cash flow will be required to service its indebtedness. No cash
interest will accrue on the Notes until August 15, 2003. Thereafter, cash
interest will accrue and be payable on the Notes. All of the indebtedness
under the New Credit Facilities will become due prior to the time payments of
principal on the Notes become due. In addition, the Company may be required to
refinance the New Credit Facilities and Holdings may be required to refinance
the Notes at maturity. No assurance can be given that, if required, the New
Credit Facilities or the Notes will be refinanced on terms acceptable to the
Company, if at all. The Company's ability to service its indebtedness will
depend upon the Company's future operating performance, which is subject to
financial, political, business, regulatory, general economic and other
factors, many of which are beyond the Company's control. Since borrowings
under the New Credit Facilities bear interest at rates that will fluctuate
with certain prevailing interest rates, increases in such rates likely will
increase the Company's interest expense with respect to borrowings thereunder
and could have an adverse effect on the Company. There can be no assurance
that the Company's cash flow from operations will be sufficient to enable it
to make payments on its indebtedness, including the Notes.
If the Company were to sustain a decline in its operating results, it could
experience difficulty in complying with the covenants that are contained in
the Indenture, the New Credit Facilities and any other agreements governing
future indebtedness of the Company. The failure to comply with such covenants
could result in an event of default under such agreements, thereby permitting
acceleration of indebtedness incurred pursuant thereto, as well as
indebtedness under other instruments that contain cross-acceleration or cross-
default provisions. In addition, if the Company experienced difficulty in
servicing its indebtedness, including the Notes, it may be forced to examine
alternative strategies that may include actions such as reducing or delaying
capital expenditures, restructuring or refinancing its indebtedness, the sale
of assets or the Company's ownership interest in its subsidiaries or seeking
additional debt and/or equity financings. There can be no assurance that any
of these strategies could be effected on satisfactory terms, if at all. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition--Liquidity and Sources of Capital."
HOLDING COMPANY STRUCTURE; STRUCTURAL AND EFFECTIVE SUBORDINATION; LIMITATION
ON PAYMENT OF FUNDS TO HOLDINGS
Holdings is a holding company and does not have any material operations or
assets other than ownership of the capital stock of its subsidiaries.
Accordingly, the New Notes will be structurally subordinated to all existing
17
<PAGE>
and future liabilities of its subsidiaries, including indebtedness under the
New Credit Facilities. In addition, the New Notes will not be secured by any
of the assets of Holdings or its subsidiaries. Therefore, the New Notes will
be effectively subordinated to all existing and future secured indebtedness of
Holdings to the extent of the value of the assets securing such indebtedness.
The obligations of Telemundo under the New Credit Facilities are guaranteed on
a senior basis by Holdings and by substantially all of Telemundo's wholly
owned domestic subsidiaries, and are secured by substantially all of the
assets of Holdings and such subsidiaries. See "Description of Certain
Indebtedness--New Credit Facilities." In the event of bankruptcy, liquidation
or reorganization of Holdings or any of its subsidiaries or in the event of
acceleration of any indebtedness of any subsidiary of Holdings upon the
occurrence of an event of default, the assets of Holdings or such subsidiary
would be available to pay obligations on the New Notes only after such secured
indebtedness of Holdings or other indebtedness of such subsidiary has been
paid in full. As of June 30, 1998, on a pro forma basis after giving effect to
the Transactions, the aggregate amount of indebtedness (excluding trade
payables) of Holdings' subsidiaries to which the holders of the New Notes
would be structurally subordinated would have been approximately $304.9
million. Holdings and its subsidiaries may incur additional indebtedness in
the future, subject to certain limitations contained in the instruments
governing their indebtedness. Such indebtedness may be incurred by Holdings or
its subsidiaries and may be secured indebtedness.
In addition, as a holding company, Holdings derives substantially all of its
operating income from its subsidiaries. Holdings must rely upon cash flow from
its subsidiaries to generate the funds necessary to meet its obligations,
including the payment of principal of and interest on the New Notes and any
other indebtedness. Holdings' subsidiaries will have no obligation, contingent
or otherwise, to pay interest or principal on Holdings' indebtedness,
including the New Notes, or make any funds available to Holdings. The New
Credit Facilities restrict, and future indebtedness of Telemundo and its
subsidiaries may restrict, the ability of Telemundo and its subsidiaries to
pay dividends to Holdings. However, assuming no default or event of default
under the New Credit Facilities, the New Credit Facilities do not restrict the
ability of Telemundo to pay dividends to Holdings to enable Holdings to make
scheduled payments of cash interest on the New Notes. There can be no
assurance that Holdings will obtain sufficient funds from its subsidiaries in
order to make payments on its indebtedness, including the New Notes. See
"Description of Certain Indebtedness--New Credit Facilities."
HISTORY OF LOSSES
In July 1993, Telemundo consented to the entry of an order for relief under
Chapter 11 of the United States Code (the "Bankruptcy Code") and on December
30, 1994, consummated a plan of reorganization (the "Reorganization") under
the Bankruptcy Code. Although the Company has reported operating income for
each of the three years ended December 31, 1995, 1996 and 1997, it reported
net losses of $10.1 million, $18.4 million and $13.4 million for such years,
respectively. The net loss for 1996 includes the effect of an extraordinary
loss of $17.2 million. In addition, on a pro forma basis after giving effect
to the Transactions, for the year ended December 31, 1997 and for the 12
months ended June 30, 1998, the Company would have incurred a net loss of
$10.0 million and $8.9 million, respectively. There can be no assurance that
the Company will achieve or sustain profitability in the future.
COMPETITION
The broadcasting industry is highly competitive. The Company's owned and
operated television stations face competition for advertising revenue from
other Spanish-language and English-language television broadcasters. The
Company's competitors also include cable television operators, wireless cable
systems, direct broadcast satellite systems, telephone company video systems,
Spanish-language and English-language radio broadcasters and other media
including newspapers, magazines, computer on-line services, movies and other
forms of entertainment and advertising. Many of the Company's competitors are
better capitalized and have greater financial resources and flexibility than
the Company.
The ability of television broadcast stations to generate advertising
revenues depends to a significant degree upon audience ratings. Technological
innovation and the resulting proliferation of programming alternatives,
18
<PAGE>
such as independent broadcast stations, cable television and other multi-
channel competitors, pay-per-view and VCRs have fragmented television viewing
audiences and subjected television broadcast stations to new types of
competition. During the past decade, cable television and independent stations
have captured an increasing market share and overall viewership of general
market broadcast network television has declined.
In the Spanish-language television broadcast market, the Company has faced
significant competition from Univision, which operates the other national
Spanish-language broadcast company in the United States and has a
substantially greater audience share than the Company. In each of the markets
in which the Company owns and operates full-power stations, except Puerto
Rico, the Company's station competes directly with a full-power Univision
station. Together, the Univision stations and the Univision network affiliates
reach a larger percentage of Hispanic viewers in the United States than the
Company's owned and operated stations and the Network Company's network
affiliates and within the last year have attracted as much as 84% of the U.S.
Spanish-language television network audience (as reported by Nielsen TV).
Generally, the competing Univision stations have been operating in their
markets longer than have the Company's stations. Univision also owns
Galavision, a Spanish-language cable network that is reported to serve
approximately 2.5 million Hispanic subscribers, representing approximately 55%
of all Hispanic households that subscribed to cable television in 1997. Both
Grupo Televisa, S.A. de C.V. ("Televisa") and Corporacion Venezolana de
Television, C.A. ("Venevision"), which are significant stockholders of
Univision, have entered into long-term contracts to supply Spanish-language
programming to the Univision and Galavision networks. Televisa is the largest
supplier of Spanish-language programming in the world. Through these program
license agreements, Univision has the right of first refusal to air in the
United States all Spanish-language programming produced by Televisa and
Venevision. These supply contracts currently provide Univision with a
competitive advantage in obtaining programming originating from Mexico and in
targeting U.S. Hispanics of Mexican origin, who account for approximately 63%
of the U.S. Hispanic market. In May 1998, Televisa announced that it may
reduce its ownership interest in Univision by up to 70%. The Company is unable
to predict the effect that such ownership change would have on the broadcast
television market or on the Company's financial condition or future results of
operations.
Further, certain of the Company's stations, particularly in Puerto Rico and
Los Angeles, also face competition on a local level from various independent
Spanish-language television stations. In March 1998, TV Azteca, S.A. de C.V.
("TV Azteca"), one of two Mexican television broadcast companies, announced
its intention to create a third Spanish-language network in the United States.
Increased competition for viewers and revenues may have a material adverse
effect on the Company's financial condition or future results of operations.
The Company also competes with English-language broadcasters for Hispanic
viewers, including the four principal English-language television networks,
ABC, CBS, NBC and Fox, and, in certain cities, the UPN and WB networks. Sony
Pictures and Liberty provide programming to each of the principal English-
language networks. Certain of these and other English-language networks have
begun producing Spanish-language programming and simulcasting certain
programming in English and Spanish. Several cable programming networks,
including HBO, ESPN and CNN, provide Spanish-language services as well. There
can be no assurance that current Spanish-language television viewers will
continue to watch the Company's or any other Spanish-language broadcaster's
programming rather than English-language programming or Spanish-language
simulcast programming. In addition, many of the Company's competitors are
better capitalized and have greater financial resources and flexibility than
the Company. Increased competition for viewers and revenues may have a
material adverse effect on the Company's financial condition or future results
of operations. See "Business--Competition."
CONCENTRATION OF REVENUE FROM WKAQ IN PUERTO RICO
The Company's owned and operated station in Puerto Rico, WKAQ, accounted for
approximately 26% of the Company's net commercial air time sales for the year
ended December 31, 1997. A decline in the revenue of WKAQ could have a
material adverse effect on the Company's financial condition or future results
of operations. The Company expects that the revenues of WKAQ will be adversely
affected as a result of advertisers reducing their spending while businesses
and services, including electricity, are disrupted due to damage caused by
Hurricane Georges in September 1998.
19
<PAGE>
INDUSTRY AND ECONOMIC CONDITIONS; SEASONALITY
The Company's profitability may be affected by numerous factors, including
changes in audience viewing preferences, priorities of advertisers, reductions
in advertisers' budgets, new laws and governmental regulations and policies,
changes in broadcast technical requirements, technological advances, proposals
to eliminate the tax deductibility of certain advertising expenses incurred by
advertisers and changes in the willingness of financial institutions and other
lenders to finance television station acquisitions and operations. The Company
cannot predict which, if any, of these or other factors might have a
significant impact on the television broadcasting industry in the future, nor
can it predict what impact, if any, the occurrence of these or other events
might have on the Company's financial condition or future results of
operations.
Historically, advertising in most forms of media has correlated with the
general condition of the economy. Television broadcasters are also exposed to
the general economic conditions of the local regions in which they operate.
Due to the concentration of revenues from WKAQ in Puerto Rico, the Company may
be adversely affected more than other broadcasters by an economic downturn in
Puerto Rico.
Seasonal revenue fluctuations are common in the television broadcasting
industry and the Company's revenue reflects seasonal patterns with respect to
advertiser expenditures. Increased advertising during the holiday season
results in increases in advertising revenue for the fourth quarter,
particularly in Puerto Rico. As a result, the Company experiences seasonal
fluctuations in its revenue to a greater degree than its direct competitors
and the broadcasting industry in general. Because costs are more ratably
spread throughout the year, the impact of this seasonality on operating income
may be pronounced. See "--Concentration of Revenue from WKAQ in Puerto Rico."
IMPACT OF NEW TECHNOLOGIES
In recent years, the FCC has adopted policies providing for authorization of
new technologies and a more favorable operating environment for certain
existing technologies that have the potential to provide additional
competition for television stations. Further advances in technology such as
video compression, direct broadcast satellites and programming delivered
through fiber optic telephone lines could facilitate the entry of new channels
and encourage the development of increasingly specialized "niche" programming.
In particular, the Company may be affected by the development of digital
television technology ("DTV") and the adoption of standards and regulations
for DTV by the FCC. The FCC recently completed several rulemaking proceedings
in order to implement DTV. Broadcasters are tentatively required to complete
the transition to DTV broadcasting by 2006, subject to biennial reviews to
evaluate the progress of implementation. DTV implementation will impose
significant additional costs on the Company, primarily due to the capital
costs associated with construction of DTV facilities and increased operating
costs both during and after the transition period, and no assurance can be
given that the Company will have adequate financial resources to incur such
costs. In addition, the FCC is currently engaged in a rulemaking proceeding
regarding the application of the must-carry rules to DTV. Moreover,
broadcasters who elect not to engage in DTV broadcasting at an early stage
could suffer a significant competitive disadvantage. The Company is unable to
predict the effect that technological changes will have on the broadcast
television industry or on the Company's financial condition or future results
of operations.
The FCC has acknowledged that DTV channel allotment may involve displacement
of existing low-power television stations, particularly in major television
markets. Accordingly, the Company's existing low-power owned and operated
stations and the Network Company's broadcast affiliates may be materially
adversely affected. The Company's largest low power broadcast station
represents approximately 2.8% of the Company's coverage of the U.S. Hispanic
market. In 1997, the Company's low power broadcast stations collectively
represented less than 1% of total revenues.
In addition, the Balanced Budget Act of 1997 requires (unless the FCC finds
that certain conditions have not been met) broadcasters to return their analog
channels on an expedited basis by 2006 to permit them to be reauctioned to new
licensees. An expedited transition period could require the Company to end
analog transmission before all of its viewers (particularly in the Hispanic
markets which the Company serves) have purchased DTV-compatible reception
equipment.
20
<PAGE>
NETWORK SALE; DEPENDENCE ON PROGRAMMING; AFFILIATION AGREEMENT
Prior to the Merger, the Company produced or acquired and distributed its
network programming through the Telemundo Network to Telemundo's owned and
operated stations and its network affiliates. In connection with the Merger,
the Company sold its network operations to the Network Company and entered
into the Affiliation Agreement. As a result, network programming is provided,
and network and national advertising sales and marketing activities are
conducted, by the Network Company. The Network Sale created certain risks and
uncertainties for the Company, including risks relating to the separation and
independent operation of the Company and the Telemundo Network, which
historically have been integrated. The Company does not control the Network
Company. There can be no assurance that the Company and the Telemundo Network
will be able to successfully operate independently from one another. The
failure of the Network Company to successfully operate its network could have
a material adverse effect on the Company's financial condition or future
results of operations.
In connection with the Network Sale, the Company entered into the
Affiliation Agreement, pursuant to which the Network Company provides
programming to the Company, and the Company and the Network Company have
agreed to pool and allocate local, national spot and network advertising
revenues pursuant to a revenue sharing arrangement. Accordingly, the Company
relies solely on the Network Company for all of its network programming and is
dependent, to a significant extent, on the ability of the Network Company to
generate advertising revenues. The Telemundo network's average share of the
weekday Spanish-language television network audience has declined
significantly to 16% in the second quarter of 1998 as compared to 26% in the
first quarter of 1996. The Spanish-language television market shares for the
Company's stations will be dependent upon the Network Company's ability to
produce or acquire and distribute programming which attracts significant
viewer levels. If the programming provided by the Network Company fails to
attract viewers, each of the Company's and the Network Company's ability to
attract advertisers and generate revenues and profits would be impaired. There
can be no assurance that the programming provided by the Network Company will
achieve or maintain satisfactory viewership levels or maintain current
viewership levels, or that the Company or the Network Company will be able to
generate significant advertising revenues.
The initial term of the Affiliation Agreement is ten years and the Network
Company will have the right to renew for two consecutive five-year terms if
certain performance goals are met. The Affiliation Agreement is terminable by
either party in the event of a "material default of a material provision" (as
defined therein). The termination of the Affiliation Agreement would
constitute an event of default under the New Credit Facilities and the
Indenture and would have a material adverse effect on the Company's financial
condition and results of operations. In addition, the obligations of the
Network Company under the Affiliation Agreement as to a particular station can
be terminated under certain limited circumstances. Such termination, if
materially adverse to the Company, would constitute an event of default under
the New Credit Facilities and the Indenture. See "Business--Affiliation
Agreement" and "Description of the Notes."
DEPENDENCE ON DISTRIBUTION SYSTEM
The Company's stations receive network broadcast feeds by satellite.
Satellites are subject to significant risks that may prevent or impair proper
commercial operations, including satellite defects, launch failure,
destruction and damage and incorrect orbital placement. On May 19, 1998, the
satellite leased by the Telemundo Network experienced a failure which resulted
in the disruption of the Telemundo Network's transmission for a short period
of time. A substitute satellite was made available to transmit the Telemundo
Network's signal. The Network Company recently entered into a new satellite
lease agreement. There can be no assurance that other disruptions of
transmissions will not occur in the future. The operation of the satellite is
outside the control of the Company and the Network Company and a disruption of
the transmissions could have a material adverse effect on the Company's
financial condition or future results of operations.
21
<PAGE>
The Company owns and leases antenna and transmitter space for each of its
owned and operated stations. The loss of certain of these antenna tower leases
could also have a material adverse effect on the financial condition or future
results of operations of the Company.
CERTAIN LITIGATION RELATING TO THE MERGER
The Company is aware of six lawsuits that have been filed relating to the
Merger. Telemundo and its directors are defendants in all of the lawsuits. On
March 5, 1998, the six actions were consolidated for all purposes, and the
complaint entitled Mimona Capital, CA No. 16052-NC was designated as the sole
operative complaint for the consolidated action. The complaint asserts that
the $44.00 per share price to be paid to the stockholders of Telemundo is
inadequate and is not the result of arm's-length negotiations and that the
Merger Agreement serves no legitimate business purpose. To date none of the
defendants has been required to answer, move or otherwise respond to the
complaint and no discovery has been taken. There can be no assurance that the
result of such litigation will not have a material adverse effect on the
Company. See "Business--Legal Proceedings."
GOVERNMENT REGULATION
The television broadcasting industry is subject to extensive and changing
regulation. Among other things, the Communications Act of 1934 (the
"Communications Act") and FCC rules and policies require that each television
broadcaster must operate in compliance with a license issued by the FCC. Each
of the Company's television stations operates pursuant to one or more licenses
issued by the FCC that expire at different times. The Company must apply to
renew these licenses, and third parties may challenge those applications.
Although the Company has no reason to believe that its licenses will not be
renewed in the ordinary course, there can be no assurance that its licenses
will be renewed. See "--Impact of New Technologies" and "Business--FCC
Regulation."
On July 30, 1998, the FCC issued an initial consent to the transfer of
control of certain broadcast licenses to Holdings (the "Initial FCC Consent").
The parties consummated the Transactions on the basis of the Initial FCC
Consent. Any person whose interests are adversely affected by the Initial FCC
Consent has 30 days after public notice thereof to seek reconsideration or
review of the Initial FCC Consent. If no timely petition for reconsideration
or review of the Initial FCC Consent is filed within 30 days thereof and the
FCC does not timely reconsider the action on its own motion within 40 days
thereof, such Initial FCC Consent shall become a final order and shall no
longer be subject to further administrative or judicial review at the close of
business on the 40th day after public notice of the Initial FCC Consent. In
connection with Holdings' application for the Initial FCC Consent, Univision
filed a "Petition to Deny" and a supplement to its "Petition to Deny," which
were denied by the FCC on July 30, 1998. On August 6, 1998, Univision filed an
application (the "Univision Application") seeking review of the Initial FCC
Consent. On August 26, 1998, the Company filed its opposition to the Univision
Application and on September 19, 1998, Univision filed its reply. Although the
Company cannot predict the timing for FCC action on, or the outcome of, the
Univision Application, the Univision Application or any timely judicial appeal
of the FCC decision on the Univision Application may substantially delay the
Initial FCC Consent becoming a final order. See "Certain Relationships and
Related Transactions--Transactions Related to the Merger--Merger Agreement."
A number of the Company's stations serving several markets and many of the
Network Company's affiliates are classified by the FCC as "low-power"
stations. Certain of the Company's owned and operated stations and the Network
Company's affiliates increase their coverage through use of "translators" that
rebroadcast the station's signal. Both low-power and translator stations are
referred to as "LPTV" stations and generally operate at significantly lower
levels of power than full-power stations. Under FCC rules, in addition to its
policies regarding DTV, such LPTV stations operate on a secondary basis, and,
therefore, are subject to displacement by a full-power station or other
facility if one is licensed and they must tolerate defined levels of
electromagnetic interference from full-power stations.
22
<PAGE>
The Telecommunications Act directed the broadcast and cable television
industries to develop and transmit an encrypted rating in all video
programming that, when used in conjunction with the so-called "V-Chip"
technology, would permit the blocking of programs with a common rating. On
March 12, 1998, the FCC voted to accept an industry proposal providing for a
voluntary ratings system of "TV Parental Guidelines" under which all video
programming will be designated in one of six categories in order to permit the
electronic blocking of selected video programming. The FCC has begun a
separate proceeding to address technical issues related to the "V-Chip." The
FCC has directed that all television receiver models with picture screens 13
inches or greater be equipped with "V-Chip" technology under a phased
implementation beginning on July 1, 1999. The Company cannot predict how
changes in the implementation of the ratings system and "V-Chip" technology
will affect the Company's business.
Congress and the FCC currently have under consideration and may in the
future adopt new laws or modify existing laws and regulations and policies
regarding a wide variety of matters, including the adoption of attribution
rules which would further restrict broadcast station ownership, that could
directly or indirectly adversely affect the ownership and operation of the
Company's broadcast properties, as well as the Company's business strategies.
The adoption of various measures could accelerate the existing trend toward
vertical integration in the media and home entertainment industries and cause
the Company to face more formidable competition in the future. The
Telecommunications Act of 1996 (the "Telecommunications Act") modified or
eliminated restrictions on the offering of multiple network services by the
existing major television networks, restrictions on the participation by the
regional telephone operating companies in cable television and other direct to
home video technologies, and certain restrictions on broadcast station
ownership. The Company is unable to predict whether these or other potential
changes in the regulatory environment could restrict or curtail the ability of
the Company to acquire, operate and dispose of stations or, in general, to
compete profitably with other operators of television stations and other media
properties.
CHANGE OF CONTROL
In the event of a Change of Control, Holdings will be required to offer to
purchase all of the outstanding Notes at 101% of the Accreted Value thereof at
the date of purchase, if such purchase occurs prior to August 15, 2003, or
101% of the aggregate principal amount thereof, plus any accrued and unpaid
interest thereon to the date of purchase, if such purchase occurs thereafter.
The exercise by the holders of the Notes of their rights to require Holdings
to offer to purchase Notes upon a Change of Control could also cause a default
under other indebtedness of Holdings, including the New Credit Facilities,
even if the Change of Control itself does not, because of the financial effect
of such repurchase on Holdings. Holdings' ability to pay cash to any of the
holders of New Notes upon a repurchase may be limited by Holdings' then
existing capital resources. There can be no assurance that in the event of a
Change of Control, Holdings will have, or will have access to, sufficient
funds or will be contractually permitted under the terms of outstanding
indebtedness, including the New Credit Facilities, to pay the required
purchase price for any New Notes. See "Description of the Notes--Change of
Control."
CONTROL BY MAJOR STOCKHOLDERS
As a result of the Merger and the related transactions, Apollo Investment
indirectly owns 34.06% of Holdings, Bastion indirectly owns 16.04% of Holdings
and Liberty and Sony Pictures each own 24.95% of Holdings. Station Partners,
which is owned 68% by Apollo Investment and 32% by Bastion, is the record
holder of an aggregate 50.1% ownership interest in Holdings. Further, Liberty
has granted to Station Partners a proxy to vote all of the shares of common
stock of Holdings owned by Liberty and, as a result, Station Partners has the
right to vote 75.05% of the shares of common stock of Holdings. In addition,
Station Partners, on the one hand, and Sony Pictures and Liberty, on the other
hand, have entered into certain put/call arrangements with respect to their
shares of common stock. Under Delaware law, owners of a majority of a
company's outstanding common stock are able to elect all of a company's
directors and approve significant corporate transactions without the approval
or consent of other stockholders. In addition, each of Sony Pictures, Liberty
and Station Partners
23
<PAGE>
(collectively, the "Initial Stockholders") have entered into a Stockholders
Agreement (as defined), providing for, among other things, the election of
directors and voting with respect to Major Decisions (as defined in the
Stockholders Agreement). See "Certain Relationships and Related Transactions--
Transactions Related to the Merger--Stockholders Agreement." Circumstances
could arise in which the interests of the Initial Stockholders, as equity
holders, could be in conflict with the interests of the holders of the New
Notes. In addition, these stockholders could pursue transactions that in their
judgment enhance the value of their equity investment but involve risks to
holders of the New Notes.
RELIANCE ON KEY PERSONNEL
The Company believes that its success will continue to be dependent upon the
ability of the Company and the Network Company to attract and retain skilled
managers and other personnel, including its present officers and network and
station employees. The Company does not have any control with respect to the
officers and employees of the Network Company. The loss of the services of any
key personnel may have a material adverse effect on the results of operations
or financial condition of the Company or the Network Company. The Company
presently does not maintain any key man life insurance policies on any of its
personnel. The Company generally has employment agreements with its key
personnel which contain non-competition or non-interference covenants. See
"Management--Executive Compensation--Employment Agreements."
YEAR 2000
The Company has developed plans, utilizing internal resources, to ensure its
information systems are capable of properly utilizing dates beyond December
31, 1999. During the past year, the Company upgraded or replaced many of its
accounting and traffic computer systems, including the conversion to new
software which is Year 2000 compliant. Additionally, the Company has evaluated
its other principal computer systems and determined they are substantially
Year 2000 compliant. The Company is also seeking to work with its relevant
customers, suppliers and other service providers to ensure their systems are
Year 2000 compliant. Although the impact on the Company caused by the failure
of its significant customers, suppliers and other service providers to achieve
Year 2000 compliance in a timely and effective manner is uncertain, the
Company's business and results of operations could be materially adversely
affected by such failure. See "Management's Discussion and Analysis of Results
of Operations and Financial Condition--Year 2000."
ORIGINAL ISSUE DISCOUNT; POSSIBLE TAX AND OTHER LEGAL CONSEQUENCES FOR
HOLDERS OF NEW NOTES AND THE COMPANY
The New Notes will be issued at a substantial discount from their principal
amount at maturity. Cash payments of interest on the New Notes will not be
paid prior to 2004. However, original issue discount (i.e., the difference
between the "stated redemption price at maturity" of the New Notes and the
"issue price" of the New Notes) will accrue from the issue date of the New
Notes and will be includable as interest income periodically in a holder's
gross income for U.S. federal income tax purposes in advance of receipt of the
cash payments to which the income is attributable. Furthermore, the New Notes
will be subject to the applicable high-yield discount obligation rules, and
the Company will not be able to deduct the original issue discount
attributable to the New Notes until paid in cash or property. As a result, the
Company's after-tax cash flow may be less than if such original issue discount
were deductible when accrued. See "Certain U.S. Federal Income Tax
Considerations--Original Issue Discount."
If a bankruptcy case were commenced by or against Holdings under the
Bankruptcy Code after the issuance of the New Notes, the claim of a holder of
the New Notes with respect to the principal amount thereof may be limited to
an amount equal to the sum of (i) the initial offering price and (ii) that
portion of the original issue discount that is not deemed to constitute
"unmatured interest" for purposes of the Bankruptcy Code. Any original issue
discount that had not amortized as of the date of any such bankruptcy filing
would constitute "unmatured interest."
Generally, Section 382 of the Internal Revenue Code of 1986, as amended (the
"Code"), limits a corporation's use of its net operating losses ("NOLs") and
other tax attributes (the "Section 382 Limitation"),
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if a corporation has a cumulative change in ownership of greater than 50%
within a three-year period (an "ownership change"). The Section 382 Limitation
applies to the use of NOLs and other tax attributes in periods after such an
ownership change. The Company's use of its NOLs incurred prior to December 31,
1994 are subject to the Section 382 Limitation. In addition, as a result of
the Merger, the Company has undergone a further ownership change and its use
of NOLs from periods prior to the Merger will be further limited. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition--Liquidity and Sources of Capital."
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF NEW NOTE PRICE
There is no public market for the New Notes and there can be no assurance
that an active trading market for the New Notes will develop or be sustained.
If such a market were to develop, there can be no assurance as to the
liquidity of any market that may develop for the New Notes, the ability of the
holders of the New Notes to sell their New Notes, or the prices at which the
holders of the New Notes would be able to sell their New Notes. Future trading
prices of the New Notes will depend upon many factors, including prevailing
interest rates, the Company's operating results and the markets for similar
securities. Although the Initial Purchasers have advised the Company that they
currently intend to make a market in the New Notes, they are not obligated to
do so and any market making may be discontinued at any time. In addition,
because the Exchange Offer is not conditioned upon any minimum number of Old
Notes being tendered for exchange, the number of New Notes tendered could be
quite small, which could have an adverse effect on the liquidity of the New
Notes. Therefore, no assurance can be given as to the liquidity of the trading
market for the New Notes. Historically, the market for non-investment grade
debt securities has been subject to disruptions that have caused substantial
volatility in the prices of securities similar to the New Notes. There can be
no assurance that the market for the New Notes will not be subject to similar
disruptions. Any such disruptions could have an adverse effect on holders of
the New Notes. The Company does not intend to list the New Notes on any
national securities exchange or apply for quotation through any automated
quotation system.
CONSEQUENCES OF THE EXCHANGE OFFER ON NON-TENDERING HOLDERS OF THE OLD NOTES
The Company intends for the Exchange Offer to satisfy its registration
obligations under the Registration Rights Agreement. If the Exchange Offer is
consummated, the Company does not intend to file further registration
statements for the sale or other disposition of Old Notes. Old Notes that are
not exchanged for New Notes will remain restricted securities within the
meaning of Rule 144 of the Securities Act. Consequently, following completion
of the Exchange Offer, holders of Old Notes seeking liquidity in their
investment would have to rely on an exemption to the registration requirements
under applicable securities laws, including the Securities Act, with respect
to any sale or other disposition of the Old Notes. In addition, to the extent
that Old Notes are tendered and accepted in the Exchange Offer, a holder's
ability to sell untendered Old Notes could be adversely affected.
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USE OF PROCEEDS
Holdings will not receive any cash proceeds from the exchange of the New
Notes for the Old Notes pursuant to the Exchange Offer.
The proceeds to Holdings from the sale of the Old Notes of approximately
$119.0 million (after deducting underwriting discounts and fees and expenses
of the Offering) were applied, together with the Equity Contributions,
borrowings under the New Credit Facilities and the proceeds of the Network
Sale, to fund the Merger, refinance existing indebtedness of Telemundo and pay
fees and expenses related to the Transactions. See "Offering Circular
Summary--The Merger and Related Transactions--Sources and Uses of Funds."
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THE EXCHANGE OFFER
PURPOSE AND EFFECTS OF THE EXCHANGE OFFER
The Old Notes were sold by Holdings on August 12, 1998 (the "Issue Date") to
the Initial Purchasers, pursuant to the Purchase Agreement. The Initial
Purchasers subsequently resold the Old Notes to qualified institutional buyers
within the meaning of Rule 144A under the Securities Act. As a condition to
the Purchase Agreement, Holdings and the Initial Purchasers entered into the
Registration Rights Agreement on August 12, 1998. The Registration Rights
Agreement required Holdings to file with the Commission following the Issue
Date, a registration statement relating to an exchange offer pursuant to which
notes that are substantially identical to the Old Notes would be offered in
exchange for the then outstanding Old Notes tendered at the option of the
holders thereof. The form and terms of the New Notes are identical in all
material respects to the form and terms of the Old Notes except (i) the New
Notes will have been registered under the Securities Act, (ii) the holders of
the New Notes will not be entitled to certain rights of holders of the Old
Notes under the Registration Rights Agreement and (iii) for certain contingent
provisions relating to additional interest. The Exchange Offer is being made
to satisfy the contractual obligations of Holdings under the Registration
Rights Agreement. The holders of any Old Notes not tendered in the Exchange
Offer will not be entitled to require Holdings to file the Resale Registration
Statement.
Holdings has agreed pursuant to Registration Rights Agreement that, unless
clause (i) of the first sentence of the next paragraph shall apply, Holdings
will, at its cost, (i) no later than 60 days after the Issue Date file a
registration statement (the "Exchange Offer Registration Statement") with the
Commission with respect to an Exchange Offer to exchange the Old Notes for New
Notes and (ii) use all reasonable efforts to cause the Exchange Offer
Registration Statement to be declared effective under the Securities Act
within 150 days after the Issue Date. Upon the effectiveness of the Exchange
Offer Registration Statement, Holdings will offer the New Notes in exchange
for surrender of the Old Notes. Holdings will keep the Exchange Offer open for
not less than 30 days (or longer if required by applicable law) after the date
notice of the Exchange Offer is mailed to the Holders. For each Old Note
surrendered to Holdings pursuant to the Exchange Offer, the Holder of such Old
Note will receive a New Note having a principal amount at maturity and
Accreted Value on the date of exchange equal to that of the surrendered Old
Note.
In the event that (i) applicable law or interpretations of the staff of the
Commission do not permit Holdings to effect the Exchange Offer, (ii) if for
any other reason the Exchange Offer is not consummated within 180 days of the
Issue Date, (iii) any Initial Purchaser so requests with respect to the Old
Notes not eligible to be exchanged for New Notes in the Exchange Offer by it
following consummation of the Exchange Offer, or (iv) any Holder notifies
Holdings within 30 days after commencement of the Exchange Offer that such
Holder (x) is prohibited by applicable law or Commission policy from
participating in the Exchange Offer, (y) may not resell New Notes acquired by
it to the public without delivery of a prospectus and that the prospectus
contained in the Exchange Offer Registration Statement is not appropriate or
available for such resales by such Holder or (z) is a broker-dealer and holds
Old Notes acquired directly from Holdings or an affiliate of Holdings, then
Holdings will, at its cost, (a) as promptly as practicable, file a
registration statement (the "Shelf Registration Statement") covering resales
of the Old Notes or the New Notes, as the case may be, from time to time, (b)
use all reasonable efforts to cause the Shelf Registration Statement to be
declared effective under the Securities Act and (c) keep the Shelf
Registration Statement continuously effective until the earlier of two years
from the Issue Date or such time as all of the Old Notes or New Notes covered
by the Shelf Registration Statement have been disposed of pursuant to the
Shelf Registration Statement or are no longer restricted securities (as
defined under Rule 144 under the Securities Act). Holdings will, in the event
a Shelf Registration Statement is filed, among other things, provide to each
Holder for whom such Shelf Registration Statement was filed copies of the
prospectus which is a part of the Shelf Registration Statement, notify each
such Holder when the Shelf Registration Statement has become effective and
take certain other actions as are required to permit unrestricted resales of
the Old Notes or the New Notes, as the case may be. A holder selling Old Notes
or New Notes pursuant to the Shelf Registration Statement
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generally would be required to be named as a selling security holder in the
related prospectus and to deliver a prospectus to purchasers, will be subject
to certain of the civil liability provisions under the Securities Act in
connection with such sales and will be bound by the provisions of the
Registration Rights Agreement which are applicable to such Holder (including
certain indemnification obligations). In addition, each Holder of the Old
Notes or New Notes to be registered under the Shelf Registration Statement
will be required to deliver information to be used in connection with the
Shelf Registration Statement within the time period set forth in the
Registration Rights Agreement in order to have such holder's Old Notes or New
Notes included in the Shelf Registration Statement and to benefit from the
provisions regarding additional interest set forth in the following paragraph.
If (i) on or prior to 60 days after the Issue Date, neither the Exchange
Offer Registration Statement nor the Shelf Registration Statement has been
filed with the Commission; or (ii) on or prior to 150 days after the Issue
Date, neither the Exchange Offer Registration Statement has been declared
effective nor the Shelf Registration Statement has been declared effective; or
(iii) on or prior to 180 days after the Issue Date, neither the Exchange Offer
has been consummated nor the Shelf Registration Statement has been declared
effective; or (iv) the Shelf Registration Statement has not been filed with
the Commission or declared effective within the periods specified in the
Registration Rights Agreement; or (v) after either the Exchange Offer
Registration Statement or the Shelf Registration Statement is declared
effective, such Exchange Offer Registration Statement or such Shelf
Registration Statement thereafter ceases to be effective or usable (subject to
certain exceptions) in connection with resales of Old Notes or New Notes in
accordance with and during the periods specified in the Registration Rights
Agreement (each such event referred to in clauses (i), (ii), (iii), (iv) and
(v) a "Registration Default"), additional cash interest ("Additional
Interest") will accrue on the Old Notes and the New Notes, as applicable, at
the rate of 0.50% per annum, from and including the date on which any such
Registration Default shall occur to, but excluding, the next Semi-Annual
Accrual Date (as defined)(calculated on the Accreted Value on such Semi-Annual
Accrual Date); and shall continue to accrue from and including such Semi-
Annual Accrual Date, and be payable on each successive Semi-Annual Accrual
Date (calculated on the Accreted Value on each such date) to, but excluding,
the earlier of (i) the date on which such Registration Default has been cured
or (ii) the date on which all the Old Notes and New Notes otherwise become
freely transferable by Holders other than affiliates of Holdings without
further registration under the Securities Act. Such interest is payable in
addition to any other interest payable from time to time with respect to the
Old Notes and the New Notes in cash on each Semi-Annual Accrual Date after any
accrual of such interest to the Holders of record (as determined pursuant to
the Indenture), notwithstanding that cash interest may not otherwise be
payable on such Old Notes or New Notes on each such date. Notwithstanding the
foregoing, (i) the amount of Additional Interest payable shall not increase
because more than one Registration Default has occurred and is pending, (ii) a
Holder of Old Notes or New Notes who is not entitled to the benefits of the
Shelf Registration Statement (i.e., such Holder has not elected to include
information) shall not be entitled to Additional Interest with respect to a
Registration Default that pertains to the Shelf Registration Statement, and
(iii) a Holder of Old Notes constituting an unsold allotment from the original
sale of the Old Notes or who otherwise is not entitled to participate in the
Registered Exchange Offer shall not be entitled to Additional Interest by
reason of a Registration Default that pertains to the Registered Exchange
Offer.
Based on interpretations by the staff of the Commission set forth in no-
action letters issued to unrelated third parties, Holdings believes that New
Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold or otherwise transferred by holders thereof (other
than any Restricted Holder) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holders' business and such
holders are not participating, do not intend to participate and have no
arrangement or understanding with any person to participate, in a distribution
of such New Notes. See "Shearman & Sterling," SEC No-Action Letter (available
July 2, 1993); "Morgan Stanley & Co., Incorporated," SEC No-Action Letter
(available June 5, 1991); and "Exxon Capital Holdings Corporation," SEC No-
Action Letter (available May 13, 1988). Each broker-dealer that receives New
Notes for its own account in exchange for Old Notes, where such Old Notes were
acquired by
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such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. See "Plan of Distribution."
If any person were to participate in the Exchange Offer for the purpose of
distributing securities in a manner not permitted by the preceding paragraph,
such person could not rely on the position of the staff of the Commission and
must comply with the Prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. Therefore, each holder of Old
Notes who accepts the Exchange Offer must represent in the Letter of
Transmittal that it meets the conditions described above.
The Exchange Offer shall be deemed to have been consummated upon the earlier
to occur of (i) Holdings having exchanged New Notes for all outstanding Old
Notes (other than Old Notes held by a Restricted Holder) pursuant to such
Exchange Offer and (ii) Holdings having exchanged, pursuant to such Exchange
Offer, New Notes for all Old Notes that have been validly tendered and not
withdrawn on the Expiration Date. In such event, holders of Old Notes seeking
liquidity in their investment would have to rely on exemptions to registration
requirements under applicable securities laws, including the Securities Act.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal, Holdings will accept all Old
Notes validly tendered prior to the Expiration Date. The exchange of New Notes
for Old Notes will be made with respect to all Old Notes validly tendered and
not withdrawn on or prior to the Expiration Date, promptly following the
Expiration Date. The New Notes issued pursuant to the Exchange Offer will be
delivered promptly following the Expiration Date. Holdings will issue $1,000
principal amount at maturity of New Notes in exchange for $1,000 principal
amount at maturity of outstanding Old Notes accepted in the Exchange Offer.
Holders may tender some or all of their Old Notes pursuant to the Exchange
Offer in denominations of $1,000 and integral multiples of $1,000 in excess
thereof.
As of the date of this Prospectus, the Accreted Value of the Old Notes is
$ .
This Prospectus, together with the Letter of Transmittal, is being sent to
all registered holders of Old Notes as of , 1998 (the "Record
Date").
Holdings shall be deemed to have accepted validly tendered Old Notes when,
as and if Holdings has given oral or written notice thereof to the Exchange
Agent. The Exchange Agent will act as agent for the tendering holders of Old
Notes for the purpose of receiving New Notes from Holdings and delivering New
Notes to such holders.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender or the occurrence of certain other events set forth herein,
certificates for any such unaccepted Old Notes will be returned, without
expense, to the tendering holder thereof as promptly as practicable after the
Expiration Date.
The registration expenses to be incurred in connection with the Exchange
Offer, including fees and expenses of the Exchange Agent and Trustee and
accounting and legal fees, will be paid by Holdings. Holdings has agreed to
pay, subject to the instructions in the Letter of Transmittal, all transfer
taxes, if any, relating to the sale or disposition of such holders' Old Notes
pursuant to the Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1998, unless Holdings, in its sole discretion, extends the Exchange
Offer, in which case, the term "Expiration Date" shall mean the latest date
and time to which the Exchange Offer is extended.
In order to extend the Expiration Date, Holdings will notify the Exchange
Agent of any extension by oral or written notice and will mail to the record
holders of Old Notes an announcement thereof, each prior to 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date. Such announcement may state that Holdings is extending the
Exchange Offer for a specified period of time.
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Subject to the applicable rules and regulations of the Commission, Holdings
reserves the right to (i) delay acceptance of Old Notes, extend the Exchange
Offer or terminate the Exchange Offer and refuse to accept Old Notes not
previously accepted, if any of the conditions set forth herein under "--
Conditions" shall not have been satisfied or waived by Holdings, by giving
oral or written notice of such delay, extension or termination to the Exchange
Agent, and (ii) amend the terms of the Exchange Offer in any manner deemed by
it to be advantageous to the holders of the Old Notes. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly
as practicable by oral or written notice thereof. If the Exchange Offer is
amended in a manner determined by Holdings to constitute a material change,
Holdings will promptly disclose such amendment in a manner reasonably
calculated to inform the holders of the Old Notes of such amendment.
Without limiting the manner in which Holdings may choose to make public
announcements of any delay in acceptance, extension, termination or amendment
of the Exchange Offer, Holdings shall have no obligation to publish, advertise
or otherwise communicate any such public announcement other than by making a
timely release to a financial news service.
ACCRETION OF NEW NOTES
The New Notes will accrete at a rate of 11 1/2%, compounded semiannually, to
100% of the principal amount at maturity by August 12, 2003.
INTEREST ON NEW NOTES
The New Notes will begin to accrue cash interest at a rate of 11 1/2% per
annum commencing on August 15, 2003, and cash interest will be payable
thereafter on February 15 and August 15 of each year, commencing February 15,
2004.
PROCEDURE FOR TENDERING
To tender Old Notes pursuant to the Exchange Offer, a holder must complete,
sign and date the Letter of Transmittal, or a facsimile thereof, and mail or
otherwise deliver such Letter of Transmittal or such facsimile, together with
the Old Notes (unless such tender is being effected pursuant to the procedure
for book-entry transfer described below) and any other required documents, to
the Exchange Agent prior to the Expiration Date. Signatures on a Letter of
Transmittal or a notice of withdrawal, as the case may be, must be guaranteed
by a member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc., a commercial bank or trust
company having an office or correspondent in the United States or an "eligible
guarantor institution" as defined by Rule 17Ad-15 under the Exchange Act (any
of the foregoing hereinafter referred to as an "Eligible Institution") unless
the Old Notes tendered pursuant thereto are tendered (i) by a registered
holder who has not completed the box entitled "Special Issuance Instructions"
or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for
the account of an Eligible Institution.
Any financial institution that is a participant in DTC's Book-Entry Transfer
Facility system may make book-entry delivery of the Old Notes by causing DTC
to transfer such Old Notes into the Exchange Agent's account in accordance
with DTC's procedure for such transfer. Although delivery of Old Notes may be
effected through book-entry transfer into the Exchange Agent's account at DTC,
the Letter of Transmittal (or facsimile thereof), with any required signature
guarantees and any other required documents, must, in any case, be transmitted
to and received or confirmed by the Exchange Agent at its addresses set forth
herein prior to the Expiration Date. DELIVERY OF DOCUMENTS TO DTC IN
ACCORDANCE WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
The tender by a holder of Old Notes will constitute an agreement between
such holder and Holdings in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
Delivery of all documents must be made to the Exchange Agent at its address
set forth herein. Holders may also request that their respective brokers,
dealers, commercial banks, trust companies or nominees effect such tender for
such holders.
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THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDERS. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTER OF TRANSMITTAL OR OLD NOTES
SHOULD BE SENT TO HOLDINGS.
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
The term "holder" with respect to the Exchange Offer means any person in whose
name Old Notes are registered on the books of Holdings or any other person who
has obtained a properly completed bond power from the registered holder.
Any beneficial holder whose Old Notes are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender his Old Notes should contact the registered holder promptly and
instruct such registered holder to tender on his behalf. If such beneficial
holder wishes to tender on his own behalf, such beneficial holder must, prior
to completing and executing the Letter of Transmittal and delivering his Old
Notes, either make appropriate arrangements to register ownership of the Old
Notes in such holder's name or obtain a properly completed bond power from the
registered holder. The transfer of record ownership may take considerable
time.
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by appropriate bond powers which authorize such person to tender
the Old Notes on behalf of the registered holder, in either case, signed as
the name of the registered holder or holders appears on the Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
a corporation or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by Holdings,
evidence satisfactory to Holdings of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Old Notes will be
determined by Holdings in its sole discretion, which determination will be
final and binding. Holdings reserves the absolute right to reject any and all
Old Notes not validly tendered or any Old Notes the acceptance of which would,
in the opinion of counsel for Holdings, be unlawful. Holdings also reserves
the absolute right to waive any irregularities or conditions of tender as to
particular Old Notes. Holdings' interpretation of the terms and conditions of
the Exchange Offer (including the instructions in the Letter of Transmittal)
will be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Notes must be cured within
such time as Holdings shall determine. Neither Holdings, the Exchange Agent
nor any other person shall be under any duty to give notification of defects
or irregularities with respect to tenders of Old Notes nor shall any of them
incur any liability for failure to give such notification. Tenders of Old
Notes will not be deemed to have been made until such irregularities have been
cured or waived. Any Old Notes received by the Exchange Agent that are not
validly tendered and as to which the defects or irregularities have not been
cured or waived will be returned by the Exchange Agent without cost to the
tendering holder of such Old Notes unless otherwise provided in the Letter of
Transmittal, as promptly as practicable following the Expiration Date.
By tendering Old Notes pursuant to the Exchange Offer, each holder will
represent to Holdings that, among other things, (i) such holder is acquiring
the New Notes in the ordinary course of its business, (ii) such holder is not
participating, does not intend to participate and has no arrangement or
understanding with any person to participate, in a distribution of such New
Notes, (iii) such holder is not an "affiliate," as defined under Rule 405 of
the Securities Act, of Holdings and (iv) such holder is not a broker-dealer
who acquired Old Notes directly from Holdings to resell pursuant to Rule 144A
or any other available exemption under the Securities Act.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, the Letter
of Transmittal or any other required documents to the Exchange Agent prior to
the Expiration Date, may effect a tender if:
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(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (the "Notice of Guaranteed Deliver") (by facsimile
transmission, mail or hand delivery) setting forth the name and address of
the holder of the Old Notes, the certificate number or numbers of such Old
Notes and the principal amount at maturity of Old Notes, the certificate
number or numbers of such Old Notes and the principal amount of Old Notes
tendered, stating that the tender is being made thereby, and guaranteeing
that, within three business days after the date of execution of the Notice
of Guaranteed Delivery, the Letter of Transmittal (or facsimile thereof),
together with the certificate(s) representing the Old Notes to be tendered
in proper form (or confirmation of a book-entry transfer into the Exchange
Agent's account at DTC of Old Notes delivered electronically) for transfer
and any other documents required by the Letter of Transmittal, will be
deposited by the Eligible Institution with the Exchange Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), together with the certificate(s) representing all
tendered Old Notes in proper form for transfer (or confirmation of a book-
entry transfer into the Exchange Agent's account at DTC of Old Notes
delivered electronically) and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within three business days
after the date of execution of the Notice of Guaranteed Delivery.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to the Expiration Date. Any such
notice of withdrawal must (i) specify the name of the person having deposited
the Old Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes
to be withdrawn (including the certificate number or numbers and principal
amount of such Old Notes), (iii) be signed by the Depositor in the same manner
as the original signature on the Letter of Transmittal by which such Old Notes
were tendered (including required signature guarantees) or be accompanied by
documents of transfer sufficient to permit the trustee with respect to the Old
Notes to register the transfer of such Old Notes into the name of the
Depositor withdrawing the tender and (iv) specify the name in which any such
Old Notes are to be registered, if different from that of the Depositor. All
questions as to the validity, form and eligibility (including time of receipt)
of such withdrawal notices will be determined by Holdings, whose determination
shall be final and binding on all parties. Any Old Notes so withdrawn will be
deemed not to have been validly tendered for purposes of the Exchange Offer
and no New Notes will be issued with respect thereto unless the Old Notes so
withdrawn are validly retendered. Any Old Notes which have been tendered but
which are not accepted for exchange will be returned by the Exchange Agent to
the holder thereof without cost to such holder as promptly as practicable
after withdrawal, rejection of tender or termination of the Exchange Offer.
Properly withdrawn Old Notes may be retendered by following one of the
procedures described above under "--Procedure for Tendering" at any time prior
to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, Holdings will not be
obligated to consummate the Exchange Offer if the New Notes to be received
will not be tradeable by the holder, other than in the case of Restricted
Holders, without restriction under the Securities Act and the Exchange Act and
without material restrictions under the Blue Sky or securities laws of
substantially all of the states of the United States. Such condition will be
deemed to be satisfied unless a holder provides Holdings with an opinion of
counsel reasonably satisfactory to Holdings to the effect that the New Notes
received by such holder will not be tradeable without restriction under the
Securities Act and the Exchange Act and without material restrictions under
the Blue Sky or securities laws of substantially all of the states of the
United States. Holdings may waive this condition.
32
<PAGE>
If the condition described above exists, Holdings will be entitled to refuse
to accept any Old Notes and, in the case of such refusal, will return tendered
Old Notes to tendering holders of Old Notes.
EXCHANGE AGENT
Bank of Montreal Trust Company, the Trustee under the Indenture, has been
appointed as Exchange Agent for the Exchange Offer. Questions and requests for
assistance and requests for additional copies of this Prospectus or of the
Letter of Transmittal should be directed to the Exchange Agent addressed as
follows:
By Hand Delivery, Registered or Certified Mail or Overnight Courier:
Bank of Montreal Trust Company
Wall Street Plaza
88 Pine Street, 19th Floor
New York, New York 10005
Attention: Reorganization Department
Confirm by Telephone: (212) 701-7624
Facsimile: (212) 701-7636
FEES AND EXPENSES
The fees and expenses of soliciting tenders pursuant to the Exchange Offer
will be borne by Holdings. The principal solicitation for tenders pursuant to
the Exchange Offer is being made by mail. Additional solicitations may be made
by officers and regular employees of Holdings and its affiliates in person, by
telegraph or telephone.
Holdings will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. Holdings, however, will pay the
Exchange Agent reasonable and customary fees for its services and will
reimburse the Exchange Agent for its reasonable out-of-pocket expenses in
connection therewith.
The registration expenses to be incurred in connection with the Exchange
Offer, including fees and expenses of the Exchange Agent and Trustee and
accounting and legal fees, will be paid by Holdings. Holdings has agreed to
pay, subject to the instructions in the Letter of Transmittal, all transfer
taxes, if any, relating to the sale or disposition of Old Notes pursuant to
the Exchange Offer. If, however, certificates representing New Notes or Old
Notes for principal amounts at maturity not tendered or accepted for exchange
are to be delivered to, or are to be registered or issued in the name of, any
person other than the registered holder of the Old Notes tendered, or if
tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes pursuant to the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with the Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering holder.
ACCOUNTING TREATMENT
The New Notes will be recorded in the Company's accounting records at the
same carrying values as the Old Notes as reflected in the Company's accounting
records on the date of the exchange. Accordingly, no gain or loss for
accounting purposes will be recognized by Holdings upon the consummation of
the Exchange Offer. The expenses of the Exchange Offer will be amortized by
Holdings over the term of the New Notes under generally accepted accounting
principles.
33
<PAGE>
CAPITALIZATION
The following table sets forth the combined capitalization of the Company on
June 30, 1998, and as adjusted to give effect to the Offering (after deducting
discounts to the Initial Purchasers and estimated expenses of the Offering)
and pro forma to give effect to the Merger, initial borrowings under the New
Credit Facilities, the Equity Contributions, the Network Sale and the Tender
Offer as if each had occurred on June 30, 1998. This table should be read in
conjunction with "Selected Historical Consolidated Financial Data," "Unaudited
Pro Forma Condensed Consolidated Financial Statements," "Management's
Discussion and Analysis of Results of Operations and Financial Condition" and
the historical financial statements of Telemundo and the notes thereto
included elsewhere herein. See also "Use of Proceeds."
<TABLE>
<CAPTION>
JUNE 30, 1998
------------------
ACTUAL PRO FORMA
-------- ---------
(IN THOUSANDS)
<S> <C> <C>
Debt:
New Credit Facilities:
Revolving Credit Facility............................ $ -- $100,000
Tranche A Term Loan.................................. -- 25,000
Tranche B Term Loan.................................. -- 175,000
Capital Lease Obligations.............................. 4,600 4,600
10 1/2% Notes.......................................... 188,300 300
Old Credit Facility.................................... -- --
Old Notes.............................................. -- 125,000
-------- --------
Total Debt........................................... 192,900 429,900
Minority Interest........................................ 5,400 5,400
Common Stockholders' Equity.............................. 17,700 203,000
-------- --------
Total Capitalization................................. $216,000 $638,300
======== ========
</TABLE>
34
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following presents selected historical consolidated financial data of
Telemundo for the five years ended December 31, 1997, and for the six months
ended June 30, 1997 and 1998, which have been derived from Telemundo's audited
consolidated financial statements for the five years ended December 31, 1997
and the unaudited consolidated financial statements for the six months ended
June 30, 1997 and 1998, respectively. In the opinion of management, the
unaudited consolidated financial data presented herein reflect all adjustments
(consisting of normal recurring accruals only) necessary to fairly present the
information for such periods. The historical financial statements do not
reflect the consummation of the Transactions or the capital structure of the
Company following the Transactions and may not be indicative of results that
would have been reported had the Transactions occurred nor may it be
indicative of the Company's future financial position or operating results.
The selected historical consolidated financial data should be read in
conjunction with "Summary Historical and Pro Forma Consolidated Financial
Data," "Management's Discussion and Analysis of Results of Operations and
Financial Condition" and the historical financial statements of Telemundo and
the notes thereto included elsewhere herein.
35
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------------- ------------------
PREDECESSOR(A)
--------------------
1993 1994 1995 1996 1997 1997 1998
----------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenue............. $ 177,809 $183,894 $169,148 $202,713 $197,588 $ 90,781 $101,536
Operating income
(loss)................. 16,597 13,176 14,379 29,292 16,114 (91) 1,845
Reorganization items.... (2,543) 76,255 -- -- -- -- --
Merger related
expenses............... -- -- -- -- (1,707) -- (2,812)
Interest expense--net... (24,411) (645) (14,489) (18,920) (20,849) (10,210) (10,681)
Loss from investment in
and disposal of
TeleNoticias........... -- (1,314) (6,355) (5,561) -- -- --
Minority interest....... -- -- -- (2,125) (2,808) (1,404) (1,542)
Income (loss) before
extraordinary item..... (14,059) 84,049 (10,088) (1,179) (13,444) (13,788) (15,527)
Extraordinary item--
extinguishment of
debt................... -- 130,482 -- (17,243) -- -- --
Net income (loss)....... (14,059) 214,531 (10,088) (18,422) (13,444) (13,788) (15,527)
OTHER FINANCIAL DATA:
Capital expenditures.... $ 8,485 $ 12,550 $ 6,719 $ 9,125 $ 11,156 $ 6,424 $ 5,589
Depreciation and
amortization........... 11,469 10,804 11,642 13,311 13,938 7,043 7,478
Ratio of earnings to
fixed charges(b)....... -- -- -- 1.4x -- -- --
<CAPTION>
PREDECESSOR
-----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT
END OF PERIOD):
Working capital......... $ 65,691 $ 32,325 $ 35,541 $ 44,769 $ 44,576 $ 35,966
Broadcast licenses and
reorganization value in
excess of amounts
allocable to
identifiable assets,
net.................... -- 92,792 90,200 132,831 128,366 126,133
Total assets............ 169,657 232,024 224,459 295,560 290,086 284,985
Long-term debt
(liabilities subject to
settlement prior to
1994).................. 326,784 100,724 108,032 179,695 189,081 188,255
Common stockholders'
equity (deficiency).... (214,816) 70,000 60,251 42,893 29,909 17,729
</TABLE>
- --------
(a) Prior to 1995, net income (loss) was significantly impacted in certain
years by nonrecurring income and expense items related to Telemundo's
financial restructuring. Telemundo was recapitalized and adopted fresh
start reporting as of December 31, 1994. Consequently, for the years prior
to 1995, Telemundo is referred to as the Predecessor.
(b) For purposes of computing the ratio of earnings to fixed charges,
"earnings" consists of net income (loss), before extraordinary items,
income taxes, net loss from investment in and disposal of Telenoticias,
Merger related expenses and fixed charges. Fixed charges consist of
interest expense--net, which includes interest on capital leases, the
interest component of operating leases and amortization of deferred
financing fees. As a result of the effects of the restructuring referred
to in Note (a), the ratio of earnings to fixed charges is not applicable
for 1994 and prior periods. Earnings were insufficient to cover fixed
charges by approximately $200,000 and $7.5 million, $11.7 million and
$10.4 million, respectively, for the years ended December 31, 1995 and
1997 and the six months ended June 30, 1997 and 1998. The seasonality of
Telemundo's earnings impacts the ratio of earnings to fixed charges for
periods less than one year.
36
<PAGE>
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited pro forma condensed consolidated financial
statements give effect to (i) the payment of the merger consideration in
connection with the Merger, (ii) the related financings including the Equity
Contributions, the New Credit Facilities, the Tender Offer, the Offering and
repayment of the Old Credit Facility, (iii) the consummation of the Network
Sale and (iv) certain operating items related to the above, including the
impact of the Affiliation Agreement with the Network Company.
The historical information included in the unaudited pro forma condensed
consolidated financial statements for the year ended December 31, 1997 have
been derived from Telemundo's audited financial statements for the year ended
December 31, 1997, and the historical information as of and for the six months
ended June 30, 1998 have been derived from Telemundo's unaudited financial
statements for the six months ended June 30, 1998. Pro forma data for the
twelve months ended June 30, 1998 is calculated by adding the pro forma data
presented for the six months ended June 30, 1998 to the pro forma data for the
six months ended December 31, 1997.
The unaudited pro forma condensed consolidated statements of operations have
been presented as if the Transactions had been consummated on January 1, 1997.
The unaudited pro forma condensed consolidated balance sheet has been
presented as if the Transactions had been consummated on June 30, 1998. The
unaudited pro forma condensed consolidated financial statements do not purport
to represent what the Company's results of operations or financial position
would have been if any of the Transactions had actually occurred at any date,
nor does such data purport to represent the results of operations for any
future period. The pro forma adjustments are based on available information
and certain assumptions that the Company believes are reasonable.
The unaudited pro forma condensed consolidated financial statements should
be read in conjunction with "Selected Historical Financial Data,"
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" and historical financial statements of Telemundo and the notes
thereto included elsewhere herein.
37
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPANY PRO FORMA ADJUSTMENTS
--------------------------------
TELEMUNDO MERGER & RELATED COMPANY
HISTORICAL FINANCINGS NETWORK SALE(C) PRO FORMA
---------- ---------------- --------------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Television programming.. $ 17,622 $ -- $ (9,866) $ 7,756
Other current assets.... 61,111 7,000 (a) (3,361) 64,750
-------- -------- -------- --------
Total current assets.. 78,733 7,000 (13,227) 72,506
Property and equipment,
net.................... 66,930 (23,251) 43,679
Television programming.. 6,419 (5,054) 1,365
Other assets............ 6,770 (4,578)(b)
14,000 (b) (314) 15,878
Broadcast licenses and
other intangible
assets, net............ 126,133 479,913 (a) (36,470) 569,576
-------- -------- -------- --------
$284,985 $496,335 $(78,316) $703,004
======== ======== ======== ========
LIABILITIES AND STOCK-
HOLDERS' EQUITY
Current Liabilities:
Television programming
obligations............ $ 6,376 $ -- $ (4,179) $ 2,197
Other current
liabilities............ 36,391 -- 36,391
-------- -------- -------- --------
Total current liabili-
ties................. 42,767 (4,179) 38,588
Long-term debt.......... 188,255 (187,936)(b)
425,000 (b) 425,319
Capital lease
obligations............ 4,627 4,627
Television programming
obligations............ 343 (137) 206
Other liabilities....... 25,884 25,884
-------- -------- -------- --------
261,876 237,064 (4,316) 494,624
Minority interest....... 5,380 5,380
Contingencies and
commitments
Common Stockholders'
Equity................. 17,729 259,271 (a) (74,000) 203,000
-------- -------- -------- --------
$284,985 $496,335 $(78,316) $703,004
======== ======== ======== ========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
38
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(a) The unaudited pro forma condensed consolidated financial statements
reflect (i) the purchase of all of the outstanding common stock and common
stock equivalents of Telemundo, net of proceeds from common stock equivalents,
(ii) the retirement of approximately $191.7 million face amount of the 10 1/2%
Notes, at approximately 113% of face amount pursuant to the Tender Offer,
(iii) the repayment of the Old Credit Facility, (iv) $15.7 million of fees and
expenses (excluding $14.0 million of debt issuance costs), and (v) the
assumption of long-term capital lease obligations.
The excess purchase price over the fair value of the net assets acquired has
been allocated to broadcast licenses and other intangible assets, reduced by a
step basis adjustment, reflecting the continuing stock ownership of TLMD II,
Bastion and their respective affiliates (30.0% prior to the Merger). The
allocation of the net purchase consideration between tangible and intangible
assets and liabilities is preliminary. Independent appraisals will be
performed to establish the actual fair values.
The purchase consideration is determined as follows (in millions):
<TABLE>
<S> <C>
Purchase outstanding common stock and common stock equivalents....... $538.4
Option and warrant proceeds.......................................... (20.1)
------
518.3
Retirement of 10 1/2% Notes at carrying value........................ 188.3
Adjust 10 1/2% Notes carrying value to face.......................... 3.4
10 1/2% Notes retirement premium..................................... 25.8
Assumption of untendered 10 1/2% Notes............................... 0.3
Assumption of capital leases......................................... 4.6
Repayment of Old Credit Facility..................................... 0.5
Merger related costs................................................. 15.7
------
Total consideration.................................................. 756.9
Step basis adjustment................................................ (71.0)
------
Net purchase consideration........................................... $685.9
======
The related pro forma adjustments are as follows (in millions):
Pro forma purchase price allocation adjustment:
Net purchase consideration........................................... $685.9
Operating assets and liabilities, net................................ (1.4)
Property and equipment, net.......................................... (43.7)
Historical broadcast licenses and other intangible assets, net....... (89.7)
Network net assets................................................... (74.0)
------
Pro forma adjustment................................................. $479.9
======
Pro forma equity adjustment:
Equity Contributions................................................. $274.0
Step basis adjustment................................................ (71.0)
------
Pro forma common stockholders' equity................................ 203.0
Proceeds from Network Sale........................................... 74.0
Historical common stockholders' equity............................... (17.7)
------
Pro forma adjustment................................................. $259.3
======
</TABLE>
39
<PAGE>
(b) Reflects the financing of the Merger, including $14.0 million of related
debt issuance costs and the retirement of the 10 1/2% Notes. The 10 1/2% Notes
were repurchased at a 13% premium over face value, including consent fees,
pursuant to the Tender Offer. The Old Credit Facility was retired as part of
the Merger. The unamortized debt issuance costs related to the debt retired
was written off.
Merger financing is as follows (in millions):
<TABLE>
<S> <C>
Equity Contributions................................................. $274.0
Issuance of Old Notes................................................ 125.0
New Credit Facilities................................................ 300.0
Network Sale......................................................... 74.0
Assumption of capital lease obligations.............................. 4.6
------
Total Merger financing............................................... $777.6
======
</TABLE>
The New Credit Facilities provide for aggregate borrowings of up to $350
million.
(c) Reflects consummation of the Network Sale for $74.0 million, which
resulted in no gain as the Network Company's assets and liabilities were
adjusted to fair value as part of the Merger.
40
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
--------------------------------------------
TELEMUNDO MERGER & RELATED OPERATING COMPANY
HISTORICAL FINANCINGS NETWORK SALE(A) ADJUSTMENTS PRO FORMA
---------- ---------------- --------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Net revenue............. $197,588 $ -- $(62,559) $13,807(b) $148,836
Costs and expenses:
Direct operating costs.. 93,297 (41,514) 51,783
Selling, general and
administrative expenses
other than network and
corporate.............. 38,707 38,707
Network expenses........ 30,650 (30,650) --
Corporate expenses...... 4,882 4,882
Depreciation and
amortization........... 13,938 7,819 (c) (5,266) 16,491
-------- -------- -------- ------- --------
181,474 7,819 (77,430) -- 111,863
-------- -------- -------- ------- --------
Operating income........ 16,114 (7,819) 14,871 13,807 36,973
Merger related and other
expenses............... (1,700) 1,700 (d) --
Interest expense, net of
interest income........ (20,849) (19,151)(e) (40,000)
-------- -------- -------- ------- --------
Income (loss) before
income taxes and
minority interest...... (6,435) (25,270) 14,871 13,807 (3,027)
Income tax provision.... (4,201) (4,201)
Minority interest....... (2,808) (2,808)
-------- -------- -------- ------- --------
Net income (loss)....... $(13,444) $(25,270) $ 14,871 $13,807 $(10,036)
======== ======== ======== ======= ========
OTHER FINANCIAL DATA:
Cash interest expense... $ 14,696 $ 23,600
Capital expenditures.... 11,156 4,927
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
41
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
--------------------------------------------
TELEMUNDO MERGER & RELATED OPERATING COMPANY
HISTORICAL FINANCINGS NETWORK SALE(A) ADJUSTMENTS PRO FORMA
---------- ---------------- --------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Net revenue............. $101,536 $ -- $(35,610) $8,758(b) $74,684
Costs and expenses:
Direct operating costs.. 53,099 (25,734) 27,365
Selling, general and
administrative expenses
other than network and
corporate.............. 20,615 20,615
Network expenses........ 15,156 (15,156) --
Corporate expenses...... 3,343 3,343
Depreciation and
amortization........... 7,478 3,762 (c) (2,995) 8,245
-------- -------- -------- ------ -------
99,691 3,762 (43,885) -- 59,568
-------- -------- -------- ------ -------
Operating income........ 1,845 (3,762) 8,275 8,758 15,116
Merger related and other
expenses............... (2,812) 2,812 (d) --
Interest expense, net of
interest income........ (10,681) (9,919)(e) (20,600)
-------- -------- -------- ------ -------
Income (loss) before
income taxes and
minority interest...... (11,648) (10,869) 8,275 8,758 (5,484)
Income tax provision.... (2,337) (2,337)
Minority interest....... (1,542) (1,542)
-------- -------- -------- ------ -------
Net income (loss)....... $(15,527) $(10,869) $ 8,275 $8,758 $(9,363)
======== ======== ======== ====== =======
OTHER FINANCIAL DATA:
Cash interest expense... 7,389 11,800
Capital expenditures.... 5,589 2,341
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
42
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
--------------------------------------------
TELEMUNDO MERGER & RELATED OPERATING COMPANY
HISTORICAL FINANCINGS NETWORK SALE(A) ADJUSTMENTS PRO FORMA
---------- ---------------- --------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Net revenue............. $208,343 $ -- $(69,871) $16,334(b) $154,806
Costs and expenses:
Direct operating costs.. 96,819 (43,154) 53,665
Selling, general and
administrative expenses
other than network and
corporate.............. 39,459 39,459
Network expenses........ 33,743 (33,743) --
Corporate expenses...... 5,899 5,899
Depreciation and
amortization........... 14,373 7,720 (c) (5,602) 16,491
-------- -------- -------- ------- --------
190,293 7,720 (82,499) -- 115,514
-------- -------- -------- ------- --------
Operating income........ 18,050 (7,720) 12,628 16,334 39,292
Merger related and other
expenses............... (4,519) 4,519 (d) --
Interest expense, net of
interest income........ (21,320) (19,480)(e) (40,800)
-------- -------- -------- ------- --------
Income (loss) before
income taxes and
minority interest...... (7,789) (22,681) 12,628 16,334 (1,508)
Income tax provision.... (4,455) (4,455)
Minority interest....... (2,946) (2,946)
-------- -------- -------- ------- --------
Net income (loss)....... $(15,190) $(22,681) $ 12,628 $16,334 $ (8,909)
======== ======== ======== ======= ========
OTHER FINANCIAL DATA:
Cash interest expense... $ 14,890 $ 23,600
Capital expenditures.... 10,321 5,062
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
43
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Other than those items described below, the unaudited pro forma condensed
consolidated financial statements do not reflect any costs associated with
operational changes resulting from the Transactions, including incremental
investments in local programming and marketing which may be incurred. The
following notes describe the pro forma adjustments to the pro forma condensed
consolidated statements of operations.
(a) Reflects consummation of Network Sale for $74.0 million, which resulted
in no gain as the Network Company's assets and liabilities were adjusted to
fair value as part of the Merger.
(b) Reflects impact of Affiliation Agreement with the Network Company, which
determines the allocation of revenues to the entities, among other things.
Revenue from the Company (excluding WKAQ in Puerto Rico) and the Network
Company is pooled and, pursuant to a formula, allocated to the entities. The
formula, which allocates the highest percentage of the pooled revenue to the
Company at the lowest threshold revenue level (which approximates current
levels), has the impact of allocating incremental revenue to the historical
revenue attributable to stations in the pro forma periods. The pro forma
impact on net revenue is as follows (in millions):
<TABLE>
<CAPTION>
SIX TWELVE
YEAR MONTHS MONTHS
ENDED ENDED ENDED
12/31/97 6/30/98 6/30/98
-------- ------- -------
<S> <C> <C> <C>
Historical revenue on a consolidated basis....... $197.6 $101.5 $208.4
Reflects Network Sale............................ (62.6) (35.6) (69.9)
------ ------ ------
Historical revenue attributable to Company....... 135.0 65.9 138.5
Revenue allocated to Company pursuant to
Affiliation Agreement........................... 148.8 74.7 154.8
------ ------ ------
Pro forma adjustment............................. $ 13.8 $ 8.8 $ 16.3
====== ====== ======
</TABLE>
(c) Reflects the impact on depreciation and amortization resulting from the
Merger. A 40 year life was used for broadcast licenses and other intangible
assets.
(d) To eliminate non-recurring Merger costs (investment advisory, legal,
accounting and other fees) incurred by Telemundo.
(e) Adjustment to reflect pro forma interest expense (in millions):
<TABLE>
<CAPTION>
SIX TWELVE
YEAR MONTHS MONTHS
ENDED ENDED ENDED
12/31/97 6/30/98 6/30/98
-------- ------- -------
<S> <C> <C> <C>
New Credit Facilities (at assumed average
interest rate of 7.8%).......................... $23.4 $11.7 $23.4
Capital lease obligations........................ 0.5 0.2 0.5
----- ----- -----
23.9 11.9 23.9
Less: interest income............................ (0.3) (0.1) (0.3)
----- ----- -----
Cash interest expense............................ 23.6 11.8 23.6
Old Notes ($125.0 million gross proceeds at
interest rate
of 11 1/2%)..................................... 14.8 8.0 15.6
Amortization of debt issuance costs.............. 1.6 0.8 1.6
----- ----- -----
Pro forma total interest expense................. 40.0 20.6 40.8
Historical interest expense...................... 20.8 10.7 21.3
----- ----- -----
Pro forma adjustment............................. $19.2 $ 9.9 $19.5
===== ===== =====
</TABLE>
44
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
INTRODUCTION
The Company is one of two national Spanish-language television broadcast
companies currently operating in the United States. The Company owns and
operates seven full-power UHF stations serving the seven largest Hispanic
Market Areas in the United States--Los Angeles, New York, Miami, San
Francisco, Chicago, San Antonio and Houston. Four of these markets are among
the five largest general Market Areas in the United States. The Company also
owns and operates the leading full-power television station and related
production facilities in Puerto Rico.
Prior to the Merger, the Company produced or acquired and distributed its
network programming through the Telemundo Network to Telemundo's owned and
operated stations and network affiliates. The Telemundo network's average
share of the weekday Spanish-language television network audience has declined
significantly to 16% in the second quarter of 1998 as compared to 26% in the
first quarter of 1996. The Company believes that this overall decline in
audience share has been principally the consequence of difficulties
encountered in acquiring and developing programming to compete effectively
with Univision's prime-time programming. The Company determined that it would
likely be able to compete more effectively by allying itself with one or more
strategic partners who could provide it with the programming, capital and
other resources necessary to aggressively pursue the U.S. Spanish-language
television audience. Discussions with potential strategic partners resulted in
the Merger and the related transactions.
In connection with the Merger, the Company sold its network operations,
which consisted of substantially all of the programming and production assets
and the related liabilities of the Telemundo Network, to the Network Company.
The Company also entered into the Affiliation Agreement, pursuant to which the
Network Company provides network programming to the Company, and the Company
and the Network Company have agreed to pool and allocate local, national spot
and network advertising revenues pursuant to a revenue sharing arrangement. As
a result, the Company is no longer required to bear any costs or expenses
related to, or fund or make capital expenditures in connection with, the
development of network programming or the operations of the Telemundo Network.
The Network Company currently serves 62 markets in the United States,
including the 37 largest Hispanic markets, and reaches approximately 85% of
all U.S. Hispanic households.
The primary source of revenues for the Company is a formula-based allocation
of combined local, national spot and network advertising revenues (the
"Station Compensation Pool") generated by the Company and the Network Company
pursuant to the terms of the Affiliation Agreement. The Station Compensation
Pool consists of the following revenue sources (collectively, the "Aggregate
Net Advertising Receipts"): (i) 61% of the net advertising revenues received
by the Network Company pursuant to the sale of network advertising and block
time (time made available for paid programming); and (ii) 100% of the net
advertising revenues received by the Company (excluding WKAQ in Puerto Rico)
from the sale of "spot" and local advertising time and local and national
block time. The Station Compensation Pool is shared between the Company and
the Network Company, with the Company's allocation based on the following
formula: (i) 80% of the first $130 million of Aggregate Net Advertising
Receipts; plus (ii) 55% of the incremental Aggregate Net Advertising Receipts
above $130 million up to $230 million; plus (iii) 45% of the incremental
Aggregate Net Advertising Receipts above $230 million. After the initial year,
the threshold levels (i.e., $130 million and $230 million) will be increased
3% annually. See "Business--Affiliation Agreement." The Company does not
control the Network Company. See "Risk Factors--Network Sale; Dependence on
Programming; Affiliation Agreement."
As a result of the revenue sharing arrangement and the reduction in
operating costs resulting from the Network Sale, the Company expects to be
able to apply greater cash resources to improve its local programming,
marketing and advertising efforts. For the twelve months ended June 30, 1998,
after giving pro forma effect to the Merger, the Network Sale and the related
transactions, the Company would have had net revenue of $154.8 million and
EBITDA after minority interest (as defined) of $52.8 million, as well as
substantially improved operating margins as compared to historical levels.
45
<PAGE>
Seasonal revenue fluctuations are common in the television broadcasting
industry and the Company's revenue, particularly in Puerto Rico, reflects
seasonal patterns with respect to advertiser expenditures. The first quarter
generally produces the lowest level of revenue due to the reduced demand for
advertising time. Because costs are more ratably spread throughout the year,
the impact of this seasonality on operating income is more pronounced during
the first quarter.
The historical financial statements of Telemundo discussed herein do not
reflect (i) the consummation of the Transactions, (ii) the impact of revenue
sharing pursuant to the Affiliation Agreement and (iii) the capital structure
of the Company following the Transactions. As a result, the historical
financial statements may not be indicative of results that would have been
reported had the Transactions occurred and may not be comparable to the
Company's future financial position or operating results or to the unaudited
pro forma condensed consolidated financial statements included herein. See
"Unaudited Pro Forma Condensed Consolidated Financial Statements."
RESULTS OF OPERATIONS
Six months ended June 30, 1998 and 1997
Net revenue for the six months ended June 30, 1998, as compared to the
corresponding period of 1997, was as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------------
1998 1997 CHANGE
------------ ----------- ------
<S> <C> <C> <C>
Net Commercial Air Time:
Continental U.S.:
Network and National Spot..................... $ 44,382,000 $37,467,000 18%
Local......................................... 22,745,000 20,714,000 10%
------------ -----------
67,127,000 58,181,000 15%
Puerto Rico.................................... 19,410,000 18,149,000 7%
------------ -----------
86,537,000 76,330,000 13%
Other........................................... 14,999,000 14,451,000 4%
------------ -----------
$101,536,000 $90,781,000 12%
============ ===========
</TABLE>
The increase in network and national spot revenue for the six month period
ended June 30, 1998, as compared to the corresponding period of 1997, is the
result of the continued strong growth in the overall Spanish-language
television market, offset in part by a decline in average audience shares. The
Company's average share of the weekday Spanish-language network television
audience from the fourth quarter of 1997 through the second quarter of 1998
was 18%, 16% and 16%, respectively, compared to 21%, 18% and 18%,
respectively, for the comparable periods of the prior years. A change in
audience share typically has a delayed effect on revenue.
The increase in local revenue is primarily attributable to KVEA-Los Angeles
where growth in the local Spanish-language television market coupled with an
increase in audience share, particularly in prime-time, led to increased local
revenue.
The increase in commercial air time revenue in Puerto Rico for the six month
period ended June 30, 1998 is the result of WKAQ maintaining its dominant
audience share in an advertising market which grew slightly.
Other revenue increased primarily due to sales of blocks of broadcast time
at higher rates.
46
<PAGE>
Direct operating costs increased by 7% for the six month period ended June
30, 1998 from the corresponding period of the prior year. This was primarily
the result of an increase in programming and production expenses, including
those at WKAQ.
Selling, general and administrative expenses other than network and
corporate increased by 4% for the six months ended June 30, 1998. This was
primarily the result of greater sales commissions and other costs related to
the increase in revenue and an increase in advertising and promotion
expenditures at the owned and operated stations.
Network expenses, which represent costs associated with the network
operations center as well as sales, marketing and other network costs not
allocated to specific television stations, increased by $3.1 million for the
six month period ended June 30, 1998 from the corresponding period of the
prior year, primarily as a result of increases in sales commissions and
bonuses related to the increase in revenue and increases in various other
network expenses.
Corporate expenses increased by $1.0 million for the six month period ended
June 30, 1998 from the comparable period of the prior year. This was primarily
the result of an increase in executive performance-based compensation and
additional legal costs.
As a result of the above, operating income before depreciation and
amortization increased by $2.4 million for the six month period ended June 30,
1998 from the comparable period of the prior year.
Merger related expenses include investment banking, legal, accounting and
other costs incurred during the six months ended June 30, 1998 for services
provided to the Company in connection with the Merger.
Interest expense, net of interest income, for the six months ended June 30,
1998 totaled $10.7 million as compared to $10.2 million for the corresponding
periods of the prior year. Interest expense for all periods includes (i)
interest accrued and accreted on the 10 1/4% Notes which were outstanding
during the period (approximately 99.8% of which were tendered in a repurchase
offer on February 26, 1996), (ii) interest accrued and accreted on the 10 1/2%
Notes, which were issued at a discount and were structured to produce a yield
to maturity of 10 1/2% per annum, (iii) amortization of deferred issuance
costs for the 10 1/2% Notes, and (iv) interest and fees on the Old Credit
Facility. Interest expense was offset by $159,000 and $162,000 of interest
income for the six months ended June 30, 1998 and 1997, respectively.
The income tax provision recorded in each of the periods relates to WKAQ,
which is taxed separately under Puerto Rico income tax regulations,
withholding taxes related to intercompany interest, and certain federal and
state income and franchise taxes. The Company is in a net operating loss
position for federal income tax purposes. The Company's use of its net
operating and capital loss carryforwards incurred prior to December 31, 1994
are subject to certain limitations imposed by Section 382 of the Code and
their use will be limited.
Minority interest represents distributions to the 25.5% partner in Video 44,
which is based on a minimum annual preferred distribution to such partner.
47
<PAGE>
Fiscal years ended December 31, 1997, 1996 and 1995
Net revenue for each of the three years in the period ended December 31,
1997 was as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 CHANGE 1996 CHANGE 1997
------------ ------ ------------ ------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net Commercial Air Time:
Continental U.S.:
Network and National
Spot................. $ 67,938 22% $ 82,741 -- % $ 82,828
Local................. 38,888 22% 47,345 (12)% 41,572
-------- -------- --------
106,826 22% 130,086 (4)% 124,400
Puerto Rico............ 37,830 16% 43,741 1 % 44,012
-------- -------- --------
144,656 20% 173,827 (3)% 168,412
Other Revenue........... 24,492 18% 28,886 1 % 29,176
-------- -------- --------
$169,148 20% $202,713 (3)% $197,588
======== ======== ========
</TABLE>
The increase in network and national spot revenue in 1997 is the result of
the continued growth in the overall Spanish-language television market and the
acquisition of WSNS-TV in Chicago, offset by a decline in audience share.
Excluding the impact of WSNS, which is reflected in the financial statements
effective February 27, 1996, network and national spot revenue would have
decreased by 1% in 1997. The increase in network and national spot revenue in
1996 was the result of the growth in the overall Spanish-language television
market, the acquisition of WSNS-TV, and increases in audience share for the
relevant ratings periods. Excluding the impact of WSNS, network and national
spot revenue would have increased by 13% in 1996.
The decrease in local revenue in 1997 is primarily the result of the decline
in audience share which impacted all stations, most significantly KVEA-Los
Angeles and WSCV-Miami. Local revenue was also impacted by the operations of
WSNS being included for the entire year in 1997. Excluding the impact of WSNS,
local revenue would have decreased by 14%. The increase in local revenue in
1996 was the result of an increase at KVEA-Los Angeles and other major owned
and operated stations, related to increases in audience shares for the
relevant ratings periods, and the acquisition of WSNS. Excluding the impact of
WSNS, local revenue would have increased by 7% in 1996.
The Company's average share of the weekday Spanish-language television
network audience for each of the first through fourth quarters of 1997 was 18%
and was 26%, 23%, 23% and 21%, respectively, for the first through fourth
quarters of 1996. A change in audience share typically has a delayed impact on
revenue.
The increase in commercial air time revenue in Puerto Rico in 1997 is the
result of WKAQ maintaining its dominant audience share in a market which grew
slightly. The increase in 1996 was the result of an increase in WKAQ's prime
time audience share and growth in the overall market, due in part to political
advertising.
Other revenue increased in 1997 primarily as a result of an increase in
international program sales and the impact of WSNS, which was offset by the
decline in sales of blocks of broadcast time to independent programmers.
Excluding the impact of WSNS, other revenue would have decreased by 1%. Other
revenue increased in 1996 primarily due to sales of blocks of broadcast time
and the acquisition of WSNS. Excluding the impact of WSNS, other revenue would
have increased by 9% in 1996.
Direct operating costs increased $6.3 million or 7% in 1997, which primarily
reflects an increase in programming and production expenses, including those
at WKAQ, and the impact of including the costs of WSNS for the entire year.
Excluding the impact of WSNS, direct operating costs would have increased by
6%. The $8.4 million or 11% increase in 1996 primarily reflected an increase
in programming costs, as well as costs attributable to WSNS. Excluding WSNS,
direct operating expenses would have increased by 8% in 1996.
48
<PAGE>
Selling, general and administrative expenses, other than network and
corporate expenses, decreased $1.2 million or 3% in 1997, which is primarily
the result of the Company undertaking cost reduction efforts, particularly at
the station group, and was offset in part by the impact of the acquisition of
WSNS. Excluding WSNS, selling, general and administrative expenses would have
decreased by 4%. The $5.6 million or 16% increase in 1996 primarily reflected
the acquisition of WSNS. Excluding WSNS, selling, general and administrative
expenses would have increased by 2% in 1996.
Network expenses, which represent costs associated with the network
operations center as well as sales, marketing and other network costs not
allocated to specific television stations, increased by $1.8 million or 6% in
1997 which primarily reflects increases in advertising and promotion costs.
Network expenses increased by $3.0 million or 12% in 1996 primarily as a
result of an increase to the allowance for doubtful accounts.
Corporate expenses increased by $511,000 in 1997 which is primarily a result
of a full year of compensation and operating expenses associated with an
additional corporate office and increased legal costs, offset in part by a
decrease in executive incentive compensation. Corporate expenses decreased by
$29,000 in 1996, which was primarily a result of an increase in executive
incentive compensation more than offset by other expense savings.
Depreciation and amortization expense increased by $627,000 or 5% in 1997
which reflects an increase in fixed asset additions and the impact of a full
year of WSNS. Depreciation and amortization expense increased $1.7 million or
14% in 1996 which was primarily the result of the addition of WSNS.
The Company incurred Merger related expenses of $1.7 million in 1997.
Interest expense, net of interest income, in 1997 totaled $20.8 million as
compared to $18.9 million and $14.5 million in 1996 and 1995, respectively.
Interest expense in 1997 and 1996 includes (i) interest accrued and accreted
on the 10 1/2% Notes, which were issued on February 26, 1996 at a discount and
were structured to produce a yield to maturity of 10 1/2% per annum, (ii)
amortization of deferred issuance costs for the 10 1/2% Notes, (iii) interest
and fees associated with the Old Credit Facility, and (iv) interest accrued
and accreted on the 10 1/4% Notes (approximately 99.8% of which were tendered
in a repurchase offer on February 26, 1996). Interest expense was offset by
$303,000 and $304,000 of interest income in 1997 and 1996, respectively.
Interest expense in 1995 primarily represents interest on the Company's 10
1/4% Notes, and is offset by $268,000 of interest income.
Net loss from investment in TeleNoticias of $3.1 million and $6.4 million in
1996 and 1995, respectively, represented the Company's 42% share of
TeleNoticias' net loss and related costs. In addition, the loss on disposal of
TeleNoticias of $2.4 million in 1996 resulted from the disposal of the
Company's interests in TeleNoticias on June 26, 1996 (see Note 4 of "Notes to
Consolidated Financial Statements" contained elsewhere herein).
The income tax provision recorded in each of the periods relates to WKAQ,
which is taxed separately under Puerto Rico income tax regulations,
withholding taxes related to foreign operations, and certain state income and
franchise taxes. The Company is in a net operating loss position for federal
tax purposes. The Company's use of its net operating and capital loss
carryforwards, incurred prior to December 31, 1994, are subject to certain
limitations imposed by Section 382 of the Code and their use will be limited.
Minority interest represents distributions to the 25.5% partner in Video 44,
which is based on a minimum preferred distribution to such partner.
The extraordinary loss on extinguishment of debt in 1996 is related to the
repurchase of 10 1/4% Notes.
LIQUIDITY AND SOURCES OF CAPITAL
The Company's cash flows from operating activities were $486,000 for 1997 as
compared to $24.7 million for 1996 and $11.6 million for 1995. The decrease in
1997 is the result of a decrease in operating income before depreciation and
amortization and the net effect of changes in certain asset and liability
accounts. The increase
49
<PAGE>
in 1996 was the result of the improvement in operating income before
depreciation and amortization and the net effect of changes in certain asset
and liability accounts, including WSNS's initial working capital requirements.
The Company's cash flows provided from (used in) operating activities were
$8.4 million and $(9.4) million for the six months ended June 30, 1998 and
1997, respectively. The increase was primarily the result of the net effect of
changes in certain asset and liability accounts, in particular the timing of
accounts payable, and the increase in operating income before depreciation and
amortization.
Operating income before depreciation and amortization reduced by minority
interest ("EBITDA after minority interest") was $5.5 million and $7.8 million
for the six months ended June 30, 1997 and 1998, respectively, and $40.5
million and $27.2 million for the years ended December 31, 1996 and 1997,
respectively. On a pro forma basis, EBITDA after minority interest was $50.7
million for the year ended December 31, 1997, $21.8 million for the six months
ended June 30, 1998 and $52.8 million for the twelve months ended June 30,
1998. Although EBITDA is not intended to represent cash flow or any other
measure of financial performance under generally accepted accounting
principles and may not be comparable between companies, the Company believes
it is helpful in understanding cash flow generated from operations that is
available for debt service, taxes, working capital requirements and capital
expenditures. "EBITDA" is a term used in certain financial covenants,
including those in the Indenture.
The Company had working capital of $36.0 million at June 30, 1998, compared
to $44.6 million at June 30, 1997.
Capital expenditures of approximately $11.2 million were made during 1997
for the replacement and upgrading of equipment, expanding production
capabilities and upgrading facilities. Capital expenditures of approximately
$5.6 million were made during the six months ended June 30, 1998 for the
replacement and upgrading of equipment and upgrading of facilities. Of these
amounts, $6.2 million and $3.2 million, respectively, of capital expenditures
were made in 1997 and the six months ended June 30, 1998 with respect to
network operations. As a result of the Network Sale, the Company no longer has
capital expenditure requirements with respect to network operations. On a pro
forma basis after giving effect to the Transactions, the Company expects
capital expenditures of $6.0 million in 1998, including expenditures related
to the commencement of conversion to DTV.
In connection with the Merger, the Company entered into the New Credit
Facilities which provide for aggregate borrowings of up to $350 million and
consists of a $150 million Revolving Credit Facility, a $25 million Tranche A
Facility and a $175 million Tranche B Facility (each as defined). In
connection with the New Credit Facilities, the Old Credit Facility, which
provided for borrowings of up to $20 million, was terminated. Subject to
compliance with the terms thereof, the Revolving Credit Facility is available
until September 30, 2005. The commitment thereunder will be reduced to $142.5
million, $127.5 million, $112.5 million and $90.0 million on December 31,
2001, 2002, 2003 and 2004, respectively. The Tranche A Facility matures on
September 30, 2005 and the Tranche B Facility matures on March 31, 2007.
Loans under the Tranche A Facility are scheduled to amortize in 24 quarterly
installments commencing on December 31, 1999 in the following aggregate
amounts: (i) $2.5 million for the first year, (ii) $3.125 million for the
second year, (iii) $3.75 million for the third year, (iv) $4.375 million for
the fourth year, (v) $5.0 million for the fifth year and (vi) $6.25 million
for the last year. Loans under the Tranche B Facility are scheduled to
amortize in 29 quarterly installments of $437,500 commencing on December 31,
1999 with a final quarterly payment of $162.3 million. In certain
circumstances, the Company may also be required to repay the New Credit
Facilities with the net proceeds of asset sales and equity issuances and with
a portion of Excess Cash Flow (as defined in the New Credit Facilities).
Subject to customary conditions precedent, amounts repaid on the Revolving
Credit Facility prior to maturity may be reborrowed up to $150 million,
subject to reduction of the Revolving Credit Facility. Amounts repaid on the
Tranche A Facility and the Tranche B Facility may not be reborrowed.
50
<PAGE>
The New Credit Facilities are obligations of Telemundo and are
unconditionally guaranteed by Holdings and by each subsidiary of Telemundo
which is a wholly owned domestic entity for U.S. federal income tax purposes,
and is secured by substantially all of the assets of Holdings and each such
subsidiary (other than certain subsidiaries as permitted by the lenders).
Telemundo's Puerto Rican subsidiary has granted a security interest to
Telemundo in its assets to secure certain existing indebtedness of such
subsidiary to Telemundo, and Telemundo has pledged 65% of the voting stock and
100% of the nonvoting stock of such subsidiary as security for the New Credit
Facilities. Loans under the New Credit Facilities bear interest at Telemundo's
option at either (i) Adjusted LIBOR (as defined in the New Credit Facilities)
plus the Applicable Margin or (ii) the Base Rate (as defined) plus the
Applicable Margin. The Applicable Margin for the Revolving Credit Facility and
the Tranche A Facility is initially (a) 1.875% for Adjusted LIBOR loans and
(b) 0.875% for Base Rate loans, and thereafter will be determined by a grid
based upon the ratio of total debt to EBITDA (as defined in the New Credit
Facilities). The Applicable Margin for the Tranche B Facility is (a) 2.125%
for Adjusted LIBOR loans and (b) 1.125% for Base Rate loans. Telemundo
recently entered into a swap agreement which fixed the LIBOR rate for $100
million of the New Credit Facilities at 5.145 % for five years.
On August 12, 1998, TLMD Acquisition purchased approximately $191.7 million
aggregate principal amount of the 10 1/2% Notes pursuant to the Tender Offer,
of which approximately $192.0 aggregate principal amount was outstanding prior
to the Merger.
As a result of the Transactions, the Company's total long-term debt
increased from $192.9 million at June 30, 1998 on a historical basis to $429.9
million at that date on a pro forma basis. On a pro forma basis for the year
ended December 31, 1997 and the twelve months ended June 30, 1998, the
Company's cash interest expense, net of interest income, would have been $23.6
million for both periods and its total interest expense, net of interest
income, would have been $40.0 million and $40.8 million, respectively. The Old
Notes were, and the New Notes will be, offered at a substantial discount from
their principal amount at maturity and cash interest will not begin to accrue
until August 15, 2003.
As of June 30, 1998, after giving pro forma effect to the Transactions, the
Company would have had approximately $50.0 million available under the
Revolving Credit Facility for working capital and general corporate purposes.
The Company's principal sources of liquidity are expected to be cash flow from
operations and the Revolving Credit Facility. The Company believes that its
cash flow from operations, together with amounts available to it under the New
Credit Facilities, will be sufficient to fund its debt service and other
currently anticipated cash requirements. The Company's ability to incur
additional indebtedness is limited by the New Credit Facilities and the
Indenture.
YEAR 2000
The Company has developed plans, utilizing internal resources, to ensure its
information systems are capable of properly utilizing dates beyond December
31, 1999. Since January 1, 1997, the Company has upgraded or replaced many of
its accounting and traffic computer systems, including the conversion to new
software which is Year 2000 compliant at a total cost of approximately
$450,000. Additionally, the Company has evaluated its other principal computer
systems and determined they are substantially Year 2000 compliant. The Company
does not expect to incur more than an additional $250,000 in connection with
the Year 2000 issue.
The Company is also seeking to work with its relevant customers, suppliers
and other service providers to ensure their systems are Year 2000 compliant.
If any of the Company's customers are not Year 2000 compliant, the Company
could, among other things, experience delays in collections of accounts
receivable. Further, Year 2000 non-compliance could adversely affect the
overall operations of the Company's customers, which could result in reduced
demand for advertising time. Although the impact on the Company caused by the
failure of its significant customers, suppliers and other service providers to
achieve Year 2000 compliance in a timely and effective manner is uncertain,
the Company's business and results of operations could be materially adversely
affected by such failure. The amount of potential liability and lost revenue
has not been estimated. However, the Company does not believe that the most
reasonably likely worst case Year 2000 scenario would significantly
51
<PAGE>
impact the Company. Accordingly, the Company does not believe it is necessary
to develop a contingency plan at this time. The Company will continuously
monitor the need for a contingency plan as it acquires additional information
regarding the Year 2000 compliance programs of its customers, suppliers and
other service providers.
RECENT ACCOUNTING PRONOUNCEMENTS
During 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income"(SFAS
130") and Statement of Financial Accounting Standards No. 131, "Disclosures
about Segments of an Enterprise and Related Information" (SFAS 131"). SFAS 130
provides guidance for the presentation and display of comprehensive income.
SFAS 131 establishes standards for disclosure of operating segments, products,
services, geographic areas and major customers. The Company is required to
adopt both standards for its fiscal year ended December 31, 1998. Management
believes that the implementation of SFAS 130 and SFAS 131 will not have a
material impact on the presentation of the Company's financial statements.
During 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133 establishes accounting and
reporting standards for derivative instruments, including derivative
instruments embedded in other contracts. The Company is required to adopt this
standard for all fiscal quarters of fiscal years beginning after June 15,
1999. Management believes that the implementation of SFAS 133 will not have a
material impact on the Company's financial statements.
52
<PAGE>
BUSINESS
The Company is one of two national Spanish-language television broadcast
companies currently operating in the United States. The Company owns and
operates seven full-power UHF stations serving the seven largest Hispanic
Market Areas in the United States--Los Angeles, New York, Miami, San
Francisco, Chicago, San Antonio and Houston. Four of these markets are among
the five largest general Market Areas in the United States. The Company also
owns and operates the leading full-power television station and related
production facilities in Puerto Rico. The Company's stations broadcast a wide
variety of network programming, including movies, telenovelas (soap operas),
talk shows, entertainment programs, national and international news, music and
sporting events. In addition, the Company supplements its network programming
with local programming focused on local news and community events.
Prior to the Merger, the Company produced and acquired its network
programming through the Telemundo Network, which provided programming 24-hours
a day to Telemundo's owned and operated stations and network affiliates. In
connection with the Merger, the Company sold its network operations, which
consisted of substantially all of the programming and production assets of the
Telemundo Network, to the Network Company, which is equally owned by a
subsidiary of Sony Pictures and a subsidiary of Liberty. The Company also
entered into the Affiliation Agreement, pursuant to which the Network Company
provides network programming to the Company, and the Company and the Network
Company have agreed to pool and allocate local, national spot and network
advertising revenues on a predetermined basis. See "--Affiliation Agreement."
The Network Company currently serves 62 markets in the United States,
including the 37 largest Hispanic markets, and reaches approximately 85% of
all U.S. Hispanic households.
The Company believes that it will benefit significantly from the global
production, programming and distribution expertise of Sony Pictures and the
diverse programming and cable distribution capabilities of Liberty. The
Company expects that Sony Pictures and Liberty will provide (i) a source of
high-quality network programming, the expenses associated with which will be
borne entirely by the Network Company, (ii) access to significant national
sales and marketing resources, (iii) a favorable revenue sharing arrangement
pursuant to the Affiliation Agreement and (iv) greater market penetration
through increased cable television coverage. As a result of the reduction in
operating costs due to the Network Sale and the favorable effect of the
revenue sharing arrangement, for the twelve months ended June 30, 1998, after
giving pro forma effect to the Merger, the Network Sale and the related
transactions, the Company would have had net revenue of $154.8 million and
EBITDA after minority interest of $52.8 million, as well as substantially
improved operating margins as compared to historical levels.
U.S. HISPANIC MARKET OVERVIEW
Market Demographics
Hispanics are one of the fastest growing segments of the U.S. population.
According to the U.S. Census Bureau, the U.S. Hispanic population has grown
from an estimated 14.6 million people, or 6.4% of the U.S. population in 1980,
to 28.7 million people, or 10.7% of the U.S. population in 1997. The Hispanic
population in the United States, the fifth largest Hispanic population in the
world, is growing at approximately five times the rate of the non-Hispanic
population. By the year 2010, the Hispanic population in the United States is
projected by the U.S. Census Bureau to reach approximately 41.1 million
people, accounting for approximately 13.8% of the total population of the
United States, which would represent the country's largest minority group.
The U.S. Hispanic population is highly concentrated geographically, with
over 50% of all Hispanics residing in the seven largest Hispanic Market Areas.
In addition, Hispanic households in the United States on average tend to be
larger than non-Hispanic households, averaging 3.5 persons compared to 2.6
persons for all U.S. households. The U.S. Hispanic population is also younger,
with an average age of 27 years compared to 35 years for the entire
population, and spends a greater percentage of their total household income on
consumer products than non-Hispanic households.
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<PAGE>
Importance of Spanish-Language Media, Especially Television
Hispanics in the United States historically have tended to retain Spanish as
their dominant language. The 1997-1998 Nielsen Enumeration Study indicates
that approximately 48% of U.S. Hispanic households speak predominantly
Spanish. Consequently, many Hispanics in the United States rely on Spanish-
language media as an important, and often the exclusive, source of news and
information as well as entertainment. Approximately 80% of U.S. Hispanic
television households view Spanish-language television, and aggregate viewing
of Spanish-language television increased by approximately 33% from 1993 to
1997, as compared to a decrease of approximately 13% for the general market
English-language television broadcast networks during the same period. As a
result, the Company believes that major advertisers such as The Procter &
Gamble Co., AT&T Corp., Sears, Roebuck & Co., General Motors Corporation and
McDonald's Corporation have found that Spanish-language advertising is a more
cost-efficient means to target this growing audience than English-language
broadcast media. See "--Sales and Marketing."
Advertising Market
The annual purchasing power of Hispanics is in excess of $260 billion. With
the continuing growth of the Hispanic market, advertisers have substantially
increased their use of Spanish-language media, particularly television.
According to Hispanic Business Magazine, total advertising expenditures
directed towards Spanish-language media were estimated to have increased from
approximately $830 million in 1993 to approximately $1.4 billion in 1997,
representing a compounded annual growth rate of 14% over the four-year period.
More recently, total advertising expenditures directed towards Spanish-
language media increased approximately 17% from 1996 to 1997, with over half
of these expenditures spent on Spanish-language television. Despite the rapid
growth, advertising expenditures directed to the Hispanic television market
still represent less than 1.7% of all television advertising in the United
States. Based on Nielsen TV data, however, the Company estimates that
approximately 4% of total television viewing is of Spanish-language
television. The Company believes that this disparity will narrow as
advertisers continue to increase their advertising expenditures on Spanish-
language television and as more information on the Hispanic market becomes
available.
The Company believes that advertising should continue to grow significantly
as new advertisers enter the Hispanic market and existing advertisers increase
the percentage of their budgets directed towards Spanish-language television.
AFFILIATION WITH SONY PICTURES AND LIBERTY
The Company is owned by Sony Pictures, Liberty and Station Partners, LLC.
Each of Sony Pictures and Liberty have made significant investments to acquire
their interests in the Company and the Network Company and have agreed to make
additional significant contributions of capital and other resources to the
Network Company. Sony Pictures, a subsidiary of Sony Corporation, is a global
entertainment company whose operations include motion picture production and
distribution, television channels, production and syndication and home
entertainment. Sony Pictures has demonstrated its expertise in television
programming and marketing and currently has ownership interests in 24
international television channels, nine of which are in Latin America. The
Company has been advised that Sony Pictures expects its Telemundo investment
to be an integral part of Sony Pictures' strategy to serve domestic and
international Spanish-language markets.
Liberty is the programming unit of TCI, one of the leading cable and
telecommunications companies in the United States, and owns interests in
numerous globally-branded entertainment and electronic retailing networks.
Liberty invests in and manages entities engaged in the production, acquisition
and distribution of branded entertainment and informational programming and
software, including multimedia products. On June 24, 1998, TCI and AT&T
announced that they had entered into an Agreement and Plan of Restructuring
and Merger pursuant to which TCI will become a wholly owned subsidiary of
AT&T. In addition, TCI announced its intention to combine Liberty and TCI
Ventures Group concurrently with the consummation of the AT&T/TCI Merger.
Immediately following the AT&T/TCI Merger, AT&T will issue separate tracking
stock to holders of Liberty to continue the holders' interest in Liberty. The
consummation of these transactions is subject to certain regulatory approvals
and there can be no assurance that these transactions will be consummated.
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The Company expects that Sony Pictures and Liberty will provide (i) a source
of high-quality network programming, (ii) access to significant national sales
and marketing resources, (iii) a favorable revenue sharing arrangement
pursuant to the Affiliation Agreement and (iv) greater market penetration
through increased cable television coverage.
SOURCE OF HIGH-QUALITY PROGRAMMING. Pursuant to the Affiliation Agreement,
the Network Company provides all network programming to the Company, the
expenses associated with which are borne entirely by the Network Company. The
Company believes that with the support of Sony Pictures' vast production
resources and library, which contains over 3,500 movie titles and 35,000
series episodes, together with Liberty's access to programming, the Network
Company will be a valuable source of innovative and high-quality programming.
Sony Pictures is one of the premiere producers of network and syndicated
television programming in the world, and has produced or distributed such
programs as Seinfeld, Mad About You, Party of Five, Days of Our Lives, Wheel
of Fortune and Jeopardy. Sony Pictures has also recently produced such movies
as The Mask of Zorro, Men In Black, Air Force One, As Good As It Gets and
Jerry Maguire. In addition, Liberty will provide access to sports and other
programming from its numerous investments in cable channels, including Fox
Sports Americas and Discovery Channel.
The Network Company is expected to produce original and innovative
programming, as well as utilize Sony Pictures' production resources and
library and Liberty's access to programming to supplement and enhance the
Company's schedule. The Network Company is also expected to adapt certain
proven sitcom, game-show and drama formats to create original Spanish-language
programming which will be more culturally relevant to Hispanics in the United
States than currently available Spanish-language programming.
NATIONAL SALES AND MARKETING RESOURCES. Pursuant to the Affiliation
Agreement, the Network Company is responsible for the sale of all network
advertising time, as well as the sale of national spot advertising time on
behalf of network affiliated stations (including the Company's owned and
operated stations). While the Network Company conducts its own sales and
marketing activities, Columbia Television Advertiser Sales, Sony Pictures'
national advertising sales and marketing affiliate, is expected to provide
advertising assistance to the Network Company. The Company believes that the
Network Company will be able to leverage such national and international
experience, relationships and other advertising and marketing resources to
enhance the Network Company's sales and marketing efforts.
REVENUE SHARING. Pursuant to the Affiliation Agreement, the Company and the
Network Company have agreed to pool and allocate local, national spot and
network advertising revenues on a predetermined basis. As a result, the
Company receives a formula-based percentage of the revenues that are generated
by the Network Company from the sale of advertising time on its network of
affiliated stations (including the Company's owned and operated stations). The
revenue sharing arrangement, together with the reduction in programming and
other operating expenses resulting from the Network Sale, significantly
improves pro forma operating margins and should permit the Company to apply
greater cash resources to improve its local programming, marketing and
advertising efforts. See "--Affiliation Agreement."
CABLE CARRIAGE. Pursuant to the Carriage Agreement, a subsidiary of TCI will
agree to provide incremental cable carriage to the Network Company through its
extensive cable distribution infrastructure. The Company expects that the
Carriage Agreement, together with Liberty's comprehensive cable experience and
relationships, will increase the market coverage of the Network Company. See
"--Carriage Agreement."
BUSINESS STRATEGY
The Spanish-language television market in the United States is currently
served by only two national television broadcast companies, Univision and the
Company. The Company believes that since 1993, it has lost market share to
Univision due to the Company's limited programming, production and financial
resources, and as a result of certain exclusive programming relationships
Univision has with Televisa and Venevision. See
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"Risk Factors--Competition." The Company has developed an operating strategy
that is designed to improve ratings and audience share and result in increased
revenue and EBITDA. The key components to the Company's strategy include the
following:
LEVERAGE RELATIONSHIP WITH SONY PICTURES AND LIBERTY. The Company intends
to fully leverage its relationship with Sony Pictures and Liberty in order to
gain access to a source of high-quality network programming and significant
national sales and marketing resources and to obtain greater market
penetration through increased cable television coverage.
Improve Programming. For over 30 years, the U.S. Spanish-language
television market has followed the traditional programming format
originated in Mexico, which involves broadcasting primarily telenovelas
throughout the day and almost exclusively during prime time. This
programming format offers largely imported programming from Mexico and
other Latin American countries, which has the effect of ignoring large
segments of U.S. Spanish-language viewers, primarily younger and male
audiences. Independent research confirms that U.S. Hispanic audiences are
seeking a more varied and culturally relevant alternative to the
telenovela.
The Company believes that as a result of the Network Company's
relationship with Sony Pictures and Liberty, the Network Company will be
able to provide the Company with a more diverse and compelling product that
is tailored specifically for Hispanics in the United States. The Company
expects that the Network Company will offer new categories and formats of
high-quality programming, in addition to the telenovela, that have not
previously been available to the Hispanic audience, focusing on programming
that both reflects and impacts the lifestyles of Hispanics in the United
States. Examples of such new Spanish-language programming include action
and adventure programs such as Angeles and Reyes & Rey and game shows such
as Buscando Parejas (The Dating Game) and Los Recien Casados (The
Newlyweds). The Company also expects that the Network Company will
broadcast in the Spanish language major motion picture releases from Sony
Pictures' library. These programming initiatives will be initially focused
on prime time slots, which the Company believes represent the greatest
growth opportunity and generate the majority of advertising revenues.
Enhance Marketing Efforts and Advertising Presence. The Company believes
that the Telemundo brand name is well known and well respected in the
Hispanic community. The Company and the Network Company intend to enhance
Telemundo's image by repositioning Telemundo as a more contemporary
network. The marketing strategy includes committing greater resources to
its marketing efforts, creating a new and distinct brand identity,
developing and investing in strategic advertising and promotion and
improving overall public relations. In addition, the Company and the
Network Company have identified key advertising sales initiatives,
including cultivating new accounts, offering competitive packages and
services and creating program sponsorships and product integration
programs. The Company believes that both the Network Company and the
Company could increase their respective shares of the advertising market by
simply increasing their visibility in the market.
Increase Market Penetration. The Carriage Agreement, which will provide
for incremental cable carriage of the Network Company's programming over
TCI's extensive cable systems, is expected to increase the market
penetration of the Network Company. The Company believes that the increased
market penetration, together with the programming and marketing
initiatives, will result in increased audience share and revenues for the
Network Company and the Company.
STRENGTHEN LOCAL IDENTITY. The Company believes that local programming,
particularly strong coverage of news and community affairs, enhances local
presence, builds viewer loyalty and ultimately increases viewership levels.
Accordingly, the Company plans to increase spending on local programming and
produce new local programming, as well as enhance coverage of local news and
community affairs. In addition, the Company intends to reduce the level of
paid programming (infomercials), which the Company believes will also result
in improved viewer loyalty and further increase viewership.
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TELEVISION STATIONS
The Company owns and operates eight full-power and 15 low-power Spanish-
language television stations in the United States and Puerto Rico.
Full-Power Stations
The Company's U.S. owned and operated full-power stations broadcast network
programming provided by the Network Company and produce and broadcast local
news and limited other programming focused on the audience in each of their
respective local markets. Each full-power station also sells blocks of
broadcast time during non-network programming hours to independent programmers
("block time programmers"). The following table sets forth certain information
about the Company's owned and operated full-power Spanish-language television
stations.
<TABLE>
<CAPTION>
NUMBER OF
RANKING OF RANKING OF OTHER SPANISH-
NUMBER OF MARKET AREA MARKET AREA LANGUAGE
HISPANIC HISPANICS BY NUMBER BY NUMBER TELEVISION
TELEVISION AS A PERCENTAGE OF HISPANIC OF TOTAL STATIONS
MARKET AREA STATION HOUSEHOLDS IN OF TOTAL TELEVISION TELEVISION OPERATING IN
SERVED AND CHANNEL MARKET AREA(1) POPULATION(2) HOUSEHOLDS(1) HOUSEHOLDS(1) MARKET AREA(3)
- ----------------- ------------- -------------- --------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Los Angeles, CA KVEA (Ch. 52) 1,351,000 37% 1 2 2
New York, NY WNJU (Ch. 47) 1,023,000 18% 2 1 1
Miami, FL WSCV (Ch. 51) 451,000 37% 3 16 3
San Francisco, CA KSTS (Ch. 48) 301,000 18% 4 5 1
Chicago, IL(4) WSNS (Ch. 44) 293,000 13% 5 3 1
San Antonio, TX KVDA (Ch. 60) 283,000 52% 6 38 2
Houston, TX KTMD (Ch. 48) 278,000 23% 7 11 1
San Juan, PR WKAQ (Ch. 2) 1,145,000(5) -- -- -- 6
</TABLE>
- --------
(1) Estimated by Nielsen TV as of January 1, 1998.
(2) Claritas, Inc., 1997, derived from U.S. Census Bureau data and other
government statistics.
(3) The Company and each of its Spanish-language competitors broadcast over
UHF, except in Puerto Rico, where WKAQ and its three major competitors
broadcast over VHF.
(4) The Company owns a 74.5% interest in WSNS through a joint venture.
(5) Mediafax, Puerto Rico Market Data, December 1997.
Los Angeles: The Company owns and operates KVEA, Channel 52, licensed to
Corona, California and serving the Los Angeles market. KVEA began operating as
a Spanish-language station in 1985. Los Angeles is the largest U.S. Hispanic
market, representing approximately 17% of the Hispanic television households
in the United States. An estimated 5.8 million Hispanics reside in the Los
Angeles DMA, constituting approximately 37% of the Los Angeles DMA population.
The Hispanic population in Los Angeles more than doubled between 1980 and
1997, and immigration trends indicate that the Hispanic population will
continue to grow rapidly. As a reflection of the significance of Spanish-
language television, Spanish-language television programs periodically draw
higher overall audience levels than the competing English-language programs in
the Los Angeles DMA. The Hispanic population in Los Angeles is predominantly
Mexican in origin.
New York: The Company owns and operates WNJU, Channel 47, licensed to
Linden, New Jersey and serving the New York market. WNJU began operating as a
Spanish-language station in 1965. New York is the second largest U.S. Hispanic
market, representing approximately 13% of the Hispanic television households
in the United States. An estimated 3.4 million Hispanics reside in the New
York DMA, constituting approximately 18% of the New York DMA population. The
Hispanic population in New York increased by approximately 64% between 1980
and 1997. Although almost half of this market is of Puerto Rican origin, the
New York Hispanic community is relatively diverse.
Miami: The Company owns and operates WSCV, Channel 51, licensed to Ft.
Lauderdale, Florida and serving the Miami-Ft. Lauderdale market. WSCV began
operating as a Spanish-language station in 1985. In
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February 1998, Univision's WLTV in Miami became the first Spanish-language
station in the United States to be the highest rated television station in its
market, achieving higher ratings than any of the major English-language
network affiliates. Miami is the third largest U.S. Hispanic market,
representing approximately 6% of the Hispanic television households in the
United States. An estimated 1.3 million Hispanics reside in the Miami DMA,
constituting approximately 37% of the Miami DMA population. It has been
estimated that more than half of the population of Miami-Dade County is
comprised of Hispanics. The Hispanic population in Miami more than doubled
between 1980 and 1997. Approximately 54% of Hispanics in Miami are of Cuban
origin.
San Francisco: The Company owns and operates KSTS, Channel 48, licensed to
San Jose, California and serving the San Francisco-San Jose market. KSTS began
operating as a Spanish-language station in 1987. The San Francisco-San Jose
Hispanic market is the fourth largest U.S. Hispanic market, representing
approximately 4% of the Hispanic television households in the United States.
An estimated 1.2 million Hispanics reside in the San Francisco DMA (which
includes San Jose), constituting approximately 18% of the San Francisco DMA
population. The Hispanic population in this market grew by approximately 83%
from 1980 to 1997 and is over 68% of Mexican origin.
Chicago: The Company owns a 74.5% interest in and operates WSNS, Channel 44,
licensed to and serving the Chicago market. WSNS began operating as a Spanish-
language station in 1985. The Chicago market is the fifth largest Hispanic
market in the United States, representing approximately 4% of the Hispanic
television households in the United States. An estimated 1.1 million Hispanics
reside in the Chicago DMA, constituting approximately 13% of the Chicago DMA
population. The Hispanic population in Chicago grew by approximately 76% from
1980 to 1997 and is over 69% of Mexican origin.
San Antonio: The Company owns and operates KVDA, Channel 60, licensed to and
serving the San Antonio, Texas market. KVDA began operating as a Spanish-
language station in 1989. The San Antonio market is the sixth largest U.S.
Hispanic market, representing approximately 4% of the Hispanic television
households in the United States. An estimated 1.0 million Hispanics reside in
the San Antonio DMA, constituting approximately 52% of the San Antonio DMA
population. The Hispanic population in San Antonio, which is principally of
Mexican origin, increased by approximately 54% between 1980 and 1997.
Houston: The Company owns and operates KTMD, Channel 48, licensed to
Galveston, Texas and serving the Houston-Galveston market. KTMD began
operating as a Spanish-language station in 1987. The Houston-Galveston market
is the seventh largest U.S. Hispanic market, representing approximately 4% of
the Hispanic television households in the United States. An estimated 1.0
million Hispanics reside in the Houston DMA (which includes Galveston),
constituting approximately 23% of the Houston DMA population. The Hispanic
population in Houston more than doubled between 1980 and 1997 and is
principally of Mexican origin.
San Juan, Puerto Rico: The Company owns and operates television station
WKAQ, Channel 2, in San Juan, which together with its affiliate, WOLE (Channel
12 in Mayaguez), and its translator facilities, cover virtually all of Puerto
Rico. WKAQ began operating as a Spanish-language television station in 1954.
The current population of Puerto Rico is approximately 3.8 million.
Low-Power Stations
In addition to its 15 owned and operated LPTVs, the Company has received
permission from the FCC to build two additional LPTVs. LPTVs and "translator
stations" generally operate at significantly lower levels of power than full-
power stations. In addition, their signals generally cover smaller areas than
those covered by full-power stations and may not cover the full Market Area in
which they are located. LPTVs extend the Company's and the Network Company's
coverage in areas where the Company does not own a full-power television
station or where the Network Company does not have a network affiliate. The
Company's low-power television stations operate with minimal staff and
generally do not originate programming or have their own sales forces. See
"Risk Factors--Impact of New Technologies" and "--FCC Regulation."
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The following table sets forth certain information about the Company's owned
and operated LPTVs.
<TABLE>
<CAPTION>
NUMBER OF HISPANIC
TELEVISION HOUSEHOLDS
MARKET AREA SERVED STATION(S) IN MARKET AREA(1)
------------------ ---------- ---------------------
<S> <C> <C>
Albuquerque/Santa Fe, NM(2)(3)....... K52BS 181,000
Sacramento, CA(2).................... K47DQ, K52CK, K61F1 154,000
Boston, MA........................... W32AY 89,000
Austin, TX(2)........................ K11SF 79,000
Salinas/Monterey, CA................. K15CU 51,000
Colorado Springs, CO................. K49CJ 40,000
Santa Barbara/Santa Maria, CA........ K27EI 40,000
Salt Lake City, UT................... K48EJ 37,000
Odessa/Midland, TX(2)................ K60EE, K49CD 37,000
Amarillo, TX......................... K36DV 28,000
Reno, NV............................. K52FF 18,000
Abilene, TX.......................... K40DX 14,000
</TABLE>
- --------
(1) Estimated by Nielsen TV as of January 1, 1998.
(2) These areas are served by more than one LPTV, including affiliated LPTVs.
(3) The Company expects to sell its LPTV in Santa Fe, New Mexico, which is
expected to become an affiliate of the Network Company.
AFFILIATION AGREEMENT
Pursuant to the Affiliation Agreement, the Network Company provides
programming to the Company, and the Company and the Network Company have
agreed to pool and allocate local, national spot and network advertising
revenues on a predetermined basis. The initial term of the Affiliation
Agreement is ten years and the Network Company will have the right to renew
the Affiliation Agreement for two consecutive five-year terms if certain
performance goals are met. The Affiliation Agreement is terminable by either
party in the event of a "material default of a material provision" (as defined
therein). The Network Company may terminate its obligations with respect to
any of the Company's low-power television stations and enter into an
affiliation agreement with either another low-power or a full-power television
station in the same licensed community (which need not be owned by the
Company) if that station has greater signal coverage than that of the
terminated low-power station. In addition, the obligations of the Network
Company under the Affiliation Agreement as to a particular station can be
terminated under certain limited circumstances.
Programming
The Affiliation Agreement provides that all network programming will be
provided by the Network Company. Subject to certain exceptions, the Company
has the exclusive broadcast rights in the areas in which the Company operates.
Moreover, any licensing to third parties of any programs first shown on the
network is subject to agreed upon limitations. Pursuant to the Affiliation
Agreement, all expenses associated with the development of original Network
Company programming will be borne by the Network Company, while all expenses
related to the development of local programming will be borne by the Company.
Each of the stations is responsible for approximately 2 to 3 hours of local
programming daily, consisting primarily of local news and coverage of
community affairs.
Advertising and Revenue Sharing
Pursuant to the Affiliation Agreement, the Network Company is responsible
for the sale of all network advertising time, as well as the sale of national
spot advertising time on behalf of network affiliated stations (including the
Company's owned and operated stations), while the Company is responsible for
the sale of local
59
<PAGE>
advertising time. Revenue allocation is based on a formula applied to the
Station Compensation Pool, which consists of the following revenue sources:
(i) 61% of the net advertising revenues received by the Network Company
pursuant to the sale of network advertising and block time (time made
available for paid programming); and (ii) 100% of the net advertising revenues
received by the Company (excluding WKAQ in Puerto Rico) from the sale of
"spot" and local advertising time and local and national block time. The
Station Compensation Pool is shared between the Company and the Network
Company, with the Company's allocation based on the following formula: (x) 80%
of the first $130 million of Aggregate Net Advertising Receipts; plus (y) 55%
of the incremental Aggregate Net Advertising Receipts above $130 million up to
$230 million; plus (z) 45% of the incremental Aggregate Net Advertising
Receipts above $230 million. After the initial year, the above levels (i.e.,
$130 million and $230 million) will be increased 3% annually. The Affiliation
Agreement provides that not less than 50% of all advertising time during
network programming will be available for local and national spot advertising.
Under certain limited circumstances involving a specified number of "Willful
Unauthorized Preemptions" or "Other Unauthorized Preemptions" or a "Change in
Operations" (each as defined in the Affiliation Agreement) affecting a
particular station, the obligations of the Network Company with respect to
such station may be terminated by the Network Company. Upon such a
termination, the percentage of net advertising revenues contributed by the
Network Company referred to in clause (i) of the preceding paragraph would be
reduced to a percentage figure equal to 61% multiplied by a fraction, the
denominator of which is equal to the Company's stations' then prevailing
aggregate "network" coverage of U.S. Hispanic television households (as
measured by objective demographic data obtained from Nielsen TV or as
otherwise agreed) and the numerator of which is the Company's stations' then
prevailing aggregate "network" coverage of U.S. Hispanic television households
excluding the "network" coverage of U.S. Hispanic television households
provided by the terminated station.
CARRIAGE AGREEMENT
The Network Company will enter into the Carriage Agreement with a subsidiary
of TCI, pursuant to which such subsidiary will provide for incremental cable
carriage to the Network Company through TCI's extensive cable distribution
infrastructure. The Carriage Agreement is expected to increase the market
penetration of the Network Company. The Company believes that an incremental
400,000 subscribers in areas in which the Company or the Network Company
currently does not operate would increase the network's coverage from 85% to
90% of all U.S. Hispanic households.
Under the Carriage Agreement, the Network Company will pay such TCI
subsidiary fees for delivering new Hispanic surname households as subscribers
to a TCI cable system carrying the Network Company's programming ("TCI
Hispanic Subscribers"). The Affiliation Agreement provides that the Company
will reimburse the Network Company for one-half of the fees actually paid by
the Network Company (up to $2.50 per TCI Hispanic Subscriber) for the first
400,000 TCI Hispanic Subscribers, and a specified percentage of such fees (up
to a maximum payment obligation of $1,000,000) for TCI Hispanic Subscribers in
excess of 400,000 and for new Hispanic cable subscribers on other than TCI
cable systems carrying the Network Company's programming ("Non-TCI
Subscribers"). The Company's maximum total payment obligation for additional
TCI Hispanic Subscribers and Non-TCI Subscribers is $2,000,000.
PROGRAMMING
As a result of the Affiliation Agreement, the Company relies on the Network
Company for network programming. The Network Company provides the Company with
a variety of entertainment and news programs, national and international news,
music and sporting events.
On June 16, 1998, the Telemundo network announced its programming schedule
for the 1998-1999 broadcast season. The Telemundo network will provide such
action and adventure programs such as Angeles,
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AXN, Reyes y Rey and Operacion Rescate (Operation Rescue), game shows such as
Buscando Parejas (The Dating Game) and Los Recien Casados (The Newlyweds) and
situation comedies such as Sola en America (Only in America) and Una Familia
con Angel (A Family with Angel ). Telemundo's programming schedule is further
supplemented by a new line-up of feature films from Sony Pictures' library.
The Telemundo network also provides the Emmy Award-winning show, Occurrio
Asi, a one-hour reality-based investigative news magazine show, which has
consistently been one of the Company's highest-rated programs. Other Telemundo
network programming with consistently strong market shares that are provided
include Sevcec, a talk show hosted by renowned journalist, Pedro Sevcec, which
is designed to entertain the public with a mix of celebrities, musical
performances and comedians and educate the public on a wide range of issues,
including immigration and violence, and El y Ella (He and She), a talk show
that discusses everyday topics and common problems from the male and female
perspective, which is hosted by Sofia Webber and Guillermo Quintanilla.
The Telemundo network's programming currently includes network newscasts
produced by CBS-Telenoticias.
In addition, the Company's owned and operated full-power stations produce
and broadcast local news and limited other programming focused on the audience
in each of their respective local markets. The remainder of the Company's
programming is purchased from various program suppliers primarily in Mexico
and other Latin American countries.
The programming lineup of WKAQ in Puerto Rico differs from that of the
Telemundo network, but includes approximately 15 hours per week of network
programming. Through its production studios, WKAQ produces approximately 28
hours of programming weekly, including variety and comedy shows, mini-series,
news and public affairs shows, all primarily directed toward the Puerto Rico
market. In addition, WKAQ has the right of first refusal to purchase
telenovelas and other programming for the Puerto Rico market, produced by
Televisa pursuant to a programming agreement which expires in May 2005. WKAQ
also broadcasts programming from other Latin American countries and broadcasts
United States syndicated programming dubbed in Spanish.
Prior to the Merger, the Company, through the Telemundo Network, sold the
rights to broadcast network original programming in the international markets.
Revenue from the international syndication of such programming represented
less than 2% of the Company's total net revenue in 1997.
AFFILIATES
In addition to the Company's owned and operated stations, the Network
Company provides programming to 160 affiliates serving 45 Hispanic markets in
the United States. These affiliates, which consist of 44 affiliated broadcast
stations and 116 satellite direct cable affiliates that take the Network
Company's signal directly from the satellite, represent approximately 31% of
the Network Company's total coverage of the U.S. Hispanic market.
SALES AND MARKETING
Pursuant to the Affiliation Agreement, the Network Company is responsible
for the sale of all network advertising time, as well as the sale of national
spot advertising time on behalf of network affiliated stations (including the
Company's owned and operated stations), while the Company is responsible for
the sale of local advertising time. Revenue is allocated between the Company
and the Network Company based on a formula applied to a combination of the
Company's and the Network Company's local, national spot and network
advertising revenue. See "--Affiliation Agreement." Each of the Company's
owned and operated full-power stations maintains a sales and marketing force
to sell local advertising time on its own behalf.
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The Network Company currently has a network and national spot sales and
marketing force, including account executives and sales managers with
backgrounds in both Spanish-language and English-language media, to sell
advertising time broadcast over the Network Company's entire network (network
sales) and to sell advertising time in markets covered by the Company's owned
and operated stations and the Network Company's other network affiliates
(national spot sales). The Network Company currently has national sales
offices in New York, Los Angeles, Miami, Chicago, San Francisco, San Antonio,
Dallas, Houston and Orange County, California.
The Company and the Network Company sell advertising time to a broad and
diverse group of advertisers. No single advertiser accounted for 10% or more
of the Company's 1997 total revenue. According to Hispanic Business Magazine,
the top ten advertisers in Spanish-language media in 1997, all of which
broadcast advertisements over the Telemundo network and the Company's owned
and operated stations, were:
The Procter & Gamble Co. McDonald's Corporation
AT&T Corp. Anheuser-Busch Companies Inc.
Sears, Roebuck & Co. Philip Morris Companies, Inc.
General Motors Corporation Colgate-Palmolive Company
MCI Communications Corporation Ford Motor Company
Additionally, the Network Company and each of the Company's stations sell
blocks of air time during non-network programming hours to block time
programmers. The Company intends to gradually reduce the programming hours
allocated to block time programmers.
RATINGS SYSTEMS
The Company's advertising revenue depends to a large extent on its ratings
and audience share. The Nielsen Hispanic Television Index ("NHTI") which began
in November 1992, and the Nielsen Hispanic Station Index ("NHSI") provide
national network (NHTI) and local (NHSI) television ratings and share data for
the Hispanic audience. Management believes that Spanish-language television
has the potential to garner a larger share of total U.S. television
advertising revenue, and better demographic information and audience research
should continue to accelerate this process.
COMPETITION
The broadcasting industry has become increasingly competitive in recent
years. The competitive success of a television network or station depends
primarily on public response to the programs broadcast, which affects the
revenue earned by the network or station from the sale of advertising time. In
addition to programming, factors determining competitive position include
management's ability and experience, marketing, research and promotional
efforts.
In the Spanish-language television broadcast market, the Company has faced
significant competition from Univision, which operates the other Spanish-
language broadcast company in the United States and has a substantially
greater audience share than the Company. In each of the markets in which the
Company owns and operates full-power stations, except Puerto Rico, the
Company's station competes directly with a full-power Univision station.
Together the Univision stations and the Univision network affiliates reach a
larger percentage of Hispanic viewers in the United States than the Company's
owned and operated stations and the Network Company's network affiliates and
within the last year have attracted as much as 84% of the U.S. Spanish-
language television network audience (as reported by Nielsen TV). Generally,
the competing Univision stations have been operating in their markets longer
than have the Company's stations. Univision also owns Galavision, a Spanish-
language cable network that is reported to serve approximately 2.5 million
Hispanic subscribers, representing approximately 55% of all Hispanic
households that subscribed to cable television in 1997. Both Televisa and
Venevision, which are significant stockholders of Univision, have entered into
long-term contracts to supply Spanish-language programming to the Univision
and Galavision networks. Televisa is the largest
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supplier of Spanish-language programming in the world. Through these program
license agreements, Univision has the right of first refusal to air in the
United States all Spanish-language programming produced by Televisa and
Venevision. These supply contracts currently provide Univision with a
competitive advantage in obtaining programming originating from Mexico and in
targeting U.S. Hispanics of Mexican origin, who account for approximately 63%
of the U.S. Hispanic market. In May 1998, Televisa announced that it may
reduce its ownership interest in Univision by up to 70%.
Certain of the Company's stations, particularly in Puerto Rico and Los
Angeles, also face competition on a local level from various independent
Spanish-language television stations. In March 1998, TV Azteca, one of two
Mexican television broadcast companies, announced its intention to create a
third Spanish-language network in the United States.
There are also several independent Spanish-language television stations that
broadcast, on a full-time or part-time basis, in markets in which the Company
owns and operates stations. Independent Spanish-language television stations
compete with Company-owned stations in the Los Angeles, Miami and San Antonio
Market Areas.
The Company's owned and operated television stations and the Network
Company's affiliates also face competition for advertising revenue from other
sources serving the same markets and competing for the same target audience,
such as other Spanish-language and English-language media, including
television stations, cable channels, direct broadcast satellites, radio
stations, magazines, newspapers, movies and other forms of entertainment. The
English-language media are generally better developed and better capitalized
than the Spanish-language media in the United States. The Company also
competes with English-language broadcasters for Hispanic viewers, including
the four principal English-language television networks, ABC, CBS, NBC and
Fox, and, in certain cities, the UPN and WB networks. Certain of these and
other English-language networks have begun producing Spanish-language
programming and simulcasting certain programming in English and Spanish.
Several cable programming networks, including HBO, ESPN and CNN, provide
Spanish-language services as well. There can be no assurance that current
Spanish-language television viewers will continue to watch the Company's or
any other Spanish-language broadcaster's programming rather than English-
language programming or Spanish-language simulcast programming.
In Puerto Rico, WKAQ has three significant Spanish-language television
station competitors. In addition, three other Spanish-language television
stations operate in that market. Although the general market programming of
the major English-language U.S. networks is available in Puerto Rico through
cable carriage, none of such networks has attracted a significant share of the
Puerto Rico audience to date.
Further advances in technology such as video compression and programming
delivered through fiber optic telephone lines could lower entry barriers for
new channels and encourage the development of increasingly specialized niche
programming. See "Risk Factors--Competition."
FCC REGULATION
Licensing
The ownership of the Company's television stations and certain of its
television broadcasting operations are subject to the jurisdiction of the FCC
under the Communications Act. The Communications Act was substantially amended
by the Telecommunications Act of 1996. The Communications Act prohibits the
operation of television broadcasting stations except under a license issued by
the FCC and empowers the FCC, among other matters, to issue, renew, revoke and
modify broadcast licenses, to determine the location of stations, to establish
areas to be served and to regulate certain aspects of broadcast programming.
The Communications Act prohibits the assignment of a broadcast license or the
transfer of control of a licensee without the prior approval of the FCC. If
the FCC determines that violations of the Communications Act or the FCC's own
regulations have occurred, it may impose sanctions ranging from admonition of
a licensee to license revocation.
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The Communications Act provides that a license may be granted to any
applicant if the public interest, convenience and necessity will be served
thereby, subject to certain limitations. Pursuant to the terms of the
Telecommunications Act, the FCC increased the terms of such licenses and their
renewals from five to eight years. FCC licenses of full-power stations held by
the Company have the following expiration dates: KSTS and KVEA--December 1,
1998; WNJU--June 1, 1999; WKAQ and WSCV--February 1, 2005; WSNS--December 1,
2005; and KTMD and KVDA--August 1, 2006. License renewal applications for KSTS
and KVEA were filed on August 3, 1998. The Company expects that the WNJU
application will be filed on February 1, 1999. The Company must apply to renew
these licenses, and third parties may challenge those applications. Although
the Company has no reason to believe that its licenses will not be renewed in
the ordinary course, there can be no assurance that its licenses will be
renewed.
Attributable Interests
Under current FCC regulations, the officers, directors and certain of the
equity owners of a broadcasting company are deemed to have an "attributable
interest" in the broadcasting company. In the case of a corporation owning or
controlling television stations, subject to certain exceptions, there is
generally attribution only to officers and directors and to stockholders who
own 5% or more of the outstanding voting stock (except for certain
institutional investors, which are subject to a 10% voting stock benchmark
provided certain conditions are satisfied). In addition, under one of these
exceptions, there is no attribution of minority stock interests if there is a
single holder of more than 50% of the outstanding voting stock of a corporate
broadcast licensee in which the minority interest is held.
Under current FCC rules governing multiple and cross-ownership of broadcast
companies, a license to operate a television station will not be granted
(unless established waiver standards are met) to any party (or parties under
common control) that has an attributable interest in another television
station with an overlapping service contour, as defined in the rules. The
regulations also prohibit a party from having an attributable interest in
television stations located in markets which, in the aggregate, include more
than 35% of total U.S. television households. (For purposes of this rule, UHF
stations are attributed with 50% of the television households in their
respective markets). The rules also prohibit (with certain qualifications) a
party from holding attributable interests in (i) a television and a radio
station, (ii) a television station and a cable television system, or (iii) a
television or radio station and a daily newspaper, in the same local market.
In addition, the FCC's "cross-interest" policy generally prohibits a party (or
parties under common control) that has an attributable interest in one media
company from having a non-attributable but "meaningful" interest, including a
significant non-voting equity interest, in another media company serving
"substantially the same area." The FCC is conducting rulemaking proceedings to
consider, among other things, changes in its attribution rules and the
modification of the local cross-ownership restrictions and the cross-interest
policy. In addition, on March 12, 1998, the FCC commenced a formal inquiry to
review all of its broadcast ownership rules which are not otherwise under
review, including the national audience limitation, the associated 50%
discount for UHF stations and the cable/television cross-ownership rule. The
Company cannot predict the timing or effect of any changes resulting from
these rulemaking proceedings.
The Company does not have any attributable interests in other broadcast
stations, cable systems or newspapers, but the parent company of one of the
Company's stockholders, directly or indirectly, holds (i) attributable
interests in cable television systems within each of the markets served by the
Company's television stations, and (ii) non-attributable interests in
television stations operating within certain of the markets served by the
Company's television stations. In addition, a limited partner of one of the
Company's stockholders holds attributable interests in cable television
systems within two of the markets served by the Company's television stations.
Pursuant to the Initial FCC Consent, these interests in the Company were
deemed not to be attributable under FCC rules and not to be "meaningful" for
purposes of the cross-interest policy. See "Risk Factors--Government
Regulation."
Foreign Ownership Restrictions
The Communications Act prohibits the issuance of a broadcast license to, or
the holding of a broadcast license by, any corporation of which more than 20%
of the capital stock is owned of record or voted by non-U.S. citizens or their
representatives or by a foreign government or a representative thereof, or by
any corporation
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organized under the laws of a foreign country (collectively, "Aliens"). The
Communications Act also authorizes the FCC, if the FCC determines that it
would be in the public interest, to prohibit the issuance of a broadcast
license to, or the holding of a broadcast license by, any corporation directly
or indirectly controlled by any other corporation of which more than 25% of
the capital stock is owned of record or voted by Aliens. The FCC has issued
interpretations of existing law under which these restrictions in modified
form apply to other forms of business organizations, including partnerships.
In the Initial FCC Consent, the FCC held that less than 25% of the capital
stock of the Company is owned of record or voted by Aliens. See "Risk
Factors--Government Regulation."
Coverage and Must-Carry Rights
Pursuant to the 1992 Cable Act, television broadcasters are required to make
triennial elections to exercise either certain "must-carry" or "retransmission
consent" rights in connection with their carriage by cable systems in each
broadcaster's local market. By electing must-carry rights, a broadcaster
demands carriage on a specified channel on cable systems within its Area of
Dominant Influence ("ADI"), as defined by the Arbitron 1991-92 Television
Market Guide. However, these must-carry rights are not absolute, but are
dependent on variables such as the number of activated channels on, and the
location and size of, the cable system, the amount of duplicative programming
on a broadcast station, the channel positioning demands of other broadcast
stations and the signal quality of the stations at the cable system's
principal headend. Alternatively, if a broadcaster chooses to exercise
retransmission consent rights, it can prohibit cable systems from carrying its
signal or grant the appropriate cable system the authority to retransmit the
broadcast signal for a fee or other consideration. LPTVs have very limited
must-carry rights, although cable systems cannot retransmit LPTV stations'
signals without their consent. The Company's owned and operated full-power
stations have elected must-carry rights.
A number of the Company's stations serving several markets and many of the
Network Company's affiliates are classified by the FCC as "low-power"
stations. Certain of the Company's owned and operated stations and the Network
Company's affiliates increase their coverage through use of "translators" that
rebroadcast the station's signal. Both low-power and translator stations are
referred to as "LPTV" stations and generally operate at significantly lower
levels of power than full-power stations. Under FCC rules, in addition to its
policies regarding DTV, such LPTV stations operate on a secondary basis, and,
therefore, are subject to displacement by a full-power station or other
facility if one is licensed and they must tolerate defined levels of
electromagnetic interference from full-power stations.
Recent and Proposed Legislation; Proposed Rulemaking
On February 17, 1998, the FCC adopted a final table of digital channel
allotments and rules for the implementation of DTV service (including high-
definition television) in the United States. The digital table of allotments
provides each existing full power television station licensee or permittee
with a second broadcast channel to be used during the transition to DTV,
conditioned upon the surrender of one of the channels at the end of the DTV
transition period. The implementing rules permit broadcasters to use their
assigned digital spectrum flexibly to provide either standard or high-
definition video signals and additional services, including, for example, data
transfer, subscription video, interactive materials and audio signals, subject
to the requirement that they continue to provide at least one free, over-the-
air television service. The FCC has set a target date of 2006 for expiration
of the transition period, subject to biennial reviews to evaluate the progress
of DTV, including the rate of consumer acceptance. Conversion to DTV may
reduce the geographic reach of the Company's stations or result in increased
interference, with, in either case, a corresponding loss of population
coverage. DTV implementation will impose additional costs on the Company,
primarily due to the capital costs associated with construction of DTV
facilities and increased operating costs both during and after the transition
period. In addition, on July 10, 1998, the FCC initiated a rulemaking
proceeding to determine how the must-carry rule will be applied to the digital
broadcast channel assigned to each current full power television station
licensee. The Company cannot predict the effect this proceeding will have on
the cable carriage of Telemundo's full power television stations. Also, the
Telecommunications Act requires the FCC to assess and collect a fee for any
use of a broadcaster's DTV channel for which it receives subscription fees or
other compensation other than advertising revenue. The FCC has pending a
rulemaking proceeding to implement this requirement. The FCC has maintained
the secondary status of LPTV stations in connection with its implementation of
a channel allotment plan for
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DTV, but has announced steps to assist LPTV stations that are displaced or
otherwise affected by DTV operations, including affording procedural
protections to LPTV stations that seek to relocate to a new channel to
eliminate interference to or from an allotted full service DTV facility.
Pursuant to the Children's Television Act of 1990, the amount of commercial
matter that may be broadcast during the programming designed for children 12
years of age and younger has been limited to 12 minutes per hour on weekdays
and 10.5 minutes per hour on weekends. In addition, television stations are
required to broadcast a minimum of three hours per week of "core" children's
educational programming, which the FCC defines as programming that (i) has
serving the educational and informational needs of children 16 years of age
and under as a significant purpose; (ii) is regularly scheduled, weekly and at
least 30 minutes in duration; and (iii) is aired between the hours of 7:00
a.m. and 10:00 p.m. A television station found not to have complied with the
"core" programming requirements or the children's commercial limitations could
face sanctions, including monetary fines and the possible non-renewal of its
broadcasting license.
The Telecommunications Act directed the broadcast and cable television
industries to develop and transmit an encrypted rating in all video
programming that, when used in conjunction with the so-called "V-Chip"
technology, would permit the blocking of programs with a common rating. On
March 12, 1998, the FCC voted to accept an industry proposal providing for a
voluntary ratings system of "TV Parental Guidelines" under which all video
programming will be designated in one of six categories in order to permit the
electronic blocking of selected video programming. The FCC has begun a
separate proceeding to address technical issues related to the "V-Chip." The
FCC has directed that all television receiver models with picture screens 13
inches or greater be equipped with "V-Chip" technology under a phased
implementation beginning on July 1, 1999. The Company cannot predict how
changes in the implementation of the ratings system and "V-Chip" technology
will affect the Company's business.
The FCC's closed captioning rules, which became effective January 1, 1998,
provide for the phased implementation of a universal on-screen captioning
requirement with respect to the vast majority of video programming. Program
distributors, including television stations and cable systems, are generally
responsible for compliance with the captioning rules. The FCC has granted a
blanket exemption from the new rules, however, for foreign-language
broadcasters, including the Company's owned stations and the Network Company's
other affiliates.
Congress and the FCC currently have under consideration and may in the
future adopt new laws or modify existing laws and regulations and policies
regarding a wide variety of matters, including the adoption of attribution
rules which would further restrict broadcast station ownership, that could
directly or indirectly adversely affect the ownership and operation of the
Company's broadcast properties, as well as the Company's business strategies.
The adoption of various measures could accelerate the existing trend toward
vertical integration in the media and home entertainment industries and cause
the Company to face more formidable competition in the future. The
Telecommunications Act modified or eliminated restrictions on the offering of
multiple network services by the existing major television networks,
restrictions on the participation by the regional telephone operating
companies in cable television and other direct-to-home video technologies, and
certain restrictions on broadcast station ownership. The Company is unable to
predict whether these or other potential changes in the regulatory environment
could restrict or curtail the ability of the Company to acquire, operate and
dispose of stations or, in general, to compete profitably with other operators
of television stations and other media properties.
The foregoing does not purport to be a complete summary of all the
provisions of the Communications Act, the Telecommunications Act or other
Congressional acts or of the regulations and policies of the FCC thereunder.
Reference is made to the Communications Act, the Telecommunications Act, other
Congressional acts, such regulations and policies, and the public notices
promulgated by the FCC for further information. The laws, rules, regulations
and interpretations governing the Company's business are revised from time to
time and it is not possible to predict the effect that future regulatory
changes will have on the Company's business.
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ENVIRONMENTAL MATTERS
Under certain environmental laws, a current or previous owner of real
property, and parties that generate or transport hazardous substances that are
disposed of at real property, may be liable for the costs of investigating and
remediating such substances on or under the property. The federal
Comprehensive Environmental Response, Compensation & Liability Act, as amended
("CERCLA"), and similar state laws, impose liability on a joint and several
basis, regardless of whether the owner, operator, or other responsible party
was at fault for the presence of such hazardous or toxic substances.
Environmental laws also may impose restrictions on the manner in which
property may be used or businesses may be operated, and these restrictions may
require expenditures for compliance. In connection with the ownership or
operation of its facilities, the Company could be liable for such costs in the
future.
The Company currently is not aware of any material environmental claims
pending or threatened against it, and does not believe it is subject to any
material environmental remediation obligations. However, no assurance can be
given that a material environmental claim or compliance obligation will not
arise in the future. The cost of defending against any claims of liability, of
remediating a contaminated property, or of complying with future environmental
requirements could impose material costs on the Company.
PROPERTIES
The table below sets forth the Company's principal properties as of June 30,
1998. Except where otherwise indicated, the Company expects to exercise
renewal options for leases expiring in 1998.
<TABLE>
<CAPTION>
LEASE/OPTION
STATION LOCATION USE OWNED/LEASED SIZE (SQ.FT.) EXPIRATION
- ------- --------------------- ------------------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
WSCV Hialeah, FL Office & studio(1) Leased 25,000 1998
Transmission tower site Leased 2004/2011
WNJU Hasbrouck Hts, NJ Office & studio(2) Leased 15,000 1999/2004
Transmission tower site(3) Leased 2004
KVEA Glendale, CA Office & studio Leased 32,000 2002
Transmission tower site Leased (4)
KTMD Houston, TX Office & studio Leased 17,000 (5)
Transmission tower site Owned
KSTS San Jose, CA Office & studio Leased 16,000 1998/2003
Transmission tower site(6) Leased 1998
WSNS Chicago, IL Office & studio Owned 21,000
Transmission tower site Leased 1999/2009
KVDA San Antonio, TX Office & studio Owned 20,000
Transmission tower site Owned
WKAQ San Juan, Puerto Rico Office & studio Owned 180,000
Transmission tower site(7) Leased 2009
</TABLE>
- --------
(1) WSCV also shares additional space in the Network Company's operations
center in Hialeah, Florida. It is expected that the office and studio
lease will be extended to be coterminous with the lease for the Network
Company's operations center, which has renewal options through 2004.
(2) WNJU also shares space in the Network Company's national sales offices in
New York, New York.
(3) Located on the top of the World Trade Center in New York, New York.
(4) The Company currently uses this site pursuant to an oral lease and expects
to execute a written lease which will expire in 2003, with options to
extend until 2013.
(5) The Company currently occupies this property pursuant to an oral lease and
is negotiating a new five-year lease.
(6) Relocating to an alternative transmitter and antenna site in San Jose,
California in the second half of 1998.
(7) Located on property owned by the Department of Natural Resources of the
Commonwealth of Puerto Rico.
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In addition, the Company is in the process of negotiating a lease for
corporate offices in Glendale, California where the Company currently occupies
space. The Company also leases various properties throughout the country for
LPTVs. None of these lease commitments are material to the Company.
EMPLOYEES
As of June 30, 1998, the Company and its subsidiaries had approximately 775
full-time employees, approximately 215 of whom were employees of WKAQ in
Puerto Rico. In addition, the Telemundo Network had approximately 425
employees, which became employees of the Network Company in connection with
the Network Sale. Approximately 60 employees of WNJU, 30 employees of KSTS,
120 employees of WKAQ and 30 employees of WSNS are covered by union contracts.
The Company is currently negotiating a collective bargaining agreement for the
approximately 60 unionized employees of KVEA. The Company believes its
relations with its employees and unions are satisfactory.
LEGAL PROCEEDINGS
The Company is aware of six lawsuits that have been filed relating to the
Merger. Telemundo and its directors are defendants in all of the lawsuits.
Certain of Telemundo's significant stockholders are defendants in two of the
lawsuits. All of the lawsuits were filed by stockholders of Telemundo not
affiliated with the Company or its affiliates, seeking to represent a putative
class of all such stockholders. All of the lawsuits were filed in the Delaware
Court of Chancery. On March 5, 1998, the six actions were consolidated for all
purposes, and the complaint entitled Mimona Capital, CA No. 16052-NC was
designated as the sole operative complaint for the consolidated action.
The complaint asserts that the $44.00 per share price to be paid to the
stockholders of Telemundo is inadequate and is not the result of arm's-length
negotiations and that the Merger Agreement serves no legitimate business
purpose. The complaint also alleges that the defendants breached their
fiduciary duties in approving the Merger Agreement.
The complaint seeks preliminary and injunctive relief prohibiting Telemundo
from, among other things, consummating the Merger. To date no motion to enjoin
any of the proceedings contemplated by the Merger Agreement has been made. The
complaint also seeks unspecified damages, attorneys' fees and other relief. To
date none of the defendants has been required to answer, move or otherwise
respond to the complaint and no discovery has been taken. Telemundo believes
that the allegations contained in the complaint are without merit and intends
to contest the action vigorously. The individual defendants have advised the
Company that they also believe that the allegations in the complaint are
without merit and that they intend to contest the action vigorously. There can
be no assurance that the result of such litigation will not have a material
adverse effect on the Company.
The Company and its subsidiaries are involved in a number of other actions
arising out of the ordinary course of business and are contesting the
allegations of the complaints in each pending action and believe, based on
current knowledge, that the outcome of all such actions will not have a
material adverse effect on the Company or its business.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name, age and position of each executive
officer and director of Holdings:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Roland A. Hernandez...... 40 President, Chief Executive Officer and Director
Peter J. Housman II...... 47 Chief Financial Officer and Treasurer
Osvaldo F. Torres........ 37 Vice President, General Counsel and Secretary
Leon D. Black............ 47 Director
Guillermo Bron........... 46 Director
Brian D. Finn............ 38 Director
Yair Landau.............. 34 Director
Enrique F. Senior........ 55 Director
Bruce H. Spector......... 56 Director
Barry Thurston........... 57 Director
Edward M. Yorke.......... 40 Director
</TABLE>
Roland A. Hernandez. Mr. Hernandez has been President, Chief Executive
Officer and a Director of Holdings since August 1998. Mr. Hernandez has been a
Director of Telemundo from 1989 to August 1998 and has been President and
Chief Executive Officer of Telemundo since March 1995. Since November 1997,
Mr. Hernandez has been an executive officer of HIC Broadcast, Inc. ("HIC"),
which owns Spanish-language television station KFWD, Channel 52, a Telemundo
affiliate serving the Dallas/Fort Worth market. From 1987 to 1997, Mr.
Hernandez was an executive officer of the corporate general partner of
Interspan Communications ("Interspan"), the predecessor to HIC. Mr. Hernandez
is a Director of Wal-Mart Stores, Inc.
Peter J. Housman II. Mr. Housman has been the Chief Financial Officer and
Treasurer of Holdings since August 1998 and the Chief Financial Officer and
Treasurer of Telemundo since February 1987.
Osvaldo F. Torres. Mr. Torres has been Vice President, General Counsel and
Secretary of Holdings since August 1998 and Vice President, General Counsel
and Secretary of Telemundo since May 1997. From May 1996 to May 1997, Mr.
Torres served as Associate General Counsel and Secretary of Telemundo. From
February 1995 to May 1996, Mr. Torres served as an associate in the law firm
of Gunster, Yoakley, Valdes-Fauli & Stewart, P.A., in West Palm Beach,
Florida. From February 1989 to February 1995, Mr. Torres served as an
associate in the law firm of Schulte Roth & Zabel in New York City.
Leon D. Black. Mr. Black has been a Director of Holdings since August 1998
and has been Chairman of the Board of Directors of Telemundo from December 30,
1994 to August 1998. Mr. Black is one of the founding principals and a limited
partner of Apollo Management (as defined). Mr. Black is also a founding
principal of Lion Advisors (as defined) which acts as financial advisor to and
representative for certain institutional investors with respect to securities
investments. Mr. Black is also a Director of Converse, Inc., Samsonite
Corporation and Vail Resorts, Inc.
Guillermo Bron. Mr. Bron has been a Director of Holdings since August 1998
and has been a Director of Telemundo from December 30, 1994 to August 1998.
From July 1994 to present, Mr. Bron has been an officer, director and
principal stockholder of the corporate general partner of Bastion Partners,
which is the general partner of Bastion. Mr. Bron is a Director of United
PanAm Financial Corp.
Brian D. Finn. Mr. Finn has been a Director of Holdings since August 1998.
Mr. Finn joined Clayton, Dubilier & Rice, Inc., a private investment firm, in
1997 as principal. Prior to 1997, Mr. Finn was a Managing Director and Co-Head
of Mergers & Acquisitions at Credit Suisse First Boston.
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Yair Landau. Mr. Landau has been a Director of Holdings since August 1998.
Since October 1997, Mr. Landau has served as Executive Vice President,
Corporate Development and Strategic Planning of Sony Pictures. From January
1997 to September 1997, Mr. Landau was Senior Vice President, Corporate
Development and Strategic Planning. Mr. Landau joined Sony Pictures in May
1991 as Director, Financial Planning and Analysis, and was promoted to Vice
President, Business Planning, for Sony Pictures' motion picture operations in
September 1992. Mr. Landau served in that capacity until January 1997.
Enrique F. Senior. Mr. Senior has been a Director of Holdings since August
1998. Mr. Senior is a Managing Director and Executive Vice President of Allen
& Company, Incorporated, having joined Allen & Company in 1973. Mr. Senior is
a Director of Princeton Video Image, Inc. and dick clark productions, inc.
Bruce H. Spector. Mr. Spector has been a Director of Holdings since August
1998 and has been a Director of Telemundo from December 30, 1994 to August
1998. From 1992 to 1995, Mr. Spector was a consultant to Apollo Management. In
March 1995, Mr. Spector became a principal of Apollo Management. For 25 years
prior to 1992, Mr. Spector was a member of the Los Angeles law firm of Stutman
Triester & Glatt. Mr. Spector is also a Director of Metropolis Realty Trust,
Inc., Nexthealth, Inc., United International Holdings, Inc. and Vail Resorts,
Inc.
Barry Thurston. Mr. Thurston has been a Director of Holdings since August
1998. Mr. Thurston has served as President of Columbia TriStar Television
Distribution and its predecessors since 1986. In this capacity, Mr. Thurston
is responsible for the domestic distribution to television outlets of all Sony
Pictures' television and feature film product.
Edward M. Yorke. Mr. Yorke has been a Director of Holdings since August 1998
and has been a Director of Telemundo since June 1995. Since August 1998, Mr.
Yorke has been a Managing Director and principal of Donaldson, Lufkin &
Jenrette Securities Corporation. From 1992 to 1998, Mr. Yorke was a principal
of Apollo Management and Lion Advisors, and since March 1995 a principal of
Advisors II (as defined). Mr. Yorke is also a Director of Aris Industries,
Inc., and Salant Corporation.
Pursuant to the Stockholders Agreement, Station Partners, Sony Pictures and
Liberty have agreed to elect nine directors to the Board of Directors of
Holdings, of which four directors would be designated by Station Partners, two
directors would be designated by Sony Pictures, one director would be
nominated by Liberty, subject to the approval of a majority of the outstanding
shares of common stock of the Company held by stockholders other than Liberty,
and two directors would be designated as independent. One of the independent
directors would be nominated by Station Partners, subject to the approval of
Liberty and Sony Pictures, and the other independent director would be
nominated by Liberty and Sony Pictures, subject to the approval of Station
Partners. Station Partners has designated Messrs. Black, Bron, Hernandez and
Spector as directors, Sony Pictures has designated Messrs. Landau and Thurston
as directors and Mr. Finn has been nominated by Liberty. Messrs. Senior and
Yorke have been selected as the independent directors. The Stockholders
Agreement also requires that certain Major Decisions receive the unanimous
approval of each of Station Partners, Sony Pictures and Liberty. See "Certain
Relationships and Related Transactions--Transactions Related to the Merger--
Stockholders Agreement."
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EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning the compensation for
services in all capacities to Telemundo for the years ended December 31, 1997,
1996, and 1995 paid to (a) the Chief Executive Officer and (b) the other four
most highly compensated executive officers of Telemundo during 1997
(collectively, the "Named Executive Officers"). Roland A. Hernandez became the
Chief Executive Officer of Telemundo and Stephen J. Levin became an executive
officer of Telemundo in early 1995. Mr. Tringali became an executive officer
in 1996. The amounts shown in the table for 1995, with respect to Messrs.
Hernandez and Levin, and for 1996, with respect to Mr. Tringali, reflect
payments from the dates they became executive officers.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS (#)
---------------------- ------------
ANNUAL SECURITIES ALL OTHER
NAME AND PRINCIPAL SALARY BONUS UNDERLYING COMPENSATION
POSITION DURING 1997 YEAR ($) ($)(1) OPTIONS (#) ($)(2)
-------------------- ---- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Roland A. Hernandez..... 1997 700,000 0 30,000 8,438
President and Chief 1996 700,000 913,889 0 8,615
Executive Officer 1995 616,799 624,400 512,500 962
Stephen J. Levin........ 1997 344,900 0 30,000 6,233
Executive Vice 1996 315,500 331,566 0 7,733
President 1995 247,610 174,870 50,000 2,250
Donald J. Tringali...... 1997 344,900 0 30,000 3,502
Executive Vice 1996 177,000(3) 261,486 75,000 742(3)
President 1995 -- (3) -- -- -- (3)
Jose C. Cancela......... 1997 342,300 0 0 6,233
Executive Vice 1996 400,000 229,620 0 7,733
President 1995 400,000 0 50,000 7,391
Peter J. Housman II..... 1997 325,000 0 30,000 6,233
Chief Financial Officer 1996 325,000 186,506 0 7,733
and Treasurer 1995 325,000 50,000 50,000 7,391
</TABLE>
- --------
(1) Bonus amounts represent compensation for services rendered for the
respective years shown and were paid at the beginning of the subsequent
year.
(2) The following amounts are included in the above table. Retirement
contributions and matching 401(k) contributions: Mr. Hernandez--$4,750 for
1997, $6,250 for 1996 and $0 for 1995; Mr. Levin--$4,750 for 1997, $6,250
for 1996 and $1,288 for 1995; Mr. Tringali--$2,019 for 1997 and $0 for
1996 and 1995; Mr. Cancela--$4,750 for 1997, $6,250 for 1996 and $5,908
for 1995; Mr. Housman--$4,750 for 1997, $6,250 for 1996 and $5,908 for
1995. Life insurance premiums paid by Telemundo: Mr. Hernandez--$3,688 for
1997, $3,848 in 1996 and $962 in 1995; Mr. Levin--$1,483 in each of 1997,
1996 and 1995; Mr. Tringali-- $1,483 in 1997, $742 in 1996 and $0 for
1995; Mr. Cancela--$1,483 in each of 1997, 1996 and 1995; and Mr.
Housman--$1,483 in each of 1997, 1996 and 1995.
(3) From May 1995 through May 1996, Mr. Tringali served as a consultant to
Telemundo. Consulting fees paid to Mr. Tringali in 1996 and 1995 amounted
to $130,800 and $163,100, respectively.
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Option Grants in 1997
The following table sets forth certain information with respect to the grant
of options to purchase Series A Common Stock of Telemundo ("Series A Common
Stock") made during 1997 to each of the Named Executive Officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(2)
OPTIONS EMPLOYEES PRICE PER EXPIRATION -----------------------
NAME GRANTED(1) IN FISCAL YEAR SHARE DATE 5% 10%
---- ---------- -------------- --------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Roland A. Hernandez..... 30,000 12.7% $33.75 9/10/2007 $ 636,800 $ 1,613,700
Stephen J. Levin........ 30,000 12.7% 33.75 9/10/2007 636,800 1,613,700
Donald J. Tringali...... 30,000 12.7% 33.75 9/10/2007 636,800 1,613,700
Peter J. Housman II..... 30,000 12.7% 33.75 9/10/2007 636,800 1,613,700
</TABLE>
- --------
(1) These options have a three year vesting schedule, becoming exercisable in
three equal installments on each of February 28, 1999, February 28, 2000
and February 28, 2001, in each case if the applicable executive is
employed by Telemundo on such date. These options also become fully
exercisable upon the occurrence of a "change of control transaction" (as
defined in the applicable stock option agreement) or other accelerating
event.
(2) Amounts represent the future market price of the Series A Common Stock,
assuming the market price at the grant date appreciates at compound
annualized rates of 5% and 10% (prescribed by the SEC rules) over the 10
year term of the options, less the exercise price, multiplied by the
number of shares under grant. These amounts are not intended to forecast
possible future appreciation, if any, of Telemundo's stock price. In
connection with the Merger, all of the unexercised options outstanding
immediately prior to the Effective Time (as defined in the Merger
Agreement) (whether or not such option was then exercisable) were
converted into the right to receive, subject to any required withholding
taxes, a cash payment equal to the product of (i) the total number of
shares then subject to each such option multiplied by (ii) the excess of
the Merger Consideration (as defined in the Merger Agreement) over the
exercise price per share subject to such option, which payment was made in
connection with the Merger.
Aggregated Option Exercises in 1997 and Year-End Option Value
The following table sets forth the number of shares of Series A Common Stock
covered by stock options held by the Named Executive Officers at December 31,
1997 and also shows the value of "in-the-money" options at that date. No Named
Executive Officers exercised stock options during 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED OPTIONS
OPTIONS AT YEAR-END AT YEAR-END(1)
------------------------- ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- -------------- ---------------
<S> <C> <C> <C> <C>
Roland A. Hernandez.... 416,407 126,093 $ 12,856,500 $ 3,180,700
Stephen J. Levin....... 40,625 39,375 1,205,600 492,000
Donald J. Tringali..... 56,250 48,750 984,400 541,900
Jose C. Cancela........ 0 50,000 0 1,312,500
Peter J. Housman II.... 16,667 63,333 437,500 1,088,700
</TABLE>
- --------
(1) Based upon the closing sale price of the Series A Common Stock of $40.875
per share on December 31, 1997, less the exercise price. In connection
with the Merger, all of the unexercised options outstanding immediately
prior to the Effective Time (whether or not such option was then
exercisable) were converted into the right to receive, subject to any
required withholding taxes, a cash payment equal to the product of (i) the
total number of shares then subject to each such option multiplied by (ii)
the excess of the Merger Consideration over the exercise price per share
subject to such option, which payment was made in connection with the
Merger.
Directors Compensation
Prior to the Merger, each of the directors of Telemundo, other than Mr.
Hernandez, serving on the Board of Directors of Telemundo received for
services as a director (i) $10,000 as an annual retainer, (ii) $2,500 for each
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<PAGE>
regularly scheduled Board meeting attended, (iii) $1,000 annual fee for
serving on each committee such director served on, (iv) $1,000 for each
extraordinary meeting of the Board attended and (v) an annual grant of options
to purchase 2,500 shares of Series A Common Stock, which options were granted
on the date of Telemundo's annual meeting, vested over a period of three years
and were exercisable at the market price on the grant date. In connection with
the Merger, all of the unexercised options outstanding immediately prior to
the Effective Time (whether or not such option was then exercisable) were
converted into the right to receive, subject to any required withholding
taxes, a cash payment equal to the product of (i) the total number of shares
then subject to each such option multiplied by (ii) the excess of the Merger
Consideration over the exercise price per share subject to such option, which
payment was made in connection with the Merger.
The directors of Holdings are expected to receive usual and customary
compensation for their services.
Compensation Committee Interlocks and Insider Participation
Prior to the Merger, the members of the Compensation Committee of Telemundo
were Barry W. Ridings, Bruce H. Spector and Edward M. Yorke. None of the
members of the Compensation Committee has ever served as an officer or
employee of Telemundo, nor has any such member served as a member of a
compensation committee or other board of directors' committee performing
similar functions of any other entity in 1997 except that Mr. Spector served
on the compensation committee for United International Holdings, Inc.
Employment Agreements
Mr. Hernandez's employment agreement with Telemundo, dated as of March 9,
1995, as amended, remains in effect until February 28, 2001 and automatically
extends for additional one-year terms thereafter unless either party elects to
terminate the agreement. The amended employment agreement provides for an
annual base salary of $700,000 until February 28, 1998 and $800,000 during the
remainder of his term of employment. Mr. Hernandez will be eligible for annual
bonuses for each of the 1998, 1999, 2000 and 2001 fiscal years up to 100% of
his base salary, in each case, if Telemundo achieves certain EBITDA targets.
Mr. Housman's employment agreement with Telemundo, dated as of March 7,
1997, as amended, remains in effect until February 28, 2001 and automatically
extends for additional one-year terms thereafter unless either party elects to
terminate the agreement. The agreement provides for an annual base salary of
$325,000 until February 28, 1998 and $400,000 during the remainder of his term
of employment. Mr. Housman will be eligible for annual bonuses of up to 100%
of his base salary for the 1998, 1999, 2000 and 2001 fiscal years, in each
case, if Telemundo achieves certain EBITDA targets.
In addition to the specific provisions described above, the employment
agreements, as amended, for Messrs. Hernandez and Housman each contain the
provisions set forth below. If such executive's employment is terminated
because of death, disability or other event rendering the applicable executive
unable to perform his duties and obligations under the agreement, in addition
to his base salary and certain benefits through the date of termination,
Telemundo is obligated to pay such executive a bonus, if earned, for the year
in which such termination occurred. If such an executive is terminated for
"cause" (as defined in the applicable employment agreement) or such an
executive resigns without "good reason" (as defined in the applicable
employment agreement) pursuant to a resignation that is not a "specified
resignation" (as defined in the applicable employment agreement), Telemundo is
obligated to pay such executive only his base salary and certain other
benefits through the date of termination or resignation. The agreements
provide that if the executive is terminated by Telemundo "without cause" or by
the executive for "good reason" (each as defined in the applicable employment
agreement), the executive will be entitled to receive through an entitlement
date that is the later of February 28, 2001 or the first anniversary of the
date of termination of the executive's employment, (i) his base salary, (ii)
his bonus for the fiscal year in which such termination occurs and (iii) his
benefits (or reimbursement of the cost thereof) under his employment
agreement. These employment agreements also provide that if (a) there is a
"change of control transaction" (as defined in the applicable employment
agreement), (b) the applicable executive is offered a position allowing him to
keep his title with the successor to all or any part of Telemundo's business
and (c) a "diminution in duty" (as defined in the applicable employment
agreement) would have
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<PAGE>
occurred but for the offer of a position as described in clause (b) above,
then the applicable executive will have the option of declining the position
offered as described in clause (b) above and instead modifying his position to
a position (but not senior to that offered) that has such work location, time
commitment, duties, responsibilities and terms as the applicable executive
officer may specify in his sole and absolute discretion after consultation
with Telemundo. In addition, the employment agreements provide for "specified
resignation rights" (as defined in the applicable employment agreement) which
allow the executive, during the one-month period beginning 14 months after a
change of control transaction, to terminate his employment for any reason
whatsoever; any such termination will be treated as if it were a termination
for "good reason" (the consequences of which are described above). The
consummation of the Merger would constitute a "change of control transaction."
Mr. Torres' employment agreement with Telemundo, dated as of September 10,
1997 remains in effect until December 31, 1999 and automatically extends for
additional one-year terms thereafter unless either party elects to terminate
the agreement. The agreement provides for a current annual base salary of
$185,000. For the period beginning on May 14, 1999 and ending on December 31,
1999, the base salary will be mutually agreed upon by Mr. Torres and
Telemundo, but in no event will the base salary increase be less than ten
percent of the then current base salary. For the 1998 and 1999 fiscal years,
Mr. Torres is entitled to a performance bonus equal to fifteen percent of his
base salary. The performance bonus is awarded based solely upon an assessment
of Mr. Torres' performance of his duties, without regard to the financial
condition or performance of Telemundo. For the 1998 and 1999 fiscal years, Mr.
Torres is also entitled to a bonus based upon Telemundo's achievement with
respect to EBITDA targets. Mr. Torres has the right to resign without "good
reason" (as defined in the employment agreement) and terminate the employment
agreement at any time within six months after a "change of control
transaction" (as defined in the employment agreement) occurs and is entitled
to receive (i) his base salary earned up to the date of resignation and (ii)
all benefits due up to the date of resignation. Mr. Torres also has the right
to terminate the employment agreement if a "diminution in duty," a "designated
relocation," or any other "good reason event" (each as defined in the
employment agreement) occurs and is entitled to receive (i) his base salary
earned through the later of December 31, 1999 or six months after the date of
termination of his employment, (ii) his bonus, if any, earned for the fiscal
year in which such termination occurs and (iii) all benefits to which he is
entitled through the later of December 31, 1999 or six months after the date
of termination of his employment. The consummation of the Merger would
constitute a "change of control transaction."
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of September 1, 1998, the number and
percentage of outstanding shares of voting stock of Holdings beneficially
owned by: (i) each executive officer and director of Holdings; (ii) all
executive officers and directors of Holdings as a group; and (iii) each person
known by Holdings to own beneficially more than five percent of Holdings'
voting stock, respectively. Holdings believes that each individual or entity
named will have sole investment and voting power with respect to shares of
voting stock of Holdings indicated as beneficially owned by them, except as
otherwise noted.
<TABLE>
<CAPTION>
NUMBER OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OF CLASS
------------------------------------ --------- --------
<S> <C> <C>
5% OWNERS:
Station Partners, LLC(1)(2)............................... 7,505 75.05%
c/o Apollo Management, L.P.
1301 Avenue of the Americas
New York, New York 10019
Liberty Media Corporation(2).............................. 2,495 24.95%
8101 East Prentice Avenue
Englewood, Colorado 80111
Sony Pictures Entertainment Inc........................... 2,495 24.95%
10202 West Washington Boulevard
Culver City, California 90232-3195
EXECUTIVE OFFICERS AND DIRECTORS:
Roland A. Hernandez....................................... -- --
Peter J. Housman II....................................... -- --
Osvaldo F. Torres......................................... -- --
Leon D. Black (3)......................................... -- --
Guillermo Bron (4)........................................ -- --
Brian D. Finn............................................. -- --
Yair Landau (5)........................................... -- --
Enrique F. Senior......................................... -- --
Bruce H. Spector (3)...................................... -- --
Barry Thurston (5)........................................ -- --
Edward M. Yorke........................................... -- --
All directors and officers as a group(6).................. -- --
</TABLE>
- --------
(1) Stations Partners is owned approximately 68% by Apollo Investment and
approximately 32% by Bastion. Apollo Investment is a Delaware limited
partnership of which Apollo Advisors II, L.P., a Delaware limited
partnership ("Advisors II"), is the managing general partner. Apollo
Capital Management II, Inc., a Delaware corporation ("Apollo Capital II"),
is the general partner of Advisors II. Apollo Management L.P., a Delaware
limited partnership ("Apollo Management"), serves as manager of Apollo
Investment. AIF III Management, Inc., a Delaware corporation ("AIM"), is
the general partner of Apollo Management. Mr. Leon Black, a director of
Holdings, is a director and stockholder of Apollo Capital II, a director
of AIM and one of the founding principals and a limited partner of Apollo
Investment. Mr. Bruce Spector, currently a director of Holdings, is a
principal of Apollo Management and Advisors II and a Vice President of
Apollo Capital II. Bastion Capital Fund, L.P. is a Delaware limited
partnership. The sole general partner of Bastion Capital Fund, L.P. is
Bastion Partners, L.P., a Delaware limited partnership ("Bastion
Partners"). The general partners of Bastion Partners are Bron Corp., a
Delaware corporation ("BC"), and Villanueva Investments, Inc., a Delaware
corporation ("VII"). The sole holder of voting stock and the sole director
and officer of BC is Mr. Guillermo Bron, currently a director of Holdings.
The sole holder of voting stock of VII is the Daniel Villanueva Living
Trust, a trust created under the laws of California, the co-trustees of
which are Daniel D. Villanueva and Myrna E. Villanueva. Mr. Villanueva, a
director of Telemundo prior to the Merger, is the sole director and
principal officer of VII. Messrs. Bron and Villanueva are the managing
directors of Bastion Capital Corp., which manages the affairs of Bastion
pursuant to a management agreement.
(2) Liberty has granted to Station Partners a proxy to vote all of the shares
of common stock of Holdings owned by Liberty. As a result of such proxy,
Liberty is not entitled to vote any of the shares of common stock of
Holdings owned by it. Such shares are included in the amount shown as
beneficially owned by Station Partners in the table above.
(3) Messrs. Black and Spector are associated with Apollo Management, the
manager of Apollo Investment, and disclaim beneficial ownership of all
shares of Holdings held by Station Partners.
(4) Mr. Bron is associated with Bastion and disclaims beneficial ownership of
all shares of Holdings held by Station Partners.
(5) Messrs. Landau and Thurston are associated with Sony Pictures and disclaim
beneficial ownership of all shares of Holdings held by Sony Pictures.
(6) Excludes shares shown in the table above as held by Station Partners,
Liberty and Sony Pictures.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS RELATED TO THE MERGER
Merger Agreement
On August 12, 1998, the Merger was consummated in accordance with the Merger
Agreement pursuant to which TLMD Acquisition was merged with and into
Telemundo, with Telemundo being the surviving corporation and becoming a
wholly owned subsidiary of Holdings. In the Merger, each outstanding share of
Common Stock (other than shares of Common Stock held by Holdings, TLMD
Acquisition or any other wholly owned subsidiary of Holdings, or in the
treasury of Telemundo or by any wholly owned subsidiary of Telemundo, all of
which were canceled with no payment being made with respect thereto, or by
stockholders of Telemundo who exercised and perfected their statutory
appraisal rights under Delaware law) were converted into the right to receive
$44.00 in cash, including an increase of 8% per annum (approximately $0.29 per
share per month) during the period commencing on July 30, 1998 and ending on
August 11, 1998. Such increase was funded 50% by an increase in the price paid
to Holdings pursuant to the Network Sale and 50% by increases in the Equity
Contributions.
Consummation of the Merger was subject to various conditions, including
receipt of the Initial FCC Consent, which was received on July 30, 1998,
consummation of the Offering and the New Credit Facilities (or Holdings
securing financing pursuant to alternative financing arrangements) and the
expiration of the applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended ("HSR"). Telemundo received
notice of the early termination of the HSR waiting periods with respect to all
of the applications filed by Telemundo, Holdings and certain of Holdings'
affiliates.
On June 16, 1998, at a special meeting of the stockholders of Telemundo, the
stockholders voted to approve and adopt the Merger Agreement and the related
transactions, with 9,424,027 votes cast in favor of approving and adopting the
Merger Agreement and the related transactions, representing 91.79% of the
total shares outstanding entitled to vote at the meeting, and 5,165 votes cast
against.
Equity Contributions
Pursuant to a funding agreement, dated as of November 24, 1997, Station
Partners, Liberty and Sony Pictures made equity contributions to Holdings in
the amounts of $137.2 million (of which $93.3 million was funded by Apollo
Investment and $43.9 million was funded by Bastion), $68.4 million and $68.4
million, respectively. The commitments to make the foregoing equity
contributions were conditioned upon all conditions to the Company's
obligations to consummate the Merger having been fulfilled or waived and the
expiration or termination of the waiting period under the HSR Act.
Network Sale and Affiliation Agreement
In connection with the Merger, the Company sold its network operations,
which consisted of substantially all of the programming and production assets
of the Telemundo Network, to the Network Company. The Network Company is
equally owned by an affiliate of Sony Pictures and an affiliate of Liberty.
Sony Pictures and Liberty each own 24.95% of Holdings. The proceeds of the
Network Sale were contributed to TLMD Acquisition and Telemundo, and were used
to fund the consummation of the Merger and refinance existing indebtedness of
Telemundo. See "Offering Circular Summary--The Merger and Related
Transactions--Sources and Uses of Funds" and "Use of Proceeds."
In connection with the Network Sale, the Company also entered into the
Affiliation Agreement with the Network Company, pursuant to which the Network
Company provides network programming to the Company, and the Company and the
Network Company have agreed to pool and allocate local, national spot and
network advertising revenues on a predetermined basis. See "Business--
Affiliation Agreement."
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<PAGE>
Proxy
Station Partners has the right to vote 75.05% of the common stock of
Holdings as a result of the grant by Liberty of an irrevocable proxy to vote
all of its shares of the common stock of Holdings. The proxy may be terminated
by Liberty under certain specified circumstances.
Stockholders Agreement
In connection with the Merger, the Initial Stockholders entered into a
Stockholders Agreement (the "Stockholders Agreement") pursuant to which the
Initial Stockholders agreed to elect nine directors to the Board of Directors
of Holdings, of which four directors would be designated by Station Partners,
two directors would be designated by Sony Pictures, one director would be
nominated by Liberty, subject to the approval of a majority of the outstanding
shares of common stock of the Company held by stockholders other than Liberty,
and two directors would be designated as independent. One of the independent
directors would be nominated by Station Partners, subject to the approval of
Liberty and Sony Pictures, and the other independent director would be
nominated by Liberty and Sony Pictures, subject to the approval of Station
Partners.
The Stockholders Agreement requires that Major Decisions (as defined in the
Stockholders Agreement) receive the unanimous approval of the Initial
Stockholders. Major Decisions include (i) changing the nature or scope of the
Company's predominantly Spanish-language broadcast business or acquiring an
additional material broadcast station or other substantial business, (ii)
issuing any equity or debt securities of Holdings, (iii) merging,
consolidating or reorganizing the Company, (iv) selling all or substantially
all of the assets of the Company, (vi) selling assets of the Company with a
fair value in excess of $10 million, (v) taking any action relating to the
termination, dissolution, liquidation or winding-up of the Company,
(vii) taking any action that would constitute certain events of insolvency and
(viii) entering into any related transaction between any station or the
Company and any of its affiliates (excluding transactions between the Company
and the Network Company). In addition, the approval of Station Partners and
Sony Pictures is required to permit any station owned, directly or indirectly,
by Holdings to enter into, amend, take any action to terminate or fail to
renew any affiliation agreement. The Stockholders Agreement also requires that
the appointment of the Chief Executive Officer and Chief Financial Officer, on
the recommendation of Station Partners, be approved by Sony Pictures.
Station Partners received rights (the "Network Rights") from the Network
Company with respect to interests in the Network Company (the "Network
Interests") that represent the right to receive the value equal to 10% of the
Network Interests outstanding at the Effective Time for an amount equal to 10%
of the aggregate equity contributed by Sony Pictures and Liberty to the
Network Company (subject to certain adjustments in the future, including for
subsequent equity investments made by Sony Pictures and Liberty in the Network
Company and for certain distributions made by Network Company to Sony Pictures
and Liberty (as adjusted, the "Strike Price")).
Put/Call Agreement
In general, common stock of Holdings held by an Initial Stockholder may not
be transferred without the consent of the other Initial Stockholders. The
Initial Stockholders have entered into a Put/Call Agreement, pursuant to
which, at any time after the fifth anniversary of the Merger, and subject to
regulatory approval, including FCC approval, Station Partners has the right to
sell its ownership interest in Holdings to Sony Pictures and Liberty. Each of
Sony Pictures and Liberty are severally obligated to purchase 50% of such
ownership interest for a price (the "Station Partners Purchase Price") equal
to a proportional amount, based upon Station Partners' then ownership interest
in Holdings, of the price that an unrelated third party would pay to acquire
the entire ownership of Holdings, in an arm's-length transaction.
Notwithstanding the foregoing, if the Station Partners Purchase Price is lower
than the amount that would be required to be paid to Station Partners such
that Station Partners' internal rate of return with respect to its investment,
equals a compounded return of 10% (the "Minimum Value"), then the price to be
paid for Station Partners' ownership interest in Holdings shall be the Minimum
Value. If the Station Partners Purchase Price is higher than the amount that
would be required to be
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<PAGE>
paid to Station Partners such that Station Partners' internal rate of return
with respect to its investment equals a compounded annual return of 40% (the
"Maximum Value"), then the price to be paid for Station Partners' ownership
interest in the Company shall be the Maximum Value. If Station Partners
exercises its right to sell to Sony Pictures and Liberty its ownership
interest in Holdings, Sony Pictures and Liberty also will be required to
purchase the Network Rights at an amount equal to the difference (which shall
not be less than zero) between (x) the price equal to a proportional amount,
based upon the proportion of the total Network Interest represented by the
Network Rights, that an unrelated third party would pay to acquire all of the
equity interests (including the Network Rights) of the Network Company, in an
arm's-length transaction and (y) the aggregate Strike Price of the Network
Rights (the "Network Company Purchase Price"). After the fifth anniversary of
the Merger, and subject to regulatory approval, including FCC approval, Sony
Pictures and Liberty jointly have the right to purchase all of Station
Partners' ownership interest in Holdings for a purchase price equal to the
Station Partners Purchase Price or, if applicable, the Minimum Value or
Maximum Value. If Sony Pictures and Liberty exercise their joint right to
purchase Station Partners' ownership interest in Holdings, then Sony Pictures
and Liberty also will be required to purchase the Network Rights at an amount
equal to the Network Company Purchase Price.
Sharing Agreement
Pursuant to a sharing agreement to be entered into between Holdings and the
Network Company, Holdings and the Network Company will share certain
facilities, equipment, and administrative services, the cost of which will be
allocated and borne ratably between the parties.
TRANSACTIONS PRIOR TO THE MERGER
Prior to the Merger and in connection with the consummation on December 30,
1994 (the "Consummation Date") of its plan of reorganization (the "Plan")
under the Bankruptcy Code, Telemundo entered into a number of agreements with
certain persons, including TLMD II and certain of its affiliates, relating to
the securities of Telemundo and defining certain aspects of the ongoing
relationship between Telemundo and such persons. All of these agreements,
which are briefly summarized below, were terminated upon consummation of the
Transactions.
Warrants
Pursuant to the Plan, as of the Consummation Date, holders of certain claims
against and interests in Telemundo received cash, 10 1/4% Notes, Common Stock,
and/or five-year warrants to purchase Series A Common Stock at $7.00 per share
(the "Creditors' Warrants").
Pursuant to Telemundo's Restated Certificate of Incorporation, the holders
of the Series B Common Stock had the right until December 30, 1998 (or for a
shorter period upon the occurrence of certain events) to elect a majority of
the Board. Of the 10,000,000 shares of Common Stock distributed under the
Plan, 4,388,394 were shares of Series A Common Stock and 5,611,606 were shares
of Series B Common Stock, of which 3,011,885 were distributed in the aggregate
to Apollo Investment and Bastion. Pursuant to the Plan, Reliance Insurance
Company ("Reliance"), which had directly owned or controlled 58.4% of the then
outstanding common stock of Telemundo, received approximately 10.2% of the
total outstanding Common Stock of Telemundo, all of which was Series A Common
Stock and warrants to purchase 416,667 shares of Series A Common Stock at
$7.19 per share. In addition, certain affiliates of Reliance received warrants
to purchase 38 shares of Series A Common Stock at $7.00 per share.
At the Effective Time, all outstanding warrants were converted into the
right to receive, subject to any required withholding taxes, a cash payment
equal to the product of (i) the total number of shares then subject to each
such Warrant multiplied by (ii) the excess of the Merger Consideration over
the exercise price per share subject to such Warrant, which payment was made
in connection with the Merger.
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Old Shareholders Agreement
TLMD II, Mr. Leon Black, a director of Holdings, Bastion and Hernandez
Partners, a California general partnership of which Roland A. Hernandez, the
chief executive officer and a director of Holdings, is a partner, entered into
a shareholders agreement (the "Old Shareholders Agreement") pursuant to which
each of them agreed to vote their shares through a voting committee comprised
of three members. The Old Shareholders Agreement was terminated in connection
with the Transactions.
Old Registration Agreement
In connection with the Plan, Telemundo, Apollo Advisors, L.P. ("Advisors")
and Reliance entered into a registration rights agreement (the "Old
Registration Agreement") pursuant to which Telemundo, subject to certain
conditions, agreed to register under the Securities Act the 10 1/4% Notes and
the common stock held by Advisors and its affiliates or Reliance and its
affiliates, or their respective transferees. The registration provisions of
the Old Registration Agreement have been terminated.
OTHER TRANSACTIONS
Telemundo Transactions with Sony Pictures
In May 1997, Telemundo, Columbia TriStar Television, Inc. ("Columbia TriStar
Television"), an affiliate of Sony Pictures, and TV Azteca agreed to jointly
produce certain Spanish-language television programming. The first of these
programs is scheduled for broadcast on the Telemundo network beginning in the
fall of 1998. Telemundo Network, Inc. has entered into various agreements with
Columbia TriStar Television and Columbia TriStar Television Distribution
pursuant to which Columbia TriStar Television Distribution has agreed to
license to Telemundo Network, Inc. for broadcast on the Telemundo network
certain motion pictures and Columbia TriStar Television has agreed to develop
and produce for broadcast on the Telemundo network television serial
programming and provide to Telemundo certain advertising sales, consulting and
marketing assistance. These agreements were assumed by the Network Company in
connection with the Network Sale.
Indemnification of Directors and Officers; Directors and Officers Insurance
The Merger Agreement provides that from and after the Effective Time, the
Company and Telemundo shall maintain the right to indemnification and
exculpation of officers and directors provided for in the Restated Certificate
of Incorporation and Amended and Restated By-laws of Telemundo as in effect on
the date of the Merger Agreement, with respect to indemnification and
exculpation for acts and omissions occurring prior to the Effective Time. The
Merger Agreement also provides that, to the fullest extent permitted by
applicable law, Telemundo will indemnify and hold harmless each present and
former director and officer of Telemundo for acts and omissions occurring
prior to the Effective Time. Telemundo has also agreed to advance expenses to
each such indemnified person and to cooperate fully in the defense of any such
matter. The Merger Agreement further provides that for a period of six years
after the Effective Time, the Company or Telemundo will maintain officers' and
directors' liability insurance covering the persons who, on the date of the
Merger Agreement, were covered by Telemundo's officers' and directors'
liability insurance policies with respect to acts and omissions occurring
prior to the Effective Time.
KFWD Affiliation Agreement
HIC owns and operates television station KFWD, Channel 52, the Company's
Dallas/Fort Worth network affiliate. Mr. Hernandez and his family own HIC and
Mr. Hernandez serves as an executive officer and director of HIC. The
affiliate relationship between Telemundo and HIC is governed by an Affiliation
and Representation Agreement dated as of August 31, 1993, as amended (the
"KFWD Affiliation Agreement"). Telemundo and Interspan, HIC's predecessor,
entered into a Modification Agreement, dated as of September 10, 1997 (the
"Modification Agreement"), which modified the KFWD Affiliation Agreement. The
compensation committee
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of Telemundo, pursuant to authority delegated to it by its Board of Directors,
negotiated the terms of the Modification Agreement on behalf of Telemundo.
Among other things, the Modification Agreement extended the term of the KFWD
Affiliation Agreement through February 28, 2001 and provided HIC with the
right to terminate the KFWD Affiliation Agreement by giving Telemundo six
months' written notice of such termination during the 12-month period
following the termination, for any reason, of Mr. Hernandez's employment
relationship with Telemundo. Under the KFWD Affiliation Agreement, as modified
by the Modification Agreement, Telemundo paid to HIC $1,500,000 during the
twelve month period ended August 31, 1998 and will pay to HIC $1,612,500 and
$1,733,438 during the 12-month periods ending on August 31, 1999 and 2000,
respectively, and at the rate of $1,863,445 on an annualized basis during the
period beginning on September 1, 2000 and ending on February 28, 2001. In
addition, HIC may be entitled to an amount up to $120,500 of bonus
compensation based upon ratings performance of the station during any 12-month
period. The KFWD Affiliation Agreement was assumed by the Network Company in
connection with the Network Sale.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
NEW CREDIT FACILITIES
In connection with the Transactions, Telemundo entered into the New Credit
Facilities pursuant to which Credit Suisse First Boston, New York Branch, an
affiliate of Credit Suisse First Boston Corporation, and Canadian Imperial
Bank of Commerce, an affiliate of CIBC Oppenheimer Corp., acted as co-agents
and arrangers. Under the New Credit Facilities, the lenders have provided
Telemundo with a $150 million reducing revolving credit facility (the
"Revolving Credit Facility"), a $25 million tranche A term loan facility (the
"Tranche A Facility") and a $175 million tranche B term loan facility (the
"Tranche B Facility" and, together with the Revolving Credit Facility and the
Tranche A Facility, the "New Credit Facilities") upon the terms and conditions
set forth therein.
Subject to compliance with the terms thereof, the Revolving Credit Facility
is available until September 30, 2005. The commitment thereunder will be
reduced to $142.5 million, $127.5 million, $112.5 million and $90.0 million on
December 31, 2001, 2002, 2003 and 2004, respectively. The Tranche A Facility
matures on September 30, 2005 and the Tranche B Facility matures on March 31,
2007.
Loans under the Tranche A Facility are scheduled to amortize in 24 quarterly
installments commencing on December 31, 1999 in the following aggregate
amounts: (i) $2.5 million for the first year, (ii) $3.125 million for the
second year, (iii) $3.75 million for the third year, (iv) $4.375 million for
the fourth year, (v) $5.0 million for the fifth year and (vi) $6.25 million
for the last year. Loans under the Tranche B Facility are scheduled to
amortize in 29 quarterly installments of $437,500 commencing on December 31,
1999 with a final quarterly payment of $162.3 million. In certain
circumstances, the Company may also be required to repay the New Credit
Facilities with the net proceeds of asset sales and equity issuances and with
a portion of Excess Cash Flow (as defined in the New Credit Facilities).
Subject to customary conditions precedent, amounts repaid on the Revolving
Credit Facility prior to maturity may be reborrowed up to $150 million,
subject to reduction of the Revolving Credit Facility. Amounts repaid on the
Tranche A Facility and the Tranche B Facility may not be reborrowed.
The New Credit Facilities are obligations of Telemundo and are
unconditionally guaranteed by Holdings and by each subsidiary of Telemundo
which is a wholly owned domestic entity for U.S. federal income tax purposes,
and is secured by substantially all of the assets of Holdings and each such
subsidiary (other than certain subsidiaries as permitted by the lenders).
Telemundo's Puerto Rican subsidiary has granted a security interest to
Telemundo in its assets to secure certain existing indebtedness of such
subsidiary to Telemundo, and Telemundo has pledged 65% of the voting stock and
100% of the nonvoting stock of such subsidiary as security for the New Credit
Facilities. Loans under the New Credit Facilities bear interest at Telemundo's
option at either (i) Adjusted LIBOR plus the Applicable Margin or (ii) a base
rate (the "Base Rate") plus the Applicable Margin. The Applicable Margin for
the Revolving Credit Facility and the Tranche A Facility is initially (a)
1.875% for Adjusted LIBOR loans and (b) 0.875% for Base Rate loans, and
thereafter will be determined by a grid based upon the ratio of total debt to
EBITDA (as defined in the New Credit Facilities). The Applicable Margin for
the Tranche B Facility is (a) 2.125% for Adjusted LIBOR loans and (b) 1.125%
for Base Rate loans.
The New Credit Facilities also contain provisions restricting the ability of
Holdings and its subsidiaries, from (with certain exceptions), among other
things, (i) incurring additional indebtedness or liens, (ii) entering into
sale and lease-back transactions, (iii) making advances, investments or loans,
(iv) entering into mergers, consolidations or asset sales or purchases, (v)
paying dividends or redeeming stock, (vi) entering into transactions with
affiliates other than on an arm's-length basis, (vii) engaging in new lines of
business unrelated to their current activity, (viii) materially amending or
modifying any material document in a manner adverse to Telemundo, the Company
or the lenders, (ix) prepaying or materially amending certain other
indebtedness,
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(x) taking any action that would result in the Collateral Requirement or the
Guarantee Requirement (each as defined in the New Credit Facilities) not being
satisfied, (xi) changing its fiscal year end, or (xii) permitting any change
to occur in the ownership or control of the Company.
The New Credit Facilities also require Telemundo, for certain periods of
time, to maintain (i) a consolidated ratio of total debt to EBITDA (as defined
in the New Credit Facilities) not to exceed 7.0 to 1.0 (with such ratio being
incrementally reduced to 4.5 to 1.0 by December 31, 2001), (ii) a consolidated
interest expense coverage ratio of not less than 1.6 to 1.0 (with such ratio
being incrementally increased to 2.25 to 1.0 by September 30, 2001) and (iii)
a consolidated fixed charge coverage ratio of not less than 1.0 to 1.0 (with
such ratio being incrementally increased to 1.15 to 1.0 by September 30,
2001).
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DESCRIPTION OF THE NOTES
GENERAL
The Old Notes were, and the New Notes will be, issued under an Indenture,
dated as of August 12, 1998 (the "Indenture"), between Holdings and Bank of
Montreal Trust Company, as Trustee (the "Trustee"). The form and terms of the
New Notes are identical in all material respects to the form and terms of the
Old Notes except (i) the New Notes will have been registered under the
Securities Act, (ii) the holders of the New Notes will not be entitled to
certain rights of holders of the Old Notes under the Registration Rights
Agreement and (iii) for certain contingent provisions relating to additional
interest. The following is a summary of certain provisions of the Indenture
and the New Notes, a copy of which Indenture and the form of New Notes is
available upon request to Holdings. The following summary of certain
provisions of the Indenture and the New Notes does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, all the
provisions of the Indenture and the New Notes, and those terms made a part
thereof by reference to the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"), including the definitions of certain terms therein.
For purposes of the "Description of the Notes," references to Holdings are to
Telemundo Holdings, Inc. and its successors, and does not include any of its
subsidiaries.
Principal of, premium, if any, and interest on the New Notes will be
payable, and the New Notes may be exchanged or transferred, at the office or
agency of Holdings in the Borough of Manhattan, The City of New York, which
initially shall be the corporate trust office of the Trustee's agent, except
that, at the option of Holdings, payment of interest may be made by check
mailed to the address of the Holders as such address appears in the Note
register.
The New Notes will be issued only in fully registered form, without coupons,
in denominations of $1,000 principal amount at maturity and any integral
multiple of $1,000. See "Book-Entry, Delivery and Form." No service charge
shall be made for any registration or exchange of New Notes, but Holdings may
require payment of a sum sufficient to cover any transfer tax or other similar
governmental charge payable in connection therewith.
TERMS OF THE NOTES
The Notes are general unsecured obligations of Holdings, limited to
$218,838,000 aggregate principal amount at maturity, and will mature on August
15, 2008. The Notes will accrete at a rate of 11 1/2% per annum to 100% of the
principal amount at maturity by August 15, 2003. Except as described herein,
no cash interest will accrue on the Notes prior to August 15, 2003, although
for U.S. federal income tax purposes a significant amount of original issue
discount, taxable as ordinary income, will be recognized by a Holder as such
discount accretes. See "Certain U.S. Federal Income Tax Considerations" for a
discussion regarding the taxation of such original issue discount. Cash
interest will accrue on the Notes at the rate per annum shown on the front
cover of this Prospectus from August 15, 2003, or from the most recent date to
which interest has been paid or provided for, payable semiannually on February
15 and August 15 of each year, commencing February 15, 2004, to the Holders of
record at the close of business on the February 1 or August 1 immediately
preceding the interest payment date. Interest will be calculated on the basis
of a 360-day year comprised of twelve 30-day months.
OPTIONAL REDEMPTION
Except as set forth in the following paragraph, the Notes will not be
redeemable at the option of Holdings prior to August 15, 2003. Thereafter, the
Notes will be redeemable, at Holdings' option, in whole or in part, at any
time or from time to time, upon not less than 30 nor more than 60 days' prior
notice mailed by first-class mail to each Holder's registered address, at the
following redemption prices (expressed in percentages of principal amount),
plus accrued and unpaid interest to the redemption date (subject to the right
of Holders of record on the relevant record date to receive interest due on
the relevant interest payment date), if redeemed during the 12-month period
commencing on August 15 of the years set forth below:
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<TABLE>
<CAPTION>
REDEMPTION
PERIOD PRICE
------ ----------
<S> <C>
2003........................................................... 105.750%
2004........................................................... 103.833
2005........................................................... 101.917
2006 and thereafter............................................ 100.000
</TABLE>
In addition, at any time and from time to time prior to August 15, 2001,
Holdings may redeem in the aggregate up to 35% of the aggregate principal
amount at maturity of the Notes with the Net Cash Proceeds of one or more
Public Equity Offerings at a redemption price equal to 111 1/2% of their
Accreted Value at the redemption date; provided, however, that not less than
65% of the aggregate principal amount at maturity of Notes originally issued
must remain outstanding after each such redemption.
In the case of any partial redemption, selection of the Notes for redemption
will be made by the Trustee in compliance with the requirements of the
principal national securities exchange, if any, on which the Notes are listed,
or if the Notes are not so listed, on a pro rata basis, by lot or by such
other method as the Trustee in its sole discretion shall deem to be fair and
appropriate, although no Note of $1,000 in principal amount at maturity or
less shall be redeemed in part. If any Note is to be redeemed in part only,
the notice of redemption relating to such Note shall state the portion of the
principal amount thereof to be redeemed. A new Note in principal amount equal
to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Note.
RANKING
The indebtedness evidenced by the Notes are general unsecured obligations of
Holdings, ranking senior in right of payment to all future indebtedness of
Holdings expressly subordinated to the Notes and pari passu in right of
payment with all other existing and future indebtedness and other obligations
of Holdings. The Notes will also be effectively subordinated to all secured
obligations, if any, of Holdings to the extent of the value of the assets
securing such obligations. The obligations of Telemundo under the New Credit
Facilities are guaranteed by Holdings and each Subsidiary of Telemundo which
is a wholly owned domestic entity for U.S. federal income tax purposes and are
secured by substantially all of the assets of Holdings and each such
Subsidiary. See "Description of Certain Indebtedness--New Credit Facilities."
Although the Indenture contains limitations on the amount of additional
Indebtedness that Holdings may incur, under certain circumstances the amount
of such Indebtedness could be substantial and, in any case, such Indebtedness
may be secured Indebtedness.
Holdings is a holding company and does not have any material assets or
operations other than the ownership of Capital Stock of its Subsidiaries; all
of the operations of Holdings are conducted through its Subsidiaries. Claims
of creditors of such Subsidiaries, including trade creditors, and claims of
preferred stockholders (if any) of such Subsidiaries generally will have
priority with respect to the assets and earnings of such Subsidiaries over the
claims of creditors of Holdings, including Holders of the Notes. The Notes,
therefore, will be structurally subordinated to creditors (including trade
creditors) and preferred stockholders (if any) of Subsidiaries of Holdings. As
of June 30, 1998, on a pro forma basis after giving effect to the
Transactions, Holdings would have had no indebtedness other than the Notes,
and Holdings' Subsidiaries would have had $304.9 million of indebtedness
(including capital leases) outstanding. Although the Indenture limits the
incurrence of Indebtedness and the issuance of preferred stock of Holdings'
Restricted Subsidiaries, such limitation is subject to a number of significant
qualifications. Moreover, the Indenture does not impose any limitation on the
incurrence by such Restricted Subsidiaries of liabilities that are not
considered Indebtedness under the Indenture. See "Risk Factors--Holding
Company Structure; Structural and Effective Subordination; Limitation on
Payment of Funds to Holdings."
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CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), each Holder shall have the right to require that Holdings purchase
all or any part of such Holder's Notes at a purchase price in cash equal to
101% of the Accreted Value thereof at the date of purchase, if such purchase
occurs prior to August 15, 2003, or 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest, if any, to the date of purchase
(subject to the right of Holders of record on the relevant record date to
receive accrued and unpaid interest due on the relevant interest payment
date), if such purchase occurs thereafter:
(i) prior to a Public Equity Offering, the Permitted Holders cease to
beneficially own (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act) in the aggregate Capital Stock representing more than 50% of the
outstanding equity and the aggregate voting power represented by the
outstanding Capital Stock of Holdings, whether as a result of the issuance
of securities, merger or consolidation, transfer of securities or
otherwise;
(ii) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than one or more Permitted Holders, is or becomes
the beneficial owner (as defined above, except that for purposes of this
clause (ii) such person shall be deemed to have beneficial ownership of all
shares that such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 35% of the total voting power of the then
outstanding Voting Stock of Holdings, and the Permitted Holders
beneficially own (as defined in clause (i) above) in the aggregate Voting
Stock representing a lesser percentage of the total voting power of the
Voting Stock of Holdings;
(iii) during any period of two consecutive years after the initial Public
Equity Offering, individuals who at the beginning of such period
constituted the Board of Directors of Holdings (together with any new
directors whose election by such Board of Directors was made pursuant to
the Stockholders Agreement or whose nomination for election by the
shareholders of Holdings was approved by a vote of the majority of the
directors of Holdings then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of
the Board of Directors then in office;
(iv) Holdings consolidates with, or merges with or into, another Person
or Holdings and/or one or more Restricted Subsidiaries sells, assigns,
conveys, transfers, leases or otherwise disposes of all or substantially
all of the assets of Holdings and the Restricted Subsidiaries, taken as a
whole, in one transaction or series of related transactions, to any Person
(other than a Wholly Owned Restricted Subsidiary of Holdings), or any
Person consolidates with, or merges with or into, Holdings, in any such
event other than pursuant to a transaction in which the Person or Persons
that beneficially owned (as defined in clause (ii) above), directly or
indirectly, Voting Stock representing a majority of the total voting power
of the Voting Stock of Holdings immediately prior to such transaction or
series of related transactions beneficially own (as defined in clause (ii)
above), directly or indirectly, Voting Stock representing a majority of the
total voting power of the Voting Stock of the surviving or transferee
Person;
(v) Sony Pictures ceases to beneficially own (as defined in Rules 13d-3
and 13d-5 under the Exchange Act) Capital Stock of Holdings representing at
least 15% of the outstanding equity represented by the outstanding Capital
Stock of Holdings, whether as a result of the issuance of securities,
merger or consolidation, transfer of securities or otherwise; provided,
however, that any transfer by Sony Pictures necessary in order to comply
with restrictions imposed upon the ownership by Sony Pictures of the
Capital Stock of Holdings by any federal or state court or regulatory
authority or agency with applicable jurisdiction that would, but for this
proviso, result in a Change of Control under this clause (v), will not
result in a Change of Control so long as (x) Liberty continues to own
Capital Stock of Holdings representing at least 20% of the outstanding
equity represented by the outstanding Capital Stock of Holdings and (y)
Sony Pictures continues to own Capital Stock of the Network Company
representing 25% of the equity and the aggregate voting power represented
by the outstanding Capital Stock of the Network Company;
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(vi) Liberty ceases to beneficially own (as defined in Rules 13d-3 and
13d-5 under the Exchange Act) Capital Stock of Holdings representing at
least 15% of the outstanding equity represented by the outstanding Capital
Stock of Holdings, whether as a result of the issuance of securities,
merger or consolidation, transfer of securities or otherwise; provided,
however, that any transfer by Liberty necessary in order to comply with
restrictions imposed upon the ownership by Liberty of the Capital Stock of
Holdings by any federal or state court or regulatory authority or agency
with applicable jurisdiction that would, but for this proviso, result in a
Change of Control under this clause (vi), will not result in a Change of
Control so long as (x) Sony Pictures continues to own Capital Stock of
Holdings representing at least 20% of the outstanding equity represented by
the outstanding Capital Stock of Holdings and (y) Liberty continues to own
Capital Stock of the Network Company representing 25% of the equity and the
aggregate voting power represented by the outstanding Capital Stock of the
Network Company;
(vii) Liberty and Sony Pictures together cease to beneficially own (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act) Capital Stock of
the Network Company representing at least 50% of the equity of the Network
Company, whether as a result of the issuance of securities, merger or
consolidation, transfer of securities or otherwise; or
(viii) following the Merger, Telemundo shall not be a Wholly Owned
Subsidiary of Holdings (other than by virtue of a merger or consolidation
with Holdings).
For the purposes of this definition of Change of Control, "equity" shall be
determined after giving effect to the exercise of all options, warrants or
other rights to acquire or purchase Capital Stock and the conversion or
exchange of all securities convertible into or exchangeable for Capital Stock,
less any exercise, conversion or exchange price therefor.
Within 30 days following any Change of Control, unless Holdings has mailed a
notice of redemption with respect to all the outstanding Notes pursuant to the
provisions of the Indenture described above under "--Optional Redemption,"
Holdings shall mail a notice to the Trustee and to each Holder stating: (1)
that a Change of Control has occurred and that such Holder has the right to
require Holdings to purchase such Holder's Notes at a purchase price in cash
equal to 101% of the Accreted Value thereof at the date of purchase, if such
purchase occurs prior to August 15, 2003, or 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the date of purchase
(subject to the right of Holders of record on the relevant record date to
receive accrued and unpaid interest due on the relevant interest payment
date), if such purchase occurs thereafter; (2) a description of the
transaction or transactions constituting such Change of Control; (3) the
purchase date (which shall be no earlier than 30 days nor later than 60 days
from the date such notice is mailed); and (4) the procedures determined by
Holdings, that a Holder must follow in order to have its Notes purchased.
Holdings shall comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the purchase of Notes pursuant to this covenant. To the
extent that the provisions of any securities laws or regulations conflict with
the provisions of the covenant described hereunder, Holdings shall comply with
the applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the covenant described hereunder by virtue
thereof.
The Change of Control purchase feature is a result of negotiations between
Holdings and the Initial Purchasers. The Company has no present intention to
engage in a transaction involving a Change of Control, although it is possible
that Holdings, Sony Pictures, Liberty or the Network Company would decide to
do so in the future. Subject to the limitations discussed below, Holdings
could, in the future, enter into certain transactions, including acquisitions,
refinancings or other recapitalizations, that would not constitute a Change of
Control under the Indenture, but that could increase the amount of
Indebtedness outstanding at such time or otherwise affect Holdings' capital
structure or credit ratings. The Change of Control provisions in the Indenture
may not afford Holders protection in the event of a highly leveraged
transaction.
The New Credit Facilities contain, and future indebtedness of Holdings and
its Subsidiaries may contain, prohibitions on the occurrence of certain events
that would constitute a Change of Control or require such
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indebtedness to be repaid or purchased upon a Change of Control. There can be
no assurance that sufficient funds will be available when necessary to make
any required purchases. The New Credit Facilities do not permit Telemundo to
pay dividends or make distributions to Holdings for the purpose of purchasing
Notes in the event of Change of Control. Even if sufficient funds were
otherwise available, the terms of certain Indebtedness could prohibit
Holdings' prepayment of Notes prior to their scheduled maturity. Consequently,
if Holdings is not able to prepay such Indebtedness, Holdings will be unable
to fulfill its repurchase obligations if Holders of Notes exercise their
repurchase rights following a Change of Control. The failure of Holdings to
make or consummate the Change of Control offer or pay the purchase price when
due will give the Trustee and the Holders the rights described under "--Events
of Default." In the event Holdings is required to purchase outstanding Notes
pursuant to a Change of Control offer, Holdings may seek additional debt or
equity financing to the extent it does not have available funds to meet its
purchase obligations. However, there can be no assurance that Holdings would
be able to obtain such financing. The phrase "all or substantially all," as
used in the definition of "Change of Control," has not been interpreted under
New York law (which is the governing law of the Indenture) to represent a
specific quantitative test. As a consequence, in the event the Holders of the
Notes elected to exercise their rights under the Indenture and Holdings
elected to contest such election there could be no assurance how a court
interpreting New York law would interpret the phrase.
Holdings will not be required to make a Change of Control offer upon a
Change of Control if a third party makes the Change of Control offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the Indenture applicable to a Change of Control offer made by
Holdings and purchases all Notes validly tendered and not withdrawn under such
Change of Control offer.
The provisions under the Indenture relating to Holdings' obligation to make
an offer to purchase the Notes as a result of a Change of Control may be
waived or modified with the written consent of the Holders of a majority in
principal amount of the Notes then outstanding. The existence of a Holder's
right to require Holdings to offer to purchase such Holder's Notes upon a
Change of Control may deter a third party from acquiring Holdings in a
transaction which constitutes a Change of Control.
CERTAIN COVENANTS
The Indenture contains certain covenants including, among others, the
following:
Limitation on Indebtedness. (a) Holdings shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, Incur any Indebtedness;
provided, however, that (x) Holdings or any Restricted Subsidiary (other than
Telemundo or any of its Subsidiaries) may Incur Indebtedness if at the time of
such Incurrence and after giving effect thereto, the Consolidated Leverage
Ratio is less than or equal to 8.5 to 1.0 and (y) Telemundo or any of its
Subsidiaries may Incur Indebtedness if at the time of such Incurrence and
after giving effect thereto, the Consolidated Leverage Ratio is less than or
equal to 7.0 to 1.0 (for purposes of this clause (y), all references to
Holdings or any Restricted Subsidiary in the definitions used to calculate the
Consolidated Leverage Ratio shall be to Telemundo and its Subsidiaries (other
than any Unrestricted Subsidiary)).
(b) Notwithstanding the foregoing paragraph (a), Holdings or any Restricted
Subsidiary, as applicable, may Incur any or all of the following Indebtedness:
(1) Indebtedness of Holdings or any Restricted Subsidiary Incurred under
the Bank Credit Agreement in an aggregate amount not to exceed an aggregate
principal amount of $350 million at any time outstanding, less the
aggregate amount of any scheduled amortization payments or mandatory
prepayments actually made on term loans thereunder;
(2) the Old Notes, the New Notes or any Indebtedness (including the New
Notes) the proceeds of which are used to Refinance the Old Notes or the New
Notes;
(3) Indebtedness of Telemundo or any of its Subsidiaries outstanding on
the Issue Date (other than Indebtedness referred to in clause (1) or (2) of
this covenant);
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(4) Refinancing Indebtedness in respect of Indebtedness Incurred pursuant
to paragraph (a) or pursuant to clause (2) or (3) or this clause (4);
(5) (i) Indebtedness of any Restricted Subsidiary owed to and held by
Holdings or any Restricted Subsidiary and (ii) Indebtedness of Holdings
owed to and held by any Restricted Subsidiary which is unsecured and
subordinated in right of payment to the payment and performance of
Holdings' obligations under the Notes; provided, however, that an
incurrence of Indebtedness that is not permitted by this clause (5) shall
be deemed to have occurred upon (x) any sale or other disposition of any
Indebtedness of Holdings or any Restricted Subsidiary referred to in this
clause (5) to any Person other than Holdings or any Restricted Subsidiary
or (y) any Restricted Subsidiary that holds Indebtedness of Holdings or
another Restricted Subsidiary ceasing to be a Restricted Subsidiary;
(6) Hedging Obligations consisting of Interest Rate Agreements or
Currency Agreements directly related to Indebtedness permitted to be
Incurred by Holdings or a Restricted Subsidiary pursuant to the Indenture;
(7) Capital Lease Obligations, Acquired Indebtedness, Purchase Money
Indebtedness and Attributable Debt with respect to Sale/Leaseback
Transactions, and Refinancing Indebtedness thereof, in an aggregate
principal amount not exceeding $25 million at any one time outstanding;
(8) Indebtedness of Holdings or any Restricted Subsidiary Incurred or
Incurrable in respect of reimbursement obligations related to letters of
credit, banker's acceptances or similar facilities entered into in the
ordinary course of business;
(9) Indebtedness of Holdings or any Restricted Subsidiary in respect of
bid, performance, surety and appeal bonds and obligations provided in the
ordinary course of business;
(10) Indebtedness of Telemundo of Chicago, Inc. and Video 44 Acquisition
Corp., Inc., pursuant to Section 3.5(a) of the Chicago Joint Venture
Agreement;
(11) any Guarantee by the Company of any Indebtedness (not prohibited
under the Indenture) of any Wholly Owned Restricted Subsidiary, and any
Guarantee by any Wholly Owned Restricted Subsidiary of any Indebtedness
(not prohibited under the Indenture) of the Company or any Wholly Owned
Restricted Subsidiary;
(12) Indebtedness of any Restricted Subsidiary Incurred in the ordinary
course of business under any Local Marketing Agreement in an aggregate
amount, together with the aggregate amount of Investments pursuant to
clause (xii) of the definition of "Permitted Investment," not to exceed $10
million at any one time outstanding; and
(13) other Indebtedness in an aggregate principal amount not to exceed
$35 million at any one time outstanding.
(c) Notwithstanding the foregoing, Holdings shall not incur any Indebtedness
pursuant to the foregoing paragraph (b) if the proceeds thereof are used,
directly or indirectly, to refinance any Subordinated Obligations unless such
Indebtedness shall be subordinated to the Notes to at least the same extent as
such Subordinated Obligations.
(d) For purposes of determining compliance with this covenant, (i) in the
event that an item of Indebtedness meets the criteria of more than one of the
types of Indebtedness described above, Holdings, in its sole discretion, will
classify such item of Indebtedness and only be required to include the amount
and type of such Indebtedness in one of the above clauses and (ii) an item of
Indebtedness may be divided and classified in more than one of the types of
Indebtedness described above. A guarantee of Indebtedness permitted by this
covenant to be Incurred by Holdings or a Restricted Subsidiary otherwise
permitted to be Incurred pursuant to this covenant is not considered a
separate Incurrence for purposes of this covenant.
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Limitation on Liens. Holdings shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create or permit to exist any Lien upon
any of its property or assets, now owned or hereafter acquired, securing any
obligation unless concurrently with the creation of such Lien effective
provision is made to secure the Notes equally and ratably with such obligation
for so long as such obligation is so secured; provided, that, if such
obligation is a Subordinated Obligation, the Lien securing such obligation
shall be subordinated and junior to the Lien securing the Notes with the same
or lesser relative priority as such Subordinated Obligation shall have been
with respect to the Notes. The preceding restriction shall not require
Holdings or any Restricted Subsidiary to secure the Notes if the Lien consists
of the following:
(a) Liens created by the Indenture or otherwise securing the Notes, Liens
securing Indebtedness Incurred under the Bank Credit Agreement and Liens on
assets of Telemundo or any of its Subsidiaries existing as of the Issue
Date;
(b) Permitted Liens;
(c) Liens securing any Indebtedness of any Restricted Subsidiary
permitted to be Incurred pursuant to the Indenture;
(d) Liens to secure Purchase Money Indebtedness issued by Holdings or a
Restricted Subsidiary; provided, however, that (a) the Indebtedness secured
by such Liens shall have been permitted to be Incurred under the "--
Limitation on Indebtedness" covenant and (b) such Liens shall not encumber
any property of Holdings or any Restricted Subsidiary other than the
property acquired or any improvement or accessions on or proceeds of such
property and shall attach to such property within 180 days of the
acquisition or completion of construction of such property;
(e) Liens on the assets or property of a Restricted Subsidiary existing
at the time such Restricted Subsidiary becomes a Restricted Subsidiary and
not incurred as a result of (or in connection with or in anticipation of)
such Restricted Subsidiary becoming a Restricted Subsidiary; provided,
however, that such Liens do not extend to or cover any other property of
Holdings or any other Restricted Subsidiary;
(f) Liens deemed to exist by virtue of the buyout provisions contained in
Sections 6 and 7 of the Chicago Joint Venture Agreement;
(g) Liens on property at the time of acquisition thereof by Holdings or
any Restricted Subsidiary provided such Liens were not given as a result
of, in connection with or in anticipation of such acquisition;
(h) Liens securing Capital Lease Obligations, Acquired Indebtedness and
Attributable Debt Incurred pursuant to clause (b)(7) of the "--Limitation
on Indebtedness" covenant;
(i) Liens securing Indebtedness Incurred to Refinance Indebtedness which
has been secured by a Lien permitted under the Indenture and is permitted
to be Refinanced under the Indenture; provided, however, that such Liens do
not extend to or cover any property of Holdings or any Restricted
Subsidiary not securing the Indebtedness so Refinanced; or
(j) Liens on assets of Holdings or any Restricted Subsidiary securing
Indebtedness in an aggregate amount not to exceed $10 million.
Limitation on Sale/Leaseback Transactions. Holdings shall not, and shall not
permit any Restricted Subsidiary to, enter into any Sale/Leaseback Transaction
with respect to any property unless (i) Holdings or such Restricted Subsidiary
would be (A) in compliance with the covenant described under "--Limitation on
Indebtedness" immediately after giving effect to such Sale/Leaseback
Transaction and (B) entitled to create a Lien on such property securing the
Attributable Debt with respect to such Sale/Leaseback Transaction without
securing the Notes pursuant to the covenant described under "--Limitation on
Liens," (ii) the net proceeds received by Holdings or any Restricted
Subsidiary in connection with such Sale/Leaseback Transaction are at least
equal to the fair market value (as determined by the Board of Directors) of
such property and (iii) Holdings or such Restricted Subsidiary applies the
proceeds of such transaction in compliance with the covenant described under
"--Limitation on Sales of Assets and Subsidiary Stock."
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Limitation on Restricted Payments. (a) Holdings shall not, and shall not
permit any Restricted Subsidiary to, directly or indirectly, make a Restricted
Payment if at the time Holdings or such Restricted Subsidiary makes, and after
giving effect to, the proposed Restricted Payment: (i) a Default shall have
occurred and be continuing (or would result therefrom); (ii) Holdings is not
able to incur an additional $1.00 of Indebtedness pursuant to paragraph (a) of
the covenant described under "--Limitation on Indebtedness"; or (iii) the
aggregate amount of such Restricted Payment and all other Restricted Payments
since the Issue Date would exceed the sum of:
(A) (x) the Cumulative EBITDA less (y) 1.4 times Cumulative Consolidated
Interest Expense, each as determined at the time of such Restricted
Payment;
(B) the aggregate Net Cash Proceeds (including Net Cash Proceeds received
upon the conversion of non-cash proceeds) received by Holdings from capital
contributions or the issuance or sale of Qualified Stock subsequent to the
Issue Date or any options, warrants or rights to purchase Qualified Stock,
together with the aggregate cash received by Holdings at the time of
exercise of such options, warrants or rights (other than any such issuance
or sale to a Subsidiary of Holdings);
(C) the amount by which Indebtedness of Holdings is reduced on Holdings'
balance sheet upon the conversion or exchange (other than by a Subsidiary
of Holdings) of any Indebtedness of Holdings or a Restricted Subsidiary
issued subsequent to the Issue Date for Qualified Stock (less the amount of
any cash, or the fair value of any other property, distributed by Holdings
upon such conversion or exchange), whether pursuant to the terms of such
Indebtedness or pursuant to an agreement with a creditor to engage in an
equity for debt exchange; and
(D) an amount equal to the sum of (i) the net reduction in Investments in
Unrestricted Subsidiaries or Investments constituting Restricted Payments
resulting from interest on debt, dividends, repayments of loans or advances
or other transfers of assets or proceeds from the disposition of Capital
Stock or other distributions or payments, in each case to Holdings or any
Restricted Subsidiary from, or with respect to an Investment in,
Unrestricted Subsidiaries, and (ii) the portion (proportionate to Holdings'
equity interest in such Subsidiary) of the fair market value of the net
assets of an Unrestricted Subsidiary at the time such Unrestricted
Subsidiary is designated a Restricted Subsidiary; provided, however, that
the foregoing sum shall not exceed, in the case of any Unrestricted
Subsidiary, the aggregate amount of Investments previously made (and
treated as a Restricted Payment) by Holdings or any Restricted Subsidiary
in such Unrestricted Subsidiary subsequent to the Issue Date and the
aggregate amount of Investments in such Person constituting Restricted
Payments.
(b) The provisions of the foregoing paragraph (a) shall not prohibit:
(i) any purchase or redemption of Capital Stock of Holdings or any
Restricted Subsidiary or Subordinated Obligations of Holdings made by
exchange for, or out of the proceeds of the substantially concurrent
issuance and sale of, Qualified Stock (other than any such issuance and
sale to a Subsidiary of Holdings) or out of the proceeds of a
substantially concurrent capital contribution to Holdings; provided,
however, that (x) such purchase, capital contribution or redemption
shall be excluded in the calculation of the amount of Restricted
Payments and (y) the Net Cash Proceeds from such sale of Capital Stock
or capital contribution shall be excluded from clause (iii)(B) of
paragraph (a) above;
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations in
whole or in part (including premium, if any, and accrued and unpaid
interest) made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Indebtedness of Holdings which is
permitted to be Incurred pursuant to the covenant described under "--
Limitation on Indebtedness"; provided, however, that such purchase,
repurchase, redemption, defeasance or other acquisition or retirement
for value shall be excluded in the calculation of the amount of
Restricted Payments;
(iii) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have
complied with this covenant; provided, however, that such
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dividend shall be included in the calculation of the amount of
Restricted Payments if not already taken into consideration for
determining such amount upon the declaration thereof; and
(iv) the redemption of Capital Stock of Holdings from present or
former directors, officers or employees of Holdings and its
Subsidiaries or their estates or beneficiaries pursuant to the terms of
an employee benefit plan or employment or other agreement; provided
that the aggregate amount of all such repurchases shall not exceed $3
million in any fiscal year and $10 million since the Issue Date plus
the aggregate cash proceeds received by Holdings from any reissuance of
such Capital Stock to directors, officers and employees of Holdings and
its Subsidiaries; provided, further, that such redemption shall be
excluded in the calculation of the amount of Restricted Payments.
Limitation on Restrictions on Distributions from Restricted
Subsidiaries. Holdings shall not, and shall not permit any Restricted
Subsidiary to, create or otherwise cause or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary (a) to pay dividends or make any other distributions on
its Capital Stock to Holdings or a Restricted Subsidiary or pay any
Indebtedness owed to Holdings, (b) to make any loans or advances to Holdings
or (c) to transfer any of its property or assets to Holdings, except: (i) any
Permitted Restriction; (ii) any encumbrance or restriction pursuant to any
agreement in effect at or entered into on the date of the Indenture as such
agreement is in effect on such date; (iii) any encumbrance or restriction with
respect to a Person pursuant to an agreement relating to any Indebtedness
Incurred by such Person prior to the date on which such Person became a
Restricted Subsidiary and not Incurred by such Person in connection with, or
in anticipation or contemplation of, such Person becoming a Restricted
Subsidiary; (iv) any encumbrance or restriction pursuant to an agreement
effecting Refinancing Indebtedness Incurred pursuant to an agreement referred
to in clause (ii) or (iii) of this covenant or this clause (iv) or contained
in any amendment to an agreement referred to in clause (ii) or (iii) of this
covenant or this clause (iv); provided, however, that the encumbrances and
restrictions with respect to any such Restricted Subsidiary contained in any
such refinancing agreement or amendment are no less favorable to the Holders
in any material respect as determined in good faith by the Board of Directors
of Holdings than encumbrances and restrictions with respect to such Restricted
Subsidiary contained in such agreements; (v) any such encumbrance or
restriction (A) consisting of customary non-assignment provisions in leases to
the extent such provisions restrict the subletting, assignment or transfer of
the lease or the property leased thereunder or in purchase money financings or
(B) by virtue of any Indebtedness, transfer, option or right with respect to,
or any Lien on, any property or assets of Holdings or any Restricted
Subsidiary not otherwise prohibited by the Indenture; (vi) in the case of
clause (c) above, restrictions contained in security agreements or mortgages
securing Indebtedness of a Restricted Subsidiary to the extent such
restrictions restrict the transfer of the property subject to such security
agreements or mortgages; (vii) encumbrances or restrictions imposed by
operation of any applicable law, rule, regulation or order; (viii) any
restriction with respect to assets imposed pursuant to an agreement entered
into for the sale or disposition of such assets pending the closing of such
sale or disposition; (ix) customary non-assignment provisions in licenses of
intellectual property entered into in the ordinary course of business
(including programming agreements) and in Local Marketing Agreements; (x)
Capitalized Lease Obligations that are otherwise permitted hereunder;
provided, however, that such encumbrance or restriction does not extend to any
property other than that subject to the underlying lease; (xi) any restriction
imposed by Liens permitted under the Indenture; and (xii) any encumbrance or
restriction relating to an agreement relating to the acquisition of assets or
property so long as such encumbrances and restrictions relate solely to the
assets so acquired (and any improvements thereon).
Limitation on Sales of Assets and Subsidiary Stock. (a) Holdings shall not,
and shall not permit any Restricted Subsidiary to, directly or indirectly,
consummate any Asset Disposition unless (i) Holdings or such Restricted
Subsidiary receives consideration at the time of such Asset Disposition at
least equal to the fair market value (including the value of all non-cash
consideration), as determined in good faith by the Board of Directors of
Holdings, of the shares and assets subject to such Asset Disposition, and at
least 75% of the consideration thereof received by Holdings or such Restricted
Subsidiary is in the form of cash or cash equivalents and (ii) an amount equal
to 100% of the Net Available Cash from such Asset Disposition is applied by
Holdings (or such Restricted Subsidiary, as the case may be) (A) first, to the
extent Holdings elects (or is required by the terms of
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any Indebtedness), to prepay, repay or redeem (and permanently reduce the
commitments under) Indebtedness under the Bank Credit Agreement or
Indebtedness of any Restricted Subsidiary within one year from the later of
the date of such Asset Disposition or the receipt of such Net Available Cash
(the "Receipt Date") and/or to acquire Additional Assets; provided, however,
that Holdings shall be required to commit such Net Available Cash to the
acquisition of Additional Assets within nine months from the later of the date
of such Asset Disposition or the Receipt Date and shall be required to
consummate the acquisition of such Additional Assets within fifteen months
from the Receipt Date; provided, further, that if the other party to such
acquisition refuses or fails, after the first anniversary of the Receipt Date,
to consummate such acquisition, Holdings shall apply such Net Available Cash,
within fifteen months from the Receipt Date, as provided in the first part of
this clause (A) or clause (B); (B) second, to the extent of the balance of
such Net Available Cash after application in accordance with clause (A), to
make an offer pursuant to paragraph (b) below (x) to the Holders to purchase
Notes pursuant to and subject to the conditions contained in the Indenture and
(y) if applicable, to the holders of other Indebtedness of Holdings that ranks
pari passu with the Notes (the "Other Debt") and that by its terms requires
Holdings to make an offer to purchase such Other Debt upon consummation of an
Asset Disposition, to purchase such Other Debt on a pro rata basis with the
Notes; and (C) third, to the extent of the balance of such Net Available Cash
after application in accordance with clauses (A) and (B) to any other
application or use not prohibited by the Indenture. Notwithstanding the
foregoing provisions of this paragraph, Holdings and the Restricted
Subsidiaries shall not be required to apply the Net Available Cash in
accordance with this paragraph until the aggregate Net Available Cash from all
Asset Dispositions which is not applied in accordance with this paragraph
exceeds $10.0 million (at which time, the entire unutilized Net Available
Cash, and not just the amount in excess of $10.0 million, shall be applied
pursuant to this paragraph).
For the purposes of this covenant, the following are deemed to be cash or
cash equivalents: (x) the express assumption of Indebtedness of Holdings or
any Restricted Subsidiary and the release of Holdings or such Restricted
Subsidiary from all liability on such Indebtedness in connection with such
Asset Disposition; (y) securities received by Holdings or any Restricted
Subsidiary from the transferee that are converted by Holdings or such
Restricted Subsidiary into cash within 180 days of closing the transaction;
and (z) Temporary Cash Investments.
(b) In the event of an Asset Disposition that requires the purchase of the
Notes and, if applicable, Other Debt pursuant to clause (a)(ii)(B) above,
Holdings will be required to purchase (i) Notes tendered pursuant to an offer
by Holdings for the Notes at a purchase price of 100% of their aggregate
Accreted Value at the date of purchase, if such purchase occurs prior to
August 15, 2003, or 100% of their aggregate principal amount, plus accrued but
unpaid interest, if any, to the date of purchase, if such purchase occurs
thereafter, and (ii) if applicable, Other Debt to the extent required thereby
and provided there is a permanent reduction in the principal amount thereof,
in each case, in accordance with the procedures (including prorating in the
event of oversubscription) set forth in the Indenture.
(c) Holdings shall comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of the covenant described hereunder,
Holdings shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under the covenant
described hereunder by virtue thereof.
Limitation on Affiliate Transactions. (a) Holdings shall not, and shall not
permit any Restricted Subsidiary to, enter into any transaction (including the
purchase, sale, lease or exchange of any property or the rendering of any
service) with or for the benefit of any Affiliate of Holdings (an "Affiliate
Transaction") unless the terms thereof (1) are no less favorable to Holdings
or such Restricted Subsidiary than those that could be obtained at the time of
such transaction in a comparable transaction in arm's-length dealings with a
Person who is not such an Affiliate, (2) if such Affiliate Transaction
involves an amount in excess of $2.5 million, (i) are set forth in writing and
(ii) have been approved by a majority of the members of the Board of Directors
of Holdings having no material personal financial stake in such Affiliate
Transaction and (3) if such Affiliate Transaction involves
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an amount in excess of $10.0 million, have been determined by a nationally
recognized investment banking firm or nationally recognized independent
appraisal firm qualified to perform such task to be fair to Holdings or such
Restricted Subsidiary, as the case may be, from a financial point of view.
(b) The provisions of the foregoing paragraph (a) shall not prohibit (i) any
Permitted Investment or Restricted Payment permitted to be made pursuant to
the covenant described under "--Limitation on Restricted Payments," or any
payment or transaction specifically excepted from the definition of Restricted
Payment, (ii) transactions exclusively between or among Holdings and one or
more Restricted Subsidiaries or exclusively between or among Restricted
Subsidiaries; (iii) customary directors' fees, indemnification and similar
arrangements, employee salaries, bonuses or employment agreements,
compensation or retirement or employee benefit arrangements and incentive
arrangements with any officer, director or employee of Holdings or any
Restricted Subsidiary entered into in the ordinary course of business; (iv)
agreements (and transactions pursuant to agreements), in effect on the Issue
Date, including, without limitation, the Affiliation Agreement, the Network
Sale Agreement and the Stockholders Agreement (but excluding the Sharing
Agreement), as such agreements are in effect on such date or as thereafter
amended in a manner not materially adverse to Holdings in the good faith
judgment of the Board of Directors of Holdings; (v) issuances of Qualified
Stock; or (vi) loans and advances to officers, directors and employees of
Holdings or any Restricted Subsidiary for travel, entertainment, moving and
other relocation expenses, in each case made in the ordinary course of
business and consistent with past business practices in an aggregate principal
amount not to exceed $2 million at any one time outstanding.
(c) The provisions of clauses (2) and (3) of the foregoing paragraph (a)
shall not be applicable to any transaction between Holdings and/or one or more
Restricted Subsidiaries, on the one hand, and one or more Affiliates of
Holdings, on the other hand, for the provision of goods and services in the
ordinary course of business of Holdings and the Restricted Subsidiaries and in
the ordinary course of business of such Affiliate or Affiliates (including any
such transaction pursuant to the Sharing Agreement).
Limitation on the Sale or Issuance of Capital Stock of Restricted
Subsidiaries. Holdings shall not sell or otherwise dispose of any shares of
Capital Stock of a Restricted Subsidiary, and shall not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of
any shares of its Capital Stock except (i) to Holdings or a Wholly Owned
Restricted Subsidiary; (ii) directors' qualifying shares or shares required by
applicable law to be held by a person other than Holdings or a Restricted
Subsidiary; (iii) the sale of all of the Capital Stock of a Restricted
Subsidiary in accordance with "--Limitation on Sales of Assets and Subsidiary
Stock"; (iv) in the case of issuance of Capital Stock by a non-Wholly Owned
Restricted Subsidiary if, after giving effect to such issuance, such
Restricted Subsidiary remains a Restricted Subsidiary; or (v) shares of
Capital Stock in any Restricted Subsidiary the assets of which are limited to
a low-power television station, the station license therefor and assets
directly related thereto.
Limitation on Asset Swaps. Holdings will not, and will not permit any
Restricted Subsidiary to, engage in any Asset Swaps, unless:
(i) at the time of entering into the agreement with respect thereto and
immediately after giving effect to the proposed Asset Swap, no Default
shall have occurred and be continuing;
(ii) the respective fair market values of the Productive Assets (to be
determined in good faith by the Board of Directors and to be evidenced by a
resolution of such Board set forth in an Officer's Certificate delivered to
the Trustee) being purchased and sold by Holdings or any Restricted
Subsidiary are substantially the same at the time of entering into such
agreement; and
(iii) the cash payments, if any, received by Holdings or such Restricted
Subsidiary in connection with such Asset Swap are treated as Net Available
Cash received from an Asset Disposition.
Amendment of Affiliation Agreement. Holdings shall not amend the Affiliation
Agreement except in a manner that the Board of Directors of Holdings
determines in good faith is not materially adverse to Holdings (such
determination of the Board of Directors of Holdings to include the affirmative
vote of at least two members who have been designated as independent directors
pursuant to the Stockholders Agreement).
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Merger and Consolidation. Holdings shall not consolidate with or merge with
or into any other Person, and Holdings shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, sell, convey, transfer or
lease, in one transaction or a series of transactions, all or substantially
all of the assets of Holdings and the Restricted Subsidiaries, taken as a
whole, to any Person, unless: (i) either Holdings shall be the surviving
Person or the resulting, surviving or transferee Person (the "Successor
Company") shall be a Person organized and existing under the laws of the
United States of America, any State thereof or the District of Columbia and
the Successor Company (if not Holdings) shall expressly assume, by an
indenture supplemental thereto, executed and delivered to the Trustee, in form
reasonably satisfactory to the Trustee, all the obligations of Holdings under
the Notes, the Indenture and the Registration Rights Agreement; (ii)
immediately after giving effect to such transaction (and treating any
Indebtedness which becomes an obligation of the Successor Company or any
Subsidiary as a result of such transaction as having been incurred by such
Successor Company or such Subsidiary at the time of such transaction), no
Default shall have occurred and be continuing; (iii) immediately after giving
effect to such transaction, the Successor Company would be able to incur an
additional $1.00 of Indebtedness pursuant to paragraph (a) (x) of the covenant
described under "--Limitation on Incurrence of Additional Indebtedness" (if
Holdings shall not be the Sucessor Company, all references to Holdings or any
Restricted Subsidiary in the definitions used to calculate the Consolidated
Leverage Ratio shall be to the Sucessor Company and its Subsidiaries (other
than any Unrestricted Subsidiary)); and (iv) Holdings shall have delivered to
the Trustee an officer's certificate and an opinion of counsel, each stating
that such consolidation, merger or transfer and such supplemental indenture
(if any) comply with the Indenture.
The Successor Company shall succeed to, and be substituted for, and may
exercise every right and power of, Holdings under the Indenture, but, in the
case of a conveyance, transfer or lease, Holdings shall not be released from
the obligation to pay the principal of and interest on the Notes.
Notwithstanding the foregoing clauses (ii) and (iii), (x) any Restricted
Subsidiary may consolidate or merge with and into or transfer all or part of
its properties and assets to Holdings or another Restricted Subsidiary and (y)
Holdings may consolidate or merge with and into Telemundo.
SEC Reports. Notwithstanding that Holdings may not be or required to remain
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, Holdings shall file with the SEC (unless the SEC will not accept such a
filing, in which case, Holdings shall provide such documents to the Trustee)
and provide within 15 days to the Trustee and make available to the Holders
such annual reports and such information, documents and other reports as are
specified in Sections 13 and 15(d) of the Exchange Act and applicable to a
U.S. corporation subject to such Sections, such information, documents and
other reports to be so filed and provided at the times specified for the
filing of such information, documents and reports under such Sections. In
addition, for so long as any Notes remain outstanding, Holdings shall furnish
to the Holders and to securities analysts and prospective investors, upon
their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act, and, to any beneficial holder of Notes,
if not obtainable from the SEC, information of the type that would be filed
with the SEC pursuant to the foregoing provisions, upon the request of any
such holder.
EVENTS OF DEFAULT
Each of the following constitutes an Event of Default under the Indenture:
(i) a default in the payment of interest on the Notes when due, continued
for 30 days;
(ii) a default in the payment of principal of any Note when due at its
Stated Maturity, upon optional redemption, upon required repurchase, upon
acceleration or otherwise;
(iii) the failure by Holdings to comply with its obligations under (x)
"--Certain Covenants--Merger and Consolidation" or (y) "--Amendment of
Affiliation Agreement" above;
(iv) the failure by Holdings to comply for 30 days after notice with any
of its obligations in the covenants described above under "Change of
Control" (other than a failure to purchase Notes) or under
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"--Certain Covenants--Limitation on Indebtedness," "--Limitation on
Restricted Payments," "--Limitation on Restrictions on Distributions from
Restricted Subsidiaries," "--Limitation on Sales of Assets and Subsidiary
Stock," "--Limitation on Affiliate Transactions," "--Limitation on the Sale
or Issuance of Capital Stock of Restricted Subsidiaries" or "--Limitation
on Asset Swaps";
(v) the failure by Holdings to comply for 60 days after notice with its
other agreements contained in the Indenture;
(vi) Indebtedness of Holdings or any Significant Subsidiary is not paid
within any applicable grace period after final maturity or is accelerated
by the holders thereof because of a default and the total amount of such
Indebtedness unpaid or accelerated exceeds $10.0 million and such non-
payment continues or such acceleration is not rescinded within ten days
after notice thereof (the "cross acceleration provision");
(vii) certain events of bankruptcy, insolvency or reorganization of
Holdings or any Significant Subsidiary (the "bankruptcy provisions");
(viii) any judgment or decree (not covered by insurance or an indemnity
by a person other than Holdings or a Restricted Subsidiary, which
indemnitor is solvent) for the payment of money in excess of $10.0 million
is entered against Holdings or any Significant Subsidiary, remains
outstanding for a period of 60 days following such judgment and is not
discharged, bonded, waived or stayed within 30 days after notice (the
"judgment default provision");
(ix) the Umbrella Affiliation Agreement shall cease to be in full force
and effect; or
(x) any one or more Station Affiliation Agreements shall cease to be in
full force and effect and such cessation shall be materially adverse to
Holdings; provided, however, that no such cessation shall be deemed
materially adverse to Holdings if the Board of Directors of Holdings shall
have determined in good faith that such cessation is not materially adverse
to Holdings (such determination of the Board of Directors of Holdings to
include the affirmative vote of at least two members who have been
designated as independent directors pursuant to the Stockholders
Agreement).
If an Event of Default (other than the bankruptcy provisions relating to
Holdings) occurs and is continuing, the Trustee or the Holders of at least 25%
in principal amount at maturity of the outstanding Notes may declare the
Accreted Value of and accrued but unpaid interest on all the Notes to be due
and payable. Upon such a declaration, such Accreted Value and interest shall
be due and payable immediately. If an Event of Default relating to the
bankruptcy provisions relating to Holdings occurs and is continuing, the
Accreted Value of and interest on all the Notes will ipso facto become and be
immediately due and payable without any declaration or other act on the part
of the Trustee or any Holders. Under certain circumstances, the Holders of a
majority in principal amount of the outstanding Notes may rescind any such
acceleration with respect to the Notes and its consequences.
In the event of a declaration of acceleration because an Event of Default
set forth in clause (vi) has occurred and is continuing, such declaration of
acceleration shall be automatically rescinded and annulled if (A) either (x)
the holders of the Indebtedness which is the subject of such Event of Default
have waived such failure to pay at final maturity or have rescinded the
acceleration in respect of such Indebtedness within 60 days of such maturity
or declaration of acceleration, as the case may be, and no other Event of
Default has occurred during such 60-day period that has not been cured or
waived, or (y) such Indebtedness shall have been discharged or the maturity
thereof shall have been extended such that it is not then due and payable, or
the underlying default has been cured (and any acceleration based thereon of
such other Indebtedness has been rescinded), within 60 days of such maturity
or declaration of acceleration, as the case may be, and (B) no judgment or
decree for the payment of the money due on the Notes has been obtained by the
Trustee as provided in the Indenture.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee
will be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders unless such
Holders have offered to the Trustee
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reasonable indemnity or security against any loss, liability or expense.
Except to enforce the right to receive payment of principal, premium (if any)
or interest when due, no Holder of a Note may pursue any remedy with respect
to the Indenture or the Notes unless (i) such Holder has previously given the
Trustee notice that an Event of Default is continuing, (ii) Holders of at
least 25% in principal amount at maturity of the outstanding Notes have
requested the Trustee to pursue the remedy, (iii) such Holders have offered
the Trustee reasonable security or indemnity against any loss, liability or
expense, (iv) the Trustee has not complied with such request within 60 days
after the receipt thereof and the offer of security or indemnity and (v) the
Holders of a majority in principal amount at maturity of the outstanding Notes
have not given the Trustee a direction inconsistent with such request within
such 60-day period. Subject to certain restrictions, the Holders of a majority
in principal amount at maturity of the outstanding Notes are given the right
to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or of exercising any trust or power conferred
on the Trustee. The Trustee, however, may refuse to follow any direction that
conflicts with law or the Indenture or that the Trustee determines is unduly
prejudicial to the rights of any other Holder or that would involve the
Trustee in personal liability.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each Holder notice of the
Default within 90 days after it occurs. Except in the case of a Default in the
payment of principal of or interest on any Note, the Trustee may withhold
notice if and so long as the board of directors, the executive committee or a
committee of its trust officers determines that withholding notice is not
opposed to the interest of the Holders. In addition, Holdings is required to
deliver to the Trustee, within 120 days after the end of each fiscal year, a
certificate indicating whether the signers thereof know of any Default that
occurred during the previous year. Holdings also is required to deliver to the
Trustee, within 30 days after the occurrence thereof, written notice of any
event which would constitute certain Defaults, their status and what action
Holdings is taking or proposes to take in respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the consent
of the Holders of a majority in principal amount at maturity of the Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange for the Notes) and any past default or compliance with any provisions
may also be waived with the consent of the Holders of a majority in principal
amount at maturity of the Notes then outstanding.
The provisions under the Indenture relating to Holdings' obligation to make
an offer to repurchase the Notes as a result of a Change of Control may be
waived or modified with the written consent of the Holders of a majority in
principal amount of the Notes then outstanding.
Without the consent of each Holder of an outstanding Note affected thereby,
no amendment may (i) reduce the amount of Notes whose Holders must consent to
an amendment, (ii) reduce the rate of or extend the time for payment of
interest on any Note, (iii) reduce the principal or Accreted Value of or
change the Stated Maturity of any Note, (iv) reduce the premium payable upon
the redemption of any Note or change the time at which any Note may be
redeemed as described under "--Optional Redemption" above, (v) make any Note
payable in money other than that stated in the Notes, (vi) impair the right of
any Holder to receive payment of principal of and interest on such Holder's
Notes on or after the due dates therefor or to institute suit for the
enforcement of any payment on or with respect to such Holder's Notes, (vii)
make any change in the amendment provisions which require each Holder's
consent or in the waiver provisions or (viii) subordinate the Notes in right
of payment to any other Indebtedness.
Without the consent of any Holder, Holdings and the Trustee may amend the
Indenture to cure any ambiguity, omission, defect or inconsistency, to provide
for the assumption by a successor corporation of the obligations of Holdings
under the Indenture, to provide for uncertificated Notes in addition to or in
place of certificated Notes (provided that the uncertificated Notes are issued
in registered form for purposes of Section 163(f) of the Code, or in a manner
such that the uncertificated Notes are described in Section 163(f)(2)(B) of
the
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Code), to add Guarantees with respect to the Notes, to secure the Notes, to
add to the covenants of Holdings for the benefit of the Holders or to
surrender any right or power conferred upon Holdings, to make any change that
does not adversely affect the rights of any Holder or to comply with any
requirement of the SEC in connection with the qualification of the Indenture
under the Trust Indenture Act.
The consent of the Holders is not necessary under the Indenture to approve
the particular form of any proposed amendment. It is sufficient if such
consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, Holdings is
required to mail to Holders a notice briefly describing such amendment.
However, the failure to give such notice to all Holders, or any defect
therein, will not impair or affect the validity of the amendment.
TRANSFER
The New Notes were, and the Old Notes will be, issued in registered form and
will be transferable only upon the surrender of the Notes being transferred
for registration of transfer. Holdings may require payment of a sum sufficient
to cover any tax, assessment or other governmental charge payable in
connection with certain transfers and exchanges. Holdings is not required to
transfer or exchange any Note selected for redemption or repurchase or to
transfer or exchange any Note for a period of 15 days prior to selection of
Notes to be redeemed or repurchased.
DEFEASANCE
Holdings at its option at any time may terminate all of its obligations
under the Notes and the Indenture ("legal defeasance"), except for certain
obligations, including those respecting the defeasance trust and obligations
to register the transfer or exchange of the Notes, to replace mutilated,
destroyed, lost or stolen Notes and to maintain a registrar and paying agent
in respect of the Notes. In addition, Holdings at its option at any time may
terminate its obligations under "Change of Control" and substantially all of
its covenants in the Indenture, including the covenants described under "--
Certain Covenants" (other than the covenant described under "--Merger and
Consolidation") (and any omission to comply with such obligations shall not
constitute a Default or an Event of Default with respect to the Notes), the
operation of the cross acceleration provision, the bankruptcy provisions with
respect to Significant Subsidiaries, the judgment default provision described
under "--Events of Default" above and the limitations contained in clauses
(iii) and (iv) under "--Certain Covenants--Merger and Consolidation" above
("covenant defeasance").
Holdings may exercise its legal defeasance option notwithstanding its prior
exercise of its covenant defeasance option. If Holdings exercises its legal
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default with respect thereto. If Holdings exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iii)(y), (iv), (v), (vi), (vii) (with
respect only to Significant Subsidiaries), (viii), (ix) or (x) under "--Events
of Default" above or because of the failure of Holdings to comply with clause
(iii) under "--Certain Covenants--Merger and Consolidation" above.
In order to exercise either defeasance option, Holdings must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations or a combination thereof for the payment of principal,
premium, if any, and interest on the Notes to maturity or any redemption date
specified by Holdings, as the case may be, and must comply with certain other
conditions, including delivery to the Trustee of an opinion of counsel to the
effect that Holders will not recognize income, gain or loss for federal income
tax purposes as a result of such deposit and defeasance and will be subject to
federal income tax on the same amount and in the same manner and at the same
times as would have been the case if such deposit and defeasance had not
occurred (and, in the case of legal defeasance only, such opinion of counsel
must be based on a ruling of the Internal Revenue Service or other change in
applicable federal income tax law).
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SATISFACTION AND DISCHARGE
The Indenture will cease to be of further effect (except as to surviving
rights of registration of transfer or exchange of the Notes, as expressly
provided for in the Indenture) as to all outstanding Notes when: (i) either
(a) all the Notes theretofore authenticated and delivered (except lost, stolen
or destroyed Notes which have been replaced or paid) have been delivered to
the Trustee for cancellation or (b) all Notes not theretofore delivered to the
Trustee for cancellation have become due and payable, will become due and
payable within one year or are to be called for redemption within one year
under irrevocable arrangements reasonably satisfactory to the Trustee for the
giving of notice of redemption by the Trustee and Holdings has irrevocably
deposited or caused to be deposited with the Trustee an amount in United
States dollars sufficient to pay and discharge the entire indebtedness on the
Notes not theretofore delivered to the Trustee for cancellation, for the
principal of, premium, if any, and interest to the date of deposit or maturity
or redemption date; (ii) Holdings has paid or caused to be paid all other sums
then due and payable under the Indenture by Holdings; and (iii) Holdings has
delivered to the Trustee an officers' certificate and an opinion of counsel
each stating that all conditions precedent under the Indenture relating to the
satisfaction and discharge of the Indenture have been complied with.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
The Indenture provides that no recourse for the payment of the principal of,
premium, if any, or interest on any of the Notes or for any claim based
thereon or otherwise in respect thereof, and no recourse under or upon any
obligation, covenant or agreement of Holdings in the Indenture, or in any of
the Notes or because of the creation of any Indebtedness represented thereby,
shall be had against any incorporator, stockholder, officer, director,
employee, affiliate or controlling person of Holdings or any successor Person
or affiliate thereof. Each Holder, by accepting the Notes, waives and releases
all such liability. The waiver and release are part of the consideration for
the issuance of the Notes. Such waiver may not be effective to waive
liabilities under the federal securities laws and it is the view of the SEC
that such waiver is against public policy.
CONCERNING THE TRUSTEE
Bank of Montreal Trust Company is the Trustee under the Indenture and has
been appointed by Holdings as Registrar and Paying Agent with regard to the
Notes. Such bank may also act as a depository of funds for, or make loans to
and perform other services for, Holdings or its Affiliates in the ordinary
course of business in the future.
The Holders of a majority in principal amount at maturity of outstanding
Notes will have the right to direct the time, method and place of conducting
any proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that if an Event of Default occurs
(and is not cured), the Trustee will be required, in the exercise of its
power, to use the degree of care of a prudent person in the conduct of its own
affairs. Subject to such provisions, the Trustee will be under no obligation
to exercise any of its rights or powers under the Indenture at the request of
any Holder of Notes, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense and then only to the extent required by the terms of the Indenture.
The Trustee may resign at any time or may be removed by Holdings. If the
Trustee resigns, is removed or becomes incapable of acting as Trustee or if a
vacancy occurs in the office of the Trustee for any cause, a successor Trustee
shall be appointed in accordance with the provisions of the Indenture.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject
to the provisions of, the Trust Indenture Act and the Indenture. The Indenture
also contains certain limitations on the right of the Trustee, as a creditor
of Holdings, to obtain payment of claims in certain cases, or to realize on
certain property received by it in respect of any such claims, as security or
otherwise.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
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CERTAIN DEFINITIONS
"Accreted Value" means, as of any date (the "Specified Date"), the amount
provided below for each $1,000 principal amount at maturity of Notes:
(i) if the Specified Date occurs on one of the following dates (each, a
"Semi-Annual Accrual Date"), the Accreted Value will equal the amount set
forth below for such Semi-Annual Accrual Date:
<TABLE>
<CAPTION>
SEMI-ANNUAL ACCRETED
ACCRUAL DATE VALUE
------------ ---------
<S> <C>
February 15, 1999............................................... $ 604.61
August 15, 1999................................................. $ 639.38
February 15, 2000............................................... $ 676.14
August 15, 2000................................................. $ 715.02
February 15, 2001............................................... $ 756.13
August 15, 2001................................................. $ 799.61
February 15, 2002............................................... $ 845.59
August 15, 2002................................................. $ 894.21
February 15, 2003............................................... $ 945.63
August 15, 2003................................................. $1,000.00
</TABLE>
(ii) if the Specified Date occurs before the first Semi-Annual Accrual
Date, the Accreted Value will equal the sum of (a) the original issue price
of a Note and (b) an amount equal to the product of (1) the Accreted Value
for the first Semi-Annual Accrual Date less such original issue price
multiplied by (2) a fraction, the numerator of which is the number of days
from the Issue Date to the Specified Date, using a 360-day year of twelve
30-day months, and the denominator of which is the number of days elapsed
from the Issue Date to the first Semi-Annual Accrual Date, using a 360-day
year of twelve 30-day months;
(iii) if the Specified Date occurs between two Semi-Annual Accrual Dates,
the Accreted Value will equal the sum of (a) the Accreted Value for the
Semi-Annual Accrual Date immediately preceding such Specified Date and (b)
an amount equal to the product of (1) the Accreted Value for the
immediately following Semi-Annual Accrual Date less the Accreted Value for
the immediately preceding Semi-Annual Accrual Date multiplied by (2) a
fraction, the numerator of which is the number of days from the immediately
preceding Semi-Annual Accrual Date to the Specified Date, using a 360-day
year of twelve 30-day months, and the denominator of which is 180; or
(iv) if the Specified Date occurs after the last Semi-Annual Accrual
Date, the Accreted Value will equal $1,000.
"Acquired Indebtedness" means Indebtedness of any Person existing at the
time such Person becomes a Restricted Subsidiary or at the time it merges or
consolidates with Holdings or any Restricted Subsidiary or assumed in
connection with the acquisition of assets from such Person and not Incurred by
such Person in connection with, or in anticipation or contemplation of, such
Person becoming a Restricted Subsidiary or such merger, consolidation or
acquisition.
"Acquired Person" means, with respect to any specified Person, any other
Person which merges with or into or becomes a Subsidiary of such specified
Person.
"Acquisition" means (i) any capital contribution (by means of transfers of
cash or other property to others or payments for property or services for the
account or use of others, or otherwise) by Holdings or any Restricted
Subsidiary to any other Person, or any acquisition or purchase of Capital
Stock of any other Person by Holdings or any Restricted Subsidiary, in either
case, pursuant to which such Person shall become a Restricted Subsidiary or
shall be consolidated, merged with or into Holdings or any Restricted
Subsidiary or (ii) any acquisition by Holdings or any Restricted Subsidiary of
the assets of any Person which constitute substantially all of an
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operating unit or division or a line of business of such Person or which is
otherwise outside of the ordinary course of business.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business, (ii) the Capital Stock
of a Person that becomes a Restricted Subsidiary as a result of the
acquisition of such Capital Stock by Holdings or another Restricted Subsidiary
or (iii) Capital Stock constituting a minority interest in any Person that at
such time is a Restricted Subsidiary; provided, however, that any such
Restricted Subsidiary described in clause (ii) or (iii) above is primarily
engaged in a Related Business.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, Controlling or Controlled by or under direct or indirect common
Control with such specified Person.
"Affiliation Agreement" means the Umbrella Affiliation Agreement, the Cable
Payments Agreement and the Station Affiliation Agreements, each as amended
from time to time in accordance with the covenant under "--Certain Covenants--
Amendment of Affiliation Agreement."
"amend" means amend, supplement, modify, restate, amend and restate, renew
or extend, including successively; and "amended," "amending" and "amendment"
have meanings correlative thereto.
"Apollo" means Apollo Investment Fund III, L.P., Apollo Advisors II, L.P.
and Apollo Management, L.P. (the "Original Apollo Entities") and any Person
with respect to which the investment decisions, decisions as to the exercise
of voting or consensual rights and other material decisions are ultimately
controlled by substantially the same individual or individuals at the time
controlling such decisions as to any of the Original Apollo Entities and
without limitation such individual or individuals themselves.
"Asset Disposition" means any sale, lease, transfer or other disposition (or
series of related sales, leases, transfers or dispositions) by Holdings or any
Restricted Subsidiary, including any disposition by means of a merger or
consolidation (each referred to for the purposes of this definition as a
"disposition"), of (i) any shares of Capital Stock of a Restricted Subsidiary
(other than directors' qualifying shares or shares required by applicable law
to be held by a Person other than Holdings or a Restricted Subsidiary), (ii)
all or substantially all the assets (other than Capital Stock of an
Unrestricted Subsidiary) of any division or line of business of Holdings or
any Restricted Subsidiary, or (iii) any other assets (other than Capital Stock
of an Unrestricted Subsidiary) of Holdings or any Restricted Subsidiary
outside of the ordinary course of business of Holdings or such Restricted
Subsidiary (other than, in the case of (i), (ii) and (iii) above, (x) a
disposition by a Restricted Subsidiary to Holdings or by Holdings or a
Restricted Subsidiary to a Restricted Subsidiary and (y) for purposes of the
covenant described under "--Certain Covenants--Limitation on Sales of Assets
and Subsidiary Stock" only, a disposition that constitutes a Restricted
Payment permitted by the covenant described under "--Certain Covenants--
Limitation on Restricted Payments" or a disposition specifically excepted from
the definition of Restricted Payments); provided, however, that Asset
Disposition shall not include (a) a transaction or series of related
transactions for which Holdings or its Restricted Subsidiaries receive
aggregate consideration less than or equal to $1.0 million, (b) the sale,
lease, conveyance, disposition or other transfer of all or substantially all
of the assets of Holdings as permitted under "--Certain Covenants--Merger and
Consolidation"; (c) Asset Swaps permitted under "--Certain Covenants--
Limitation on Asset Swaps"; (d) a disposition of Temporary Cash Investments;
(e) the Network Sale; and (f) any transaction constituting a Change of
Control.
"Asset Swap" means the execution of a definitive agreement, subject only to
governmental approval and other customary closing conditions, that Holdings in
good faith believes will be satisfied, for a substantially concurrent purchase
and sale, or exchange, of Productive Assets between Holdings or any Restricted
Subsidiary and another Person or group of Persons; provided that any amendment
to or waiver of any closing condition which individually or in the aggregate
is material to the Asset Swap will be deemed to be a new Asset Swap; provided,
however, that the cash and other assets to be received by Holdings or such
Restricted Subsidiary which do not constitute Productive Assets do not
constitute more than 25% of the total consideration to be received by Holdings
or such Restricted Subsidiary in such Asset Swap.
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"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at
the time of determination, the present value (discounted at the interest rate
borne by the Notes, compounded annually) of the total obligations of the
lessee for rental payments during the remaining term of the lease included in
such Sale/Leaseback Transaction (including any period for which such lease has
been extended) or until the earliest date on which the lessee may terminate
such lease without penalty.
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied
by the amount of such payment by (ii) the sum of all such payments.
"Bank Credit Agreement" means the Credit Agreement, dated as of August 4,
1998 among Holdings, TLMD Acquisition, as borrower, Credit Suisse First
Boston, as administrative agent, collateral agent and issuing bank, Canadian
Imperial Bank of Commerce, as documentation agent, and the lenders party
thereto, together with the related documents thereto (including, without
limitation, any guarantees, agreements and security documents), in each case,
as such agreements, in whole or in part, may be amended, increased (but only
so long as such increase is permitted under the terms of the Indenture) or
Refinanced in whole or in part by one or more separate agreements.
"Bastion" means Bastion Capital Fund, L.P., Bastion Partners L.P., and
Bastion Management Corp. (the "Original Bastion Entities") and/or any other
Person with respect to which the investment decisions as to the exercise of
voting or consensual rights and other material decisions are ultimately
controlled by substantially the same individual or individuals at the time
controlling such decisions as to any of the Original Bastion Entities
(including, without limitation, such individual or individuals themselves.)
"Board of Directors" means the Board of Directors of Holdings or any
committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Cable Payments Agreement" means the Memorandum of Agreement dated the Issue
Date between Telemundo Network Group LLC and Telemundo regarding certain cable
payments.
"Capital Lease Obligations" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented
by such obligation shall be the capitalized amount of such obligation
determined in accordance with GAAP; and the Stated Maturity thereof shall be
the date of the last payment of rent or any other amount due under such lease
prior to the first date upon which such lease may be terminated by the lessee
without payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any
Preferred Stock, but excluding any debt securities convertible into such
equity and, excluding any Network Rights (as defined in the Stockholders
Agreement).
"Chicago Joint Venture Agreement" means the Amended and Restated Partnership
Agreement of Video 44, dated as of February 26, 1996 by and among Essaness
Theatres Corporation, Telemundo of Chicago, Inc. and Video 44 Acquisition
Corp., Inc., as in effect on the date of the Indenture.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated EBITDA" for any period means the sum of Consolidated Net
Income plus the following to the extent deducted in calculating such
Consolidated Net Income: (a) Consolidated Interest Expense, (b) all income tax
expense of Holdings and the Restricted Subsidiaries, (c) depreciation expense,
(d) amortization expense, (e) Merger related expenses and (f) all other non-
cash items reducing such Consolidated Net Income (excluding any non-cash item
to the extent it represents an accrual of, or reserve for, cash disbursement
for any
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subsequent period) less all non-cash items increasing such Consolidated Net
Income (such amount calculated pursuant to this clause (f) not to be less than
zero), in each case for such period. Notwithstanding the foregoing, the
provision for taxes based on the income or profits of, and the depreciation
and amortization of, a Subsidiary of Holdings shall be added to Consolidated
Net Income to compute EBITDA only to the extent (and in the same proportion)
that the net income of such Subsidiary was included in calculating
Consolidated Net Income and only if a corresponding amount would be permitted
at the date of determination to be paid as a dividend to Holdings by such
Subsidiary without prior approval (that has not been obtained), pursuant to
the terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to such
Subsidiary or its stockholders.
"Consolidated Interest Expense" means, for any period, the total interest
expense, net of interest income, of Holdings and its consolidated Restricted
Subsidiaries for such period determined on a consolidated basis in accordance
with GAAP, plus, to the extent not included in such total interest expense,
and to the extent Incurred by Holdings or any Restricted Subsidiary, (i)
interest expense attributable to Capital Lease Obligations, (ii) amortization
of debt discount, (iii) capitalized interest, (iv) non-cash interest expense,
(v) commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing, (vi) net costs associated
with Hedging Obligations (including amortization of fees), (vii) Preferred
Stock dividends in respect of all Preferred Stock held by Persons other than
Holdings or a Restricted Subsidiary and (viii) interest accruing on any
Indebtedness of any other Person to the extent such Indebtedness is guaranteed
by Holdings or any Restricted Subsidiary minus, to the extent included, (x)
any amortization or write-off or deferred financing costs of Holdings and the
Restricted Subsidiaries during such period and (y) any charge related to any
penalty or premium paid in connection with Refinancing any Indebtedness of
Holdings or any Restricted Subsidiary prior to its Stated Maturity.
"Consolidated Leverage Ratio" means the ratio of (a) the Total Consolidated
Indebtedness as of the date of calculation (the "Determination Date") to (b)
the Consolidated EBITDA for the most recent four consecutive fiscal quarters
for which financial information is available immediately preceding such
Determination Date (the "Measurement Period"). For purposes of calculating
Consolidated EBITDA for the Measurement Period immediately prior to the
relevant Determination Date, (I) any Person that is a Restricted Subsidiary on
the Determination Date (or would become a Restricted Subsidiary on such
Determination Date in connection with the transaction that requires the
determination of such Consolidated EBITDA) will be deemed to have been a
Restricted Subsidiary at all times during such Measurement Period, (II) any
Person that is not a Restricted Subsidiary on such Determination Date (or
would cease to be a Restricted Subsidiary on such Determination Date in
connection with the transaction that requires the determination of such
Consolidated EBITDA) will be deemed not to have been a Restricted Subsidiary
at any time during such Measurement Period or after the end of such period and
on or prior to such Determination Date, and (III) if Holdings or any
Restricted Subsidiary shall have in any manner (x) acquired (through an
Acquisition or the commencement of activities constituting an operating
business or asset) or (y) disposed of (by way of an Asset Disposition or the
Network Sale or the termination or discontinuance of activities constituting
such operating business or asset) any operating business or asset during such
Measurement Period or after the end of such period and on or prior to such
Determination Date, such calculation will be made on a pro forma basis as if,
in the case of an Acquisition or the commencement of activities constituting
such operating business or asset, all such transactions had been consummated
on the first day of such Measurement Period and, in the case of an Asset
Disposition or the Network Sale or termination or discontinuance of activities
constituting such operating business or asset, all such transactions had been
consummated prior to the first day of such Measurement Period (it being
understood that in calculating Consolidated EBITDA the exclusions set forth in
clauses (i) through (vi) of the definition of Consolidated Net Income shall
apply to an Acquired Person as if it were a Restricted Subsidiary).
"Consolidated Net Income" means, for any period, the net income of Holdings
and its consolidated Subsidiaries for such period determined on a consolidated
basis in accordance with GAAP; provided, however, that there shall not be
included in such Consolidated Net Income: (i) any net income of any Person if
such Person is not a Restricted Subsidiary, except that (A) subject to the
exclusion contained in clause (iv) below, Holdings'
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equity in the net income of any such Person for such period shall be included
in such Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Person during such period (or, in the case of Video 44, in
respect of such period pursuant to the Chicago Joint Venture Agreement) to
Holdings or a Restricted Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution paid to a Restricted
Subsidiary, to the limitations contained in clause (iii) below) and (B)
Holdings' equity in a net loss of any such Person for such period shall be
included in determining such Consolidated Net Income up to the aggregate
amount invested by Holdings or any Restricted Subsidiary in such Person; (ii)
any net income (or loss) of any Person acquired by Holdings or a Subsidiary of
Holdings in a pooling of interests transaction for any period prior to the
date of such acquisition; (iii) any net income of any Restricted Subsidiary to
the extent that such Restricted Subsidiary is subject to restrictions (other
than the Permitted Restrictions), directly or indirectly, on the payment of
dividends or the making of distributions by such Restricted Subsidiary,
directly or indirectly, to Holdings, except that (A) subject to the exclusion
contained in clause (iv) below, Holdings' equity in the net income of any such
Restricted Subsidiary for such period shall be included in such Consolidated
Net Income up to the aggregate amount of cash actually distributed by such
Restricted Subsidiary during such period to Holdings or another Restricted
Subsidiary as a dividend or other distribution (subject, in the case of a
dividend or other distribution paid to another Restricted Subsidiary, to the
limitation contained in this clause) and (B) Holdings' equity in a net loss of
any such Restricted Subsidiary for such period shall be included in
determining such Consolidated Net Income; (iv) any gain or loss realized upon
the sale or other disposition of any assets of Holdings or its consolidated
Subsidiaries (including pursuant to any sale-and-leaseback arrangement) which
is not sold or otherwise disposed of in the ordinary course of business and
any gain or loss realized upon the sale or other disposition of any Capital
Stock of any Person; (v) extraordinary gains or losses; and (vi) the
cumulative effect of a change in accounting principles.
"Control" shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "Controlling" and "Controlled" shall have meanings correlative
thereto.
"Cumulative Consolidated Interest Expense" means, as at any date of
determination, Consolidated Interest Expense during the period (taken as a
single accounting period) commencing on the Issue Date and ending on the last
day of the most recent fiscal quarter immediately preceding the date of
determination for which consolidated financial information of Holdings is
available.
"Cumulative EBITDA" means, as at any date of determination, the positive
cumulative Consolidated EBITDA realized during the period (taken as a single
accounting period) commencing on the Issue Date and ending on the last day of
the most recent fiscal quarter immediately preceding the date of determination
for which
consolidated financial information of Holdings is available or, if such
cumulative Consolidated EBITDA for such period is negative, the negative
amount by which cumulative Consolidated EBITDA is less than zero.
"Currency Agreement" means with respect to any Person any foreign exchange
contract, currency swap agreement or other similar agreement to which such
Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Depositary" means The Depository Trust Company, its nominees and their
respective successors.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or upon the happening of any
event (i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness
or Disqualified Stock, or (iii) is redeemable at the option of the holder
thereof, in whole or in part, in each case on or prior to the 91st day
following the Stated Maturity of the Notes; provided, however, that any
Capital Stock that would not constitute Disqualified Stock but for provisions
thereof giving holders thereof the right to require such Person to redeem such
Capital Stock upon the occurrence
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of an "asset sale" or "change of control" occurring prior to the Stated
Maturity of the Notes shall not constitute Disqualified Stock if the "asset
sale" or "change of control" provisions applicable to such Capital Stock are
not more favorable to the holders of such Capital Stock than the provisions
described under "--Certain Covenants--Limitation on Sales of Assets and
Subsidiary Stock" and "--Certain Covenants--Change of Control."
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect from time to time applied on a consistent basis for
all applicable periods, including those set forth (i) in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants, (ii) in statements and pronouncements of the
Financial Accounting Standards Board, (iii) in such other statements by such
other entity as approved by a significant segment of the accounting
profession, and (iv) in the rules and regulations of the SEC governing the
inclusion of financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to Section 13 of the
Exchange Act, including opinions and pronouncements in staff accounting
bulletins and similar written statements from the accounting staff of the SEC.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness of such Person (whether arising by virtue of agreements to
keep-well, to purchase assets, goods, securities or services, to take-or-pay
or to maintain financial statement conditions or otherwise) or (ii) entered
into for the purpose of assuring in any other manner the obligee of such
Indebtedness of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided, however, that the term
"guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "guarantee" used as a verb (and the
participle formed therefrom) shall have a correlative meaning. The term
"guarantor" shall mean any Person Guaranteeing any obligation.
"Hedging Obligations" of any Person means the obligations of such Person
determined in accordance with GAAP pursuant to any Interest Rate Agreement or
Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is registered
on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable for
Indebtedness; provided, however, that any Indebtedness of a Person existing at
the time such Person becomes a Subsidiary (whether by merger, consolidation,
acquisition or otherwise) shall be deemed to be Incurred by such Subsidiary at
the time it becomes a Subsidiary. The term "Incurrence" shall have a
correlative meaning. Neither the accrual of interest nor the accretion of
principal of a non-interest bearing or other discount security shall be deemed
the Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of (A) indebtedness of such Person for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other similar
instruments for the payment of which such Person is responsible or liable;
(ii) all Capital Lease Obligations of such Person and all Attributable Debt in
respect of Sale/Leaseback Transactions entered into by such Person; (iii) all
obligations of such Person issued or assumed as the deferred purchase price of
property, all conditional sale obligations of such Person and all obligations
of such Person under any title retention agreement (but excluding trade
accounts payable or accrued liabilities arising in the ordinary course of
business); (iv) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit securing
obligations (other than obligations described in clauses (i) through (iii)
above) entered into in the ordinary course of business of such Person to the
extent such letters of credit are not drawn upon, or, if and to the extent
drawn upon, such drawing is reimbursed no later than the tenth Business Day
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following receipt by such Person of a demand for reimbursement following
payment on the letter of credit); (v) the amount of all obligations of such
Person with respect to the redemption, repayment or other repurchase of any
Disqualified Stock or, with respect to any Subsidiary of such Person, any
Preferred Stock (but excluding, in each case, any accrued dividends); (vi) all
obligations of the type referred to in clauses (i) through (v) of other
Persons and all dividends of other Persons for the payment of which, in either
case, such Person is responsible or liable, directly or indirectly, as
obligor, guarantor or otherwise, including by means of any guarantee
(exclusive of endorsements of negotiable instruments in the ordinary course of
business) but only to the extent of the lesser of the amount of such
obligations and the maximum liability of such Person for the payment of such
obligations; (vii) all obligations of the type referred to in clauses (i)
through (vi) of other Persons secured by any Lien on any property or asset of
such Person (whether or not such obligation is assumed by such Person), the
amount of such obligation being deemed to be the lesser of the value of such
property or assets or the amount of the obligation so secured; and (viii) to
the extent not otherwise included in this definition, Hedging Obligations of
such Person (it being understood that Indebtedness shall not include ordinary
course payment obligations (not described in the foregoing clauses (i) through
(viii)) pursuant to a Local Marketing Agreement). For purposes of the
preceding sentence, the maximum fixed repurchase price of any Disqualified
Stock that does not have a fixed repurchase price shall be calculated in
accordance with the terms of such Disqualified Stock as if such Disqualified
Stock were repurchased on any date on which Indebtedness shall be required to
be determined pursuant to the Indenture; provided, however, that if such
Disqualified Stock is not then permitted to be repurchased, the repurchase
price shall be the book value of such Disqualified Stock. The amount of
Indebtedness of any Person at any date shall be the outstanding balance at
such date of all unconditional obligations as described above and the maximum
liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date; provided, however,
that for purposes of calculating the amount of any non-interest bearing or
other discount security, such indebtedness shall be deemed to be the principal
amount thereof that would be shown on the balance sheet of the issuer dated
such date prepared in accordance with GAAP.
"interest" means, with respect to the Notes, the sum of any interest and any
Additional Interest on the Notes.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement or other financial agreement or arrangement designed solely
to protect Holdings or any Restricted Subsidiary against fluctuations in
interest rates.
"Investment" in any Person means any direct or indirect advance, loan (other
than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of the Person making the
advance or loan) or other extensions of credit (including by way of guarantee
or similar arrangement or negotiable instruments held for collection) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or
other similar instruments issued by such Person.
"Issue Date" means the date of original issuance of the Old Notes.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the State of New York are authorized or required by law to
close. If a payment date is a Legal Holiday, payment shall be made on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for
the intervening period. If a regular record date is a Legal Holiday, the
record shall not be affected.
"Liberty" means Liberty Media Corporation and its successors, Tele-
Communications Inc. and its successors, and their respective Affiliates.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
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"Local Marketing Agreement" means a local marketing arrangement, sale
agreement, time brokerage agreement, management agreement or similar
arrangement pursuant to which a Person: (a) obtains the right to sell at least
a majority of the advertising inventory of a television station on behalf of a
third party, (b) purchases at least a majority of the air time of a television
station to exhibit programming and sell advertising time, (c) manages the
selling operations of a television station with respect to at least a majority
of the advertising inventory of such station, (d) manages the acquisition of
programming for a television station, (e) acts as a program consultant for a
television station or (f) manages the operation of a television station
generally.
"Moody's" means Moody's Investors Service, Inc.
"Net Available Cash" from an Asset Disposition means cash payments received
therefrom (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only
as and when received, but excluding any other consideration received in the
form of assumption by the acquiring Person of Indebtedness or other
obligations relating to such properties or assets or received in any other
noncash form) in each case net of (i) all legal, title and recording tax
expenses, brokerage commissions, underwriting discounts or commissions or
sales commissions and other reasonable fees and expenses (including, without
limitation, fees and expenses of counsel, accountants and investment bankers)
related to such Asset Disposition or converting to cash any other proceeds
received, and any relocation and severance expenses as a result thereof, and
all federal, state, provincial, foreign and local taxes attributable to such
Asset Disposition, (ii) all payments made on any Indebtedness which is secured
by any assets subject to such Asset Disposition or made in order to obtain a
necessary consent to such Asset Disposition or to comply with applicable law,
(iii) all distributions and other payments required to be made to minority
interest holders in Subsidiaries or joint ventures as a result of such Asset
Disposition and (iv) appropriate amounts provided by the seller as a reserve,
in accordance with GAAP, against any liabilities associated with the property
or other assets disposed of in such Asset Disposition and retained by Holdings
or any Restricted Subsidiary after such Asset Disposition, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Disposition. Further, with respect to
an Asset Disposition by a Subsidiary which is not a Wholly Owned Restricted
Subsidiary, Net Available Cash shall be reduced pro rata for the portion of
the equity of such Subsidiary which is not owned by Holdings.
"Net Cash Proceeds," with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees and expenses actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result thereof.
"Network Sale Agreement" means the Purchase Agreement dated as of the Issue
Date among Telemundo, Telemundo Network, Inc. and Telemundo Network Group LLC.
"Permitted Holders" means (i) Apollo, (ii) Bastion, (iii) Liberty, (iv) Sony
Pictures, and (v) any transferee of the shares of Capital Stock of Holdings
(or any rights to purchase any such Capital Stock) owned by Station Partners
on the date of the Indenture in accordance with the express provisions of the
Stockholders' Agreement.
"Permitted Investment" means (i) any Investment in Holdings or any
Restricted Subsidiary or a Person that will, upon the making of such
Investment, become a Restricted Subsidiary; provided, however, that the
primary business of such Person is a Related Business; (ii) an Investment in
any Person, if as a result of such Investment such other Person is merged or
consolidated with or into, or transfers or conveys all or substantially all
its assets to, Holdings or any Restricted Subsidiary; provided, however, that
such Person's primary business is a Related Business; (iii) Temporary Cash
Investments; (iv) receivables owing to Holdings or any Restricted Subsidiary,
if created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; provided, however,
that such trade terms may include such concessionary trade terms as Holdings
or any such Restricted Subsidiary deems reasonable under the circumstances;
(v) payroll, travel and similar advances to cover matters that are expected at
the time of such advances ultimately to be treated as
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expenses for accounting purposes and that are made in the ordinary course of
business; (vi) loans or advances to officers and employees made in the
ordinary course of business consistent with past practices of Holdings or such
Restricted Subsidiary; (vii) stock, obligations or securities received in
settlement of debts created in the ordinary course of business and owing to
Holdings or any Restricted Subsidiary or in satisfaction of judgments or
pursuant to a plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of trade debtors or customers of Holdings or any
Restricted Subsidiary or upon the foreclosure, perfection or enforcement of a
Lien in favor of Holdings or any Restricted Subsidiary that arose in the
ordinary course of business of Holdings or such Restricted Subsidiary; (viii)
an Investment in any Person to the extent such Investment represents the non-
cash portion of the consideration received for an Asset Disposition as
permitted pursuant to the covenant described under "--Certain Covenants--
Limitation on Sales of Assets and Subsidiary Stock"; (ix) an Investment in a
joint venture, any Person engaged in a Related Business or any Unrestricted
Subsidiary; provided that the aggregate amount of all such Investments
outstanding at any time shall not exceed $35 million; (x) Hedging Obligations
entered into in compliance with the terms of the Indenture; (xi) an Investment
held by any Person on the date such Person becomes a Restricted Subsidiary so
long as such Investments were not made in contemplation of such acquisition;
(xii) an Investment in any Person with which Holdings or any Restricted
Subsidiary has entered into, or has an agreement that, subject to consummation
of such agreement, entitles Holdings or any Restricted Subsidiary to enter
into a Local Marketing Agreement and in any Person created by such a Local
Market Agreement; provided that the aggregate amount of all such Investments,
together with the aggregate amount of Indebtedness Incurred pursuant to clause
(b)(12) of the "--Limitation on Indebtedness" covenant, shall not exceed $10
million at any time outstanding; (xiii) any Investment made with Qualified
Stock or acquired as a capital contribution to Holdings; and (xiv) any
Investment required by Section 3.5(a) of the Chicago Joint Venture Agreement.
"Permitted Liens" means, with respect to any Person, (a) Liens incurred or
pledges or deposits by such Person under workers' compensation laws,
unemployment insurance laws or similar legislation, or good faith deposits in
connection with bids, tenders, contracts (other than for the payment of
Indebtedness) or leases to which such Person is a party, or deposits to secure
public or statutory obligations of such Person or deposits or cash or United
States government bonds to secure surety or appeal bonds to which such Person
is a party, performance bonds and other obligations of a like nature incurred
in the ordinary course of business, or deposits as security for contested
taxes or import duties or for the payment of rent, in each case incurred in
the ordinary course of business; (b) Liens imposed by law, such as carriers',
warehousemen's and mechanics' Liens, in each case for sums not yet due or
being contested in good faith by appropriate proceedings; (c) Liens arising
out of judgments or awards against such Person with respect to which such
Person shall then be proceeding with an appeal or other proceedings for review
or time for appeal has not yet expired; (d) Liens for taxes, assessments or
other governmental charges not yet subject to penalties for non-payment or
which are being contested in good faith by appropriate proceedings; (e) Liens
in favor of issuers of surety bonds or letters of credit issued pursuant to
the request of and for the account of such Person in the ordinary course of
its business; provided, however, that such letters of credit do not constitute
Indebtedness; (f) survey exceptions, encumbrances, easements or reservations
of or rights of others for licenses, rights of way, sewers, electric lines,
telegraph and telephone lines and other similar purposes, or zoning or other
restrictions as to the use of real properties or Liens incidental to the
conduct of the business of such Person or to the ownership of its properties
which were not incurred in connection with Indebtedness and which do not in
the aggregate materially adversely affect the value of said properties or
materially impair their use in the operation of the business of such Person;
(g) Liens securing an Interest Rate Agreement so long as the related
Indebtedness is, and is permitted under the Indenture to be, secured by a Lien
on the same property securing the Interest Rate Agreement; (h) Liens securing
Currency Agreements so long as the related Indebtedness is, and is permitted
under the Indenture to be, secured by a Lien on the same property securing
such Currency Agreement; (i) Liens in favor of Holdings and its Wholly Owned
Restricted Subsidiaries; (j) Liens relating to any license of intellectual
property entered into in the ordinary course of business (including
programming agreements); (k) Liens pursuant to Local Marketing Agreements and
not securing any Indebtedness; (l) minor imperfections of, or encumbrances on,
title that do not impair the value of property for its intended use; and (m)
Liens, leases and subleases of real property which do not interfere with the
ordinary conduct of the business of such Person, and which are made on
customary and usual terms applicable to similar properties.
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"Permitted Restrictions" means (i) the encumbrances or restrictions
contained in the Bank Credit Agreement as in effect on the date of the
Indenture or as thereafter amended in a manner no less favorable to the
Holders in any material respect as determined in good faith by the Board of
Directors of Holdings and (ii) any encumbrance or restriction contained in any
other agreement governing Indebtedness of any Restricted Subsidiary permitted
under the Indenture which encumbrance or restriction does not prohibit (except
upon a default or event of default thereunder) the payment of dividends in an
amount sufficient to cover scheduled payments of cash interest on the Notes.
"Person" means any individual, corporation, limited liability company,
limited or general partnership, joint venture, association, joint-stock
company, trust, unincorporated organization, government or any agency or
political subdivision thereof or any other entity.
"Preferred Stock," as applied to the Capital Stock of any corporation, means
Capital Stock of any class or classes (however designated) which is preferred
as to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
"principal" of a Note means the principal of the Note plus the premium, if
any, payable on the Note which is due or overdue or is to become due at the
relevant time.
"Productive Assets" means assets used or useful in the ownership or
operation of a Related Business of Holdings or any Restricted Subsidiary,
including any and all licenses, franchises and assets related thereto.
"Public Equity Offering" means an underwritten public offering of common
stock of Holdings pursuant to an effective registration statement under the
Securities Act that yields not less than $25.0 million in gross proceeds,
which for purposes of the provisions described under "--Optional Redemption"
only shall be a primary offering for the account of Holdings.
"Purchase Money Indebtedness" means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including the
cost of construction) of an item of assets, the amount of which Indebtedness
does not exceed the sum of (i) 100% of the lesser of such cost or the fair
market value of such assets, as determined in good faith by the Board of
Directors of Holdings, and (ii) reasonable fees and expenses of such Person
incurred in connection therewith.
"Qualified Stock" means any Capital Stock of Holdings that is not
Disqualified Stock.
"redeem" means redeem, repurchase, defease or otherwise acquire or retire
for value; and "redemption" and "redeemed" have correlative meanings thereto.
"Refinance" means refinance, renew, extend, replace, defease or refund, in
whole or in part, including successively; and "Refinancing" and "Refinanced"
have correlative meanings thereto.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of Holdings or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with the Indenture, including Indebtedness that
Refinances Refinancing Indebtedness; provided, however, that (i) such
Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced, (ii) such Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being Refinanced and (iii) such Refinancing Indebtedness has an aggregate
principal amount (or if Incurred with original issue discount, an aggregate
issue price) that is equal to or less than the aggregate principal amount (or
if Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed (plus fees and expenses, including any premium and
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defeasance costs) under the Indebtedness being Refinanced; provided, further,
however, that Refinancing Indebtedness shall not include (x) Indebtedness of a
Restricted Subsidiary that Refinances Indebtedness of Holdings or (y)
Indebtedness of Holdings or a Restricted Subsidiary that Refinances
Indebtedness of an Unrestricted Subsidiary.
"Related Business" means any business related, ancillary or complementary to
the businesses of Holdings, Telemundo or any of its Subsidiaries or the
Network Company on the Issue Date.
"Restricted Payment" with respect to any Person means (i) the declaration or
payment of any dividends or any other distributions of any sort in respect of
its Capital Stock (including any payment in connection with any merger or
consolidation involving such Person), other than dividends or distributions
payable solely in Qualified Stock and dividends or distributions payable to
Holdings or a Restricted Subsidiary, and other than pro rata dividends or
other distributions made by a Subsidiary that is not a Wholly Owned Subsidiary
to minority stockholders (or owners of an equivalent interest in the case of a
Subsidiary that is an entity other than a corporation), (ii) the purchase,
redemption or other acquisition or retirement for value of any Capital Stock
of Holdings held by any Person or of any Capital Stock of a Restricted
Subsidiary held by any Affiliate of Holdings (other than a Restricted
Subsidiary), including the exercise of any option to exchange any Capital
Stock (other than into Qualified Stock), (iii) with respect to Holdings, the
purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value, prior to scheduled maturity, scheduled repayment or
scheduled sinking fund payment of any Subordinated Obligations (other than the
purchase, repurchase or other acquisition of Subordinated Obligations
purchased in anticipation of satisfying of a sinking fund obligation,
principal installment or final maturity, in each case due within one year of
the date of acquisition), or (iv) the making of any Investment in any Person
(other than a Permitted Investment), including by designation of any
Subsidiary as an Unrestricted Subsidiary.
"Restricted Subsidiary" means any Subsidiary of Holdings that is not an
Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby Holdings or a Restricted Subsidiary
transfers such property to a Person and Holdings or a Restricted Subsidiary
leases it from such Person.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of Holdings secured by a Lien.
"Sharing Agreement" means the agreement expected to be entered into between
Holdings and Telemundo Network Group LLC, pursuant to which they will share
certain facilities, equipment and administrative services, as in effect from
time to time.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of Holdings within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Sony Pictures" means Sony Pictures Entertainment Inc. and its successors,
Sony Corporation of America and its successors, and their respective
Affiliates.
"Stated Maturity" means, with respect to any security, the date specified in
such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory
redemption provision (but excluding any provision providing for the repurchase
of such security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"Station Affiliation Agreements" means the several Station Affiliation
Agreements dated the Issue Date between Telemundo Network Group LLC and
certain subsidiaries of Telemundo and any other agreement in substantially the
same form with respect to any future television station of Telemundo or any
Restricted Subsidiary.
"Stockholders Agreement" means the Agreement dated as of the Issue Date
among Holdings, Apollo, Bastion, Station Partners, Liberty and Sony Pictures,
as in effect on such date.
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"Subordinated Obligation" means any Indebtedness of Holdings (whether
outstanding on the Issue Date or thereafter incurred) which is subordinate or
junior in right of payment to the Notes pursuant to a written agreement to
that effect.
"Subsidiary" means, in respect of any Person, any corporation, association,
limited liability company, limited or general partnership or other business
entity of which more than 50% of the total voting power of shares of Capital
Stock or other interests (including partnership interests) entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by (i) such Person, (ii) such Person and one or more
Subsidiaries of such Person, or (iii) one or more Subsidiaries of such Person.
"S&P" means Standard & Poor's Ratings Group.
"Telemundo" means Telemundo Group, Inc., a Delaware corporation.
"Temporary Cash Investments" means any of the following: (i) any investment
in direct obligations of the United States of America or any agency thereof or
obligations guaranteed by the United States of America or any agency thereof,
(ii) investments in time deposit accounts, demand deposits, Eurodollar
deposits, certificates of deposit and money market deposits maturing within
365 days of the date of acquisition thereof issued by a bank or trust company
which is organized under the laws of the United States of America, any state
thereof or any foreign country recognized by the United States, and which bank
or trust company has capital, surplus and undivided profits aggregating in
excess of $50,000,000 (or the foreign currency equivalent thereof) or any
money-market fund sponsored by a registered broker dealer or mutual fund
distributor, (iii) repurchase obligations with a term of not more than 30 days
for underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii) above,
(iv) investments in commercial paper, maturing not more than 180 days after
the date of acquisition, issued by a corporation (other than an Affiliate of
Holdings) organized and in existence under the laws of the United States of
America or any foreign country recognized by the United States of America with
a rating at the time as of which any investment therein is made of "P-2" (or
higher) according to Moody's or "A-2" (or higher) according to S&P,
(v) investments in securities with maturities of six months or less from the
date of acquisition issued or fully guaranteed by any state, commonwealth or
territory of the United States of America, or by any political subdivision or
taxing authority thereof, and rated at least "A" by S&P or "A" by Moody's and
(vi) investments in money market funds that make investments in instruments of
the type described in clauses (i) through (v) above in accordance with the
regulations of the SEC under the Investment Company Act of 1940, as amended.
"Total Consolidated Indebtedness" means, as at any date of determination, an
amount equal to the aggregate amount of all Indebtedness of Holdings and the
Restricted Subsidiaries outstanding on a consolidated basis as of such date of
determination, after giving pro forma effect to any Incurrence of Indebtedness
and the application of the proceeds, including the repayment of any
Indebtedness, therefrom giving rise to such determination.
"Umbrella Affiliation Agreement" means the Memorandum of Agreement dated the
Issue Date between Telemundo Network Group LLC and Telemundo regarding, among
other things, revenue sharing.
"Unrestricted Subsidiary" means (i) any Subsidiary of Holdings that at the
time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors of Holdings in the manner provided below and (ii) any
Subsidiary of an Unrestricted Subsidiary. Video 44 shall be deemed to have
been designated an Unrestricted Subsidiary as of the Issue Date. The Board of
Directors of Holdings may designate any Subsidiary of Holdings (including any
newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary
unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or
Indebtedness of, or holds any Lien on any property of, Holdings or any other
Subsidiary of Holdings that is not a Subsidiary of the Subsidiary to be so
designated; provided, however, that either (A) the Subsidiary to be so
designated has total assets of $1,000 or
110
<PAGE>
less or (B) if such Subsidiary has assets greater than $1,000, such
designation would be permitted under the covenant described under "--Certain
Covenants--Limitation on Restricted Payments." The Board of Directors of
Holdings may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided, however, that immediately after giving effect to such
designation (x) if such Unrestricted Subsidiary at such time has Indebtedness,
Holdings could Incur $1.00 of additional Indebtedness under paragraph (a) of
the covenant described under "--Certain Covenants-- Limitation on
Indebtedness" and (y) no Default shall have occurred and be continuing. Any
such designation by the Board of Directors of Holdings shall be evidenced by
Holdings to the Trustee by promptly filing with the Trustee a copy of the
board resolution giving effect to such designation and an officers'
certificate certifying that such designation complied with the foregoing
provisions.
"U.S. Government Obligations" means securities that are (x) direct
obligations of the United States of America for the timely payment of which
its full faith and credit is pledged or (y) obligations of a Person controlled
or supervised by and acting as an agency or instrumentality of the United
States of America the timely payment of which is unconditionally guaranteed as
a full faith and credit obligation by the United States of America, which, in
either case, are not callable or redeemable at the option of the issuer
thereof, and shall also include a depository receipt issued by a bank (as
defined in Section 3(a)(2) of the Securities Act), as custodian with respect
to any such U.S. Government Obligation held by such custodian for the account
of the holder of such depository receipt, provided that (except as required by
law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by
the custodian in respect of the U.S. Government Obligation or the specific
payment of principal of or interest on the U.S. Government Obligation
evidenced by such depository receipt.
"Video 44" means Video 44, an Illinois general partnership formed under the
Chicago Joint Venture Agreement.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding
and normally entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof.
"Wholly Owned Restricted Subsidiary" means a Restricted Subsidiary all the
Capital Stock of which (other than directors' qualifying shares and shares
held by other Persons to the extent such shares are required by applicable law
to be held by a Person other than Holdings or a Restricted Subsidiary) is
owned by Holdings or one or more Wholly Owned Restricted Subsidiaries.
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<PAGE>
BOOK-ENTRY, DELIVERY AND FORM
The New Notes will be issued in the form of one or more fully registered
Notes in global form ("Global Notes"). The Global Notes will be deposited
with, or on behalf of, the Depositary and registered in the name of the
Depositary or its nominee. Except as set forth below, the Global Notes may be
transferred, in whole and not in part, only to the Depositary or another
nominee of the Depositary. Investors may hold their beneficial interests in
the Global Notes directly through the Depositary if they have an account with
the Depositary or indirectly through organizations which have accounts with
the Depositary.
New Notes that are issued as described below under "Certificated Notes" will
be issued in definitive certificated form. Upon the transfer of Old Notes in
definitive certificated form to a QIB, such Old Notes will, unless the Global
Note representing the principal amount of Old Notes being transferred has
previously been exchanged for Old Notes in definitive certificated form, be
exchanged for an interest in such Global Note.
The Depositary has advised Holdings as follows: the Depositary is a limited-
purpose trust company organized under the laws of the State of New York, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. The
Depositary was created to hold securities of institutions that have accounts
with the Depositary ("participants") and to facilitate the clearance and
settlement of securities transactions among its participants in such
securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. The Depositary's participants include securities brokers and
dealers (which may include the Initial Purchasers), banks, trust companies,
clearing corporations and certain other organizations. Access to the
Depositary's book-entry system is also available to others, such as banks,
brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, whether directly or indirectly.
Upon the issuance of the Global Notes, the Depositary will credit, on its
book-entry registration and transfer system, the amount of New Notes
represented by such Global Notes to the accounts of participants. Ownership of
beneficial interests in the Global Notes will be limited to participants or
persons that may hold interests through participants. Ownership of beneficial
interests in the Global Notes will be shown on, and the transfer of those
ownership interests will be effected only through, records maintained by the
Depositary or its nominee (with respect to participants' interests) for such
Global Notes, or by participants or persons that hold interests through
participants (with respect to the beneficial interests in the Global Notes of
persons other than participants). The laws of some jurisdictions may require
that certain purchasers of securities take physical delivery of such
securities in definitive form. Such limits and laws may impair the ability to
transfer or pledge beneficial interests in the Global Notes.
So long as the Depositary, or its nominee, is the registered holder and
owner of any Global Notes, the Depositary or such nominee, as the case may be,
will be considered the sole legal owner and holder of the New Notes
represented by such Global Notes for all purposes under the Indenture and the
New Notes. Except as set forth below, owners of beneficial interests in Global
Notes will not be entitled to have such Global Notes registered in their
names, will not receive or be entitled to receive physical delivery of
certificated New Notes in definitive form and will not be considered to be the
owners or holders of such Global Notes for any purpose under the New Notes or
the Indenture. Holdings understands that under existing industry practice, in
the event an owner of a beneficial interest in a Global Note desires to take
any action that the Depositary, as the holder of such Global Note, is entitled
to take, the Depositary would authorize the participants to take such action,
and that the participants would authorize beneficial owners owning through
such participants to take such action or would otherwise act upon the
instructions of beneficial owners owning through them.
Payment of principal of and interest on New Notes represented by Global
Notes registered in the name of and held by the Depositary or its nominee will
be made to the Depositary or its nominee, as the case may be, as the
registered owner and holder of the Global Notes.
112
<PAGE>
Holdings expects that the Depositary or its nominee, upon receipt of any
payment of principal of or interest on the Global Notes, will credit
participants' accounts with payments in amounts proportionate to their
respective
beneficial interests in the principal amount of the Global Notes as shown on
the records of the Depositary or its nominee. Holdings also expects that
payments by participants to owners of beneficial interests in the Global Notes
held through such participants will be governed by standing instructions and
customary practices and will be the responsibility of such participants. None
of the Trustee, Holdings or any paying agent for the Global Notes will have
any responsibility or liability for any aspect of the records relating to, or
payments made on account of, beneficial ownership interests in any of the
Global Notes or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interests or for any other aspect of relationship
between the Depositary and its participants or the relationship between such
participants and the owners of beneficial interests in the Global Notes owning
through such participants.
Unless and until exchanged in whole or in part for certificated New Notes in
definitive form, the Global Notes may not be transferred except as a whole by
the Depositary to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary.
Although the Depositary has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Notes among participants of
the Depositary, it is under no obligation to perform or continue to perform
such procedures, and such procedures may be discontinued at any time. Neither
the Trustee nor Holdings will have any responsibility for the performance by
the Depositary or its participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
CERTIFICATED NOTES
The New Notes represented by the Global Notes are exchangeable for
certificated Notes in definitive form of like tenor as such New Notes in
denominations of $1,000 and integral multiples thereof if (i) the Depositary
notifies Holdings that it is unwilling or unable to continue as Depositary for
the Global Notes or if at any time the Depositary ceases to be a clearing
agency registered under the Exchange Act and, in either case, Holdings fails
to appoint a successor depositary within 90 days; (ii) Holdings in its
discretion at any time determines not to have all of the New Notes represented
by the Global Notes or (iii) an Event of Default has occurred and is
continuing and the Registrar has received a written request from the
Depositary to issue certificated New Notes. Any New Notes that are
exchangeable pursuant to the preceding sentence are exchangeable for
certificated New Notes issuable in authorized denominations and registered in
such names as the Depositary shall direct. Subject to the foregoing, the
Global Notes are not exchangeable, except for the Global Notes of the same
aggregate denomination to be registered in the name of the Depositary or its
nominee.
Neither Holdings nor the Trustee will be liable for any delay by the
Depositary or its nominee in indemnifying the beneficial owners of the New
Notes, and Holdings and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Depositary or its nominee for
all purposes.
113
<PAGE>
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes certain U.S. federal income tax consequences
of an investment in the Notes. Except where noted, it deals only with Notes
that are held as capital assets (generally, property held for investment) by
holders that are United States Persons (as defined below) and does not deal
with special situations, such as those of foreign persons, dealers in
securities, financial institutions, life insurance companies, holders whose
"functional currency" is not the United States dollar, or holders that hold
the Notes as part of a hedge, conversion transaction, straddle or other risk
reduction transaction. Furthermore, the discussion below is based upon the
provisions of the Code, and Treasury regulations, administrative rulings and
judicial decisions thereunder, all as of the date hereof. Such authorities may
be repealed, revoked or modified, possibly with retroactive effect, so as to
result in U.S. federal income tax consequences different from those discussed
below. PROSPECTIVE PURCHASERS CONSIDERING AN INVESTMENT IN THE NOTES ARE URGED
TO CONSULT THEIR TAX ADVISORS CONCERNING THE UNITED STATES FEDERAL INCOME TAX
CONSIDERATIONS THAT MAY BE SPECIFIC TO THEM AS WELL AS ANY TAX CONSEQUENCES
ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION.
As used herein, "United States Person" means a beneficial owner of a Note
who or which is (i) a citizen or resident of the United States, (ii) a
corporation or a partnership for U.S. federal income tax purposes and that is
organized in or under the laws of the United States or any state thereof or
the District of Columbia (although certain partnerships so organized may be
treated, under regulations not yet published, as not a United States Person),
(iii) an estate the income of which is subject to U.S. federal income taxation
regardless of its source or (iv) a trust if a court within the United States
is able to exercise primary supervision over the administration of the trust
and one or more United States Persons have the authority to control all
substantial decisions of the trust.
Exchange
The exchange of Old Notes for New Notes pursuant to the Exchange Offer will
not be treated as an exchange or other taxable event for U.S. federal income
tax purposes because the New Notes will not be considered to differ materially
in kind or extent from the Old Notes. A holder should have the same adjusted
basis and holding period in the New Notes immediately after the Exchange Offer
as it had in the Old Notes immediately before the Exchange Offer.
Original Issue Discount
The Notes have been issued with original issue discount ("OID") for U.S.
federal income tax purposes. Accordingly, each holder of a Note generally will
be required to include OID in gross income as it accrues on a yield-to-
maturity basis over the term of the Notes in advance of the receipt of any
cash payment attributable to such income (regardless of whether the holder is
a cash or accrual basis taxpayer). The amount of OID with respect to a Note
will be the excess of the stated redemption price at maturity of such Note
over its issue price. The stated redemption price at maturity of a Note
generally will include all payments required to be made on the Note, whether
denominated as principal or interest. The issue price of a Note is the first
price at which a substantial amount of the Old Notes were sold for money
(other than sales to bond houses, brokers, similar persons or organizations
acting in the capacity of underwriters, placement agents, or wholesalers,
including the Initial Purchasers).
A holder of a debt instrument that bears OID is required to include in gross
income an amount equal to the sum of the daily portions of OID for each day
during the taxable year in which the debt instrument is held. The daily
portions of OID are determined by allocating to each day in an accrual period
the pro rata portion of the OID that is allocable to the accrual period. The
amount of OID that is allocable to an accrual period generally is equal to the
product of the adjusted issue price of the Notes at the beginning of the
accrual period (the issue price of the Notes determined as described above,
generally increased by all prior accruals of OID and decreased by the amount
of any payments made on the Notes) and the Notes' yield to maturity (the
discount rate, which, when applied to all payments under the Notes, results in
a present value equal to the issue price of the Notes). In the case of the
final accrual period, the allocable OID generally is the difference between
the amount payable at maturity and the adjusted issue price at the beginning
of the accrual period.
114
<PAGE>
The Company will furnish annually to the Internal Revenue Service (the
"Service") and to holders (other than with respect to certain exempt holders,
including, in particular, corporations) information with respect to the OID
accruing while the Notes were held by the holders. Holders may be required to
include different amounts of OID in gross income based on their individual
circumstances, such as the acquisition of a Note for an amount in excess of
its adjusted issue price (as discussed below).
Certain Potential Federal Income Tax Consequences to the Company and to
Corporate Holders
The Notes constitute applicable high yield debt obligations ("AHYDOs") as
their yield to maturity exceeds the sum of the relevant applicable federal
rate (the "AFR") plus five percentage points, and the Notes have been issued
with significant OID. Under the rules applicable to AHYDOs, the Company will
not be entitled to deduct OID that accrues with respect to such Notes until
amounts attributable to such OID are paid. The Company does not expect that
the loss of this deduction on a current basis would have a material adverse
effect on the Company's financial condition or results of operations. Subject
to otherwise applicable limitations, holders that are corporations will be
entitled to a dividends-received deduction (generally at a rate of 70%) with
respect to any disqualified portion of the accrued OID to the extent that the
Company has sufficient current or accumulated earnings and profits. If the
disqualified portion exceeds the Company's current and accumulated earnings
and profits, the excess will continue to be taxed as ordinary OID income in
accordance with the rules described above in "Original Issue Discount."
Disposition of Notes
A holder will generally recognize gain or loss upon the sale, exchange,
retirement or other disposition of Notes equal to the difference between the
amount realized on the disposition and the holder's adjusted tax basis in the
Notes. A holder's adjusted tax basis in a Note will generally be the cost of
such Note, increased by the amount of OID previously included in income by
such holder, and decreased by the amount of any payments that are not
Additional Interest. Such gain or loss generally would be capital gain or
loss, and will be long-term capital gain or loss if at the time of the sale,
exchange, retirement or other disposition the holder has held the Note for
more than one year. For holders that are individuals, estates or trusts, the
maximum rate of U.S. federal income taxation on long-term capital gains
generally is 20%.
Backup Withholding
Under certain circumstances, a holder may be subject to backup withholding
at a 31% rate on payments received with respect to the Notes. This withholding
generally applies only if the holder (i) fails to furnish his or her social
security or other taxpayer identification number ("TIN"); (ii) furnishes an
incorrect TIN; (iii) is notified by the Service that he or she has failed to
report payment of interest and dividends properly and the Service has notified
the Company that he or she is subject to backup withholding or (iv) fails,
under certain circumstances, to provide a certified statement, signed under
penalty of perjury, that the TIN provided is his or her correct number and
that he or she is not subject to backup withholding. Any amount withheld from
a payment to a holder under the backup withholding rules is allowable as a
credit against such holder's U.S. federal income tax liability, provided that
the required information is furnished to the Service. Certain holders
(including, among others, corporations) are not subject to backup withholding.
Holders should consult their tax advisors as to their qualification for
exemption from backup withholding and the procedure for obtaining such an
exemption.
115
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Company has agreed that, for a period of 180 days
after the Expiration Date, it will make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any
such resale. In addition, until , 1999, all dealers effecting transactions
in the New Notes may be required to deliver a Prospectus.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from
any such broker-dealer or the purchasers of any such New Notes. Any broker-
dealer that resells New Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such New Notes may be deemed to be an "underwriter" within the
meaning of the Securities Act and any profit on any such resale of New Notes
and any commissions or concessions received by any such persons may be deemed
to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that, by acknowledging that it will deliver and be
delivering a Prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in the
Letter of Transmittal. The Company has agreed to pay all expenses incident to
the Exchange Offer (including the reasonable expenses of one counsel for the
Holders of the New Notes) other than commissions or concessions of any brokers
or dealers and will indemnify the Holders of the New Notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
116
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the validity of the New Notes will be
passed upon for the Company by Akin, Gump, Strauss, Hauer & Feld, L.L.P., New
York, New York.
EXPERTS
The financial statements included in this Prospectus and the related
financial statement schedules included elsewhere in the Registration Statement
and the financial statements from which the Selected Financial Data included
in the Prospectus have been derived have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report appearing herein. Such
financial statements, financial statement schedules and Selected Financial
Data have been included herein in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
117
<PAGE>
INDEX TO FINANCIAL STATEMENTS
TELEMUNDO GROUP, INC.
<TABLE>
<S> <C>
Audited Consolidated Financial Statements
Independent Auditors' Report of Deloitte & Touche LLP................... F-2
Consolidated Statements of Operations for the years ended December 31,
1995, 1996 and 1997..................................................... F-3
Consolidated Balance Sheets at December 31, 1996 and 1997............... F-4
Consolidated Statements of Changes in Common Stockholders' Equity for
the years ended
December 31, 1995, 1996 and 1997....................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1995, 1996 and 1997..................................................... F-6
Notes to Consolidated Financial Statements.............................. F-7
Unaudited Consolidated Financial Statements
Consolidated Statements of Operations for the three and six months ended
June 30, 1997 and 1998.................................................. F-19
Consolidated Balance Sheets at December 31, 1997 and June 30, 1998...... F-20
Consolidated Statement of Changes in Common Stockholders' Equity for the
six months ended June 30, 1998........................................ F-21
Consolidated Statements of Cash Flows for the six months ended June 30,
1997 and 1998........................................................... F-22
Notes to Consolidated Financial Statements.............................. F-23
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of Telemundo Group, Inc.
We have audited the accompanying consolidated balance sheets of Telemundo
Group, Inc. (the "Company") and its subsidiaries as of December 31, 1997 and
1996 and the related consolidated statements of operations, changes in common
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits. We
did not audit the financial statements of TeleNoticias del Mundo L.P.
("TeleNoticias"), the Company's investment in which was accounted for by use
of the equity method for 1995. The Company's share of the net loss of
$6,355,000 for the year ended December 31, 1995 is included in the
accompanying consolidated financial statements, see Note 4. The financial
statements of TeleNoticias for 1995 were audited by other auditors whose
report (which contains substantial doubt as to TeleNoticias' ability to
continue as a going concern, the effect of which, in our opinion, was not
material in relation to the consolidated financial statements) has been
furnished to us, and our opinion insofar as it relates to the amount included
for TeleNoticias, was based solely on the report of such other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of the other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors, such
consolidated financial statements present fairly, in all material respects,
the financial position of the Company as of December 31, 1997 and 1996, and
the results of its operations and its cash flows for each of the three years
in the period ended December 31, 1997 in conformity with general accepted
accounting principles.
Deloitte & Touche LLP
New York, New York
March 19, 1998
F-2
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net revenue.......................... $169,148,000 $202,713,000 $197,588,000
------------ ------------ ------------
Costs and expenses:
Direct operating costs............... 78,609,000 86,994,000 93,297,000
Selling, general and administrative
expenses other than
network and corporate.............. 34,270,000 39,910,000 38,707,000
Network expenses.................... 25,848,000 28,835,000 30,650,000
Corporate expenses.................. 4,400,000 4,371,000 4,882,000
Depreciation and amortization....... 11,642,000 13,311,000 13,938,000
------------ ------------ ------------
154,769,000 173,421,000 181,474,000
------------ ------------ ------------
Operating income..................... 14,379,000 29,292,000 16,114,000
Merger related expenses.............. -- -- (1,707,000)
Interest expense --net of interest
income of $303,000 in
1997, $304,000 in 1996 and $268,000
in 1995............................. (14,489,000) (18,920,000) (20,849,000)
Loss from investment in
TeleNoticias........................ (6,355,000) (3,120,000) --
Loss on disposal of TeleNoticias..... -- (2,441,000) --
Other income (expense)............... (104,000) 14,000 7,000
------------ ------------ ------------
Income (loss) before income taxes,
minority interest and
extraordinary item.................. (6,569,000) 4,825,000 (6,435,000)
Income tax provision................. (3,519,000) (3,879,000) (4,201,000)
Minority interest.................... -- (2,125,000) (2,808,000)
------------ ------------ ------------
Loss before extraordinary item....... (10,088,000) (1,179,000) (13,444,000)
Extraordinary item--extinguishment of
debt................................ -- (17,243,000) --
------------ ------------ ------------
Net loss............................. $(10,088,000) $(18,422,000) $(13,444,000)
============ ============ ============
Basic net loss per share:
Loss before extraordinary item...... $ (1.01) $ (.12) $ (1.32)
Extraordinary item.................. -- (1.71) --
------------ ------------ ------------
Net loss............................ $ (1.01) $ (1.83) $ (1.32)
============ ============ ============
Weighted average shares outstanding.. 10,000,000 10,054,000 10,163,000
============ ============ ============
</TABLE>
See notes to consolidated financial statements
F-3
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
ASSETS 1996 1997
------ ------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents......................... $ 12,587,000 $ 2,378,000
Accounts receivable, less allowance for doubtful
accounts of $5,943,000 and $7,583,000............ 51,824,000 54,155,000
Television programming............................ 14,062,000 15,154,000
Prepaid expenses and other........................ 7,685,000 9,287,000
------------ ------------
Total current assets............................ 86,158,000 80,974,000
Property and equipment, net......................... 64,532,000 66,602,000
Television programming.............................. 4,588,000 6,779,000
Other assets........................................ 7,451,000 7,365,000
Broadcast licenses and reorganization value in
excess of amounts allocable to identifiable assets,
net................................................ 132,831,000 128,366,000
------------ ------------
Total Assets........................................ $295,560,000 $290,086,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable.................................. $ 8,831,000 $ 7,726,000
Accrued expenses and other........................ 27,484,000 22,761,000
Television programming obligations................ 5,074,000 5,911,000
------------ ------------
Total current liabilities....................... 41,389,000 36,398,000
Long-term debt...................................... 179,695,000 189,081,000
Capital lease obligations........................... 5,945,000 5,120,000
Television programming obligations.................. 442,000 399,000
Other liabilities................................... 19,950,000 23,845,000
------------ ------------
247,421,000 254,843,000
------------ ------------
Minority interest................................... 5,246,000 5,334,000
------------ ------------
Contingencies and commitments
Common stockholders' equity:
Series A common stock, $.01 par value, 14,388,394
shares authorized, 6,621,983 and 7,129,614 shares
outstanding at December 31, 1996 and 1997........ 66,000 71,000
Series B common stock, $.01 par value, 5,611,606
shares authorized, 3,530,232 and 3,088,341 shares
outstanding at December 31, 1996 and 1997........ 36,000 31,000
Additional paid-in capital.......................... 71,301,000 71,761,000
Accumulated deficit................................. (28,510,000) (41,954,000)
------------ ------------
42,893,000 29,909,000
------------ ------------
Total Liabilities and Stockholders' Equity.......... $295,560,000 $290,086,000
============ ============
</TABLE>
See notes to consolidated financial statements
F-4
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NUMBER OF SHARES
OUTSTANDING COMMON STOCK
-------------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
SERIES A SERIES B SERIES A SERIES B ADDITIONAL COMMON
COMMON COMMON COMMON COMMON PAID-IN ACCUMULATED STOCKHOLDERS'
STOCK STOCK STOCK STOCK CAPITAL DEFICIT EQUITY
--------- ---------- -------- -------- ----------- ------------ -------------
<CAPTION>
Balance at December 31,
1994................... 4,388,394 5,611,606 $ 44,000 $ 56,000 $69,900,000 $ -- $ 70,000,000
<S> <C> <C> <C> <C> <C> <C> <C>
Net loss................ -- -- -- -- -- (10,088,000) (10,088,000)
Stock option transac-
tions (a).............. -- -- -- -- 338,000 -- 338,000
Warrant conversions..... 200 -- -- -- 1,000 -- 1,000
Stock conversions....... 1,545,271 (1,545,271) 15,000 (15,000) -- -- --
--------- ---------- -------- -------- ----------- ------------ -------------
Balance at December 31,
1995................... 5,933,865 4,066,335 59,000 41,000 70,239,000 (10,088,000) 60,251,000
Net loss................ -- -- -- -- -- (18,422,000) (18,422,000)
Issuance of stock pursu-
ant to
exercise of stock op-
tions.................. 150,000 -- 2,000 -- 1,048,000 -- 1,050,000
Warrant conversions..... 2,015 -- -- -- 14,000 -- 14,000
Stock conversions....... 536,103 (536,103) 5,000 (5,000) -- -- --
--------- ---------- -------- -------- ----------- ------------ -------------
Balance at December 31,
1996................... 6,621,983 3,530,232 66,000 36,000 71,301,000 (28,510,000) 42,893,000
Net loss................ -- -- -- -- -- (13,444,000) (13,444,000)
Warrant conversions..... 65,740 -- -- -- 460,000 -- 460,000
Stock conversions....... 441,891 (441,891) 5,000 (5,000) -- -- --
--------- ---------- -------- -------- ----------- ------------ -------------
Balance at December 31,
1997................... 7,129,614 3,088,341 $ 71,000 $ 31,000 $71,761,000 $(41,954,000) $ 29,909,000
========= ========== ======== ======== =========== ============ =============
</TABLE>
- --------
(a) Effect of the cancellation and issuance of options to a former officer.
See notes to consolidated financial statements
F-5
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................. $(10,088,000) $(18,422,000) $(13,444,000)
Charges not affecting cash:
Depreciation and amortization....... 11,642,000 13,311,000 13,938,000
Interest accretion.................. 1,511,000 4,559,000 5,557,000
Loss from investment in
TeleNoticias........................ 6,355,000 3,120,000 --
Loss on disposal of TeleNoticias.... -- 2,441,000 --
Minority interest................... -- 2,125,000 2,808,000
Extraordinary item--extinguishment
of debt............................. -- 17,243,000 --
Changes in assets and liabilities:
Accounts receivable................. 1,872,000 (6,023,000) (2,331,000)
Television programming.............. (676,000) (2,392,000) (3,283,000)
Television programming obligations.. (1,133,000) 594,000 794,000
Accounts payable and accrued ex-
penses and other.................... 2,112,000 8,117,000 (3,553,000)
------------ ------------ ------------
Cash flows provided from operating
activities.......................... 11,595,000 24,673,000 486,000
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Video 44, net of cash
acquired............................ -- (43,973,000) --
Additions to property and equipment.. (6,719,000) (9,125,000) (11,156,000)
Investment in TeleNoticias........... (3,104,000) (1,704,000) --
Disposal of TeleNoticias, net........ -- (2,769,000) --
------------ ------------ ------------
Cash flows used in investing activ-
ities............................... (9,823,000) (57,571,000) (11,156,000)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of 10.5%
Notes............................... -- 169,981,000 --
Repurchase of 10.25% Notes, consent
fee and related costs............... -- (118,993,000) --
Proceeds from exercise of stock op-
tions and warrants.................. -- 1,065,000 460,000
Payments of obligations under capital
leases.............................. (517,000) (642,000) (727,000)
Borrowings under credit facility..... 6,013,000 8,012,000 9,854,000
Payments under credit facility....... (216,000) (13,993,000) (6,025,000)
Payments to minority interest part-
ner................................. -- (2,061,000) (2,720,000)
Payments of reorganization items, li-
abilities subject to settlement un-
der Chapter 11 proceedings and oth-
er.................................. (5,703,000) (1,083,000) (381,000)
------------ ------------ ------------
Cash flows provided from (used in)
financing activities................ (423,000) 42,286,000 461,000
------------ ------------ ------------
Increase (decrease) in cash and cash
equivalents......................... 1,349,000 9,388,000 (10,209,000)
Cash and cash equivalents, beginning
of year............................. 1,850,000 3,199,000 12,587,000
------------ ------------ ------------
Cash and cash equivalents, end of
year................................ $ 3,199,000 $ 12,587,000 $ 2,378,000
============ ============ ============
Non-cash investing activities:
Note receivable and escrow deposit
associated with
disposal of TeleNoticias, net of
accrued liabilities................. $ -- $ 879,000 $ --
============ ============ ============
</TABLE>
See notes to consolidated financial statements
F-6
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Telemundo Group, Inc. ("Telemundo"), together with its subsidiaries
(collectively, the "Company"), is one of two Spanish-language television
broadcast networks in the United States. The network provides programming 24-
hours per day to its owned and operated stations and affiliates, which serve
61 markets in the United States, including the 37 largest Hispanic markets,
and reaches approximately 85% of all U.S. Hispanic households. The Company
also owns and operates the leading full-power television station and related
production facilities in Puerto Rico. The Company produces Spanish-language
programming for use on its network and for sale in foreign countries and sells
advertising time on behalf of its owned and operated television stations and
affiliates.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Telemundo and
its subsidiaries. All significant intercompany balances and transactions have
been eliminated in consolidation. The Company's 42% investment in Telenoticias
del Mundo, L.P. ("TeleNoticias") had been accounted for by the equity method
until June 26, 1996, when substantially all of the assets and certain
liabilities of TeleNoticias were sold. (see Note 4).
USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect certain amounts reported in the consolidated
financial statements and accompanying notes. Actual results could differ from
those estimates.
CASH AND CASH EQUIVALENTS
The Company considers short-term investments with an original maturity of
three months or less to be cash equivalents. Such short-term investments are
carried at cost which approximates fair value.
TELEVISION PROGRAMMING
Television programming rights and the related obligations are recorded at
gross contract prices. The costs of the rights are amortized on varying bases
related to the license period, usage of the programs and management's estimate
of revenue to be realized from each airing of the programs.
DEPRECIATION AND AMORTIZATION
Property and equipment is depreciated by the straight-line method over
estimated useful lives as follows:
<TABLE>
<S> <C>
Buildings..................................... 40 Years
Antennas and transmitters..................... 20 Years
Other broadcast equipment..................... 3 to 7 Years
Furniture and fixtures........................ 5 to 7 Years
Automobiles and trucks........................ 4 Years
Shorter of Life of Lease or
Leasehold improvements and transponder........ Useful Life of Asset
</TABLE>
F-7
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
BROADCAST LICENSES AND REORGANIZATION VALUE IN EXCESS OF AMOUNTS ALLOCABLE TO
IDENTIFIABLE ASSETS
Broadcast licenses and reorganization value in excess of amounts allocable
to identifiable assets represents the portions of reorganization value and
Video 44 purchase price not attributable to specific tangible assets at the
time of the reorganization and the purchase, and are being amortized on a
straight-line basis over periods ranging from 10 to 40 years. Accumulated
amortization was $11.2 million at December 31, 1997. Broadcast licenses and
reorganization value in excess of amounts allocable to identifiable assets is
attributable primarily to FCC broadcast licenses ($115.3 million net of
accumulated amortization at December 31, 1997). The Company evaluates the
recoverability of its investment in such intangible assets in relation to
anticipated cash flows on an undiscounted basis. If the estimated future cash
flows were projected to be less than the carrying value, an impairment write-
down would be recorded.
REVENUE RECOGNITION
Revenue is derived primarily from the sale of advertising time on a network,
national spot and local basis. In addition, the Company earns revenue from the
sale of blocks of broadcast time during non-network programming hours. Revenue
is recognized when earned, i.e., when the advertisement is aired or the block
of broadcast time is utilized. The Company reviews the collectibility of its
accounts receivable and adjusts its allowance for doubtful accounts
accordingly. During 1997, 1996 and 1995, no customer accounted for more than
10% of the Company's revenue.
INCOME TAXES
Income taxes provided reflect the current and deferred tax consequences of
events that have been recognized in the Company's financial statements or tax
returns. A valuation allowance is recorded if it is more likely than not that
a deferred tax asset will not be realized.
PER COMMON SHARE INFORMATION
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
Earnings per Share ("FAS 128"). FAS 128 replaced the calculation of primary
and fully diluted earnings per share with basic and diluted earnings per
share. Basic earnings per share excludes any dilutive effects of stock
options, warrants and convertible securities. Diluted earnings per share is
not presented as the effect of the 2,020,629 stock options and warrants is
anti-dilutive.
RECLASSIFICATIONS
Certain reclassifications have been made in the prior years' financial
statements to conform with the current year's presentation.
2. PROPOSED MERGER TRANSACTION
On November 24, 1997 the Company announced that it had entered into a
definitive agreement with a venture to be formed by Sony Pictures
Entertainment Inc., Liberty Media Corporation, Apollo Investment Fund III,
L.P. and Bastion Capital Fund, L.P. (such venture, the "Purchaser") pursuant
to which the Purchaser will acquire all of the common stock of the Company in
a cash merger transaction (the "Merger") for $44 per share, plus, subject to
certain conditions, an additional amount if the Merger is not completed by
July 30, 1998. The proposed transaction, which is expected to close in the
summer of 1998, is subject to the approval of Company stockholders (for which
a related preliminary proxy statement was filed with the Securities and
F-8
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Exchange Commission on February 18, 1998) and the Federal Communications
Commission, the expiration of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act, as well as the receipt by the Purchaser of the
financing required to consummate the Merger (the Purchaser has received
commitments from financial institutions and its stockholders in an amount
sufficient to fund the Merger). As a result of the various conditions to the
completion of the Merger, there can be no assurance that the Merger will be
consummated. Merger related costs incurred during 1997 were $1.7 million.
In November 1997 after the announcement of the Merger, the Company and its
directors were named as defendants in six purported class actions filed on
behalf of Telemundo's public stockholders. The suits are virtually identical
and allege that Telemundo and its directors violated fiduciary duties owed to
Telemundo's public stockholders by entering into the merger agreement with the
Purchaser. The Company's board of directors, relying upon the unanimous
recommendation of a special committee of the board of directors comprised of
directors who have no financial interest in the Purchaser or its affiliates,
has determined that the Merger is fair to and in the best interests of the
Company's public stockholders. The Company and its directors intend to
vigorously defend the lawsuits, and believe that the outcome of the suits will
not have a material adverse effect on the Company's consolidated financial
statements.
3. ACQUISITION AND REFINANCING
On February 26, 1996, Telemundo completed the acquisition of a 74.5%
interest in a joint venture ("Video 44"), which owns WSNS-TV, Channel 44 in
Chicago, which had been the Company's largest affiliated station (the
"Acquisition"). The purchase price for the Acquisition was approximately $44.6
million of cash and $1.3 million of costs and liabilities associated with the
Acquisition. The allocation of the $45.9 million purchase price among property
and equipment, broadcast licenses and other assets was based upon estimated
fair market values. The operations of Video 44 are consolidated with those of
the Company and the interest, subject to a minimum preferred distribution,
attributable to the partner which owns the remaining 25.5% of the venture is
reflected in the accompanying financial statements as minority interest.
On February 26, 1996, the Company also completed the sale of $192 million in
aggregate principal amount of 10.5% Senior Notes due 2006 (the "10.5% Senior
Notes"), the proceeds of which were used primarily for the Acquisition and to
repurchase $116.7 million principal amount of its 10.25% Senior Notes (the
"10.25% Notes"). The repurchase resulted in an extraordinary loss of $17.2
million in 1996.
The following summarized, unaudited pro forma results of operations for the
year ended December 31, 1996, assumes the Acquisition, the repurchase of the
10.25% Notes and the issuance of the 10.5% Senior Notes occurred as of the
beginning of the year. Items associated with TeleNoticias (see Note 4) are
excluded from the pro forma amounts, including the "Loss from investment in
TeleNoticias" and the "Loss on disposal of TeleNoticias" which are reflected
in the Company's Consolidated Statements of Operations.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
<S> <C>
Net revenue................................................. $205,215,000
Income before extraordinary item............................ 3,764,000
Net loss.................................................... (13,479,000)
Diluted earnings (loss) per share:
Income before extraordinary item........................... $ .34
Net loss................................................... $(1.22)
</TABLE>
F-9
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. INVESTMENT IN TELENOTICIAS
From July 1994 through June 1996, Telemundo held a 42% interest in
TeleNoticias, an international Spanish-language news service. On June 26,
1996, Telemundo acquired the remaining 58% interest in TeleNoticias from its
former partners for approximately $5.1 million (the "Purchase").
Contemporaneous with the Purchase, the Company sold substantially all of the
assets and certain liabilities of TeleNoticias for approximately $5.75
million, which resulted in a loss on disposal of TeleNoticias of $2.4 million.
5. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1997
------------ ------------
<S> <C> <C>
Land................................................. $ 4,727,000 $ 4,727,000
Buildings............................................ 18,965,000 19,333,000
Broadcast and other equipment........................ 43,463,000 53,152,000
Satellite transponder................................ 6,999,000 6,999,000
Leasehold improvements............................... 9,436,000 10,846,000
------------ ------------
83,590,000 95,057,000
Less accumulated depreciation and amortization....... (19,058,000) (28,455,000)
------------ ------------
$ 64,532,000 $ 66,602,000
============ ============
6. ACCRUED EXPENSES AND OTHER
<CAPTION>
DECEMBER 31,
-------------------------
1996 1997
------------ ------------
<S> <C> <C>
Accrued compensation and commissions................. $ 6,495,000 $ 4,400,000
Accrued agency commissions........................... 6,164,000 5,969,000
Accrued reorganization costs......................... 490,000 --
Accrued interest expense............................. 5,040,000 5,040,000
Other accrued expenses............................... 9,295,000 7,352,000
------------ ------------
$ 27,484,000 $ 22,761,000
============ ============
7. LONG-TERM DEBT
<CAPTION>
DECEMBER 31,
-------------------------
1996 1997
------------ ------------
<S> <C> <C>
10.5% Senior Notes................................... $179,521,000 $185,073,000
10.25% Notes......................................... 159,000 165,000
Revolving credit facility............................ 15,000 3,843,000
------------ ------------
179,695,000 189,081,000
Less current portion................................. -- --
------------ ------------
$179,695,000 $189,081,000
============ ============
</TABLE>
F-10
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Significant terms of the Company's debt agreements are as follows:
10.5% Senior Notes: On February 26, 1996, the Company completed the sale of
$192 million in aggregate principal amount of the 10.5% Senior Notes which
are unsecured obligations of the Company. The 10.5% Senior Notes were
issued at a discount and were structured to produce a yield to maturity of
10.5% per annum. The 10.5% Senior Notes require semi-annual interest
payments at the rate of 7% per annum on their principal amount at maturity
through and including February 15, 1999, and after such date will bear
interest at a rate of 10.5% per annum on their principal amount at
maturity. The principal balance is due in its entirety on February 26,
2006.
10.25% Notes: On December 30, 1994, the Company consummated a financial
restructuring pursuant to a plan of reorganization under chapter 11 of the
Bankruptcy Code (the "Plan") and issued the 10.25% Notes pursuant to the
Plan. The 10.25% Notes were recorded at their fair value of $100,524,000
(principal amount of $116,889,000) at December 31, 1994, reflecting an
effective interest rate of 13.34%, based upon market trading activity at
the time of consummation of the Plan. The 10.25% Notes are unsecured
obligations of the Company bearing interest from December 31, 1994, payable
semi-annually, and maturing December 30, 2001. As discussed above, on
February 26, 1996 the Company completed the sale of $192 million in
aggregate principal amount of 10.5% Senior Notes, the proceeds of which
were used primarily for the Acquisition and to repurchase $116,705,500
principal amount of the 10.25% Notes tendered in the repurchase offering,
representing approximately 99.8% of the aggregate outstanding principal
amount of the 10.25% Notes.
Revolving Credit Facility: The Revolving Credit Facility ("Credit
Facility") provides for borrowings of up to $20 million, which is subject
to an accounts receivable borrowing base. Approximately $15.0 million was
available at December 31, 1997 after giving effect to a $1.2 million
standby letter of credit which was issued to secure an office lease.
Interest accrues at a rate of prime plus 1.75% (10.25% and 10% at December
31, 1997 and 1996, respectively, and averaged 10.19% for 1997 and 10% for
1996). The agreement expires December 30, 1999 and is cancelable at the
Company's option prior to expiration upon payment of an early termination
fee, except under certain conditions. The Company is required to pay a fee
of 0.5% per annum based on the average unborrowed portion of the Credit
Facility and other annual fees and expenses. The Credit Facility is secured
by substantially all U.S. assets of the Company and does not require
compensating balances.
The 10.5% Senior Notes, 10.25% Notes, and Credit Facility agreements contain
certain covenants which, among other things, require the Company to maintain
certain financial ratios and impose on the Company certain limitations or
prohibitions on: (i) the incurrance of indebtedness or the guarantee or
assumption of indebtedness of another; (ii) the creation or incidence of
mortgages, pledges or security interests on the property or assets of the
Company or any of its subsidiaries; (iii) the sale of assets of the Company or
any of its subsidiaries; (iv) the merger or consolidation of the Company; (v)
the payment of dividends or the redemption or repurchase of any capital stock
of the Company; and (vi) investments and acquisitions.
The Purchaser has received commitments from financial institutions and its
stockholders in an amount sufficient to fund the Merger. Terms of any new
financing related to the Merger may require existing debt to be repaid. The
Purchaser has not yet determined whether it will refinance the 10.5% Senior
Notes and the 10.25% Notes. The Revolving Credit Facility will likely be
refinanced if the Merger is consummated.
Interest paid was $14,312,000, $8,667,000 and $12,810,000 for the years
ended 1997, 1996 and 1995, respectively.
F-11
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. INCOME TAXES
The Company and its domestic subsidiaries file a consolidated federal income
tax return. The Company files a separate Puerto Rico income tax return for its
operations in Puerto Rico. The income tax provision consisted of:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Puerto Rico (a)........................... $3,379,000 $3,473,000 $3,794,000
Federal, state and other.................. 140,000 406,000 407,000
---------- ---------- ----------
$3,519,000 $3,879,000 $4,201,000
========== ========== ==========
</TABLE>
(a) Represents a provision for withholding tax related to intercompany
interest.
The Company paid $708,000, $1,790,000 and $1,534,000 for withholding taxes
related to its operations in Puerto Rico in 1997, 1996 and 1995, respectively.
In addition, the Company paid federal and state income and franchise and
foreign withholding taxes of $289,000, $514,000 and $190,000 in 1997, 1996 and
1995, respectively.
The tax effects comprising the Company's net deferred taxes as of December
31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1997
------------ ------------
<S> <C> <C>
Deferred Tax Assets:
Net operating loss carryforwards ("NOLs")..... $ 84,459,000 $ 88,449,000
Capital loss carryforward..................... 8,827,000 8,827,000
Amortization of FCC broadcast licenses........ 28,948,000 27,009,000
Other......................................... 7,998,000 8,808,000
------------ ------------
130,232,000 133,093,000
------------ ------------
Deferred Tax Liabilities:
Amortization of FCC broadcast licenses........ (50,443,000) (49,608,000)
Accelerated depreciation...................... (1,743,000) (303,000)
------------ ------------
(52,186,000) (49,911,000)
------------ ------------
Net deferred tax asset.......................... 78,046,000 83,182,000
Valuation allowance............................. (78,046,000) (83,182,000)
------------ ------------
Net deferred tax................................ $ -- $ --
============ ============
</TABLE>
F-12
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Limitations imposed by Section 382 of the Internal Revenue Code limit the
amount of NOLs and capital loss carryforwards which will be available to
offset future U.S. taxable income to approximately $6,600,000 annually, or a
total of $72,600,000 from 1998 through 2008, except in certain circumstances.
The limitations only apply to $147,771,000 and $22,633,000 of the Company's
U.S. NOLs and capital loss carryforwards, respectively, incurred before
December 31, 1994. The Company has approximately $61,707,000 of additional
U.S. NOLs that are not subject to limitations.
As there is no assurance that the Company will generate sufficient earnings
to utilize its available tax assets, including its NOLs, a valuation allowance
has been established to offset the existing net deferred tax asset.
The Company has NOLs expiring as follows:
<TABLE>
<CAPTION>
U.S.
- -------------------------------------
<S> <C>
2002.................... $ 19,472,000
2003.................... 43,317,000
2004.................... 31,103,000
2005.................... 6,262,000
2006.................... 31,799,000
2007.................... 26,942,000
2008.................... 8,676,000
2010.................... 12,334,000
2011.................... 22,444,000
2012.................... 7,129,000
------------
$209,478,000
============
</TABLE>
<TABLE>
<CAPTION>
COMMONWEALTH OF
PUERTO RICO
- ------------------------------------
<S> <C>
1998.................... $ 5,973,000
1999.................... 5,657,000
2000.................... 3,402,000
2001.................... 1,931,000
2002.................... 313,000
2004.................... 39,000
-----------
$17,315,000
===========
</TABLE>
The Company also has state tax NOLs in various jurisdictions.
The Company's 1994 and 1995 federal income tax returns are currently under
examination by the Internal Revenue Service ("IRS"). To date, the IRS has not
communicated any proposed adjustments to the Company. Assessments, if any, are
not expected to have a material adverse effect on the Company's consolidated
financial position or results of operations.
9. COMMON STOCK AND WARRANTS
The Company has one class of Common Stock, $.01 par value, which is divided
into Series A Common Stock and Series B Common Stock. Each share of Common
Stock entitles the holder to one vote on all matters brought before the Annual
Meeting of Stockholders, except that, under the Company's Restated Certificate
of Incorporation, the majority of the Board of Directors will be elected by
the holders of the Series B Common Stock. Series B Common Stock converts to
Series A Common Stock upon sale to an unaffiliated party and upon certain
other conditions.
Pursuant to the Plan, 639,750 warrants were issued, entitling the holders of
each warrant to purchase one share of Series A common stock at $7 per share.
These warrants are exercisable from December 30, 1994 and expire on December
30, 1999. There were 571,795 warrants outstanding at December 31, 1997. Also
pursuant to the Plan, 416,667 warrants were issued to Reliance Group Holdings,
Inc. and its affiliates ("Reliance"), which are all outstanding. Each warrant
entitles the holder to purchase one share of Series A common stock at $7.19
per share and the warrants are exercisable in three equal annual installments
commencing December 30, 1995, expiring five years from the date they become
exercisable and all are currently exercisable. A complaint was
F-13
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
filed against the Company by Reliance on March 2, 1998 alleging breach of a
registration rights agreement relating to the warrants issued to Reliance. The
Company does not believe it has breached the agreement and intends to contest
the action vigorously. The warrants contain certain antidilutive provisions in
the event of a change in the Company's capitalization. If the Merger is
consummated, each warrant holder will receive, subject to any required
withholding of taxes, a cash payment equal to the product of (i) the total
number of shares then subject to each warrant multiplied by (ii) the excess of
the merger consideration over the exercise price per share subject to each
warrant. By virtue of the foregoing treatment of the warrants, all these
warrants will cease to exist.
10. EMPLOYEE RETIREMENT AND INCENTIVE PLANS
The Company maintains qualified defined contribution retirement and savings
plans for its U.S. employees. The contributions to these plans totaled
$549,000, $527,000 and $520,000 in 1997, 1996 and 1995, respectively.
Pursuant to the Plan, the Company adopted a Stock Plan (the "Stock Plan")
whereby key employees may be granted restricted stock or options to acquire up
to 1,000,000 shares of Series A common stock, exercisable for a maximum term
of 10 years. The Stock Plan is administered by a committee comprised of
independent members of the Company's board of directors.
During 1995, the Company issued options to purchase 672,500 shares of Series
A common stock, with exercise prices ranging from $10.00 to $14.625 per share,
which was their current fair market value, to officers of the Company. Also
during 1995, a former officer was issued separate options to purchase 150,000
shares of Series A common stock with an exercise price of $7.00 per share,
which were exercised on August 23, 1996.
During 1996, the Company issued options to purchase 90,000 shares of Series
A common stock, with exercise prices ranging from $19.125 to $29.875 per
share, which was their current fair market value to officers and a key
employee of the Company.
During 1997, the Company issued options to purchase an additional 235,500
shares of Series A common stock, with exercise prices ranging from $24.375 to
$33.75 per share, which was their current fair market value to officers and
key employees of the Company. The options vest over various periods, and in
certain cases, vesting is dependent on the Company achieving certain
performance targets.
In 1996, the Company adopted the 1996 Non-Employee Director Stock Option
Plan ("Director Plan") whereby each non-management director will receive an
annual grant of options to purchase 2,500 shares of the Company's Series A
Common Stock. Stock issued pursuant to the Director Plan may not exceed
100,000 shares. The exercise price shall be equal to the fair market value of
the Company's underlying common stock at the date of grant, one-third of the
granted options vest on each anniversary date and extend for a period of ten
years. The Company issued options to purchase 20,000 shares of Series A common
stock on each of June 12, 1996 and 1997 at an exercise price of $24.75 and
$24.375, respectively.
Certain options issued pursuant to the Stock Plan and Director Plan will
become immediately exercisable upon a "change of control transaction" (as
defined in the respective stock option agreements). The consummation of the
Merger would constitute a "change of control transaction" under certain of
these agreements.
If the Merger is consummated, each holder of a then outstanding and
unexercised option issued pursuant to the Company's Stock Plan or its Director
Plan that entitles the holder thereof to purchase shares of common stock,
whether or not such option is then presently exercisable, will be entitled to
receive, in settlement of such option, subject to any required withholding of
taxes, a cash payment equal to the product of (i) the total number of shares
then subject to each such option multiplied by (ii) the excess of the merger
consideration over the exercise price per share subject to each option. By
virtue of the foregoing treatment of such options, all these options will
cease to exist.
F-14
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company accounts for employee stock options under Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"),
and related interpretations. However, pro forma information regarding net
income and earnings per share is required by Financial Accounting Standards
Board Statement No. 123, "Accounting for Stock-Based Compensation" ("FAS
123"), and accordingly has been determined as if the Company had accounted for
its employee stock options under the fair value method of FAS 123. The fair
value for these options was estimated at the date of grant using a Black-
Scholes option pricing model with the following weighted-average assumptions
for 1996, 2001, 2002 and 2003, respectively: risk-free interest rates of 5.0%,
6.5%, 6.6% and 5.5%; no dividend yields; a volatility factor of the expected
market price of the Company's common stock of .41 for options granted during
1995 and 1996, and .31 for options granted during 1997; and a weighted-average
expected life of the options of 6 years.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information assuming the implementation of the fair value method of FAS
123 follows:
<TABLE>
<CAPTION>
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
Pro forma loss before extraordinary
item............................... $(11,470,000) $ (2,485,000) $(15,672,000)
Extraordinary item................ -- (17,243,000) --
------------ ------------ ------------
Net loss.......................... $(11,470,000) $(19,728,000) $(15,672,000)
============ ============ ============
Pro forma net loss per share:
Loss before extraordinary item.... $ (1.15) $ (.25) $ (1.54)
Extraordinary item................ -- (1.71) --
------------ ------------ ------------
Net loss.......................... $ (1.15) $ (1.96) $ (1.54)
============ ============ ============
</TABLE>
A summary of the Company's stock option activity and related information for
the years ended December 31 follows:
<TABLE>
<CAPTION>
1995 1996 1997
------------------------ ------------------------ -------------------------
NUMBER WEIGHTED NUMBER WEIGHTED WEIGHTED
OF AVERAGE OF AVERAGE NUMBER OF AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
-------- -------------- -------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Shares under option at
beginning of year...... 600,000 $ 7.00 822,500 $10.09 782,500 $12.64
Granted................. 822,500 10.09 110,000 24.02 255,500 30.10
Exercised............... -- -- (150,000) 7.00 -- --
Canceled or lapsed...... (600,000) 7.00 -- -- (5,833) 21.36
-------- -------- ---------
Shares under option at
end of year............ 822,500 $10.09 782,500 $12.64 1,032,167 $16.91
======== ======== =========
Exercisable at end of
year................... 150,000 $ 7.00 143,125 $10.13 543,282 $11.98
Weighted-average fair
value of options
granted during the
year................... $ 5.44 $13.08 $12.48
</TABLE>
Exercise prices for options outstanding as of December 31, 1997 ranged from
$10.00 to $33.75 which represented the fair market value of the underlying
stock at the date of grant. The weighted average remaining contractual life of
those options is 8.0 years.
F-15
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. CONTINGENCIES AND COMMITMENTS
The Company and its subsidiaries are involved in a number of actions and are
contesting the allegations of the complaints in each pending action and
believe, based on current knowledge, that the outcome of all such actions will
not have a material adverse effect on the Company's consolidated financial
statements (See Note 2).
The Company is obligated under various leases, some of which contain renewal
options and provide for cost escalation payments. At December 31, 1997, future
minimum rental payments under such leases are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
----------- ----------
<S> <C> <C>
1998................................................ $ 3,720,000 $1,271,000
1999................................................ 3,327,000 1,380,000
2000................................................ 2,434,000 1,380,000
2001................................................ 1,650,000 1,380,000
2002................................................ 1,335,000 1,380,000
2003 and later...................................... 4,849,000 575,000
----------- ----------
Total minimum lease payments........................ $17,315,000 7,366,000
===========
Less amount representing interest................... (1,423,000)
----------
Present value of minimum lease payments (includes
current
portion of $823,000)............................... $5,943,000
==========
</TABLE>
Rent expense was $3,881,000, $5,264,000 and $4,440,000 in 1997, 1996 and
1995, respectively.
Certain of the Company's affiliation agreements, which typically last two to
five years, provide for compensation to affiliates.
The Company has employment agreements with certain officers pursuant to
which the Company has commitments for compensation aggregating $2,160,000,
$2,175,000, $2,000,000 and $333,000 for 1998, 1999, 2000 and 2001
respectively. These agreements provide for additional compensation based upon
the achievement of certain performance targets. In addition, each employment
agreement provides for compensation in the event such officer's employment is
terminated under certain circumstances.
The Company has contracted for certain audience measurement services in the
U.S. and Puerto Rico. The Company is committed to pay $7,208,000, $7,625,000,
$7,308,000 and $230,000 in 1998, 1999, 2000 and 2001, respectively.
The Company has certain programming and news production contracts for which
the Company is committed to pay $10,989,000, $7,068,000, $6,964,000 and
$1,750,000 in 1998, 1999, 2000 and 2001, respectively.
If, under certain conditions, the Company terminates the merger agreement
with the Purchaser, the Company may be required to pay a termination fee of
$15 million to the Purchaser and reimburse the Purchaser up to an aggregate of
$2.5 million in expenses.
12. TRANSACTIONS WITH AFFILIATES
The Company paid compensation pursuant to an affiliation agreement of
approximately $1,433,000, $1,350,000 and $1,225,000 in 1997, 1996 and 1995,
respectively, to a broadcast television station affiliate, in which the
President and Chief Executive Officer of the Company has a financial interest.
F-16
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In February 1996, the Company completed the offering of its 10.5% Senior
Notes in which BT Alex. Brown Incorporated was a co-manager and received an
underwriting fee. A director of the Company is a Managing Director of BT Alex.
Brown Incorporated.
Management believes that the transactions described above were on terms no
less favorable to the Company than could be obtained from unaffiliated
parties.
Apollo Investment Fund III, L.P. and Bastion Capital Fund, L.P., along with
other entities, have ownership interests in the Purchaser in the proposed
Merger transaction. Certain directors of the Company are affiliated with
Apollo Investment Fund III, L.P. and Bastion Capital Fund, L.P., and these, or
affiliated entities, are significant stockholders in the Company. The
Company's board of directors, relying upon the unanimous recommendation of a
special committee of the board of directors comprised of directors who have no
financial interest in the Purchaser or its affiliates, has determined that the
Merger is fair to and in the best interests of the Company's public
stockholders.
13. FINANCIAL INSTRUMENTS
Pursuant to the Financial Accounting Standards Board Statement No. 107,
"Disclosures about Fair Values of Financial Instruments," the estimated fair
values of the Company's financial instruments are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1997
------------------------- -------------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cash and cash equiva-
lents.................... $ 12,587,000 $ 12,587,000 $ 2,378,000 $ 2,378,000
Accounts receivable....... 51,824,000 51,824,000 54,155,000 54,155,000
Long-term debt:
10.5% Senior Notes...... 179,521,000 190,080,000 185,073,000 201,600,000
10.25% Notes............ 159,000 183,000 165,000 183,000
Credit facility......... 15,000 15,000 3,843,000 3,843,000
</TABLE>
The carrying amount reported in the consolidated balance sheet for cash and
cash equivalents and accounts receivable approximates fair value because of
the short-term maturity of these financial instruments. The revolving credit
facility approximates fair value because it is a variable rate instrument.
Estimated fair value for the 10.5% Notes is based upon market prices at
December 31, 1997. Estimated fair value for the 10.25% Notes is based upon the
face amount of such Notes.
F-17
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
1996 QUARTER
--------------------------------------
FIRST SECOND THIRD FOURTH (C) YEAR
-------- -------- ------- ---------- --------
<S> <C> <C> <C> <C> <C>
Net revenue.................. $ 38,267 $ 54,311 $51,002 $59,133 $202,713
======== ======== ======= ======= ========
Operating income (loss)...... $ (3,246) $ 8,474 $ 8,099 $15,965 $ 29,292
======== ======== ======= ======= ========
Income (loss) before
extraordinary item $ (9,691) $ (2,190) $ 1,428 $ 9,274 $ (1,179)
======== ======== ======= ======= ========
Net income (loss)............ $(26,934) $ (2,190) $ 1,428 $ 9,274 $(18,422)
======== ======== ======= ======= ========
Net income (loss) per share
(a)......................... $ (2.69) $ (.22) $ .13 $ .83 $ (1.83)
======== ======== ======= ======= ========
Common stock price range (b):
High....................... $ 21.00 $ 25.625 $35.375 $ 34.50
Low........................ $ 13.75 $ 17.00 $ 20.50 $26.375
</TABLE>
<TABLE>
<CAPTION>
1997 QUARTER
------------------------------------
FIRST SECOND THIRD FOURTH YEAR
-------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net revenue.................... $ 39,100 $ 51,681 $48,646 $58,161 $197,588
======== ======== ======= ======= ========
Operating income (loss)........ $ (5,254) $ 5,163 $ 3,674 $12,542 $ 16,114
======== ======== ======= ======= ========
Net income (loss).............. $(12,057) $ (1,731) $(3,385) $ 3,729 $(13,444)
======== ======== ======= ======= ========
Net income (loss) per share
(a)........................... $ (1.19) $ (0.17) $ (0.33) $ .33 $ (1.32)
======== ======== ======= ======= ========
Common stock price range (b):
High......................... $ 32.625 $ 28.875 $ 36.50 $42.375
Low.......................... $ 27.375 $ 18.50 $23.625 $31.375
</TABLE>
(a) Weighted average shares outstanding for the third and fourth quarters of
1996 and the fourth quarter of 1997 is adjusted for the incremental shares
attributed to outstanding options and warrants to purchase common stock.
Basic earnings per share for the third and fourth quarters of 1996 and the
fourth quarter of 1997 was $.14, $.91 and $.37, respectively. Net income
per share for the third and fourth quarters of 1996 have been restated to
comply with FAS 128.
(b) The Company's Series A common stock trades on the Nasdaq National Market
tier of The Nasdaq Stock Market under the symbol TLMD. The Company's
warrants (exclusive of the warrants issued to Reliance) trade on the
Nasdaq SmallCap Market tier of The Nasdaq Stock Market under the symbol
TLMDW.
(c) Includes the impact of a significant additional provision to the allowance
for doubtful accounts and adjustments to certain expense accruals. The net
impact of these was a reduction in earnings of $1.0 million.
F-18
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------------ --------------------------
1997 1998 1997 1998
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Net revenue.............. $51,681,000 $56,930,000 $ 90,781,000 $101,536,000
----------- ----------- ------------ ------------
Costs and expenses:
Direct operating costs.. 25,499,000 26,688,000 49,577,000 53,099,000
Selling, general and
administrative expenses
other than network and
corporate.............. 10,075,000 10,673,000 19,863,000 20,615,000
Network expenses........ 6,127,000 7,945,000 12,063,000 15,156,000
Corporate expenses...... 1,264,000 1,723,000 2,326,000 3,343,000
Depreciation and
amortization........... 3,553,000 3,880,000 7,043,000 7,478,000
----------- ----------- ------------ ------------
46,518,000 50,909,000 90,872,000 99,691,000
----------- ----------- ------------ ------------
Operating income (loss).. 5,163,000 6,021,000 (91,000) 1,845,000
Merger related expenses.. -- (1,295,000) -- (2,812,000)
Interest expense--net.... (5,206,000) (5,353,000) (10,210,000) (10,681,000)
----------- ----------- ------------ ------------
Loss before income taxes
and minority interest... (43,000) (627,000) (10,301,000) (11,648,000)
Income tax provision..... (986,000) (1,172,000) (2,083,000) (2,337,000)
Minority interest........ (702,000) (771,000) (1,404,000) (1,542,000)
----------- ----------- ------------ ------------
Net loss................. $(1,731,000) $(2,570,000) $(13,788,000) $(15,527,000)
=========== =========== ============ ============
Basic net loss per
share................... $ (.17) $ (.25) $ (1.36) $ (1.50)
=========== =========== ============ ============
Weighted average shares
outstanding............. 10,166,000 10,478,000 10,161,000 10,373,000
=========== =========== ============ ============
</TABLE>
See notes to consolidated financial statements
F-19
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
ASSETS 1997 1998
------ ------------ ------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents........................ $ 2,378,000 $ 2,825,000
Accounts receivable, less allowance for doubtful
accounts of $7,583,000 and $8,414,000........... 54,155,000 50,212,000
Television programming........................... 15,154,000 17,622,000
Prepaid expenses and other....................... 9,287,000 8,074,000
------------ ------------
Total current assets........................... 80,974,000 78,733,000
Property and equipment, net........................ 66,602,000 66,930,000
Television programming............................. 6,779,000 6,419,000
Other assets....................................... 7,365,000 6,770,000
Broadcast licenses and reorganization value in ex-
cess of amounts allocable to identifiable assets,
net............................................... 128,366,000 126,133,000
------------ ------------
$290,086,000 $284,985,000
============ ============
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities:
Accounts payable................................. $ 7,726,000 $ 12,041,000
Accrued expenses and other....................... 22,761,000 24,350,000
Television programming obligations............... 5,911,000 6,376,000
------------ ------------
Total current liabilities...................... 36,398,000 42,767,000
Long-term debt..................................... 189,081,000 188,255,000
Capital lease obligations.......................... 5,120,000 4,627,000
Television programming obligations................. 399,000 343,000
Other liabilities.................................. 23,845,000 25,884,000
------------ ------------
254,843,000 261,876,000
------------ ------------
Minority interest.................................. 5,334,000 5,380,000
------------ ------------
Contingencies and commitments
Common stockholders' equity:
Series A Common Stock, $.01 par value, 14,388,394
shares authorized, 7,129,614 and 7,598,112
shares outstanding at December 31, 1997 and June
30, 1998........................................ 71,000 76,000
Series B Common Stock, $.01 par value, 5,611,606
shares authorized, 3,088,341 and 3,086,498
shares outstanding at December 31, 1997 and June
30, 1998........................................ 31,000 31,000
Additional paid-in capital......................... 71,761,000 75,103,000
Accumulated deficit................................ (41,954,000) (57,481,000)
------------ ------------
29,909,000 17,729,000
------------ ------------
$290,086,000 $284,985,000
============ ============
</TABLE>
See notes to consolidated financial statements
F-20
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCKHOLDERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF SHARES
OUTSTANDING COMMON STOCK
------------------- -----------------
SERIES A SERIES B SERIES A SERIES B ADDITIONAL COMMON
COMMON COMMON COMMON COMMON PAID-IN ACCUMULATED STOCKHOLDERS'
STOCK STOCK STOCK STOCK CAPITAL DEFICIT EQUITY
--------- --------- -------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1997................... 7,129,614 3,088,341 $71,000 $31,000 $71,761,000 $(41,954,000) $29,909,000
Net loss................ -- -- -- -- -- (15,527,000) (15,527,000)
Warrant conversions..... 466,655 -- 5,000 -- 3,342,000 -- 3,347,000
Stock conversions....... 1,843 (1,843) -- -- -- -- --
--------- --------- ------- ------- ----------- ------------ -----------
Balance, June 30, 1998.. 7,598,112 3,086,498 $76,000 $31,000 $75,103,000 $(57,481,000) $17,729,000
========= ========= ======= ======= =========== ============ ===========
</TABLE>
See notes to consolidated financial statements
F-21
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
--------------------------
1997 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................... $(13,788,000) $(15,527,000)
Charges not affecting cash:
Depreciation and amortization.................... 7,043,000 7,478,000
Interest accretion............................... 2,710,000 2,998,000
Minority interest................................ 1,404,000 1,542,000
Changes in assets and liabilities:
Accounts receivable.............................. 3,312,000 3,943,000
Television programming........................... (2,544,000) (2,108,000)
Television programming obligations............... 933,000 409,000
Accounts payable and accrued expenses and other.. (8,483,000) 9,619,000
------------ ------------
Cash flows provided from (used in) operating
activities.................................... (9,413,000) 8,354,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITY:
Additions to property and equipment................ (6,424,000) (5,589,000)
------------ ------------
Cash flows used in investing activity.......... (6,424,000) (5,589,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of warrants................. 94,000 3,347,000
Payments of obligations under capital leases....... (356,000) (345,000)
Borrowings under credit facility................... 6,288,000 5,397,000
Payments under credit facility..................... (25,000) (9,221,000)
Payments to minority interest partner.............. (1,360,000) (1,496,000)
Other.............................................. (381,000) --
------------ ------------
Cash flows provided from (used in) financing
activities.................................... 4,260,000 (2,318,000)
------------ ------------
Increase (decrease) in cash and cash equivalents... (11,577,000) 447,000
Cash and cash equivalents, beginning of period..... 12,587,000 2,378,000
------------ ------------
Cash and cash equivalents, end of period........... $ 1,010,000 $ 2,825,000
============ ============
Supplemental cash flow information:
Interest paid.................................... $ 6,754,000 $ 7,090,000
============ ============
Income taxes paid, including Puerto Rico
withholding taxes............................... $ 878,000 $ 163,000
============ ============
</TABLE>
See notes to consolidated financial statements
F-22
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited consolidated
financial statements of Telemundo Group, Inc. and its subsidiaries
(collectively "Telemundo" or the "Company") include all adjustments
(consisting of normal recurring accruals only) necessary to present fairly the
Company's financial position at June 30, 1998, and the results of operations
and cash flows for all periods presented. The results of operations for
interim periods are not necessarily indicative of the results to be obtained
for the entire year.
For a summary of significant accounting policies, which have not changed from
December 31, 1997, and additional financial information, see the Company's
Annual Report on Form 10-K for the year ended December 31, 1997.
2. BASIC NET LOSS PER SHARE
Basic net loss per share for the three and six months ended June 30, 1998 and
1997 is calculated by dividing the net loss by the weighted average number of
shares outstanding during each period. Basic earnings per share excludes any
dilutive effects of stock options, warrants and convertible securities.
Diluted earnings per share is not presented as the effect of the 1,553,974
stock options and warrants is antidilutive.
3. MERGER TRANSACTION
On August 12, 1998, the Company announced the completion of the merger (the
"Merger") of TLMD Acquisition Co., a wholly-owned subsidiary of Telemundo
Holdings, Inc. ("Holdings"), with and into the Company, with the Company
becoming a wholly-owned subsidiary of Holdings. Holdings is owned by Station
Partners, LLC, Sony Pictures Entertainment Inc. and Liberty Media Corporation
(collectively the "Purchaser"). Station Partners, LLC is a company owned by
Apollo Investment Fund III, L.P. and Bastion Capital Fund, L.P.
Each outstanding share of Common Stock, par value $.01 per share, of the
Company (other than shares of Common Stock held by Holdings or in the treasury
of the Company or by any wholly-owned subsidiary of the Company, or by
stockholders of the Company who exercise and perfect their statutory appraisal
rights under Delaware law) was converted into the right to receive $44.12537
in cash per share.
Substantially simultaneously with the completion of the Merger, TLMD
Acquisition Co. announced that it had accepted for payment an aggregate of
$191,675,000 principal amount of the outstanding 10.5% Senior Notes Due 2006
(the "10.5% Notes") of the Company (representing 99.8% of such issue) tendered
in connection with a tender offer by TLMD Acquisition Co. for the 10.5% Notes
pursuant to an Offer to Purchase and Consent Solicitation Statement, dated
July 24, 1998, as amended.
In November 1997 after the announcement of the Merger, the Company and its
directors were named as defendants in six purported class actions filed on
behalf of Telemundo's public stockholders. The suits are virtually identical
and allege that Telemundo and its directors violated fiduciary duties owed to
Telemundo's public stockholders by entering into the merger agreement with the
Purchaser. The Company's board of directors, relying upon the unanimous
recommendation of a special committee of the board of directors comprised of
directors who have no financial interest in the Purchaser or its affiliates,
has determined that the Merger is fair to and in the best interests of the
Company's public stockholders. The Company and its directors intend to
vigorously defend the lawsuits, and believe that the outcome of the suits will
not have a material adverse effect on the Company's consolidated financial
statements.
F-23
<PAGE>
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE SUCH DATE.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 1
Risk Factors............................................................. 17
Use of Proceeds.......................................................... 26
The Exchange Offer....................................................... 27
Capitalization........................................................... 34
Selected Historical Consolidated Financial Data.......................... 35
Unaudited Pro Forma Condensed Consolidated Financial Statements.......... 37
Management's Discussion and Analysis of Results of Operations and
Financial Condition..................................................... 45
Business................................................................. 53
Management............................................................... 69
Principal Stockholders................................................... 75
Certain Relationships and Related Transactions........................... 76
Description of Certain Indebtedness...................................... 81
Description of the Notes................................................. 83
Book-Entry, Delivery and Form............................................ 112
Plan of Distribution..................................................... 116
Legal Matters............................................................ 117
Experts.................................................................. 117
Index to Financial Statements............................................ F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
LOGO
TELEMUNDO HOLDINGS, INC.
$218,838,000
11 1/2% Senior Discount Notes Due 2008
PROSPECTUS
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to Section 102(b)(7) of the Delaware General Corporation Law (the
"DGCL"), Article Fifth of the Company's Amended and Restated Certificate of
Incorporation, as amended (the "Certificate of Incorporation") eliminates the
liability of the Company's directors to the Company or its stockholders,
except for liabilities related to breach of duty of loyalty, actions or
omissions not in good faith and certain other liabilities.
Section 145 of the DGCL provides, in substance, that Delaware corporations
shall have the power, under specified circumstances, to indemnify their
directors, officers, employees and agents in connection with actions, suits or
proceedings brought against them by a third party or in the right of the
corporation, by reason of the fact that they were or are such directors,
officers, employees or agents, against expenses incurred in any such action,
suit or proceeding. The DGCL also provides that Delaware corporations may
purchase insurance on behalf of any such director, officer, employee or agent.
The Company also maintains officers' and directors' liability insurance which
insures against liabilities that officers and directors of the Company may
incur in such capacities.
Reference is made to sections of the Registration Rights Agreement filed as
Exhibit 4.3 to this Registration Statement which provides for indemnification
for the officers and directors of the Company and certain control persons of
the Company against certain liabilities, including liabilities caused by any
untrue statement or alleged untrue statement of a material fact or omission or
alleged omission of a material fact in any registration statement, preliminary
prospectus, prospectus or any amendments thereto.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<C> <S>
2.1 Merger Agreement dated as of November 24, 1997 by and among TLMD
Station Group, Inc., TLMD Acquisition Co. and Telemundo Group, Inc.
3.1 The Company's Amended and Restated Certificate of Incorporation.
3.2 The Company's Restated Bylaws.
4.1 Indenture dated as of August 12, 1998 between the Company, as issuer,
and Bank of Montreal Trust Company, as trustee.
4.2 Form of 11 1/2% Senior Discount Notes due 2008.
4.3 Registration Rights Agreement dated as of August 12, 1998 between the
Company, Credit Suisse First Boston Corporation and CIBC Oppenheimer
Corp.
5.1 Legal opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P. concerning
the legality of the Notes.
10.1 Memorandum of Agreement Re: Umbrella Affiliation Agreement dated as
of August 12, 1998 between Telemundo Network Group LLC and Telemundo
Group, Inc.*
10.2 Memorandum of Agreement Re: Cable Payments dated as of August 12,
1998 between
Telemundo Network Group LLC and Telemundo Group, Inc.
10.3 Form of High Power Station Affiliation Agreement.
10.4 Stockholders Agreement dated as of August 12, 1998 between the
Company, Apollo Investment Fund III, L.P., Bastion Capital Fund L.P.,
Liberty Media Corporation, Sony Pictures Entertainment Inc. and
Station Partners, LLC.
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
10.5 Asset Purchase Agreement dated as of August 12, 1998 between
Telemundo Group, Inc., Telemundo Network Inc. and Telemundo
Network Group LLC.
10.6 Credit Agreement dated as of August 4, 1998 between TLMD
Acquisition Co., as borrower, the Company, as parent guarantor,
the Lenders (as named therein), Credit Suisse First Boston
Corporation and Canadian Imperial Bank of Commerce.
10.7 Pledge Agreement dated as of August 12, 1998 between Telemundo
Group, Inc., the Company, the Subsidiary Pledgors (as named
therein) and Credit Suisse First Boston Corporation.
10.8 Security Agreement dated as of August 12, 1998 between Telemundo
Group, Inc., the Company and the Subsidiary Guarantors (as named
therein).
10.9 Subsidiary Guarantee Agreement dated as of August 12, 1998 between
the Subsidiary Guarantors (as defined therein) and Credit Suisse
First Boston Corporation.
10.10 Amended and Restated Employment Agreement dated as of September
10, 1997 between the Company and Roland A. Hernandez.+
10.11 Amended and Restated Employment Agreement dated as of September
10, 1997 between the Company and Peter J. Housman II.+
10.12 Employment Agreement dated as of September 10, 1997 between the
Company and Osvaldo F. Torres.+
12.1 Computation of Earnings to Fixed Charges.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (included in
Exhibit 5.1).
24.1 Powers of Attorney (included on signature page hereto).
25.1 Form T-1 Statement of Eligibility and Qualification under the
Trust Indenture Act of 1939, as amended, of Bank of Montreal Trust
Company, as trustee.
27 Financial Data Schedule.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to Brokers, and Other Nominees.
99.4 Form of Letter to Clients.
99.5 Guidelines for Certification of Taxpayer Identification Number on
Form W-9.
</TABLE>
- --------
* Confidential treatment requested for certain portions.
+ Incorporated by reference to the Annual Report on form 10-K dated December
31, 1997 of Telemundo Group, Inc.
(b) Financial Statement Schedules
Schedule II--Valuation and Qualifying Accounts
II-2
<PAGE>
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the DGCL, the Certificate of Incorporation and Bylaws,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in such Securities Act, and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in such Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
items 4, 10(b), 11 or 13 of this form, within one business day receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the Registration Statement through the
date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
the Registration Statement when it became effective.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE UNDERSIGNED
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK,
STATE OF NEW YORK, ON SEPTEMBER 29, 1998.
Telemundo Holdings, Inc.
/s/ Roland A. Hernandez
By: _________________________________
ROLAND A. HERNANDEZ PRESIDENT AND
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Peter J. Housman II and Osvaldo F. Torres his
true and lawful attorneys-in-fact and agents, each acting alone, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any or all amendments to this
Registration Statement, including post-effective amendments, and any
registration statement for the same offering covered by this Registration
Statement that is to be effective upon filing pursuant to rule 462(b) under
the Securities Act, and to file the same, with all exhibits thereto, and all
documents in connection therewith, with the Securities and Exchange
Commission, granting unto attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and thing requisite
and necessary to be done in and about the premises, as fully to all intents
and purposes as he might or could do in person, and hereby ratifies and
confirms all that said attorneys-in-fact and agents, each acting alone, or
their substitute or substitutes, may lawfully do or cause to be done.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
NAME TITLE DATE
/s/ Roland A. Hernandez President, Chief September 29,
- ------------------------------------- Executive Officer 1998
ROLAND A. HERNANDEZ and Director
/s/ Peter J. Housman II Chief Financial September 29,
- ------------------------------------- Officer and 1998
PETER J. HOUSMAN II Treasurer
/s/ Osvaldo F. Torres Vice President, September 29,
- ------------------------------------- General Counsel and 1998
OSVALDO F. TORRES Secretary
/s/ Leon D. Black Director September 29,
- ------------------------------------- 1998
LEON D. BLACK
II-4
<PAGE>
NAME TITLE DATE
/s/ Guillermo Bron Director September 29,
- ------------------------------------ 1998
GUILLERMO BRON
/s/ Brian D. Finn Director September 29,
- ------------------------------------ 1998
BRIAN D. FINN
/s/ Yair Landau Director September 29,
- ------------------------------------ 1998
YAIR LANDAU
/s/ Enrique F. Senior Director September 29,
- ------------------------------------ 1998
ENRIQUE F. SENIOR
/s/ Bruce H. Spector Director September 29,
- ------------------------------------ 1998
BRUCE H. SPECTOR
/s/ Barry Thurston Director September 29,
- ------------------------------------ 1998
BARRY THURSTON
/s/ Edward M. Yorke Director September 29,
- ------------------------------------ 1998
EDWARD M. YORKE
II-5
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- ------------ ----------------------------- ------------- -------------
ADDITIONS
-----------------------------
BALANCE AT CHARGED TO CHARGED TO DEDUCTED
BEGINNING OF PROFIT AND OTHER ACCOUNTS FROM RESERVES BALANCE AT
DESCRIPTION PERIOD LOSS OR INCOME -DESCRIBE -DESCRIBE (A) END OF PERIOD
----------- ------------ -------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31,
1997:
Allowance for doubtful
accounts.............. $5,943 $3,479 $ - $1,839 $7,583
------ ------ --- ------ ------
Year Ended December 31,
1996:
Allowance for doubtful
accounts.............. $2,650 $5,522 $ - $2,229 $5,943
------ ------ --- ------ ------
Year Ended December 31,
1995:
Allowance for doubtful
accounts.............. $2,845 $2,020 $ - $2,215 $2,650
------ ------ --- ------ ------
Year Ended December 31,
1997:
Reserve for TV Program
Exhibition Rights..... $ 612 $1,152 $ - $ 386 $1,378
------ ------ --- ------ ------
Year Ended December 31,
1996:
Reserve for TV Program
Exhibition Rights..... $1,251 $ 295 $ - $ 934 $ 612
------ ------ --- ------ ------
Year Ended December 31,
1995:
Reserve for TV Program
Exhibition Rights..... $1,249 $ 835 $ - $ 833 $1,251
------ ------ --- ------ ------
</TABLE>
- --------
(a) Amounts written off, net of recoveries
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
TLMD STATION GROUP, INC.
TLMD ACQUISITION CO.
AND
TELEMUNDO GROUP, INC.
DATED AS OF NOVEMBER 24, 1997
<PAGE>
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I. DEFINITIONS..................................................... 4
Section 1.1. Definitions................................................ 4
ARTICLE II. THE MERGER..................................................... 8
Section 2.1. The Merger................................................. 8
Section 2.2. Effective Time............................................. 8
Section 2.3. Effects of the Merger...................................... 8
Section 2.4. Certificate of Incorporation and By-Laws................... 8
Section 2.5. Directors.................................................. 8
Section 2.6. Officers................................................... 8
Section 2.7. Conversion of Shares....................................... 8
Section 2.8. Conversion of Sub Common Stock............................. 9
Section 2.9. Dissenting Shares.......................................... 9
Section 2.10. Payment for Shares......................................... 10
Section 2.11. No Further Rights or Transfers............................. 11
Section 2.12. Stock Options.............................................. 11
Section 2.13. Warrants................................................... 11
Section 2.14. Adjustments................................................ 11
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY................. 12
Section 3.1. Organization............................................... 12
Section 3.2. Capitalization............................................. 12
Section 3.3. Authority Relative to This Agreement....................... 13
Section 3.4. No Violation............................................... 13
Section 3.5. SEC Reports; No Undisclosed Liabilities.................... 14
Section 3.6. Proxy Statement; Other Information......................... 14
Section 3.7. Compliance................................................. 15
Section 3.8. Absence of Certain Changes................................. 15
Section 3.9. Certain Fees............................................... 16
Section 3.10. FCC Qualifications......................................... 16
Section 3.11. Section 203................................................ 16
Section 3.12. Litigation................................................. 16
Section 3.13. Intellectual Property...................................... 16
Section 3.14. Labor Matters.............................................. 17
Section 3.15. Employee Benefit Plans: ERISA.............................. 17
Section 3.16. Taxes...................................................... 18
Section 3.17. Affiliation Agreements..................................... 18
Section 3.18. Environmental Matters...................................... 18
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB............... 19
Section 4.1. Organization............................................... 19
Section 4.2. Authority Relative to This Agreement....................... 19
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 4.3. No Violation............................................... 19
Section 4.4. Proxy Statement............................................ 20
Section 4.5. Financing.................................................. 20
Section 4.6. No Prior Activities........................................ 21
Section 4.7. Surviving Corporation after the Merger..................... 21
Section 4.8. Certain Fees............................................... 21
Section 4.9. FCC Qualifications......................................... 21
ARTICLE V. COVENANTS....................................................... 21
Section 5.1. Conduct of Business of the Company......................... 21
Section 5.2. Access to Information...................................... 23
Section 5.3. No Solicitation............................................ 24
Section 5.4. Stockholders' Meeting...................................... 25
Section 5.5. Cooperation................................................ 26
Section 5.6. Public Announcements....................................... 26
Section 5.7. Indemnification and Insurance.............................. 26
Section 5.8. FCC Covenants.............................................. 28
Section 5.9. Notification of Certain Matters............................ 28
Section 5.10. Employee Benefits.......................................... 28
Section 5.11. Acknowledgment of Parent and Sub........................... 29
Section 5.12. Renewal.................................................... 29
ARTICLE VI. CONDITIONS TO CONSUMMATION OF THE MERGER....................... 29
Section 6.1. Conditions to Each Party's Obligation To Effect the Merger. 29
Section 6.2. Conditions to the Obligation of Parent and Sub to Effect
the Merger............................................................... 30
Section 6.3. Conditions to the Obligation of the Company to Effect the
Merger................................................................... 31
ARTICLE VII. TERMINATION; AMENDMENT; WAIVER................................ 31
Section 7.1. Termination................................................ 31
Section 7.2. Certain Actions Prior to Termination....................... 32
Section 7.3. Effect of Termination...................................... 32
Section 7.4. Termination Fees........................................... 32
Section 7.5. Amendment.................................................. 33
Section 7.6. Extension; Waiver.......................................... 33
ARTICLE VIII. MISCELLANEOUS................................................ 33
Section 8.1. Non-Survival of Representations, Warranties and Agreements. 33
Section 8.2. Entire Agreement; Assignment............................... 34
Section 8.3. Validity................................................... 34
Section 8.4. Notices.................................................... 34
Section 8.5. Governing Law.............................................. 36
Section 8.6. Interpretation............................................. 36
Section 8.7. Parties in Interest........................................ 36
Section 8.8. Counterparts............................................... 36
Section 8.9. Expenses................................................... 36
Section 8.10. Obligation of Parent....................................... 36
Section 8.11. Sale of the Company........................................ 37
Section 8.12. Actions by the Company..................................... 37
SIGNATURES................................................................. S-1
</TABLE>
ii
<PAGE>
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "Agreement"), is dated as of November
24, 1997, by and among TLMD Station Group, Inc., a Delaware corporation
("Parent"), TLMD Acquisition Co., a Delaware corporation and a wholly-owned
subsidiary of Parent ("Sub"), and Telemundo Group, Inc., a Delaware
corporation (the "Company").
ARTICLE I.
DEFINITIONS
Section 1.1 Definitions. As used herein, the terms below shall have the
following meanings. Any of such terms, unless the context otherwise requires,
may be used in the singular or plural, depending on the reference.
"Acceptable FCC Order" shall have the meaning set forth in Section 6.1.
"Additional Amount" shall have the meaning set forth in Section 2.7.
"Affiliation Agreements" shall have the meaning set forth in Section 3.17.
"Affirmed Condition" shall have the meaning set forth in Section 6.2(a).
"Agreement" shall have the meaning set forth in the Preamble.
"Alternative Proposal" shall have the meaning set forth in Section 5.3(a).
"Benefit Plan" shall have the meaning set forth in Section 3.15(a).
"By-Laws" shall mean the Amended and Restated By-Laws of the Company in
effect as of the date hereof.
"Certificate of Incorporation" shall mean the Restated Certificate of
Incorporation of the Company in effect as of the date hereof.
"Certificate of Merger" shall have the meaning set forth in Section 2.2.
"Certificates" shall have the meaning set forth in Section 2.10(b).
"Claim" shall have the meaning set forth in Section 5.7(c).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Communications Act" shall mean the Communications Act of 1934, as amended,
and the rules, regulations and policies of the FCC thereunder.
"Company" shall have the meaning set forth in the Preamble.
"Company Complying Certificate" shall have the meaning set forth in Section
6.2(a).
"Company Disclosure Schedule" shall mean the schedule prepared and delivered
by the Company to and for Parent and Sub and dated as of the date hereof,
which sets forth the exceptions to the representations and warranties of the
Company contained herein and certain other information called for by this
Agreement.
"Company Material Adverse Effect" shall mean a material adverse effect on
the financial condition, results of operations or business of the Company and
its Subsidiaries, taken as a whole.
<PAGE>
"Confidentiality Agreement" shall mean, collectively, the confidentiality
agreements between the Financial Advisor, acting on behalf of the Company, and
Liberty Media Corporation, dated as of July 23, 1997, between the Financial
Advisor, acting on behalf of the Company, and Sony Pictures Entertainment
Inc., dated as of April 30, 1997 and as amended as of July 25, 1997, and
between the Financial Advisor, acting on behalf of the Company, and Apollo
Management, L.P., dated as of November 12, 1997.
"Debt Commitment Letters" shall have the meaning set forth in Section 4.5.
"DGCL" shall mean the General Corporation Law of the State of Delaware.
"Dissenting Shares" shall have the meaning set forth in Section 2.9(a).
"Effective Time" shall have the meaning set forth in Section 2.2.
"Environmental Laws" shall have the meaning set forth in Section 3.18.
"Equity Commitments" shall have the meaning set forth in Section 4.5.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" shall have the meaning set forth in Section 3.15(a).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Exchange Agent" shall have the meaning set forth in Section 2.10(a).
"FCC" shall mean the Federal Communications Commission or any successor
agency thereto.
"FCC Order" shall mean an order or decision of the FCC which grants all
consents or approvals required under the Communications Act for the transfer
of control of all FCC licenses held by the Company to Parent and/or Sub and
the consummation of the Merger and the other Transactions, whether or not any
appeal or request for reconsideration or review of such order is pending, or
whether the time for filing any such appeal or request for reconsideration or
review, or for any sua sponte action by the FCC with similar effect, has
expired. For purposes of this definition, the "FCC" shall mean the FCC or its
staff.
"FCC Permits" shall have the meaning set forth in Section 3.7(a).
"Filed SEC Reports" shall have the meaning set forth in Section 3.7(a).
"Financial Advisor" shall mean Lazard Freres & Co. LLC.
"Fund" shall have the meaning set forth in Section 2.10(a).
"Governmental Entity" shall mean any federal, state or local government or
regulatory agency, authority, commission or instrumentality.
"Hazardous Substance" shall have the meaning set forth in Section 3.18.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Indemnified Parties" shall have the meaning set forth in Section 5.7(c).
"Intellectual Property" shall mean: (i) registered and unregistered
trademarks, service marks, slogans, trade names, domain names, logos and trade
dress; (ii) registered and unregistered copyrights, including, but not limited
to, copyrights in software programs, databases, and the content contained on
any Internet site(s); (iii)
2
<PAGE>
software programs and databases; (iv) rights in names, likenesses, images and
other attributes of individuals; and (v) agreements pursuant to which the
Company has obtained the right to use any of the foregoing (together with
other agreements to which the Company or any Subsidiary is a party relating to
the development, acquisition or use of Intellectual Property, "License
Agreements").
"knowledge" shall mean the knowledge, after reasonable inquiry, of the
officers of the Company, Parent or Sub, as applicable, with the title of Vice
President or higher and, with respect to the Company, the general managers of
each of the Stations.
"Letter of Transmittal" shall have the meaning set forth in Section 2.10(b).
"Merger" shall have the meaning set forth in Section 2.1.
"Merger Consideration" shall have the meaning set forth in Section 2.7.
"NMS" shall mean the Nasdaq National Market.
"Non-Affirmed Condition" shall have the meaning set forth in Section 6.2(a).
"Non-Complying Certificate" shall have the meaning set forth in Section
6.2(a).
"Option" shall have the meaning set forth in Section 2.12.
"Parent" shall have the meaning set forth in the Preamble.
"Parent Disclosure Documents" shall have the meaning set forth in Section
5.4(b).
"Parent Response" shall have the meaning set forth in Section 6.2(a).
"Parent Stockholder" shall mean each of the persons who, at the date hereof,
are, and as of the Effective Time will be, stockholders of Parent.
"Pending Proposal" shall have the meaning set forth in Section 7.4.
"Preferred Stock" shall have the meaning set forth in Section 3.2(a).
"Proxy Statement" shall have the meaning set forth in Section 3.6.
"Representatives" shall have the meaning set forth in Section 5.3(a).
"SBI" shall mean Salomon Brothers Inc.
"SEC" shall mean the Securities and Exchange Commission or any successor
thereto.
"SEC Reports" shall have the meaning set forth in Section 3.5.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Series A Common Stock" shall mean the Series A common stock, $.01 par
value, of the Company.
"Series B Common Stock" shall mean the Series B common stock, $.01 par
value, of the Company.
"Share" shall mean a share of Stock.
"Significant Subsidiaries" shall mean any Subsidiary which (i) is a
"significant subsidiary," as defined in Rule 1-02 of Regulation S-X under the
Exchange Act; (ii) holds any FCC Permits; (iii) owns, directly or indirectly,
any interest in any Subsidiary included in clause (i) or (ii); or (iv) is
otherwise material to the Company and its Subsidiaries, taken as a whole.
3
<PAGE>
"Special Meeting" shall have the meaning set forth in Section 5.4(a)(i).
"Stations" shall mean the full-power and low-power television stations owned
and operated by the Company.
"Stock" shall mean, collectively, the Series A Common Stock, par value $.01,
of the Company together with the Series B Common Stock, par value $.01, of the
Company.
"Stock Option Plans" shall have the meaning set forth in Section 2.12.
"Sub" shall have the meaning set forth in the Preamble.
"Subsidiary" shall mean, with respect to any person, (A) (i) a corporation
in which such person, a subsidiary of such person, or such person and one or
more subsidiaries of such person, directly or indirectly, at the date of
determination, has either (a) a 50% or greater ownership interest or (b) the
power, under ordinary circumstances, to elect or to direct the election of 50%
or more of the board of directors of such corporation, (ii) a partnership in
which such person, a subsidiary of such person or such person and one or more
subsidiaries of such person (a) is, at the date of determination, general
partner or (b) has a 50% or greater ownership interest in such partnership or
the right to elect, or direct the election of, 50% or more of the governing
body of such partnership and (iii) any other person (other than corporation or
a partnership) in which such person, directly or indirectly, at the date of
determination, has either (a) a 50% or greater ownership interest or (b) the
power to elect, or direct the election of 50% or more of the directors or
other governing body of such other person and (B) any other person which is
consolidated with such person in accordance with generally accepted accounting
principles. For purposes of this Agreement, the term "parent," when not
capitalized, means, with respect to any person, any other person of which such
person is, directly or indirectly, a Subsidiary.
"Superior Offer" shall have the meaning set forth in Section 7.1(e).
"Surviving Corporation" shall have the meaning set forth in Section 2.1.
"Third Parties" shall have the meaning set forth in Section 5.3(a).
"Transactions" shall have the meaning set forth in Section 5.3(a).
"Trigger Date" shall mean the date which is seven months after the date on
which Parent and Sub shall have initially filed with the FCC the FCC Form 315
for approval of the changes of control of the FCC Permits; provided, however,
that if it has not earlier occurred, such date shall be deemed to be August 1,
1998.
"Warrants" shall mean, collectively, (i) those certain warrants dated
December 30, 1994 issued to the Company's bondholders and general unsecured
creditors as of such date entitling the holder of each such warrant to
purchase one share of Series A Common Stock at a price equal to $7.00 per
share (of which 624,094 of such warrants were outstanding as of November 12,
1997 (ii) that certain warrant dated as of December 30, 1994 issued to
Reliance Insurance Company and its subsidiaries entitling the holder of each
such warrant to purchase one share of Series A Common Stock at a price equal
to $7.19 per share (of which 416,667 of such warrants were outstanding as of
November 12, 1997).
"1994 Plan" shall have the meaning set forth in Section 2.12.
"1996 Plan" shall have the meaning set forth in Section 2.12.
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ARTICLE II.
THE MERGER
Section 2.1. The Merger. At the Effective Time (as hereinafter defined),
upon the terms and subject to the conditions hereof, and in accordance with
the DGCL, Sub shall be merged with and into the Company (the "Merger") as soon
as practicable following the satisfaction of the conditions set forth in
Article VI hereof. Following the Merger, the Company shall continue as the
surviving corporation (the "Surviving Corporation") and the separate corporate
existence of Sub shall cease.
Section 2.2. Effective Time. The Merger shall be consummated by and shall be
effective at the time of acceptance for filing by the Delaware Secretary of
State of a certificate of merger (the "Certificate of Merger") in such form as
is required by, and executed in accordance with, the relevant provisions of
the DGCL, and such other documents as shall be required by the provisions of
the DGCL (the time of such filing being the "Effective Time").
Section 2.3. Effects of the Merger. The Merger shall have the effects set
forth in the DGCL. As of the Effective Time, the Company shall be a wholly-
owned subsidiary of Parent.
Section 2.4. Certificate of Incorporation and By-Laws. Subject to Section
5.7 hereof, the Certificate of Incorporation and By-Laws of the Company as in
effect at the Effective Time shall be the Certificate of Incorporation and By-
Laws of the Surviving Corporation and thereafter may be amended in accordance
with their respective terms, the DGCL and Section 5.7 hereof.
Section 2.5. Directors. The directors of Sub at the Effective Time shall be
the directors of the Surviving Corporation and will hold office from the
Effective Time until the next annual stockholders' meeting of the Surviving
Corporation and until their successors shall be elected or appointed and shall
be duly qualified.
Section 2.6. Officers. The officers of the Company at the Effective Time
shall be the initial officers of the Surviving Corporation and will hold
office from the Effective Time until their respective successors are duly
elected or appointed and qualified in the manner provided in the certificate
of incorporation and by-laws of the Surviving Corporation, or as otherwise
provided by law.
Section 2.7. Conversion of Shares. Each Share issued and outstanding
immediately prior to the Effective Time (other than Shares held by Parent, Sub
or any other wholly-owned subsidiary of Parent, or in the treasury of the
Company or by any wholly-owned subsidiary of the Company, all of which shall
be canceled and no payment will be made with respect thereto, and Dissenting
Shares, as hereinafter defined) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into the right to
receive from Parent the Merger Consideration (as defined below), subject to
applicable withholding or back-up withholding taxes, if any, payable by the
holder thereof, without interest thereon, upon surrender of the certificate
formerly representing such Share. As used in this Agreement, the term "Merger
Consideration" shall mean the sum, in cash, of $44.00 plus the Additional
Amount (as defined below). As used in this Agreement, the term "Additional
Amount" shall mean, subject to Section 6.1(a), an amount equal to the product
of: (a) $44.00; multiplied by (b) 8%, multiplied by (c) a fraction, the
numerator of which shall be the number of days in the period from and
including the Trigger Date to but excluding the date on which the Effective
Time of the Merger occurs, and the denominator of which shall be 365.
Section 2.8. Conversion of Sub Common Stock. Each share of common stock, par
value $.01 per share, of Sub issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into and represent the right to
receive one share of common stock of the Surviving Corporation, which
thereafter will constitute all of the issued and outstanding common stock of
the Surviving Corporation.
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Section 2.9. Dissenting Shares.
(a) General. Notwithstanding anything in this Agreement to the contrary,
Shares which are issued and outstanding immediately prior to the Effective
Time and which are held by stockholders who have not voted such Shares in
favor of the Merger, who shall have delivered a written demand for appraisal
of such Shares in the manner provided in the DGCL and who, as of the Effective
Time, shall not have effectively withdrawn or lost such right to appraisal
("Dissenting Shares") shall not be converted into or represent a right to
receive the Merger Consideration pursuant to Section 2.7 hereof, but the
holders thereof shall be entitled only to such rights as are granted by
Section 262 of the DGCL. Each holder of Dissenting Shares who becomes entitled
to payment for such Shares pursuant to Section 262 of the DGCL shall receive
payment therefor from the Surviving Corporation in accordance with the DGCL;
provided, however, that (i) if any such holder of Dissenting Shares shall have
failed to establish his entitlement to appraisal rights as provided in Section
262 of the DGCL, (ii) if any such holder of Dissenting Shares shall have
effectively withdrawn his demand for appraisal of such Shares or lost his
right to appraisal and payment for his Shares under Section 262 of the DGCL or
(iii) if neither any holder of Dissenting Shares nor the Surviving Corporation
shall have filed a petition demanding a determination of the value of all
Dissenting Shares within the time provided in Section 262 of the DGCL, such
holder or holders (as the case may be) shall forfeit the right to appraisal of
such Shares and each such Share shall thereupon be deemed to have been
converted, as of the Effective Time, into and represent the right to receive
payment from the Surviving Corporation of the Merger Consideration, without
interest thereon, as provided in Section 2.7 hereof.
(b) Notice of Appraisal Demands. The Company shall give Parent and Sub (i)
prompt notice of any written demands for appraisal, withdrawals of demands for
appraisal and any other instruments served pursuant to Section 262 of the DGCL
received by the Company and (ii) the opportunity to direct all negotiations
and proceedings with respect to demands for appraisal under Section 262 of the
DGCL. The Company shall not, except with the prior written consent of Parent,
voluntarily make any payment with respect to any demands for appraisal or
offer to settle or settle any such demands.
Section 2.10. Payment for Shares.
(a) Exchange Mechanics. Prior to the Effective Time, Parent shall designate
a bank or trust company reasonably satisfactory to the Company to act as
Exchange Agent in the Merger (the "Exchange Agent"). At or prior to the
Effective Time, Parent will, or will take all steps necessary to enable and
cause the Surviving Corporation to, provide the Exchange Agent funds (the
"Fund") necessary to make the payments contemplated by Section 2.7. Out of the
Fund, the Exchange Agent shall, pursuant to irrevocable instructions, make the
payments referred to in Section 2.7. The Fund shall not be used for any other
purpose. The Exchange Agent may invest portions of the Fund, as directed by
Parent (so long as such directions do not impair the Exchange Agent's ability
to make the payments referred to in Section 2.7 hereof or otherwise impair the
rights of holders of Shares), provided that no such investments may be made
other than in direct obligations of the United States of America, obligations
for which the full faith and credit of the United States of America is pledged
to provide for the payment of principal and interest, commercial paper rated
of the highest quality by Moody's Investors Services, Inc. or Standard &
Poor's Corporation, or certificates of deposit issued by a commercial bank
having capital exceeding $500,000,000. Any net earnings resulting from, or
interest or income produced by, such investments shall be paid to the
Surviving Corporation as and when requested by Parent. The Surviving
Corporation shall replace any monies lost through any investment made pursuant
to this Section 2.10. Deposit of funds pursuant hereto shall not relieve
Parent or the Surviving Corporation of their obligations to make payments in
respect of Shares and Parent hereby guarantees the Surviving Corporation's
obligations in respect thereof.
(b) Letter of Transmittal. Promptly after the Effective Time, the Surviving
Corporation shall cause the Exchange Agent to mail to each record holder, as
of the Effective Time, of an outstanding certificate or certificates which
immediately prior to the Effective Time represented Shares (the
"Certificates") a form letter of transmittal (the "Letter of Transmittal") for
return to the Exchange Agent (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the
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Certificates to the Exchange Agent) and instructions for use in effecting the
surrender of the Certificates, for payment therefor. Upon surrender to the
Exchange Agent of a Certificate, together with the Letter of Transmittal duly
executed, the holder of such Certificate shall be entitled to receive in
exchange therefor cash in an amount equal to the product of the number of
Shares represented by such Certificate multiplied by the Merger Consideration
subject to any required withholding taxes, and such Certificate shall
forthwith be canceled. No interest will be paid or accrued on the cash payable
upon the surrender of the Certificates. If payment is to be made to a person
other than the person in whose name the Certificate surrendered is registered,
it shall be a condition of payment that the Certificate so surrendered shall
be properly endorsed or otherwise in proper form for transfer and that the
person requesting such payment shall pay any transfer or other taxes required
by reason of the payment to a person other than the registered holder of the
Certificate surrendered or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. Until
surrendered in accordance with the provisions of this Section 2.10, each
Certificate (other than Certificates representing Shares held by Parent, Sub
or any other wholly-owned subsidiary of Parent, the Company or any wholly-
owned subsidiary of the Company which shall have been canceled, or Dissenting
Shares) shall represent for all purposes the right to receive the Merger
Consideration in cash multiplied by the number of Shares evidenced by such
Certificate, without any interest thereon.
(c) Return of Unclaimed Funds. Any cash provided to the Exchange Agent
pursuant to this Section 2.10 and not exchanged for Certificates within six
months after the Effective Time will be returned by the Exchange Agent to the
Surviving Corporation, which thereafter will act as Exchange Agent.
Notwithstanding the foregoing, neither the Exchange Agent nor any party hereto
shall be liable to a holder of Shares for any Merger Consideration delivered
to a public official pursuant to applicable abandoned property, escheat and
similar laws.
Section 2.11. No Further Rights or Transfers. At and after the Effective
Time, each holder of a Certificate that represented issued and outstanding
Shares immediately prior to the Effective Time shall cease to have any rights
as a stockholder of the Company, except for the right to surrender his or her
Certificate or Certificates in exchange for the payment provided pursuant to
Sections 2.7 and 2.10 hereof or to perfect his or her right to receive payment
for his or her Shares pursuant to Section 262 of the DGCL and Section 2.9
hereof if such holder has validly exercised and perfected and not withdrawn
his or her right to receive payment for his or her Shares, and there shall be
no transfers on the stock transfer books of the Surviving Corporation of the
Shares which were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates formerly representing Shares are
presented to the Surviving Corporation, they shall be canceled and exchanged
for cash as provided in this Article II, subject to applicable law in the case
of Dissenting Shares.
Section 2.12. Stock Options. Immediately prior to the Effective Time, each
holder of a then-outstanding Company stock option issued pursuant to either
(a) the Company's 1994 Stock Plan, as amended (the "1994 Plan"), or (b) the
Company's 1996 Non-Employee Director Stock Option Plan (the "1996 Plan" and,
collectively, with the 1994 Plan, the "Stock Option Plans"), whether or not
then presently exercisable, to purchase Shares (an "Option") will be entitled
to receive, and shall receive, in settlement of such Option a cash payment
from the Company equal to the product of (i) the total number of Shares then
subject to each such Option with an exercise price per Share less than the
Merger Consideration multiplied by (ii) the excess of the Merger Consideration
over the exercise price per Share subject to such Option, subject to any
required withholding of taxes. If necessary or appropriate under the Stock
Option Plans, the Company will, upon the request of Parent, use its reasonable
best efforts to obtain the written acknowledgment of each person holding an
Option that the payment of the amount of cash referred to above will satisfy
in full the Company's obligation to such person pursuant to such Option. By
virtue of the foregoing treatment of the Options, at the Effective Time all
Options shall be canceled and shall cease to exist. Prior to the Effective
Time, the Company shall make any amendments to the terms of the Stock Option
Plans that are necessary to give effect to the transactions contemplated by
this Section 2.12.
Section 2.13. Warrants. Immediately prior to the Effective Time, each holder
of a then-outstanding Warrant will be entitled to receive, and shall receive,
in settlement of such Warrant a cash payment from the Company equal to the
product of (i) the total number of Shares then subject to each such Warrant
with an
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exercise price per Share less than the Merger Consideration multiplied by (ii)
the excess of the Merger Consideration over the exercise price per Share
subject to such Warrant, subject to any required withholding of taxes. If
necessary or appropriate under the terms of such Warrant, the Company will,
upon the request of Parent, use its reasonable best efforts to obtain the
written acknowledgment of each person holding a Warrant that the payment of
the amount of cash referred to above will satisfy in full the Company's
obligation to such person pursuant to such Warrant. By virtue of the foregoing
treatment of the Warrants, at the Effective Time all Warrants shall be
canceled and shall cease to exist. Prior to the Effective Time, the Company
shall make any amendments to the terms of the Warrants that are necessary and
give effect to the transactions contemplated by this Section 2.13.
Section 2.14. Adjustments. If, between the date of this Agreement and the
Effective Time, the outstanding Shares shall be changed into a different
number of shares or a different class by reason of any reclassification,
recapitalization, split-up, combination, exchange of shares or readjustment,
or a stock dividend thereon shall be declared with a record date prior to the
Effective Time, the amount of consideration to be received pursuant to this
Article II in exchange for each outstanding Share, Option, or Warrant shall be
correspondingly adjusted.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents, warrants and, with respect to the covenants
contained in Section 3.6 only, covenants to Parent and Sub as follows:
Section 3.1. Organization. Except as set forth in Section 3.1 of the Company
Disclosure Schedule, the Company and each of its Significant Subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of its state or jurisdiction of incorporation and is in good standing as
a foreign corporation in each jurisdiction where the properties owned, leased
or operated, or the business conducted, by it require such qualification and
where failure to be in good standing or to so qualify would, individually or
in the aggregate, have a Company Material Adverse Effect. The Company has made
available to Parent true and correct copies of the certificate of
incorporation and By-Laws or equivalent organizational documents, each as
amended to the date hereof, of the Company and each Significant Subsidiary.
Such certificates of incorporation, by-laws and equivalent organizational
documents are in full force and effect. The Company is not in violation of its
Certificate of Incorporation or By-Laws. No Significant Subsidiary is in
violation of its certificate of incorporation, by-laws or equivalent
organizational documents, except for violations that would not, individually
or in the aggregate, have a Company Material Adverse Effect.
Section 3.2. Capitalization.
(a) Company Capitalization. The authorized capital stock of the Company
consists of 14,388,394 shares of Series A Common Stock, 5,611,606 shares of
Series B Common Stock and 1,000,000 shares of preferred stock ("Preferred
Stock"). As of September 30, 1997, there were (i) 6,966,895 shares of Series A
Common Stock issued and outstanding and (ii) 3,198,761 shares of Series B
Common Stock issued and outstanding and (iii) no shares of Preferred Stock
issued and outstanding. Since September 30, 1997, no Shares have been issued
(except for (x) the issuance of Shares pursuant to the exercise of Options
outstanding under the Stock Option Plans at such date, the issuance of Shares
pursuant to the exercise of the Warrants outstanding on such date, and (y) the
issuance pursuant to the terms of the Certificate of Incorporation of Shares
of Series A Common Stock upon the sale of Shares of Series B Common Stock
issued and outstanding on such date), and no shares of Preferred Stock have
been issued. Except as set forth in Section 3.2(a) of the Company Disclosure
Schedule and except for 2,080,761 shares of Series A Common Stock issuable (i)
upon exercise of Options outstanding as of September 30, 1997 or issued in
compliance with Section 5.1 issued pursuant to the Stock Option Plans and (ii)
upon exercise of the Warrants, there are not now, and at the Effective Time
there will not be, any existing options, warrants, calls, subscriptions,
convertible or exchangeable securities, or other rights, or other agreements
or
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commitments, obligating the Company or any of its Subsidiaries to issue,
transfer or sell or cause to be issued, transferred or sold any shares of
capital stock of the Company or any of its Subsidiaries. All issued and
outstanding Shares are validly issued, fully paid, nonassessable and free of
preemptive rights. None of the outstanding shares of capital stock of the
Company is held by the Company or any of its Subsidiaries.
(b) Subsidiary Capitalization. Except as set forth in Section 3.2(b) of the
Company Disclosure Schedule, all of the outstanding shares of capital stock of
each of the Significant Subsidiaries have been validly issued and are fully
paid and non-assessable and are owned directly or indirectly by the Company
free and clear of all liens, charges, claims or encumbrances or as imposed by
applicable securities laws. Except as set forth in Section 3.2(b) of the
Company Disclosure Schedule, there are no outstanding options, warrants,
calls, subscriptions, or other rights, or other agreements or commitments,
obligating any Significant Subsidiary of the Company to issue, transfer or
sell any shares of its capital stock. There are no proxies outstanding with
respect to any shares of capital stock of the Company's Subsidiaries.
(c) Except as set forth in Section 3.2(c) of the Company Disclosure Schedule
and interests in the Subsidiaries, neither the Company nor any Significant
Subsidiary owns directly or indirectly any interest or investment (whether
equity or debt) in any corporation, partnership, joint venture, business,
trust or entity (other than non-controlling investments in the ordinary course
of business and corporate partnering, development, cooperative marketing and
similar undertakings and arrangements entered into in the ordinary course of
business).
Section 3.3. Authority Relative to This Agreement.
(a) Company Approvals. The Company has full corporate power and authority to
execute and deliver this Agreement and, subject to obtaining the necessary
approval of this Agreement by the affirmative vote of a majority of the
outstanding shares of Class A Common Stock and Class B Common Stock, voting
together as a single class (the "Stockholder Approval"), to consummate the
Transactions. The execution and delivery of this Agreement by the Company and
the consummation of the Transactions have been duly authorized by the Board of
Directors of the Company, and no other corporate proceedings on the part of
the Company are necessary for the execution and delivery of this Agreement by
the Company and, subject to the filing of the Certificate of Merger pursuant
to Section 2.2 and obtaining the Stockholder Approval, the performance by the
Company of its obligations hereunder and the consummation by the Company of
the Transactions. This Agreement has been duly executed and delivered by the
Company and, assuming this Agreement constitutes a valid and binding
obligation of each of Parent and Sub, this Agreement constitutes a valid and
binding agreement of the Company, enforceable against the Company in
accordance with its terms, except to the extent that its enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or other laws
affecting the enforcement of creditors rights generally or by general
equitable principles.
(b) Other Authorizations. Except as set forth in Section 3.3(b) of the
Company Disclosure Schedule, other than in connection with, or in compliance
with, applicable requirements of (i) the DGCL with respect to the filing of
the Certificate of Merger, (ii) the Exchange Act (including, without
limitation, the filing of the Proxy Statement), (iii) the requirements of the
NMS, (iv) the HSR Act and (v) the Communications Act (including, without
limitation, requirements related to the transfer of control licenses in
connection with the operation of the Stations), no authorization, consent or
approval of, or filing with, any court or any public body or authority is
necessary for the execution and delivery of this Agreement and the
consummation by the Company of the Transactions other than authorizations,
consents and approvals the failure to obtain, or filings the failure to make,
which would not, in the aggregate, have a Company Material Adverse Effect.
Section 3.4. No Violation. None of the execution or delivery of this
Agreement by the Company, the performance by the Company of its obligations
hereunder or the consummation by the Company of the Transactions will (a)
subject to obtaining the Stockholder Approval, constitute a breach or
violation of any provision of the Certificate of Incorporation or By-Laws of
the Company, (b) except as set forth in Section 3.4 of the Company Disclosure
Schedule, constitute a breach, violation or default (or any event which, with
notice
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or lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the payment or performance required by, or
result in the creation of any lien or encumbrance upon any of the properties
or assets of the Company or any of its Subsidiaries or permit any person to
require the Company or any Subsidiary to repurchase or repay any obligation
under, any note, bond, mortgage, indenture, deed of trust, license, agreement
or other instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which they or any of their respective properties
or assets are bound, (c) constitute a violation of any order, writ,
injunction, decree, statute, rule or regulation of any court or governmental
authority applicable to the Company, any of its Subsidiaries or any of their
properties or assets, or (d) except as set forth in Section 3.4 of the Company
Disclosure Schedule, give any person the right to require the Company or any
Subsidiary to purchase any assets from, or sell any assets to, such person or
trigger any "change of control" provisions in any agreement to which the
Company or any of its Subsidiaries is a party, other than, in the case of
clauses (b), (c) and (d) above, such breaches, violations, defaults,
terminations, accelerations or creation of liens and encumbrances or rights to
require the Company or any Subsidiary to purchase or sell any assets or
trigger any "change of control" provisions which, in the aggregate, would not
have a Company Material Adverse Effect or as set forth in Section 3.4 of the
Company Disclosure Schedule.
Section 3.5. SEC Reports; No Undisclosed Liabilities. Since September 30,
1995, the Company has filed all forms, reports and documents ("SEC Reports")
with the SEC required to be filed by it pursuant to the Securities Act, and
the Exchange Act and the SEC rules and regulations promulgated thereunder.
True and correct copies of all such SEC Reports have been made available to
Parent by the Company. All of the SEC Reports complied (as of their respective
filing dates) in all material respects with the applicable requirements of the
Securities Act, the Exchange Act and the SEC rules and regulations promulgated
thereunder. None of such SEC Reports (as of their respective filing dates)
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The audited and unaudited consolidated financial statements of
the Company included in the SEC Reports have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis (except
as otherwise stated in such financial statements included in the Filed SEC
Reports, including the related notes, and except that the interim financial
statements do not contain all of the footnote disclosures required by
generally accepted accounting principles) and fairly present in all material
respects the financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and the results of their operations and
their cash flows for the periods then ended, subject, in the case of the
interim unaudited financial statements, to normal year-end audit adjustments,
which, except as disclosed in the Filed SEC Reports, would not be material in
amount or effect. Neither the Company nor any of its Subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) that would be required to be reflected on, or
reserved against in, the consolidated financial statements of the Company or
in the notes thereto, prepared in accordance with generally accepted
accounting principles consistently applied, except for (i) liabilities or
obligations that were so reserved on, or reflected in (including the notes
to), the consolidated balance sheet of the Company as of December 31, 1996 or
September 30, 1997; (ii) liabilities or obligations arising in the ordinary
course of business consistent with past practice since September 30, 1997;
(iii) liabilities or obligations which would not, individually or in the
aggregate, have a Company Material Adverse Effect; (iv) liabilities or
obligations related to this Agreement or the Transactions; and (v) payments
required as a result of the consummation of the Merger under the acceleration
provisions of the terms existing on the date hereof of the Company's
employment agreements, severance agreements or Benefit Plans which would not,
individually or in the aggregate, have a Company Material Adverse Effect. No
Subsidiary of the Company is required to file any report or form with the SEC.
Section 3.6. Proxy Statement; Other Information. None of the information
included or incorporated by reference in the letter to stockholders, notice of
meeting, proxy statement and form of proxy, or the information statement
(including, without limitation, the proxy or information statement containing
information required by Regulation 14A under the Exchange Act, and, if
applicable, Rule 13e-3 and Schedule 13E-3 under the Exchange Act), as the case
may be, to be distributed to stockholders of the Company in connection with
the Merger, or any schedules required to be filed with the SEC in connection
therewith (collectively referred to herein as the
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"Proxy Statement"), if required, except information supplied by Parent or Sub
in writing for inclusion in the Proxy Statement or in such schedules (as to
which the Company makes no representation), will, as of the date the Proxy
Statement is first mailed to such stockholders, and on the date of the Special
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. No representation is made by the Company with respect to any
forward-looking information which may have been supplied by the Company
whether or not included in the Proxy Statement. The Proxy Statement will
comply (at the time of its mailing) as to form in all material respects with
the Exchange Act and the rules and regulations thereunder. The Company will
promptly correct any statements in the Proxy Statement that to its knowledge
have become false or misleading and take all steps necessary to cause such
Proxy Statement as so corrected to be filed with the SEC and disseminated to
the stockholders of the Company in accordance with applicable law.
Section 3.7. Compliance.
(a) Except as disclosed by the Company in the SEC Reports filed with the SEC
prior to the date hereof (the "Filed SEC Reports") or as set forth in Section
3.7(a) of the Company Disclosure Schedule, the Company and its Subsidiaries
hold all permits, licenses, waivers, exemptions, orders, franchises and
approvals necessary for the lawful conduct of their respective businesses in
the manner in which they are currently being conducted (including, but not
limited to, those required under the Communications Act or the rules and
regulations of the FCC (the "FCC Permits")), except where the failure to
possess the same would not, individually or in the aggregate, have a Company
Material Adverse Effect. The Company and its Subsidiaries are in compliance
with the terms of all FCC Permits, except where the failure to so comply would
not have a Company Material Adverse Effect.
(b) The FCC Permits are in full force and effect unimpaired by any condition
that could have a material adverse effect on the financial condition, results
of operations, or business of the Stations. Except as set forth in the Filed
SEC Reports or identified in Section 3.7(b) of the Company Disclosure
Schedule, no application, action or proceeding is pending for the renewal or
modification of any of the FCC Permits and, except for actions or proceedings
affecting television broadcast stations generally, no application, complaint,
action or proceeding is pending or, to the Company's knowledge, threatened
that is reasonably likely to result in (i) the denial of an application for
renewal, (ii) the revocation, modification, non-renewal or suspension of any
of the Station licenses and other material FCC Permits, (iii) the issuance of
a cease-and-desist order, or (iv) the imposition of any administrative or
judicial sanction with respect to any of the Stations, individually or in the
aggregate, with respect to this clause (iv) that would have a Company Material
Adverse Effect.
(c) The Stations, their respective physical facilities, electrical and
mechanical systems and transmitting and studio equipment (i) are being
operated in all material respects in compliance with the specification of the
applicable Station licenses and other material FCC Permits, and (ii) are being
operated in all material respects in compliance with all material requirements
of the Communications Act. The Company and the Stations have complied in all
material respects with all requirements of the FCC and the Federal Aviation
Administration with respect to the construction and/or alteration of the
Company's antenna structures and "no hazard" determinations for each antenna
structure owned by the Stations have been obtained.
Section 3.8. Absence of Certain Changes. Except as set forth in the Filed
SEC Reports or identified in Section 3.8 of the Company Disclosure Schedule,
since September 30, 1997 there has not been any material adverse change in the
financial condition, results of operations or business of the Company and its
Subsidiaries, taken as a whole.
Section 3.9. Certain Fees. With the exception of the fees payable to the
Financial Advisor and SBI pursuant to the respective engagement letters dated
July 17, 1997 and November 20, 1997 which have been delivered to Parent,
neither the Company, any of its Subsidiaries nor any of their officers,
directors or employees has employed any broker or finder or incurred any
liability for any financial advisory, brokerage or finder's fees or
commissions to any brokers or finders in connection with the Transactions.
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Section 3.10. FCC Qualifications. After due investigation, except for
matters described in Section 3.10 of the Company Disclosure Schedule, the
Company is not aware of any facts or circumstances related to the Company that
are likely to prevent or delay prompt consent to the transfer of control
applications (as described in Section 5.8(b)) to a qualified purchaser and the
issuance of the FCC Order.
Section 3.11. Section 203. The Board of Directors of the Company has
approved this Agreement and the Merger. Section 203 of the DGCL has been
rendered inapplicable to the consummation of the Merger and the other
Transactions.
Section 3.12. Litigation. Except as disclosed in the Filed SEC Reports or
identified in Section 3.12 of the Company Disclosure Schedule, there are no
civil, criminal or administrative actions, suits, claims, hearings,
investigations or proceedings pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries at law or in equity,
or before or by any federal or state commission, board, bureau, agency or
instrumentality, that could reasonably be expected, individually or together
with any other action, suit, claim, hearing, investigation or proceeding
arising out of or based upon the same or substantially the same facts or
circumstances, to have a Company Material Adverse Effect.
Section 3.13. Intellectual Property. Except as disclosed in the Filed SEC
Reports or identified in Section 3.13 of the Company Disclosure Schedules and
except to the extent that the inaccuracy of any of the following (or the
circumstances giving rise to such inaccuracy), individually or in the
aggregate, could not reasonably be expected to have a Company Material Adverse
Effect:
(a) The Company or its Subsidiaries own or have the valid right to use
all Intellectual Property used in or necessary for the conduct of their
businesses as currently conducted or proposed by the Company to be
conducted, free and clear of all liens, charges, claims or encumbrances and
the Company has not granted to any third party a license to use the
trademark "Telemundo" or any related logo, except as displayed or embedded
as part of video programming licensed for exhibition to third parties or
pursuant to the Affiliation Agreements or for customary cross-promotional
or advertising purposes.
(b) To the knowledge of the Company, (i) neither the Company's nor any
Subsidiary's use of any Intellectual Property nor the conduct of the
Company's nor any Subsidiary's business infringes any Intellectual Property
rights of any third party, and no such claims have been asserted against
the Company or any Subsidiary which have not been resolved, and (ii) no
third party is materially infringing any of the Company's or any
Subsidiary's Intellectual Property rights, and no such claims are pending
or threatened by the Company or any Subsidiary against any third party.
Section 3.14. Labor Matters. Except as set forth in the Filed SEC Reports or
identified in Section 3.14 of the Company Disclosure Schedules, there is no
labor strike, dispute, slowdown, work stoppage or lockout actually pending or,
to the knowledge of the Company, threatened against or affecting the Company
or any Subsidiary and, since January 1, 1995, there has not been any such
action. Except as set forth in the Filed SEC Reports or identified in Section
3.14 of the Company Disclosure Schedule, neither the Company nor any
Subsidiary is a party to or bound by any collective bargaining, guild or
similar agreement with any labor organization, or work rules or practices
agreed to with any labor organization or employee association applicable to
employees of the Company or any Subsidiary. The Company and its Subsidiaries
have at all times been in compliance with all applicable laws respecting
employment and employment practices, terms and conditions of employment,
wages, hours of work, and occupational safety and health, except where any
failure to be in compliance could not reasonably be expected to have a Company
Material Adverse Effect, and are not engaged in any unfair labor practices as
defined in the National Labor Relations Act or other applicable law, ordinance
or regulation which could reasonably be expected to have a Company Material
Adverse Effect. There is no grievance or arbitration proceeding arising out of
any collective bargaining or guild agreement or other grievance procedure
relating to the Company or its Subsidiaries which could reasonably be expected
to have a Company Material Adverse Effect.
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Section 3.15. Employee Benefit Plans: ERISA
(a) Section 3.15(a) of the Company Disclosure Schedule sets forth a true and
complete list of each material compensation plan and each other material
"employee benefit plan" (within the meaning of Section 3(2) of ERISA) that is
maintained or contributed to, or was maintained or contributed to, at any time
since January 1, 1995, by the Company, any Subsidiary or by any trade or
business, whether or nor incorporated, which together with the Company would
be deemed a "single employer" within the meaning of Section 4001(b) of ERlSA
(an "ERISA Affiliate") for the benefit of any employee, former employee,
consultant, officer, or director of the Company or any Subsidiary (a "Benefit
Plan").
(b) Except as set forth in the Filed SEC Reports or identified in Section
3.15(b) of the Company's Disclosure Schedule: (i) no Benefit Plan is a
"multiemployer plan," as such term is defined in Section (3)(37) of ERISA, or
a "multiple employer plan" within the meaning of Section 413(c) of the Code;
(ii) each of the Benefit Plans is, and has always been, operated in all
respects in accordance with the requirements of all applicable law; (iii) each
of the Benefit Plans intended to be "qualified" within the meaning of Section
401(a) of the Code has received a favorable determination letter from the
Internal Revenue Service to that effect; (iv) no Benefit Plan has an
accumulated or waived funding deficiency within the meaning of Section 412 of
the Code; (v) neither the Company nor any ERISA Affiliate has incurred,
directly or indirectly, any liability (including any material contingent
liability) to or on account of a Benefit Plan pursuant to Title IV of ERISA;
(vi) no proceedings have been instituted to terminate any Benefit Plan that is
subject to Title IV of ERISA; (vii) no "reportable event," as such term is
defined in Section 4043(b) of ERISA, has occurred with respect to any Benefit
Plan that is not reflected on an applicable annual report filed on behalf of
such plan; and (viii) no condition exists that presents a risk to the Company
or any ERISA Affiliate of incurring a liability to or on account of a Benefit
Plan pursuant to Title IV of ERISA; provided, however, that the
representations made in the foregoing clauses (ii) through (viii) of this
Section 3.15(b) shall be deemed to be true and correct except to the extent
that their untruth would, individually or in the aggregate, have a Company
Material Adverse Effect.
(c) Except as would not, individually or in the aggregate, have a Company
Material Adverse Effect, (i) there are no pending, or to the knowledge of the
Company, threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of or against any of the Benefit Plans, or any trusts
related thereto or any trustee or administrator thereof, and (ii) no
litigation or administrative or other proceeding (including, without
limitation, any litigation or proceeding under Title IV of ERlSA) has occurred
or, to the knowledge of the Company, is threatened involving any Benefit Plan
or any trusts related thereto or any trustee or administrator thereof.
Section 3.16. Taxes Except as set forth in Section 3.16 of the Company
Disclosure Schedule:
(a) Each of the Company and its Subsidiaries has filed all material tax
returns and reports required to be filed by it, or requests for extensions to
file such returns or reports have been timely filed and granted and have not
expired, and all tax returns and reports are complete and accurate in all
respects, except to the extent that such failures to file, have extensions
granted that remain in effect or be complete and accurate in all respects, as
applicable, would not, individually or in the aggregate, have a Company
Material Adverse Effect. The Company and each of its Subsidiaries has paid (or
the Company has paid on its behalf) all taxes shown as currently due on such
tax returns and reports. The most recent financial statements contained in the
SEC Reports reflect an adequate reserve for all taxes payable by the Company
and its Subsidiaries for all taxable periods and portions thereof accrued
through the date of such financial statements in accordance with generally
accepted accounting principles, and no deficiencies for any taxes have been
proposed, asserted or assessed against the Company or any Subsidiary that are
not adequately reserved for, except for inadequately reserved taxes and
inadequately reserved deficiencies that would not, individually or in the
aggregate, have a Company Material Adverse Effect. No requests for waivers of
the time to assess any taxes against the Company or any Subsidiary have been
granted and are pending, except for requests with respect to such taxes that
have been adequately reserved for in the most recent financial statements
contained in the SEC Reports, or, to the extent not adequately reserved, the
assessment of which would not, individually or in the aggregate, have a
Company Material Adverse Effect.
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(b) As used in this Section 3.16 and in Section 5.1, "taxes" shall include
all Federal, state, local and foreign income, franchise, property, sales, use,
excise and other taxes, including obligations for withholding taxes from
payments due or made to any other person and any interest, penalties or
additions to tax.
Section 3.17. Affiliation Agreements. The Company has provided Parent with
access to true and correct copies of all affiliation agreements between the
Company or any of its Subsidiaries and a television broadcast station pursuant
to which such station has agreed to broadcast the network programming of the
Company (the "Affiliation Agreements"). Each of the Affiliation Agreements is
in full force and effect, is the valid and binding obligation of the parties
thereto and is enforceable in accordance with its terms. The Company is not
and, to the knowledge of the Company, no other party to any Affiliation
Agreement is in material breach or default with respect to its obligations
thereunder, or has given notice of, or, to the Company's knowledge, has any
basis for, any action to terminate, cancel, rescind or procure a judicial
reformation thereof.
Section 3.18. Environmental Matters. The Company and its Subsidiaries are in
material compliance with all federal, state, and local laws governing
pollution or the protection of human health or the environment ("Environmental
Laws"), except in each case where noncompliance with Environmental Laws would
not reasonably be expected to have a Company Material Adverse Effect. Neither
the Company nor any of its Subsidiaries has received any written notice with
respect to the business of, or any property owned or leased by, the Company or
any of its Subsidiaries from any Governmental Entity or third party alleging
that the Company or any of its Subsidiaries is not in material compliance with
any Environmental Law. To the knowledge of the Company, there has been no
release of a "Hazardous Substance," as that term is defined in the
Comprehensive Environmental Response, Compensation, and Liability Act, 42
U.S.C. (S) 9601 et seq., in excess of a reportable quantity on any real
property owned or leased by the Company or any of its Subsidiaries.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
OF PARENT AND SUB
Parent and Sub represent and warrant and, with respect to the covenants
contained in Section 4.4 only, covenant to the Company as follows:
Section 4.1. Organization. Each of Parent and Sub is a corporation duly
organized, validly existing and in good standing under the laws of its state
or jurisdiction of incorporation and is in good standing as a foreign
corporation in each other jurisdiction where the properties owned, leased or
operated, or the business conducted, by it require such qualification and
where failure to be in good standing or so to qualify would, individually or
in the aggregate, have a material adverse effect on the financial condition,
results of operations or businesses of Parent and Sub, taken as a whole.
Section 4.2. Authority Relative to This Agreement.
(a) Parent and Sub Approvals. Each of Parent and Sub has full corporate
power and authority to execute and deliver this Agreement and to consummate
the Transactions. The execution and delivery of this Agreement by Parent and
Sub and the consummation of the Transactions have been duly authorized by the
respective Boards of Directors of Parent and Sub, and by Parent as the sole
stockholder of Sub, and no other corporate proceedings on the part of Parent
or Sub are necessary for the execution and delivery of this Agreement by each
of Parent and Sub, the performance by each of Parent and Sub of their
respective obligations hereunder and the consummation by each of Parent and
Sub of the transactions so contemplated. This Agreement has been duly executed
and delivered by each of Parent and Sub and, assuming this Agreement
constitutes a valid and binding obligation of the Company, this Agreement
constitutes a valid and binding agreement of each of Parent and Sub,
enforceable against each of Parent and Sub in accordance with its terms,
except to the extent that its enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or other laws affecting the enforcement
of creditors rights generally or by general equitable principles.
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(b) Other Authorizations. Other than in connection with, or in compliance
with, applicable requirements of (i) the DGCL with respect to the
Transactions, (ii) the Exchange Act (including, without limitation, the filing
of the Proxy Statement), (iii) the HSR Act and (iv) the Communications Act
(including, without limitation, requirements related to the transfer of
licenses in connection with the operation of the television stations owned and
operated by the Company), no authorization, consent or approval of, or filing
with, any court or any public body or authority is necessary for the
consummation by Parent and Sub of the Transactions other than authorizations,
consents and approvals the failure to obtain, or filings the failure to make,
would not, in the aggregate, have a material adverse effect on the financial
condition, results of operations or business of Parent and its Subsidiaries,
taken as a whole, or on the ability of Parent and Sub to consummate the
Transactions.
Section 4.3. No Violation. Neither the execution or delivery of this
Agreement by Parent and Sub, the performance by Parent and Sub of their
respective obligations hereunder nor the consummation by them of the
Transactions will (a) constitute a breach or violation under the certificate
of incorporation or by-laws of Parent or Sub or (b) constitute a breach,
violation or default (or any event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in the creation of any lien
or encumbrance upon any of the properties or assets of Parent or any of its
Subsidiaries under, any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument to which Parent or any of its
Subsidiaries is a party or by which they or any of their respective properties
or assets are bound or (c) constitute a violation of any order, writ,
injunction, decree, statute, rule or regulation of any court or governmental
authority applicable to Parent or Sub or any of their respective properties or
assets, give any person the right to require Parent or Sub to purchase any
assets from, or sell any assets to, such person or trigger any "change of
control" provisions in any material agreement to which Parent or Sub is a
party other than, in the case of clauses (b), (c) and (d) above, such
breaches, violations, defaults, terminations, accelerations or creation of
liens and encumbrances which, in the aggregate, would not, individually or in
the aggregate, have a material adverse effect on the financial condition,
results of operations or business of Parent and Sub, taken as a whole, or on
the ability of Parent and Sub to consummate the Transactions.
Section 4.4. Proxy Statement.
(a) None of the information supplied in writing by Parent, Sub or their
respective affiliates specifically for inclusion in the Proxy Statement will,
at the time the Proxy Statement is mailed or at the time of the Special
Meeting (as defined in Section 5.4) or at the Effective Time, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. If at any time prior to the Special Meeting any event with respect
to Parent or Sub, or with respect to information supplied by Parent or Sub for
inclusion in the Proxy Statement, shall occur which is required to be
described in an amendment of, or a supplement to, such documents, such event
shall be so described to the Company in a timely manner.
(b) Parent Disclosure. The Parent Disclosure Documents, will (as of their
respective filing dates) comply in as to form in all material respects with
the applicable requirements of the Securities Act and the Exchange Act and the
SEC rules and regulations promulgated thereunder. None of Parent Disclosure
Documents will, at the time they are filed, at the time of any distribution
thereof or at the time of the Special Meeting, contain any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading; provided, however, that this representation and warranty
will not apply to statements or omissions in the Parent Disclosure Documents
based solely upon information furnished to Parent in writing by the Company
specifically for use therein.
Section 4.5. Financing. Parent has received binding written commitments (the
"Equity Commitments") from its stockholders to contribute equity capital to
the Parent in the aggregate amount of $273,200,000 plus additional amounts
necessary to fund the Additional Amount (if any) hereunder and Sub has
received from Parent a binding written commitment from Parent that Parent will
immediately thereafter contribute the Equity Commitments to Sub. The Equity
Commitments include an unconditional commitment from each of the Parent
Stockholders that an aggregate of $100,000,000 will be contributed to Parent,
whether or not the Merger is
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consummated, to satisfy the obligations of Parent and Sub hereunder, including
without limitation, claims made as a result of any breaches by Parent or Sub
of the terms of this Agreement. Parent and Sub have or have access to the
funds, or have, at the date hereof, binding written commitments from
responsible financial institutions to provide Parent or Sub with the funds
(the "Debt Commitment Letters") necessary, together with the Equity
Commitments, to consummate the Merger and the other Transactions and to
provide working capital for the business of the Company, and to consummate the
Transactions, including the payment of related fees and expenses. True and
correct copies of all such financing commitments have previously been
furnished to the Company along with letters from each of Parent Stockholders
stating that the Company may rely on the Equity Commitments as if they were
addressed to the Company. As of the date hereof, none of the Equity
Commitments or commitments represented by the Debt Commitment Letters has been
withdrawn and Parent and Sub do not know of any facts or circumstances
existing at the date hereof that would result in any of the conditions
contained in the Debt Commitment Letters not being satisfied.
Section 4.6. No Prior Activities. Sub has not incurred, directly or
indirectly, any material liabilities or obligations, except those incurred in
connection with its organization or with the negotiation of this Agreement and
the Transactions. Sub has not engaged, directly or indirectly, in any business
or activity of any type or kind, or entered into any agreement or arrangement
with any person or entity, and is not subject to or bound by any material
obligation or undertaking, that is not contemplated by or in connection with
this Agreement and the Transactions.
Section 4.7. Surviving Corporation after the Merger. At the Effective Time
and after giving effect to any changes in the Surviving Corporation's assets
and liabilities as a result of the Merger and after giving effect to the
financing for the Merger and the use of proceeds therefrom, the Surviving
Corporation will not (a) be insolvent (either because its financial condition
is such that the sum of its debts is greater than the fair market value of its
assets or because the present fair saleable value of its assets will be less
than the amount required to pay its debts as they become due), (b) have
unreasonably small capital with which to engage in its business or (c) have
incurred or plan to incur debts beyond its ability to pay as they become
absolute and matured.
Section 4.8. Certain Fees. Neither the Parent or Sub nor any affiliates
thereof nor any of their respective officers, directors or employees has
employed any broker or finder or incurred any liability required to be paid by
the Company prior to the Closing for any financial advisory, brokerage or
finder's fees or commissions to any brokers or finders in connection with the
Transactions.
Section 4.9. FCC Qualifications. Parent and Sub, to their knowledge after
consulting with regulatory counsel and based on the FCC's current practice and
precedent, are, for purposes of obtaining the FCC Order, legally, technically,
financially and otherwise qualified to acquire control of the Company, and
Parent and Sub are not aware of any facts or circumstances related to Parent
or Sub that are likely to prevent consent to the transfer of control
applications (as described in Section 5.8(b)) and issuance of the FCC Order.
Parent's equity ownership is structured as described in the bid letter dated
November 17, 1997 and delivered by Parent and Sub to the Financial Advisor on
behalf of the Company. Parent and Sub, to their knowledge after consulting
with regulatory counsel, are not aware, except for the continuation of
existing waivers, that any waiver of any FCC rule or policy is necessary to be
obtained for the grant of the applications for transfer of control of the
Company to Parent and Sub, nor will processing pursuant to any exception to
any rule of general applicability be requested or required in connection with
the consummation of the Transactions.
ARTICLE V.
COVENANTS
Section 5.1. Conduct of Business of the Company. Except as expressly
contemplated by this Agreement or as set forth in Section 5.1 of the Company
Disclosure Schedule, during the period from the date of this Agreement to the
Effective Time, the Company will, and will cause each of its Subsidiaries to,
conduct its respective operations according to its ordinary and usual course
of business and consistent with past practice and
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use reasonable efforts to (i) preserve intact its business organizations'
goodwill, (ii) keep available the services of its present officers and key
employees, and (iii) preserve the goodwill and business relationships with
suppliers, distributors and others having business relationships with it.
Without limiting the generality of the foregoing, and except as expressly
contemplated by this Agreement or as set forth in Section 5.1 of the Company
Disclosure Schedule, prior to the Effective Time, the Company will not, and
the Company will cause its Subsidiaries not to, without the prior written
consent of Parent (such consent, except in the cases of clauses (a), (h) and
(i) below, not to be unreasonably withheld):
(a) issue, sell, pledge or otherwise dispose of, grant or otherwise
create any additional shares of, or authorize or propose the issuance,
sale, pledge, disposal, grant or creation of any shares of capital stock of
the Company and its Subsidiaries, or securities convertible into or
exchangeable for such shares, or any rights, warrants or options to acquire
such shares or other convertible or exchangeable securities, other than the
issuance of Shares pursuant to the exercise of Options or Warrants as
outstanding on the date hereof or otherwise issuable pursuant to the
automatic grant provisions of the 1996 Plan as in effect on the date
hereof, relating to director options;
(b) purchase, redeem or otherwise acquire or retire, or offer to
purchase, redeem or otherwise acquire or retire, any shares of its capital
stock, other than in transactions between the Company and its wholly-owned
subsidiaries and any required repurchases of options or stock upon
termination of employment to the extent required by agreements in effect on
the date hereof;
(c) declare, set aside, make or pay any dividend or distribution, payable
in cash, stock, property or otherwise, on any shares of its capital stock
(other than dividends paid by wholly-owned Subsidiaries of the Company to
the Company);
(d) other than with respect to intercompany payables and receivables and
intercompany debt, incur or become contingently liable with respect to any
indebtedness or guarantee of any indebtedness or issue any debt securities
other than indebtedness incurred to finance working capital requirements in
the ordinary course of business consistent with past practice;
(e) merge, consolidate with or consummate any other business combination
with any person or acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial
portion of the assets of, or by any other manner, any business or any
corporation, partnership, association or other business entity;
(f) sell, lease, license (other than exhibition licenses entered into in
the ordinary course of business consistent with past practice), mortgage,
transfer or otherwise dispose of any properties or assets which are
material to the Company and its Subsidiaries, taken as a whole;
(g) except as disclosed in Section 5.1 of the Company Disclosure Schedule
or as may be required by applicable law or by contracts existing as of the
date hereof, (i) increase the compensation payable or to become payable to
its officers or employees, except for non-officer employees and production
and talent personnel, increases in the ordinary course of business
consistent with past practice; (ii) enter into any written employment
agreement with any employee, except in the ordinary course of business
which, in any event, shall be terminable, without penalty, on not more than
six months notice; (iii) grant any severance or termination pay to any
director, officer or employee inconsistent with Company policy; or (iv)
establish, adopt, enter into, terminate, withdraw from or amend in any
material respect or take any action to accelerate any rights or benefits
under any collective bargaining agreement, any stock option plan, or any
material Benefit Plan;
(h) enter into any programming commitment other than in the ordinary
course of business consistent with past practice;
(i) enter into any local marketing, joint marketing or similar
agreements, modify or amend any such existing agreements on terms less
favorable to the Company than such existing agreements, if such terms
would, individually or in the aggregate, have a Company Material Adverse
Effect;
(j) incur any commitments for capital expenditures (as such term is used
in accordance with generally accepted accounting principles) in excess of
$10,000,000 in any twelve month period.
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(k) incur any obligations to make any payment of, or in respect of, any
tax, except in the ordinary course of business consistent with past
practice, settle any material tax audit, make or change any tax election or
file any amended tax returns; in each case other than (i) in connection
with the current audit of the Company's federal income tax returns for the
years ended December 31, 1994 and December 31, 1995, details of which have
previously been provided to representatives of Parent or Sub and (ii)
obligations and actions which action would not result in a Company Material
Adverse Effect;
(l) cancel or waive any claim or right of substantial value or settle any
material pending litigation;
(m) enter into any paid programming or infomercial agreement or any
agreement granting any person the right to program any block of network or
local time, in each case which is not terminable at the Company's
discretion upon not more than 30 days notice or which does not extend
beyond June 30, 1998;
(n) except as set forth in Section 5.1 of the Company Disclosure Schedule
or in the ordinary course of business consistent with past practice, pay,
discharge or satisfy any material claims, liabilities or obligations
(absolute, accrued, contingent or otherwise) before they are due or fail to
pay accounts payable in accordance with their terms;
(o) propose or adopt any amendments to its certificate of incorporation
or by-laws;
(p) agree, in writing or otherwise, to take any of the foregoing actions;
or
(q) take, or agree or commit to take, any action that would make any
representation or warranty of the Company hereunder inaccurate in any
respect at, or as of any time prior to, the Effective Time or result in any
of the conditions to the Merger set forth in this Agreement not being
satisfied.
Section 5.2. Access to Information.
(a) General. So long as this Agreement has not been terminated, between the
date of this Agreement and the Effective Time, the Company will give Parent
and its authorized representatives reasonable access during normal business
hours to all offices, stations, studios, production facilities and other
facilities and to all books and records of it and its Subsidiaries, will
permit Parent to make such inspections as it may reasonably require and will
cause its officers and those of its Subsidiaries to furnish Parent (at such
time as it would otherwise become available in the ordinary and usual course
of business and consistent with past practice) with such financial and
operating data and other information (consistent with that which is currently
being prepared by the Company) with respect to the business and properties of
the Company and its Subsidiaries as Parent may from time to time reasonably
request.
(b) Confidentiality. Subject to any additional requirements of law
(including, without limitation, FCC regulations) and the terms of the
Confidentiality Agreement, Parent and Sub (i) will hold and will cause their
respective representatives, advisors and financing sources to hold in strict
confidence, unless compelled to disclose by judicial or administrative
process, or, in the written opinion of its counsel with a copy sent to the
Company, by other requirements of law, all documents and information
concerning the Company and its Subsidiaries furnished to Parent, Sub or any of
their respective representatives, advisors and financing sources in connection
with the Transactions, provided, however, that, prior to any disclosure
pursuant to the foregoing, Parent shall notify the Company and afford the
Company an opportunity to obtain a protective order against such disclosure
(except to the extent that such information can be shown to have been (x)
previously known by Parent, (y) in the public domain through no fault of
Parent, its representatives or advisors or (z) later lawfully acquired by
Parent from other sources, unless Parent knows that such other sources are not
entitled to disclose such information) and (ii) will not release or disclose
such information to any other person, except in connection with this Agreement
to (1) its auditors, attorneys, financial advisors and other representatives
and advisors with a need to know such information and (2) responsible
financial institutions in connection with obtaining the financing contemplated
by Section 4.5 hereof, provided that such person shall have first been advised
of the confidentiality provisions of this Section 5.2 and the Confidentiality
Agreement and agreed to be bound thereby. If the Transactions are not
consummated, such confidence shall be maintained except to the extent such
information can be shown to have been (i) previously known by Parent, (ii) in
the public domain through no
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fault of Parent, its representatives or advisors or (iii) later lawfully
acquired by Parent from other sources, unless Parent knows that such other
sources are not entitled to disclose such information and, if requested by the
Company, Parent will return to the Company all copies of information furnished
by the Company to Parent or its agents, representatives, advisors or financing
sources, or derived therefrom, or shall in writing confirm the destruction of
such information.
Section 5.3. No Solicitation.
(a) The Company shall not, nor shall it permit any of its Subsidiaries, or
any officer, director, employee, agent or representative of the Company or any
of its Subsidiaries (including, without limitation, any investment banker,
attorney or accountant retained by the Company or any of its Subsidiaries)
(collectively, "Representatives"), directly or indirectly, to (i) initiate,
solicit or encourage any inquiries or proposals that constitute, or could
reasonably be expected to lead to, a proposal or offer for a merger,
consolidation, business combination, sale of assets representing a substantial
portion of the assets of the Company and its Subsidiaries, taken as a whole,
or a sale of shares representing 20% or more of the capital stock of the
Company, including, without limitation, by way of a tender offer or exchange
offer by any person for 20% or more of the shares of capital stock of the
Company, other than the Merger and the other transactions contemplated by this
Agreement (the "Transactions") (any of the foregoing inquiries or proposals
being referred to in this Agreement as an "Alternative Proposal"), (ii) engage
in negotiations or discussions concerning, or provide to any person or entity
any non-public information or data relating to the Company or any of its
Subsidiaries for the purposes of, or otherwise cooperate with or assist or
participate in, facilitate or encourage, any inquiries relating to or the
making of any Alternative Proposal, (iii) agree to, approve or recommend any
Alternative Proposal or (iv) take any other action inconsistent with the
obligations and commitments of the Company pursuant to this Section 5.3;
provided, however, that nothing contained in this Agreement shall prevent the
Company or its Board of Directors from (A) furnishing non-public information
to, or entering into discussions or negotiations with, any person or entity in
connection with an unsolicited bona fide written Alternative Proposal (for
which financing, to the extent required, is then committed or which, in the
good faith judgment of the Company's board of directors after consultation
with the Company's financial advisor, is reasonably capable of being obtained)
to the Company or its stockholders from persons other than Parent and its
affiliates (a "Third Party"), if and only to the extent that (1) the Board of
Directors of the Company, by action of a majority of the members of the Board
of Directors who are not affiliated with either the Parent or the person
making such Alternative Proposal or their respective affiliates, determines in
good faith, after consultation with the Company's outside counsel and its
financial advisors, that (x) such Alternative Proposal is more favorable from
a financial point of view to the Company's stockholders than the Merger and
the other Transactions and (y) failure by the Board of Directors to furnish
such information to or enter into discussions or negotiations with such Third
Party could reasonably be expected to result in a breach of its fiduciary
duties to the Company's stockholders under applicable law, and (2) prior to
furnishing such non-public information to, or entering into discussions or
negotiations with, such Third Party, the Board of Directors of the Company
receives from such person or entity an executed confidentiality agreement with
terms no less favorable to such party than those contained in the
Confidentiality Agreement; or (B) complying with Rule 14d-9 or Rule 14e-2
promulgated under the Exchange Act with regard to an Alternative Proposal or
making any other public disclosure that, based upon advice of the Company's
outside counsel, the Board of Directors determines in its good faith judgment
is required by applicable law, rule or regulation; provided, that prior to
making any such other public disclosure the Company shall to the extent
reasonably practicable inform the Parent that it intends to make such
disclosure. The Company will immediately cease and cause to be terminated any
existing activities, discussions or negotiations by the Company or its
Representatives with any parties conducted heretofore with respect to any of
the foregoing.
(b) The Company shall (i) promptly notify the Parent in writing after
receipt by the Company or its Representatives of any Alternative Proposal or
any inquiries indicating that any person is considering making or wishes to
make an Alternative Proposal, (ii) promptly notify the Parent in writing after
receipt of any request for non-public information relating to the Company or
any of its Subsidiaries or for access to the Company's or any of its
Subsidiaries' properties, books or records by any person that, to the
Company's knowledge, may be considering making, or has made, an Alternative
Proposal and (iii) keep the Parent advised of the status and principal terms
of any such Alternative Proposal, indication or request.
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Section 5.4. Stockholders' Meeting.
(a) General. The Company shall, in accordance with its charter documents:
(i) duly call, give notice of, convene and hold an annual or special
meeting (the "Special Meeting") of its stockholders as soon as practicable
for the purpose of considering and taking action upon this Agreement;
(ii) subject to its fiduciary duties under applicable law as advised in
writing by counsel, include in the Proxy Statement the recommendation of
its Board of Directors that stockholders of the Company vote in favor of
the approval and adoption of this Agreement and the Transactions
contemplated hereby; and
(iii) use its reasonable best efforts (x) (1) to obtain and furnish the
information required to be included by it in the Proxy Statement, (2) to
file the Proxy Statement with the SEC, (3) to respond promptly to any
comments made by the SEC with respect to the Proxy Statement and any
preliminary version thereof and (4) to cause the Proxy Statement to be
mailed to its stockholders at the earliest practicable time and (y) subject
to its fiduciary duties under applicable law as advised in writing by
counsel, to obtain the Stockholder Approval.
(b) Parent Disclosure Documents. As soon as practicable after the date of
this Agreement, Parent and/or Sub shall file (separately, or as part of the
Proxy Statement) with the SEC, if required, a Rule 13E-3 Transaction Statement
with respect to the Merger (together with any supplements or amendments
thereto, the "Parent Disclosure Documents"). Each of Sub and Parent agrees to
correct any information provided by it for use in the Sub Disclosure Documents
if and to the extent that it shall have become false or misleading in any
material respect. Sub agrees to take all steps necessary to cause the Sub
Disclosure Documents as so corrected to be filed with the SEC and to be
disseminated to holders of Shares, in each case as and to the extent required
by applicable federal securities laws. The Company and its counsel shall be
given reasonable opportunity to review and comment on each Sub Disclosure
Document prior to its being filed with the SEC.
(c) Voting of Shares by Parent and Sub. Parent agrees that, at the Special
Meeting, all Shares owned by Parent, Sub or any other affiliate of Parent will
be voted in favor of the Merger.
Section 5.5 Cooperation. Subject to the terms and conditions herein provided
(including, without limitation, Section 5.8), each of the parties hereto
agrees to use its reasonable best efforts (a) to take, or cause to be taken,
all action, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make
effective the Transactions including, without limitation, (i) promptly making
their respective filings, and thereafter using their reasonable best efforts
promptly to make any required submissions, under the HSR Act and (ii) promptly
making any filings that are required to be made or seeking any consents,
approvals, permits or authorizations that are required to be obtained under
any other federal, state or foreign law or regulation (including those
required under the Communications Act and by the FCC as are more fully
described in Section 5.8 of this Agreement) and (b) to refrain from taking,
directly or indirectly, any action that would result in a breach of this
Agreement. Parent shall notify the Company and keep it reasonably apprised of
developments relating to its ability to satisfy the conditions set forth in
Sections 6.1(d), 6.2(d) and 6.2(e). In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and directors of each party to this
Agreement shall use their respective reasonable best efforts to take all such
necessary action.
Section 5.6 Public Announcements. Parent, Sub and the Company will consult
with each other before issuing any press release or otherwise making any
public statements with respect to the Merger and shall not issue any such
press release or make any such public statement prior to such consultation,
except as may be required by law or any securities exchange or similar
authority (in which case prior notice of at least 24 hours by the Company to
Parent or by Parent or Sub to the Company, as applicable, of such issuance of
a press release or making of a public statement shall be required).
Section 5.7 Indemnification and Insurance.
(a) Continuation of Charter Obligations. The Company shall and from and
after the Effective Time, Parent and the Surviving Corporation shall, maintain
the right to indemnification and exculpation of officers and
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directors provided for in the Certificate of Incorporation and By-Laws of the
Company as in effect on the date hereof, with respect to indemnification and
exculpation for acts and omissions occurring prior to the Effective Time,
including, without limitation, the Transactions.
(b) Continuation of D&O Insurance. For six years after the Effective Time,
Parent or the Surviving Corporation shall maintain officers' and directors'
liability insurance covering the persons who are presently covered by the
Company's officers' and directors' liability insurance policies (copies of
which have heretofore been delivered to Parent) with respect to actions and
omissions occurring prior to the Effective Time, on terms which are not
materially less favorable, in the aggregate, than the terms of such current
insurance in effect for the Company on the date hereof.
(c) Indemnification. The Company shall and from and after the Effective
Time, the Surviving Corporation shall, (i) to the fullest extent permitted
under applicable law, indemnify and hold harmless, each present and former
director and officer of the Company (collectively, the "Indemnified Parties")
against any costs or expenses (including attorneys' fees), judgments, fines,
losses, claims, damages, liabilities and amounts paid in settlement in
connection with any pending, threatened or completed claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to any action or omission
occurring prior to the Effective Time (including, without limitation, any
claim, action, suit, proceeding or investigation arising out of or pertaining
to the Transactions (a "Claim")) and (ii) in the event of any such Claim
(whether arising before or after the Effective Time), upon receipt from the
Indemnified Party to whom expenses are advanced of an undertaking to repay
such advances required under the DGCL, advance expenses to each such
Indemnified Party, including the payment of the fees and expenses of counsel
selected by such Indemnified Party, which counsel shall be reasonably
satisfactory to the Company or the Surviving Corporation, as the case may be,
promptly after statements therefor are received, provided, that the Company
shall not, in connection with any one Claim or separate but substantially
similar or related Claims, be liable for the fees and expenses of more than
one separate firm of attorneys (in addition to any local counsel) at any time
for all such Indemnified Parties, and provided, further, that the Company
shall be entitled to participate in the defense thereof, and (iii) cooperate
fully in the defense of any such matter. Promptly after receipt by an
Indemnified Party of notice of any Claim as to which such persons intends to
seek indemnification hereunder, such person shall give notice thereof to the
Company; except that the failure to promptly give notice of any such Claim to
the Company shall not affect such persons right to indemnification, unless the
Company's ability to defend the Claim is materially impaired as a result.
Neither the Company nor the Surviving Corporation shall be liable for any
settlement effected without its written consent (which consent shall not be
unreasonably withheld).
(d) Eligibility for Indemnification. Notwithstanding any provision to the
contrary contained in the Certificate of Incorporation or By-Laws of the
Company as in effect on the date hereof, any determination required to be made
with respect to whether an Indemnified Party's conduct complies with the
standards set forth under the DGCL, under such charter provisions shall be
made by independent counsel selected by the Indemnified Party and reasonably
acceptable to the Company, Parent, Sub or the Surviving Corporation, which
shall pay such counsel's fees and expenses (it being agreed that neither the
Company, Parent, Sub nor the Surviving Corporation shall challenge any such
determination by such independent counsel which is favorable to an Indemnified
Party).
(e) Survival. This Section 5.7 shall survive the Closing, is intended to
benefit the Company, Parent, Sub or the Surviving Corporation and each of the
Indemnified Parties (each of whom shall be entitled to enforce this Section
5.7 against the Company, Parent or the Surviving Corporation, as the case may
be) and shall be binding on all successors and assigns of Parent and the
Surviving Corporation.
(f) Merger, Assignment, etc. In the event Parent, the Surviving Corporation
or any of their respective successors or assigns (i) consolidates with or
merges into any other person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any person, then, and in
each such case, proper provision shall be made so that the successors and
assigns of Parent or the Surviving Corporation assume the obligations set
forth in this Section 5.7.
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Section 5.8. FCC Covenants.
(a) Each of Parent and Sub shall use its reasonable best efforts to take, or
cause to be taken, all action and to do or satisfy, or cause to be done or
satisfied, all things and conditions necessary, proper or advisable to obtain
the FCC Order and to satisfy all conditions and take all actions required
thereby, in each case so as to come into compliance with FCC requirements and
to consummate the Merger as promptly as practicable; provided, however, this
Section 5.8 shall not be interpreted as obligating Parent, Sub, any Parent
Stockholder or any affiliates thereof, to consent to the imposition of any
condition or restriction set forth in Section 6.1(d) hereof; provided,
further, that Parent and Sub shall make all reasonable modifications and
adjustments to their respective relationships and arrangements among the
Parent Stockholders (including the grant of proxies to other Parent
Stockholders with respect to general voting rights) with respect to Parent
that are required in order to obtain an Acceptable FCC Order, so long as such
modifications and adjustments do not modify in any material respect the
contemplated minority stockholder protective provisions or modify in any
material respect the economic arrangement among and between the Parent
Stockholders. The Company shall also use such efforts, but shall not be
required to take any action that would be effective prior to the Effective
Time.
(b) As promptly as practicable, following the date of this Agreement (but in
no event later than January 1, 1998), the Company and Parent and Sub shall
prepare and file with the FCC all necessary applications for approval of the
Merger and the other Transactions. Without limiting the foregoing, the
Company, Parent and Sub shall submit to the FCC an application to be filed on
FCC Form 315 pursuant to the Communications Act.
Section 5.9. Notification of Certain Matters. Between the date of this
Agreement and the consummation of the Merger, the Company will promptly notify
Parent and Sub in writing if it becomes aware of any fact or condition that
causes or constitutes a breach of its representations and warranties as of the
date of this Agreement, or if it becomes aware of the occurrence after the
date of this Agreement of any fact or condition which would (except as
expressly contemplated by this Agreement) cause or constitute a breach of any
such representation or warranty had such representation or warranty been made
as of the time of occurrence or discovery of such fact or condition.
Notwithstanding the foregoing provisions of this Section 5.9, no party shall
be required to give notice with respect to events that are reported in the
financial or general interest newspapers that do not specifically relate to
such party or the Transactions.
Section 5.10. Employee Benefits. Parent agrees to honor, and from and after
the Effective Time shall cause the Surviving Corporation to honor, in
accordance with their respective terms as in effect on the date hereof, the
employment, severance, bonus, and commission agreements and similar
arrangements to which the Company is a party which are set forth in Section
5.10 of the Company Disclosure Schedule.
Section 5.11. Acknowledgment of Parent and Sub. Parent and Sub acknowledge
that any projections prepared by the Company and provided to Parent and/or Sub
as part of the due diligence process were and are merely estimates made by the
Company as of the time they were provided and Parent and Sub have in no way
relied on any such projections. Parent and Sub agree and acknowledge that
neither the Company nor any of its affiliates has made or is making any
representation or warranty as to the accuracy or completeness of the
Confidential Information Memorandum furnished by the Financial Advisor on
behalf of the Company or any supplement thereto provided by such person.
Without limiting the foregoing, Parent and Sub agree and acknowledge that the
only representations and warranties made by the Company with respect to the
Transactions are those representations and warranties contained in this
Agreement (together with the exceptions to such representations and warranties
set forth in the Company Disclosure Schedule) and only those representations
and warranties have and will have any legal effect following the date hereof
which effect will continue solely to the extent specifically set forth herein.
Section 5.12. Renewal. To the extent permitted by FCC regulations, with
respect to each Affiliation Agreement which requires that a notice be given,
or other action be taken, prior to the Effective Time in order to exercise the
Company's option to extend the scheduled expiration date of, or otherwise
renew, such Affiliation Agreement, the Company shall consult with Parent with
respect thereto and shall give such notice and shall take such other action
unless, after such consultation, Parent shall otherwise agree in writing.
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ARTICLE VI.
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 6.1. Conditions to Each Party's Obligation To Effect the Merger. The
respective obligations of each party to effect the Merger are subject to the
satisfaction or waiver, where legally permissible, prior to the Effective Time
of the following conditions:
(a) Stockholder Approval of this Agreement shall have been obtained;
(b) No statute, rule, regulation, order, decree or injunction shall have
been enacted, entered, promulgated or enforced by any court or governmental
authority of competent jurisdiction which restrains, enjoins or otherwise
prohibits the consummation of the Merger; provided, however, that the
Company, Parent and Sub shall use their reasonable best efforts to have any
such order, decree or injunction vacated;
(c) The applicable waiting period under the HSR Act shall have expired or
been terminated; and
(d) The FCC Order shall have been obtained without the imposition of any
conditions or restrictions that (i) seek to prohibit or limit the ownership
or operation by any of the Parent Stockholders or the Surviving Corporation
or any portion of its or their respective businesses or assets, or to
compel any Parent Stockholder or the Surviving Corporation to dispose of or
hold separate any portion of their business or assets, (ii) seek to impose
material limitations on the ability of any Parent Stockholder to acquire or
hold equity interests of the Parent, exercise the minority protective
provisions contemplated by the Parent or modify in any material respect the
economic arrangement among and between the Parent Stockholders, (iii) seek
to prohibit any Parent Stockholder from effectively controlling in any
respect any of the business or operations of such Parent Stockholder, or
(iv) which otherwise is reasonably likely to adversely effect the financial
condition, results of operations or business of any Parent Stockholder, the
Parent or the Surviving Corporation, that, in the case of conditions or
restrictions of the type referred to in clauses (i), (ii) or (iii), are not
acceptable to Parent in its sole discretion ("Acceptable FCC Order").
Section 6.2. Conditions to the Obligation of Parent and Sub to Effect the
Merger. The obligation of Parent and Sub to effect the Merger are subject to
the satisfaction or waiver, where legally permissible, prior to the Effective
Time of the following conditions:
(a) The representations and warranties of the Company set forth in this
Agreement shall be true and correct as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an
earlier date or as specifically set forth below) as of immediately before
the Effective Time, except as otherwise contemplated by this Agreement, and
the Company shall have performed all obligations required to be performed
by it at or prior to the Effective Time, except to the extent the failure
of such representations and warranties to be true and correct as of
immediately before the Effective Time or the failure to perform obligations
hereunder would not, individually or in the aggregate, have a Company
Material Adverse Effect. Notwithstanding the foregoing, on June 30, 1998,
the Company shall deliver a certificate signed on behalf of the Company by
the chief financial officer of the Company certifying that, in the good
faith judgment of such officer upon inquiry of the other officers of the
Company (Vice President level and above), on such date such officer
believes that the representation and warranty of the Company contained in
Section 3.8 hereof is true and correct, as if made at that date (a "Company
Complying Certificate") or, if such representation and warranty is not true
and correct, then stating with specificity in what respect such
representation is not true and correct (a "Non-Complying Certificate"). If
on June 30, 1998, the Company shall have delivered a Complying Certificate,
then, from and after June 30, 1998, the representation in Section 3.8 shall
be deemed to be true and correct, except as may be specifically set forth
below. If the Company shall have delivered a Non-Complying Certificate then
the representation and warranty contained in Section 3.8 shall, to the
extent of the matters so noticed, be deemed not to be satisfied unless such
matters shall have been cured. Notwithstanding the foregoing, if (i) within
15 days of the delivery of a Company Complying Certificate or a Company
Non-Complying Certificate, as applicable, the chief financial officer of
Parent delivers a certificate to the Company certifying that in the good
faith judgment of such officer upon reasonable inquiry, such officer
believes, as of June 30, 1998, that the
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representation and warranty of the Company set forth in Section 3.8 is not
true and correct, stating with specificity in what respect such
representation is not true and correct (the "Parent Response") and (ii) the
Company shall confirm in writing that such matter renders such
representation not true and correct (an "Affirmed Condition"), then the
representation and warranty of the Company contained in Section 3.8 shall
be deemed not to be satisfied, to the extent of the Affirmed Condition,
unless the Affirmed Condition shall be cured. If the Company does not
confirm in writing that any matter contained in the Parent Response renders
the representation and warranty made in Section 3.8 not true and correct (a
"Non-Affirmed Condition"), each of the parties hereby reaffirms that it
shall retain its right to exercise any and all remedies and/or defenses
available to it with respect to such Non-Affirmed Condition. If cured prior
to December 31, 1998, no matter set forth in a Company Non-Complying
Certificate or a Parent Response shall thereafter render the representation
and warranty of the Company set forth in Section 3.8 to be not true and
correct, and upon cure, each such matter shall be deemed waived. In no
event shall any matter arising after June 30, 1998 or not set forth in a
Company Non-Complying Certificate or Parent Response be deemed to render
the representation and warranty of the Company set forth in Section 3.8 not
true and correct. No Additional Amount shall accrue or be payable with
respect to any period beginning on the date on which all of the conditions
set forth in Section 6.1 and 6.2 hereof have been finally satisfied and
ending on the date on which all matters that are specified in any Non-
Complying Certificate or are Affirmed Conditions are cured.
(b) Parent shall have received a certificate signed on behalf of the
Company by the chief executive officer and the chief financial officer of
the Company to the effect of clause (a) above;
(c) Subject to the provisions of Section 5.12 of this Agreement, the
Company shall have exercised its option to extend any Affiliation Agreement
which the Company or any Subsidiary has the option to extend and which
expires (or which requires notice to be given or other action to be taken
in order to so extend such Affiliation Agreement) prior to the Effective
Time, or, after consulting with Parent, shall have executed an Affiliation
Agreement in such market with a comparable affiliate;
(d) The FCC Order shall not have been reversed, stayed, enjoined,
annulled or suspended; or
(e) The Parent shall have obtained funds pursuant to the Debt Commitment
Letters (or such alternative financing as is reasonably acceptable to the
Parent) sufficient, together with the Equity Commitments (the provision of
which is not a condition to the respective obligations of Parent and Sub to
effect the Merger), to perform its obligations under this Agreement, to
provide working capital for the business of the Company, and to consummate
the Transactions, including the payment of related fees and expenses.
Section 6.3. Conditions to the Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger are subject to the
satisfaction or waiver, where legally permissible, prior to the Effective Time
of the following conditions:
(a) The representations and warranties of Parent and Sub set forth in
this Agreement shall be true and correct as of the date of this Agreement
and (except to the extent such representations and warranties speak as of
an earlier date) as of immediately before the Effective Time, except as
otherwise contemplated by this Agreement, and Parent and Sub shall have
performed all obligations required to be performed by them at or prior to
the Effective Time, except to the extent the failure of such
representations and warranties to be true and correct as of immediately
before the Effective Time or the failure to perform obligations hereunder
would not, individually or in the aggregate, have a Company Material
Adverse Effect;
(b) The Company shall have received a certificate signed on behalf of
Parent and Sub by their respective chief executive officers and the chief
financial officers to the effect of clause (a) above.
ARTICLE VII.
TERMINATION; AMENDMENT; WAIVER
Section 7.1. Termination. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Effective Time,
notwithstanding approval thereof by the stockholders of the Company:
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(a) by mutual written consent duly authorized by the boards of directors
of Parent and the Company;
(b) subject to Section 7.4(b), by the Company or the Parent if the
Effective Time shall not have occurred on or before December 31, 1998;
provided, however, that the right of the Company or the Parent to terminate
this Agreement pursuant to this Section 7.1(b) shall not be available in
the event that the Company's or the Parent's, as the case may be, failure
to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Effective Time to occur on or before such
date;
(c) by Parent or the Company if any court of competent jurisdiction in
the United States or other United States governmental body shall have
issued an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the Merger and such order, decree,
ruling or other action shall have become final and nonappealable;
(d) by the Company or the Parent, if, at the Special Meeting (including
any adjournment or postponement thereof) called pursuant to Section 5.4
hereof, the Stockholder Approval shall not have been obtained; or
(e) by the Company, subject to Section 7.2, if the Board of Directors of
the Company shall concurrently approve, and the Company shall concurrently
enter into, a definitive agreement providing for the implementation of a
Superior Offer, provided, however, that (i) the Company is not then in
breach of Section 5.3, (ii) the Board of Directors of the Company shall
have complied with Section 7.2 in connection with such Superior Offer, and
(iii) the Company shall simultaneously make the payments required by
Section 7.4(a). For purposes of this Agreement, "Superior Offer" means an
Alternative Proposal which is superior from a financial point of view to
the Company's stockholders (other than any stockholders affiliated with the
Parent) to the Merger and the other Transactions contemplated hereby and
for which financing, to the extent required, is then committed or which, in
the good faith judgment of the Company's board of directors after
consultation with the Company's financial advisors is reasonably capable of
being obtained.
Section 7.2. Certain Actions Prior to Termination. The Company shall provide
to the Parent written notice of its intention to terminate this Agreement
pursuant to Section 7.1(e) advising the Parent (a) that the Board of Directors
of the Company has determined, by action of a majority of the members of the
Board of Directors of the Company who are not affiliated with either the
Parent or the person making such Alternative Proposal or their respective
affiliates, that such Alternative Proposal is a Superior Offer and that, in
the exercise of its good faith judgment as to fiduciary duties to stockholders
under applicable law, after consultation with the Company's outside legal
counsel, failure by the Board of Directors to terminate this Agreement could
reasonably be expected to result in a breach of such duties and (b) as to the
material terms of any such Alternative Proposal. At any time after the fifth
business day following receipt of such notice, the Company may terminate this
Agreement as provided in Section 7.1(e) only if the Board of Directors of the
Company determines, by action of a majority of the members of the Board of
Directors of the Company who are not affiliated with either the Parent or the
person making such Alternative Proposal or their respective affiliates, that
failure by the Board of Directors to terminate this Agreement continues to be
reasonably expected to result in a breach of its fiduciary duties to
stockholders under applicable law (which determination shall be made in light
of any revised proposal made by the Parent prior to the expiration of such
five business day period) and concurrently enters into a definitive agreement
providing for the implementation of such Alternative Proposal.
Section 7.3. Effect of Termination. In the event of termination of this
Agreement by the Company or the Parent as provided in Section 7.1 hereof, this
Agreement shall forthwith become void (except as set forth (i) in the last
sentence of Section 5.2(b), (ii) in Sections 7.4, 8.2, 8.3, 8.4 and 8.9 and
(iii) in this Section 7.3); provided that no party hereto shall be relieved
from liability for any breach of this Agreement.
Section 7.4. Termination Fees.
(a) If this Agreement is terminated pursuant to (a) Section 7.1(d) or (b)
Section 7.1(e), and if the Company is not at that time entitled to terminate
this Agreement by reason of Section 7.1(b) or 7.1(c), then the Company shall
promptly (and in any event within two days of receipt by the Company of
written notice from the Parent)
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pay to the Parent (by wire transfer of immediately available funds to an
account designated by the Parent) concurrently with the execution of a
definitive agreement with respect to any Alternative Proposal, a termination
fee of $15,000,000 plus an amount equal to documented fees and expenses
incurred by or on behalf of the Parent and its affiliates and investors in
connection with this Agreement and the Transactions up to an aggregate maximum
amount of $2,500,000; provided, however, that the Company shall not be
obligated to pay such fee to the Parent if this Agreement is terminated
pursuant to Section 7.1(d) unless (a)(i) at the time of the Company Meeting,
the Company has received an Alternative Proposal (a "Pending Proposal") or
(ii) prior to the termination of this Agreement the Board of Directors of the
Company shall have withdrawn, or modified in a manner adverse to the Parent,
its approval or recommendation of the Merger and the other Transactions, and
(b) within one year after the termination of this Agreement, the Company
enters into a definitive agreement or otherwise consummates with any person
such or any other Alternative Proposal, and, provided, further, that if such
termination fee becomes payable as a result of a termination pursuant to
Section 7.1(d), then such termination fee shall be paid promptly following the
earlier of the execution of such definitive agreement providing for an
Alternative Proposal and the consummation of an Alternative Proposal, as the
case may be.
(b) If (i) this Agreement is terminated pursuant to (i) Section 7.1(b) and
(ii) Parent is not at that time entitled to terminate this Agreement by reason
of Section 7.1(c) or 7.1(d), and (iii) Parent has not received an Acceptable
FCC Order, and (iv) the conditions set forth in Sections 6.1(c) and 6.2(a),
(b), (c) and (e) have been, or if the FCC Order had been obtained, would have
been, otherwise satisfied, then Parent shall promptly (and in any event within
two days of receipt by Parent of written notice from the Company) pay to the
Company (by wire transfer of immediately available funds to an account
designated by the Company) a termination fee of $17,500,000; provided,
however, that Parent shall not be obligated to pay such fee to the Company if
the sole reason that Parent and Sub have failed to obtain the Acceptable FCC
Order is due to changes, after the date hereof, in the Communications Act or
the rules and regulations of the FCC, in effect as of the date hereof (except
those which have been proposed in formal rulemaking proceedings and have been
subject to public comment prior to the date hereof).
Section 7.5. Amendment. To the extent permitted by applicable law, this
Agreement may be amended by action taken by the Company, Parent and Sub (and
the stockholders of the Company, if required by applicable law) at any time
before or after adoption of this Agreement by the Company's stockholders;
provided, however, that after the adoption of this Agreement by the Company's
stockholders, no amendment shall be made which decreases the price per Share,
changes the form of consideration to be received by the holders of Shares in
the Merger or which adversely affects the rights of stockholders of the
Company hereunder without the approval of such stockholders. This Agreement
may not be amended except by an instrument in writing signed on behalf of all
the parties.
Section 7.6. Extension; Waiver. At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations
or other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document,
certificate or writing delivered pursuant hereto or (c) waive compliance with
any of the agreements or conditions contained herein unless waiver is unlawful
or specifically prohibited. Any agreement on the part of any party to any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE VIII.
MISCELLANEOUS
Section 8.1. Non-Survival of Representations, Warranties and Agreements. The
representations and warranties made herein shall terminate at the Effective
Time or the earlier termination of this Agreement pursuant to Section 7.1 as
the case may be; provided, however, that if the Merger is consummated,
Sections 2.10, 2.11, 5.5 (with respect to the last sentence thereof), 5.7 and
5.10 will survive the Effective Time to the extent contemplated by such
sections, and provided further that the last sentence of Section 5.2(b) and
Sections 7.3, 7.4 and 8.9 will in all events survive the termination of this
Agreement.
26
<PAGE>
Section 8.2. Entire Agreement; Assignment. This Agreement, the Annexes and
Schedules referred to herein, the letter(s) contemplated by Section 4.5 hereof
and the Confidentiality Agreement (a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all other
prior agreements and understandings, both written and oral, among the parties
or any of them with respect to the subject matter hereof and (b) shall not be
assigned by operation of law or otherwise, provided that Parent may assign its
rights and obligations or those of Sub to any wholly-owned, direct or
indirect, Subsidiary of Parent, but no such assignment shall relieve Parent of
its obligations hereunder if such assignee does not perform such obligations.
Section 8.3. Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
Section 8.4. Notices. All notices and other communications among the parties
shall be in writing and shall be deemed to have been duly given when (i)
delivered in person, or (ii) one business day after delivery to a reputable
overnight courier service (i.e., Federal Express), postage pre-paid, or (iii)
delivered by telecopy and promptly confirmed by telephone and by delivery of a
copy in person or overnight as aforesaid, in each case with postage prepaid,
addressed as follows:
If to Parent or Sub:
TLMD Station Co.
c/o Apollo Management, L.P.
1301 Avenue of the Americas, 38th Floor
New York, New York 10013
Facsimile: (212) 261-4102
Attention: Michael Weiner
with a copy to:
Liberty Media Corporation
8101 East Prentice Avenue, Suite 500
Englewood, Colorado 80111
Facsimile: (303) 721-5443
Attention: David B. Koff
Sony Pictures Entertainment, Inc.
10202 West Washington Boulevard
Culver City, California 90232-3195
Facsimile: (310) 244-1818
Attention: Alan Sokol
Apollo Management, L.P.
1301 Avenue of the Americas, 38th Floor
New York, New York 10019
Facsimile: (212) 261-4102
Attention: Michael Weiner
Bastion Capital Corporation
1999 Avenue of the Stars, Ste. 2960
Los Angeles, California 90067
Facsimile: (31) 277-7582
Attention: Guillermo Bron
27
<PAGE>
With a courtesy copy to (which shall not constitute notice):
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071-3144
Facsimile: (213) 687-5600
Attention: Thomas C. Janson, Jr.
Troop Meisinger Steuber & Pasich, LLP
10940 Wilshire Boulevard, Suite 800
Los Angeles, California 90024-3902
Facsimile: (310) 443-8512
Attention: C.N. Franklin Reddick III
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Facsimile: (212) 872-1002
Attention: Patrick Dooley
Irell & Manella, LLP
333 South Hope Street
Suite 3300
Los Angeles, California 90071
Facsimile: (213) 872-1002
Attention: Edmund Kaufman
If to the Company:
Telemundo Group, Inc.
2290 West 8th Avenue
Hialeah, Florida 33010
Telecopy: 310/306-7313
Attention: Osvaldo F. Torres, General Counsel
with a courtesy copy to (which shall not constitute notice):
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
Telecopy: 213/891-8763
Attention: Paul D. Tosetti, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
SECTION 8.5. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, REGARDLESS OF
THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS
OF LAWS THEREOF.
Section 8.6. Interpretation. For purposes of this Agreement neither the
Company nor any Subsidiary of the Company shall be deemed to be an affiliate
or Subsidiary of Sub or Parent. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Inclusion of information in the Company
Disclosure Schedule, does not constitute an admission or acknowledgment of the
materiality of such information. If an ambiguity or question of intent or
interpretation arises, then this Agreement will be construed as if drafted
jointly by the parties to this Agreement, and no presumption or burden of
proof will arise favoring or disfavoring any party to this Agreement by virtue
of the authorship of any of the provisions of this Agreement.
28
<PAGE>
Section 8.7. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and except for the
provisions of Sections 2.7, 2.12, 2.13, 5.7 and 5.10 (which are intended to be
for the benefit of the persons referred to therein and their beneficiaries,
and may be enforced by such persons as intended third-party beneficiaries),
nothing in this Agreement, express or implied, is intended to confer upon any
other person any rights or remedies of any nature whatsoever under or by
reason of this Agreement.
Section 8.8. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
Section 8.9. Expenses. All costs and expenses incurred in connection with
the Transactions shall be paid by the party incurring such expenses.
Section 8.10. Obligation of Parent. Whenever this Agreement requires Sub to
take any action, such requirement will be deemed to include an undertaking on
the part of Parent to cause Sub to take such action.
Section 8.11. Sale of the Company. The parties hereto agree and acknowledge
that for the purposes of this Agreement no "sale" of the Company shall be
deemed to have occurred until the consummation of the Merger at the Effective
Time.
Section 8.12. Actions by the Company. Any action or decision requiring the
approval of the Board of Directors of the Company which is to be taken or
which is made or required to be taken or made by or for the benefit of the
Company pursuant to, in connection with or in furtherance of this Agreement
(including, without limitation, with respect to Sections 7.5 and 7.6 hereof)
shall be made or taken, as applicable, at the discretion and with the approval
of the members of the Board of Directors of the Company who are not affiliated
with Parent or Sub or their respective affiliates or stockholders.
In Witness Whereof, each of the parties has caused this Agreement and Plan
of Merger to be executed on its behalf by its officers thereunto duly
authorized, all as of the day and year first above written.
TLMD Station Group, Inc.
("Parent")
By: /s/ Edward Yorke
__________________________________
Name: Edward Yorke
Title: President
TLMD Acquisition Co.
("Sub")
By: /s/ Edward Yorke
__________________________________
Name: Edward Yorke
Title: President
Telemundo Group, Inc.
("Company")
By: /s/ Roland A. Hernandez
__________________________________
Name: Roland A. Hernandez
Title: President and Chief
Executive Officer
29
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
TELEMUNDO HOLDINGS, INC.
(PURSUANT TO SECTIONS 241 AND 245 OF THE GENERAL
CORPORATION LAW OF DELAWARE)
TELEMUNDO HOLDINGS, INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the "GCL") (the
"Corporation"), DOES HEREBY CERTIFY;
1. That the original Certificate of Incorporation of the Corporation was
filed with the Secretary of State on November 17, 1997 (under the name
TLMD Station Group, Inc.).
2. That the Corporation has not received any payment for any of its stock
and the Board of Directors of the Corporation adopted resolutions,
pursuant to Sections 241 and 245 of the GCL, authorizing the amendment
and restatement of the Certificate of Incorporation of the Corporation
as follows:
FIRST: The name of the Corporation is TELEMUNDO HOLDINGS, INC. (hereinafter
-----
the "Corporation").
SECOND: The address of the registered office of the Corporation in the
------
State of Delaware is 1209 Orange Street, in the City of Wilmington, County of
New Castle. The name of its registered agent at that address is The Corporation
Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
-----
activity for which a corporation may be organized under the GCL, as set forth in
Title 8 of the GCL.
FOURTH: The total number of shares of stock which the Corporation shall
------
have authority to issue is 10,000 shares of Common Stock, each having a par
value of one penny ($.01).
FIFTH: The following provisions are inserted for the management of the
-----
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(1) The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors, subject to the provisions
of the By-Laws of the Corporation (as may be amended from time to time, the
"By-Laws") and this Amended and Restated Certificate of Incorporation.
<PAGE>
(2) The stockholders shall have the sole power by unanimous vote to
make, alter, amend, change, add to or repeal the By-Laws.
(3) The number of directors of the Corporation shall be as from time
to time fixed by, or in the manner provided in, the By-Laws. Election of
directors need not be by written ballot unless the By-Laws so provide.
(4) No director shall be personally liable to the Corporation or any
of its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) pursuant to Section 174 of the GCL or (iv) for any
transaction from which the director derived an improper personal benefit.
Any repeal or modification of this Article FIFTH by the stockholders of the
Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or
modification with respect to acts or omissions occurring prior to such
repeal or modification.
(5) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered
to exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation, subject, nevertheless, to the
provisions of the GCL, this Amended and Restated Certificate of
Incorporation, and any By-Laws adopted by the stockholders; provided,
however, that no By-Laws hereafter adopted by the stockholders shall
invalidate any prior act of the directors which would have been valid if
such By-Laws had not been adopted.
SIXTH: Meetings of stockholders may be held within or without the State of
-----
Delaware, as the By-Laws may provide. The books of the Corporation may be kept
(subject to any provision contained in the GCL) outside the State of Delaware at
such place or places as may be designated from time to time by the Board of
Directors or in the By-Laws.
SEVENTH: Major Decisions.
------- ---------------
(1) The Board shall not authorize, and the officers of the
Corporation shall not (A) effect any Major Decision (other than the Major
Decision set forth in subparagraph (h) of the definition of Major Decision
contained in paragraph (2) of this Article SEVENTH) without the unanimous
approval of Sony Pictures Entertainment Inc. ("SPE"), Liberty Media Corporation
("Liberty") and Station Partners, LLC ("Station Partners") or their respective
Permitted Transferees as designated in accordance with Section 2 of Article VI
of the By-Laws, in their capacity as stockholders or (B) effect the Major
Decision set forth in subparagraph (h) of the definition of Major Decision
contained in paragraph (2) of this Article SEVENTH without the unanimous written
approval of both SPE and Station Partners or their respective Permitted
Transferees as designated in accordance with Section 2 of Article VI of the By-
Laws, in their capacity as stockholders. Any determination not specifically
included in the definition of "Major Decision" or otherwise identified in the
By-Laws as requiring approval of the stockholders shall,
2
<PAGE>
except to the extent required by the GCL, be made by the Board of Directors
acting by majority vote of the authorized number of Directors.
(2) Definitions. For purposes of this Article SEVENTH, the following
-----------
terms shall have the meaning set forth below:
"Affiliate" means, with respect to any Person, any other Person that,
---------
directly or indirectly, through one or more intermediaries, Controls, is
Controlled by or is under common Control with, such specified Person.
"Control" (and the related term "Controlled") means the possession,
-------
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a person, whether through the ownership of voting
securities, by contract or otherwise.
"Governmental Entity" shall mean any federal, state or local
-------------------
government or regulatory agency, authority, commission or instrumentality.
"Insolvency Event" means the taking of any of the following actions by
----------------
the Corporation or any of its Subsidiaries: (a) the Corporation or any of its
Subsidiaries institutes proceedings to be adjudicated voluntarily bankrupt; (b)
the Corporation or any of its Subsidiaries consents to the filing of a
bankruptcy proceeding against the Corporation or such subsidiary; (c) the
Corporation or any of its Subsidiaries files a petition or answer or consent
seeking reorganization under any bankruptcy or similar law or statute; (d) the
Corporation or any of its Subsidiaries consents to the filing of any petition,
or to the appointment of a custodian, receiver, liquidator, trustee or assignee
in bankruptcy or insolvency of the Corporation or such Subsidiary or any
substantial part of its assets or property; or (e) the Corporation or any of its
Subsidiaries makes a general assignment for the benefit of creditors, or takes
any corporate action in furtherance of any of the foregoing.
"Major Decision" means any of the following actions or transactions or
--------------
the entering into of any contract or agreement to do any of the following
actions or transactions described in clauses (a) - (h) below, or any
modification, amendment, enforcement, waiver, extension, or renewal thereof
(except as limited by the terms of said clauses (a) - (h)):
(a) Any substantial change in the nature or scope of the
Corporation's broadcast business, which provides predominantly Spanish-language
or Hispanic-themed programming, or the acquisition of an additional broadcast
station or other substantial business;
(b) Issuing or redeeming any equity or debt securities, or any
options, warrants or other securities which provide a right to purchase or are
convertible into equity or debt securities of the Corporation;
(c) Entering into any agreement with respect to or consummating
any merger, consolidation or reorganization of the Corporation or any of its
Subsidiaries;
3
<PAGE>
(d) Sale or other transfer by the Corporation or any of its
subsidiaries in a single transaction or series of related transactions, of all
or substantially all of the assets of the Corporation, of any broadcast station
or any other assets in a single transaction or series of related transactions
with a purchase price in excess of $10 million;
(e) Taking any action relating to the termination, liquidation,
dissolution or winding up of the Corporation;
(f) Taking any action by the Corporation or any of its
subsidiaries that would constitute an Insolvency Event for the Corporation or
any of its Subsidiaries;
(g) Any related party transaction between any station or the
Corporation or any of its subsidiaries and any of the stockholders or Affiliates
thereof, but excluding transactions between the Corporation or any of its
subsidiaries and Telemundo Network Group LLC; and
(h) Except as specified in paragraph (h) of the definition of
Major Decisions set forth in Section 1 of Article VI of the By-Laws, permitting
any station owned, directly or indirectly by the Corporation or any of its
subsidiaries to enter into, extend, amend, terminate or fail to renew any
affiliation agreement with a broadcast network (the approval of which action
pursuant to paragraph (1) of this Article SEVENTH, shall not be unreasonably
withheld by any party after applying commercial standards of review prevailing
among investors in companies comparable to the Corporation).
"Person" means any individual, limited or general partnership, limited
------
liability company, limited liability partnership, corporation, joint venture,
business trust, joint stock company, trust, estate, unincorporated association,
Governmental Entity or other entity of whatsoever nature.
"Subsidiary" means, in respect of any Person, any corporation,
----------
association, limited liability company, limited or general partnership or other
business entity of which more than 50% of the total voting power of shares of
capital stock or other interests (including partnership interests) entitled
(without regards to the occurrence of any contingency) to vote in the election
of directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by (i) such Person, (ii) such Person and one or more
Subsidiaries of such Person, or (iii) one or more Subsidiaries of such Person.
EIGHTH: The Corporation may amend, alter, change or repeal any provision
------
contained in this Amended and Restated Certificate of Incorporation only by
unanimous approval of the stockholders.
4
<PAGE>
IN WITNESS WHEREOF, said TELEMUNDO HOLDINGS, INC. has caused this
Certificate to be signed by Aaron Stone, its Secretary, this 11th day of August,
1998.
/s/ Aaron Stone
---------------------------------------
Aaron Stone, Secretary
5
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED
BY-LAWS
OF
TELEMUNDO HOLDINGS, INC.
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
-------
Section 1. Registered Office. The registered office of the
--------- -----------------
Corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware.
Section 2. Other Offices. The Corporation may also have offices at
--------- -------------
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Place of Meetings. Meetings of the stockholders for the
--------- -----------------
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware as shall be designated
from time to time by the Board of Directors.
Section 2. Annual Meetings. The Annual Meetings of Stockholders for
--------- ---------------
the election of directors shall be held on such date and at such time as shall
be designated from time to time by the Board of Directors. Any other proper
business may be transacted at the Annual Meeting of Stockholders.
Section 3. Special Meetings. Unless otherwise required by law or by
--------- ----------------
the certificate of incorporation of the Corporation, as amended and restated
from time to time (the "Certificate of Incorporation"), Special Meetings of
Stockholders, for any purpose or purposes, may be called by either (i) the
Chairman, if there be one, or (ii) the President, if there be one, (iii) the
Chief Executive Officer, (iv) any Vice President, if there be one, (v) the
Secretary or (vi) any Assistant Secretary, if there be one, and shall be called
by any such officer at the request in writing of (i) the Board of Directors,
(ii) a committee of the Board of Directors that has been duly designated by the
Board of Directors and whose powers and authority include the power to call such
meetings or (iii) stockholders owning a majority of the capital stock of the
Corporation issued and outstanding and entitled to vote. Such request shall
state the purpose or purposes of the proposed meeting. At a Special Meeting of
Stockholders, only such business shall be conducted as shall be specified in the
notice of meeting (or any supplement thereto).
<PAGE>
Section 4. Notice. Whenever stockholders are required or permitted
--------- ------
to take any action at a meeting, a written notice of the meeting shall be given
which shall state the place, date and hour of the meeting, and, in the case of a
special meeting, the purpose or purposes for which the meeting is called.
Unless otherwise required by law, the written notice of any meeting shall be
given not less than ten nor more than sixty days before the date of the meeting
to each stockholder entitled to vote at such meeting.
Section 5. Adjournments. Any meeting of the stockholders may be
--------- ------------
adjourned from time to time to reconvene at the same or some other place, and
notice need not be given of any such adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken. At the
adjourned meeting, the Corporation may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than
thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 6. Quorum. Unless otherwise required by law or the
--------- ------
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. A quorum, once established, shall
not be broken by the withdrawal of enough votes to leave less than a quorum.
If, however, such quorum shall not be present or represented at any meeting of
the stockholders, the stockholders entitled to vote thereat, present in person
or represented by proxy, shall have power to adjourn the meeting from time to
time, in the manner provided in Section 5, until a quorum shall be present or
represented.
Section 7. Voting. Unless otherwise required by law, the Certificate
--------- ------
of Incorporation, these By-Laws or Article 2 of that certain Stockholders
Agreement, dated as of August 12, 1998, by and among the Corporation, Station
Partners, LLC, ("Station Partners"), Apollo Investment Fund III, L.P., Bastion
Capital Fund, L.P., Sony Pictures Entertainment Inc. ("SPE") and Liberty Media
Corporation ("Liberty") (as may be amended from time to time, the "Stockholders'
Agreement"), any question brought before any meeting of stockholders shall be
decided by the vote of the holders of a majority of the total number of votes of
the capital stock represented and entitled to vote thereat, voting as a single
class. Unless otherwise provided in the Certificate of Incorporation, and
subject to Section 5 of Article V hereof and the Stockholders' Agreement, each
stockholder represented at a meeting of stockholders shall be entitled to cast
one vote for each share of the capital stock entitled to vote thereat held by
such stockholder. Such votes may be cast in person or by proxy but no proxy
shall be voted on or after three years from its date, unless such proxy provides
for a longer period. The Board of Directors, in its discretion, or the officer
of the Corporation presiding at a meeting of stockholders, in such officer's
discretion, may require that any votes cast at such meeting shall be cast by
written ballot.
Section 8. Consent of Stockholders in Lieu of Meeting. Unless
--------- ------------------------------------------
otherwise provided in the Certificate of Incorporation, any action required or
permitted to be taken at any Annual or Special Meeting of Stockholders of the
Corporation, may be taken without a meeting,
2
<PAGE>
without prior notice and without a vote, if a consent or consents in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted and shall be delivered to the Corporation by
delivery to its registered office in the State of Delaware, its principal place
of business, or an officer or agent of the Corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Delivery
made to the Corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. Every written consent shall bear the
date of signature of each stockholder who signs the consent and no written
consent shall be effective to take the corporate action referred to therein
unless, within sixty days of the earliest dated consent delivered in the manner
required by this Section 8 to the Corporation, written consents signed by a
sufficient number of holders to take action are delivered to the Corporation by
delivery to its registered office in the state of Delaware, its principal place
of business, or an officer or agent of the Corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Prompt
notice of the taking of the corporate action without a meeting by less than
unanimous written consent shall be given to those stockholders who have not
consented in writing and who, if the action had been taken at a meeting, would
have been entitled to notice of the meeting if the record date for such meeting
had been the date that written consents signed by a sufficient number of holders
to take the action were delivered to the Corporation as provided above in this
section.
Section 9. List of Stockholders Entitled to Vote. The officer of the
--------- -------------------------------------
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting either at a place within the city where the meeting is to be held, which
place shall be specified in the notice of the meeting, or, if not so specified,
at the place where the meeting is to be held. The list shall also be produced
and kept at the time and place of the meeting during the whole time thereof, and
may be inspected by any stockholder of the Corporation who is present.
Section 10. Stock Ledger. The stock ledger of the Corporation shall
---------- ------------
be the only evidence as to who are the stockholders entitled to examine the
stock ledger, the list required by Section 9 of this Article II or the books of
the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
Section 11. Conduct of Meetings. The Board of Directors of the
---------- -------------------
Corporation may adopt by resolution such rules and regulations for the conduct
of the meeting of the stockholders as it shall deem appropriate. Except to the
extent inconsistent with such rules and regulations as adopted by the Board of
Directors, the chairman of any meeting of the stockholders shall have the right
and authority to prescribe such rules, regulations and procedures and to do all
such acts as, in the judgment of such chairman, are appropriate for the proper
conduct of the meeting. Such rules, regulations or procedures, whether adopted
by the Board of Directors or prescribed by the chairman of the meeting, may
include, without limitation, the
3
<PAGE>
following: (i) the establishment of an agenda or order of business for the
meeting; (ii) the determination of when the polls shall open and close for any
given matter to be voted on at the meeting; (iii) rules and procedures for
maintaining order at the meeting and the safety of those present; (iv)
limitations on attendance at or participation in the meeting to stockholders of
record of the Corporation, their duly authorized and constituted proxies or such
other persons as the chairman of the meeting shall determine; (v) restrictions
on entry to the meeting after the time fixed for the commencement thereof; and
(vi) limitations on the time allotted to questions or comments by participants.
ARTICLE III
DIRECTORS
---------
Section 1. Number and Election of Directors. The Board of Directors
--------- --------------------------------
shall consist of nine members. Except as provided in Section 2.1.1(b) of the
Stockholders' Agreement with respect to the Liberty Nominated Director (as
defined therein), directors shall be elected by a majority of the votes cast at
the Annual Meetings of Stockholders and each director so elected shall hold
office until the next Annual Meeting of Stockholders and until such director's
successor is duly elected and qualified, or until such director's earlier death,
resignation or removal. Any director may resign at any time upon written notice
to the Corporation. Directors need not be stockholders. Each director must be
a citizen of the United States. The Liberty Nominated Director shall be elected
in accordance with Section 2.1.1(b) of the Stockholders' Agreement.
Section 2. Vacancies. Unless otherwise required by law, vacancies
--------- ---------
arising through death, disability, retirement, resignation or removal may be
filled only in accordance with Section 2.1.4 of the Stockholders' Agreement.
Section 3. Removal. A director may be removed in accordance with
--------- -------
Section 2.1.3 of the Stockholders' Agreement.
Section 4. Duties and Powers. The business and affairs of the
--------- -----------------
Corporation shall be managed by or under the direction of the Board of Directors
which may exercise all such powers of the Corporation and do all such lawful
acts and things as are not by statute, the Certificate of Incorporation, these
By-Laws or Article 2 of the Stockholders' Agreement required to be exercised or
done by the stockholders.
Section 5. Meetings. The Board of Directors may hold meetings, both
--------- --------
regular and special, either within or without the State of Delaware. The Board
of Directors shall hold at least four (4) regularly scheduled meetings per year
at such times as may from time to time be fixed by resolution of the Board of
Directors and no notice (other than the resolution) need be given as to a
regularly scheduled meeting. Special meetings of the Board of Directors may be
held at any time upon 48 hours notice by the Chief Executive Officer of the
Corporation or at least two directors. So long as Liberty owns at least 15% of
the outstanding shares of common stock, Liberty shall have the right to receive
notice of meetings of the Board. Written notice of the time and place of special
meetings shall be delivered personally to each director by reliable overnight
courier or communicated to each director by facsimile or other form of recorded
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communication, charges prepaid, addressed to each director at that director's
address as it is shown on the records of the Corporation or, if it is not so
shown on such records or is not readily ascertainable, at that director's
residence or usual place of business. In case such notice is delivered by
reliable overnight courier, it shall be deemed received within two business days
following such delivery to the overnight courier. In case such notice is
delivered personally or by other form of written communication, it shall be
delivered at least 48 hours before the time of the holding of the meeting.
Reasonable efforts shall be made to insure that each Director actually receives
timely notice of any such special meeting. A notice must specify the purpose of
any special meeting. Notice of a meeting need not be given to any director who
signs a waiver of notice or a consent to holding the meeting (which waiver or
consent need not specify the purpose of the meeting) or an approval of the
minutes thereof, whether before or after the meeting, or who attends the meeting
without protesting, prior to its commencement, the lack of notice to such
director. All such waivers, consents and approvals shall be filed with the
Corporation's records or made a part of the minutes of the meeting. If the
meeting is adjourned for more than twenty-four (24) hours, notice of any
adjournment shall be given prior to the time of the adjourned meeting to the
directors who are not present at the time of the adjournment. Meetings of the
Board of Directors may be held at any place which has been designated in the
notice of the meeting or at such place as may be approved by the Board of
Directors. A reasonably detailed agenda shall be supplied to each director
reasonably in advance of each meeting of the Board of Directors, together with
other appropriate documentation with respect to agenda items calling for Board
of Directors action, to inform adequately the directors regarding matters to
come before the Board of Directors. Any director wishing to place a matter on
the agenda for any meeting of the Board of Directors may do so by communicating
with the Chief Executive Officer of the Corporation sufficiently in advance of
the meeting of the Board of Directors so as to permit timely dissemination to
all directors of information with respect to the agenda items. For purposes of
these By-Laws, "business day" means any day that is not a Saturday, a Sunday or
any day on which banks are required or authorized by law to be closed in the
city of New York.
Section 6. Quorum. Except as otherwise required by law or the
--------- ------
Certificate of Incorporation, at all meetings of the Board of Directors, a
majority of the entire Board of Directors shall constitute a quorum for the
transaction of business and all actions of the Board of Directors at any meeting
at which there is a quorum shall require a majority of the votes entitled to be
cast as if all directors were present. If a quorum shall not be present at any
meeting of the Board of Directors, the directors present thereat may adjourn the
meeting from time to time, without notice to the directors who are not present
at the time of the adjournment other than (to the extent the meeting is
adjourned for more than twenty-four (24) hours) notice required by Section 5 of
this Article III.
Section 7. Actions by Written Consent. Unless otherwise provided in
--------- --------------------------
the Certificate of Incorporation, or these By-Laws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all the members of the
Board of Directors or committee, as the case may be, consent thereto in writing,
and the writing or writings are filed with the minutes of proceedings of the
Board of Directors or committee.
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Section 8. Meetings by Means of Conference Telephone. Unless
--------- -----------------------------------------
otherwise provided in the Certificate of Incorporation, members of the Board of
Directors of the Corporation, or any committee thereof, may participate in a
meeting of the Board of Directors or such committee by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to this Section 7 shall constitute presence in person at such meeting.
Section 9. Committees. The Board of Directors may only designate one
--------- ----------
or more committees upon the prior written consent of each of Station Partners,
SPE, Liberty (or their respective Permitted Transferees in accordance with
Section 2.1.1(f) of the Stockholders' Agreement), and each committee to consist
of one or more of the directors of the Corporation. The Board of Directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of any such committee.
In the absence or disqualification of a member of a committee, and in the
absence of a designation by the Board of Directors of an alternate member to
replace the absent or disqualified member, the member or members thereof present
at any meeting and not disqualified from voting, whether or not such member or
members constitute a quorum, may unanimously appoint another member of the Board
of Directors to act at the meeting in the place of any absent or disqualified
member. Any committee, to the extent permitted by law and provided in the
resolution establishing such committee, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the Corporation, and may authorize the seal of the Corporation to
be affixed to all papers which may require it. Each committee shall keep regular
minutes and report to the Board of Directors when required.
Section 10. Compensation. The directors may be paid their expenses,
---------- ------------
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director, payable in cash or securities. No such payment shall
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees may
be allowed like compensation for attending committee meetings.
Section 11. Interested Directors. No contract or transaction between
---------- --------------------
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers or have a financial interest, shall be void or voidable solely for this
reason, or solely because the director or officer is present at or participates
in the meeting of the Board of Directors or committee thereof which authorizes
the contract or transaction, or solely because the director or officer's vote is
counted for such purpose if (i) the material facts as to the director or
officer's relationship or interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or the committee, and the Board
of Directors or committee in good faith authorizes the contract or transaction
by the affirmative votes of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum; or (ii) the material
facts as to the director or officer's relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by vote of the
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stockholders; or (iii) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified by the Board of Directors,
a committee thereof or the stockholders. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee which authorizes the contract or transaction.
ARTICLE IV
OFFICERS
--------
Section 1. General. Subject to Section 3 of this Article IV, the
--------- -------
officers of the Corporation shall be chosen by the Board of Directors and shall
consist of a Chief Executive Officer, a Chief Financial Officer and such other
officers as the Board of Directors determines from time to time to be
appropriate, including, but not limited to, a Chairman of the Board of Directors
(who must be a director) and one or more Vice Presidents, Secretaries, Assistant
Secretaries, Treasurers, Assistant Treasurers and other officers (collectively,
the "Management"). Any number of offices may be held by the same person, unless
otherwise prohibited by law or the Certificate of Incorporation. The officers
of the Corporation need not be stockholders of the Corporation nor, except in
the case of the Chairman of the Board of Directors, need such officers be
directors of the Corporation. Subject to the limitations included in these
Bylaws and Article 2 of the Stockholders' Agreement, day-to-day management of
the operations of the Corporation shall be delegated to the officers of the
Corporation who will (except as otherwise specified herein or therein) exercise
such powers and perform such duties as shall be determined from time to time by
the Board of Directors, and who will act in good faith to operate the
Corporation's business in accordance with the Budget (as defined in Section
2.7.3 of the Stockholders' Agreement) and in a manner reasonably designed to
achieve the goals of the Business Plan (as defined in Section 2.7.2 of the
Stockholders' Agreement). The Board of Directors shall not delegate to any
officers of the Corporation the authority to conduct business in any manner
other than as set forth in this Section 1.
Section 2. Election. Subject to Section 3 of this Article IV, (a)
--------- --------
the Board of Directors, at its first meeting held after each Annual Meeting of
Stockholders (or action by written consent of stockholders in lieu of the Annual
Meeting of Stockholders), shall elect the officers of the Corporation who shall
hold their offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the Board of Directors;
and all officers of the Corporation shall hold office until their successors are
chosen and qualified, or until their earlier death, resignation or removal, (b)
any officer elected by the Board of Directors may be removed at any time by the
affirmative vote of the Board of Directors, (c) any vacancy occurring in any
office of the Corporation shall be filled by the Board of Directors, and (d) the
salaries of all officers of the Corporation shall be fixed by the Board of
Directors.
Section 3. Chief Executive Officer and Chief Financial Officer. The
--------- ----------------------------------------------------
appointment and remuneration or dismissal of the chief executive officer and
chief financial officer shall be made only on the recommendation of Station
Partners and the unanimous written approval of
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both Station Partners and SPE (or their respective Permitted Transferees in
accordance with Section 2.1.1(f) of the Stockholders' Agreement).
Section 4. Voting Securities Owned by the Corporation. Powers of
--------- ------------------------------------------
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by the President, if there is one, chief
executive officer or any Vice President or any other officer authorized to do so
by the Board of Directors and any such officer may, in the name of and on behalf
of the Corporation, take all such action as any such officer may deem advisable
to vote in person or by proxy at any meeting of security holders of any
corporation in which the Corporation may own securities and at any such meeting
shall possess and may exercise any and all rights and power incident to the
ownership of such securities and which, as the owner thereof, the Corporation
might have exercised and possessed if present. The Board of Directors may, by
resolution, from time to time confer like powers upon any other person or
persons.
Section 5. Chairman of the Board of Directors. The Chairman of the
--------- ----------------------------------
Board of Directors, if there be one, shall preside at all meetings of the
stockholders and of the Board of Directors. Except where by law the signature
of the President or Chief Executive Officer is required, the Chairman of the
Board of Directors shall possess the same power as the President or the chief
executive officer to sign all contracts, certificates and other instruments of
the Corporation which may be authorized by the Board of Directors. During the
absence or disability of the President or the chief executive officer, the
Chairman of the Board of Directors shall exercise all the powers and discharge
all the duties of the President or the Chief Executive Officer. The Chairman of
the Board of Directors shall also perform such other duties and may exercise
such other powers as may from time to time be assigned by these By-Laws or by
the Board of Directors.
Section 6. Chief Executive Officer. The Chief Executive Officer
--------- -----------------------
shall, subject to the control of the Board of Directors and, if there be one,
the Chairman of the Board of Directors, have general supervision of the business
of the Corporation subject to the Certificate of Incorporation, these By-Laws or
Article 2 of the Stockholders Agreement and shall see that all orders and
resolutions of the Board of Directors are carried into effect. The Chief
Executive Officer shall report to the Board of Directors and all officers shall
report to the Chief Executive Officer or another officer designated by the Chief
Executive Officer. The Chief Executive Officer shall execute all bonds,
mortgages, contracts and other instruments of the Corporation requiring a seal,
under the seal of the Corporation, except where required or permitted by law to
be otherwise signed and executed and except that the other officers of the
Corporation may sign and execute documents when so authorized by these By-Laws,
the Board of Directors or the Chief Executive Officer. In the absence or
disability of the Chairman of the Board of Directors, or if there be none, the
Chief Executive Officer shall preside at all meetings of the stockholders and
the Board of Directors. The Chief Executive Officer shall also perform such
other duties and may exercise such other powers as may from time to time be
assigned to such officer by these By-Laws or by the Board of Directors.
Section 7. Vice Presidents. At the request of the Chief Executive
--------- ---------------
Officer or in the Chief Executive Officer's absence or in the event of the Chief
Executive Officer's inability or
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<PAGE>
refusal to act (and if there be no Chairman of the Board of Directors), the Vice
President, or the Vice Presidents if there is more than one (in the order
designated by the Board of Directors), shall perform the duties of the President
and Chief Executive Officer, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the Chief Executive Officer. Each
Vice President shall perform such other duties and have such other powers as the
Board of Directors from time to time may prescribe. If there be no Chairman of
the Board of Directors and no Vice President, the Board of Directors shall
designate the officer of the Corporation who, in the absence of the Chief
Executive Officer or in the event of the inability or refusal of the Chief
Executive Officer to act, shall perform the duties of the Chief Executive
Officer, and when so acting, shall have all the powers of and be subject to all
the restrictions upon the President and Chief Executive Officer.
Section 8. Secretary. The Secretary shall attend all meetings of the
--------- ---------
Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for committees of the Board of
Directors when required. The Secretary shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors, the Chairman of the Board of Directors or the Chief Executive
Officer, under whose supervision the Secretary shall be. If the Secretary shall
be unable or shall refuse to cause to be given notice of all meetings of the
stockholders and special meetings of the Board of Directors, and if there be no
Assistant Secretary, then either the Board of Directors or the Chief Executive
Officer may choose another officer to cause such notice to be given. The
Secretary shall have custody of the seal of the Corporation and the Secretary or
any Assistant Secretary, if there be one, shall have authority to affix the same
to any instrument requiring it and when so affixed, it may be attested by the
signature of the Secretary or by the signature of any such Assistant Secretary.
The Board of Directors may give general authority to any other officer to affix
the seal of the Corporation and to attest to the affixing by such officer's
signature. The Secretary shall see that all books, reports, statements,
certificates and other documents and records required by law to be kept or filed
are properly kept or filed, as the case may be.
Section 9. Chief Financial Officer. The Chief Financial Officer
--------- -----------------------
shall have the custody of the corporate funds and securities and shall keep full
and accurate accounts of receipts and disbursements in books belonging to the
Corporation and shall deposit all moneys and other valuable effects in the name
and to the credit of the Corporation in such depositories as may be designated
by the Board of Directors. The Chief Financial Officer shall disburse the funds
of the Corporation as may be ordered by the Board of Directors, taking proper
vouchers for such disbursements, and shall render to the Chief Executive Officer
and the Board of Directors, at its regular meetings, or when the Board of
Directors so requires, an account of all transactions as Chief Financial Officer
and of the financial condition of the Corporation. If required by the Board of
Directors, the Chief Financial Officer shall give the Corporation a bond in such
sum and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of the office of the Chief
Financial Officer and for the restoration to the Corporation, in case of the
Chief Financial Officer's death, resignation, retirement or removal from office,
of all books, papers, vouchers, money and other property of whatever kind in the
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Chief Financial Officer's possession or under the Chief Financial Officer's
control belonging to the Corporation.
Section 10. Assistant Secretaries. Assistant Secretaries, if there
---------- ---------------------
be any, shall perform such duties and have such powers as from time to time may
be assigned to them by the Board of Directors, the Chief Financial Officer, any
President, Vice President, if there be one, or the Secretary, and in the absence
of the Secretary or in the event of the Secretary's disability or refusal to
act, shall perform the duties of the Secretary, and when so acting, shall have
all the powers of and be subject to all the restrictions upon the Secretary.
Section 11. Assistant Treasurers. Assistant Treasurers, if there be
---------- --------------------
any, shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the Chief Executive Officer, any
Vice President, if there be one, or the Chief Financial Officer, and in the
absence of the Chief Financial Officer and or in the event of the Chief
Financial Officer's disability or refusal to act, shall perform the duties of
the Chief Financial Officer, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the Chief Financial Officer. If
required by the Board of Directors, a Treasurer or an Assistant Treasurer shall
give the Corporation a bond in such sum and with such surety or sureties as
shall be satisfactory to the Board of Directors for the faithful performance of
the duties of the office of a Treasurer or an Assistant Treasurer and for the
restoration to the Corporation, in case of the Treasurer or Assistant
Treasurer's death, resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in the Assistant
Treasurer's possession or under the Treasurer or Assistant Treasurer's control
belonging to the Corporation.
Section 12. Other Officers. Such other officers as the Board of
---------- --------------
Directors may choose shall perform such duties and have such powers as from time
to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and powers.
ARTICLE V
STOCK
-----
Section 1. Form of Certificates. Every holder of stock in the
--------- --------------------
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation (i) by the Chairman of the Board of Directors, the Chief Executive
Officer, the President or a Vice President and (ii) by the Chief Financial
Officer or the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary of the Corporation, certifying the number of shares owned by
such stockholder in the Corporation.
Section 2. Signatures. Any or all of the signatures on a certificate
--------- ----------
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if such person were such officer, transfer agent or registrar at the date of
issue.
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Section 3. Lost Certificates. The Board of Directors may direct a
--------- -----------------
new certificate to be issued in place of any certificate theretofore issued by
the Corporation alleged to have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the person claiming the certificate of stock to
be lost, stolen or destroyed. When authorizing such issue of a new certificate,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or the owner's legal representative, to advertise the same in such
manner as the Board of Directors shall require and/or to give the Corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed or the issuance of such new certificate.
Section 4. Transfers. Subject to the restrictions on transfer
--------- ---------
contained in Article 3 of the Stockholders' Agreement, stock of the Corporation
shall be transferable in the manner prescribed by law and in these By-Laws.
Transfers of stock shall be made on the books of the Corporation only by the
person named in the certificate or by such person's attorney lawfully
constituted in writing and upon the surrender of the certificate therefor, which
shall be cancelled before a new certificate shall be issued. No transfer of
stock shall be valid as against the Corporation for any purpose until it shall
have been entered in the stock records of the Corporation by an entry showing
from and to whom transferred.
Section 5. Record Date.
--------- -----------
(a) In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which record date shall not be more
than sixty nor less than ten days before the date of such meeting. If no record
date is fixed by the Board of Directors, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held. A determination of stockholders
of record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; providing, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
(b) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which record date shall not be more than ten days after the date
upon which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the Board of Directors is
required by law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
Corporation by delivery to its registered office in this State, its principal
place of business, or an
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officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to a
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. If no record date has been fixed by the Board of
Directors and prior action by the Board of Directors is required by law, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting shall be at the close of business on the day on
which the Board of Directors adopts the resolutions taking such prior action.
(c) In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty days prior to such
action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
Section 6. Record Owners. The Corporation shall be entitled to
--------- -------------
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise required by
law.
ARTICLE VI
MAJOR DECISIONS
---------------
Section 1. Definition. For purposes of this Article VI, the following
--------- ----------
terms shall have the meaning set forth below:
"Affiliate" means, with respect to any Person, any other Person that,
---------
directly or indirectly, through one or more intermediaries, Controls, is
Controlled by or is under common Control with, such specified Person.
"Control" (and the related terms "Controlled") means the possession,
-------
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
"Governmental Entity" shall mean any federal, state or local
-------------------
government or regulatory agency, authority, commission or instrumentality.
"Insolvency Event" means the taking of any of the following actions by
----------------
the Corporation or any of its Subsidiaries: (a) the Corporation or any of its
Subsidiaries institutes proceedings to be adjudicated voluntarily bankrupt; (b)
the Corporation or any of its Subsidiaries consents to the filing of a
bankruptcy proceeding against the Corporation or such subsidiary; (c)
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the Corporation or any of its Subsidiaries files a petition or answer or consent
seeking reorganization under any bankruptcy or similar law or statute; (d) the
Corporation or any of its Subsidiaries consents to the filing of any petition,
or to the appointment of a custodian, receiver, liquidator, trustee or assignee
in bankruptcy or insolvency of the Corporation or such subsidiary or any
substantial part of its assets or property; or (e) the Corporation or any of its
Subsidiaries makes a general assignment for the benefit of creditors, or takes
any corporate action in furtherance of any of the foregoing.
"Major Decision" means any of the following actions or transactions or
--------------
the entering into of any contract or agreement to do any of the following
actions or transactions described in clauses (a) - (h) below, or any
modification, amendment, enforcement, waiver, extension, or renewal thereof
(except as limited by the terms of said clauses (a) - (h)):
(a) Any substantial change in the nature or scope of the
Corporation's broadcast business, which provides predominantly Spanish-language
or Hispanic-themed programming, or the acquisition of an additional broadcast
station or other substantial business;
(b) Issuing or redeeming any equity or debt securities, or any
options, warrants or other securities which provide a right to purchase or are
convertible into equity or debt securities of the Corporation;
(c) Entering into any agreement with respect to or consummating any
merger, consolidation or reorganization of the Corporation any of its
subsidiaries;
(d) Sale or other transfer by the Corporation or any of its
subsidiaries in a single transaction or series of related transactions, of all
or substantially all of the assets of the Corporation, of any broadcast station
or any other assets in a single transaction or series of related transactions
with a purchase price in excess of $10 million;
(e) Taking any action relating to the termination, liquidation,
dissolution or winding up of the Corporation;
(f) Taking any action by the Corporation or any of its subsidiaries
that would constitute an Insolvency Event for the Corporation or any of its
subsidiaries;
(g) Any related party transaction between any station or the
Corporation or any of its subsidiaries and any of the stockholders or Affiliates
thereof, but excluding transactions between the Corporation or any of its
subsidiaries and Telemundo Network Group LLC; and
(h) Except as set forth in Section 2.8 of the Stockholders'
Agreement, which pertains to affiliate agreements, permitting any station owned,
directly or indirectly by the Corporation or any of its subsidiaries to enter
into, extend, amend, terminate or fail to renew any affiliation agreement with a
broadcast network (the approval of which action pursuant to Section 2 below,
shall not be unreasonably withheld by any party after applying commercial
standards of review prevailing among investors in companies comparable to the
Corporation).
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"Person" means any individual, limited or general partnership, limited
------
liability company, limited liability partnership, corporation, joint venture,
business trust, joint stock company, trust, estate, unincorporated association,
Governmental Entity or other entity of whatsoever nature.
"Subsidiary" means, in respect of any Person, any corporation,
----------
association, limited liability company, limited or general partnership or other
business entity of which more than 50% of the total voting power of shares of
capital stock or other interests (including partnership interests) entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by (i) such Person, (ii) such Person and one or more
Subsidiaries of such Person, or (iii) one or more Subsidiaries of such Person.
Section 2. Major Decisions.
--------- ---------------
The Board of Directors shall not authorize, and Management shall not
(A) effect any Major Decision (other than the Major Decision set forth in
subparagraph (h) of the definition of Major Decisions contained in Section 1
above) without the unanimous approval of SPE, Liberty and Station Partners (or
their respective Permitted Transferees in accordance with Section 2.1.1(f) of
the Stockholders' Agreement), in their capacity as stockholders or (B) effect
the Major Decision set forth in subparagraph (h) of the definition of Major
Decisions contained in Section 1 above without the unanimous written approval of
both SPE and Station Partners (or their respective Permitted Transferees in
accordance with Section 2.1.1(f) of the Stockholders' Agreement), in their
capacity as stockholders. Any determination not specifically included in the
definition of "Major Decision" or otherwise identified in the Stockholders'
Agreement as requiring approval of a different percentage of the stockholders
shall, except to the extent required by the DGCL, be made by the Board of
Directors acting by majority vote of the authorized number of directors.
ARTICLE VII
NOTICES
-------
Section 1. Notices. Whenever written notice is required by law, the
--------- -------
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee or stockholder, at such
person's address as it appears on the records of the Corporation, with postage
thereon prepaid, and such notice shall be deemed to be given at the time when
the same shall be deposited in the United States mail. Written notice may also
be given personally or by telegram, telex or cable.
Section 2. Waivers of Notice. Whenever any notice is required by
--------- -----------------
law, the Certificate of Incorporation or these By-Laws, to be given to any
director, member of a committee or stockholder, a waiver thereof in writing,
signed, by the person or persons entitled to said notice, whether before or
after the time stated therein, shall be deemed equivalent thereto. Attendance
of a person at a meeting, present in person or represented by proxy, shall
constitute a waiver of notice of such meeting, except where the person attends
the meeting for the express
14
<PAGE>
purpose of objecting at the beginning of the meeting to the transaction of any
business because the meeting is not lawfully called or convened.
ARTICLE VIII
GENERAL PROVISIONS
------------------
Section 1. Dividends. Dividends upon the capital stock of the
--------- ---------
Corporation, subject to the requirements of the DGCL and the provisions of the
Certificate of Incorporation, if any, may be declared by the Board of Directors
at any regular or special meeting of the Board of Directors (or any action by
written consent in lieu thereof in accordance with Section 6 of Article III
hereof), and may be paid in cash, in property, or in shares of the Corporation's
capital stock. Before payment of any dividend, there may be set aside out of
any funds of the Corporation available for dividends such sum or sums as the
Board of Directors from time to time, in its absolute discretion, deems proper
as a reserve or reserves to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the Corporation, or for any proper
purpose, and the Board of Directors may modify or abolish any such reserve.
Section 2. Disbursements. All checks or demands for money and notes
--------- -------------
of the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be
--------- -----------
fixed by resolution of the Board of Directors.
Section 4. Corporate Seal. The corporate seal shall have inscribed
--------- --------------
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE IX
INDEMNIFICATION
---------------
Section 1. Power to Indemnify in Actions, Suits or Proceedings other
--------- ---------------------------------------------------------
than Those by or in the Right of the Corporation. Subject to Section 3 of this
- ------------------------------------------------
Article IX, the Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that such person is or was a director or officer of the Corporation, or is
or was a director or officer of the Corporation serving at the request of the
Corporation as a director or officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if such person acted in good faith and in a
manner such person
15
<PAGE>
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe such person's conduct was unlawful. The termination
of any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which such
person reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that such person's conduct was unlawful.
Section 2. Power to Indemnify in Actions, Suits or Proceedings by or
--------- ---------------------------------------------------------
in the Right of the Corporation. Subject to Section 3 of this Article IX, the
- -------------------------------
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that such person is or was a director or officer of the Corporation, or is
or was a director or officer of the Corporation serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection with the defense or settlement of such action or suit
if such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the Corporation;
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
Section 3. Authorization of Indemnification. Any indemnification
--------- --------------------------------
under this Article IX (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director or officer is proper in the circumstances
because such person has met the applicable standard of conduct set forth in
Section 1 or Section 2 of this Article IX, as the case may be. Such
determination shall be made (i) by a majority vote of the directors who are not
parties to such action, suit or proceeding, even though less than a quorum, or
(ii) if there are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion or (iii) by the stockholders. To
the extent, however, that a director or officer of the Corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding described above, or in defense of any claim, issue or matter therein,
such person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith, without
the necessity of authorization in the specific case.
Section 4. Good Faith Defined. For purposes of any determination
--------- ------------------
under Section 3 of this Article IX, a person shall be deemed to have acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the Corporation, or, with respect to any
criminal action or proceeding, to have had no reasonable cause to believe such
person's conduct was unlawful, if such person's action is based on the records
or books of
16
<PAGE>
account of the Corporation or another enterprise, or on information supplied to
such person by the officers of the Corporation or another enterprise in the
course of their duties, or on the advice of legal counsel for the Corporation or
another enterprise or on information or records given or reports made to the
Corporation or another enterprise by an independent certified public accountant
or by an appraiser or other expert selected with reasonable care by the
Corporation or another enterprise. The term "another enterprise" as used in this
Section 4 shall mean any other corporation or any partnership, joint venture,
trust, employee benefit plan or other enterprise of which such person is or was
serving at the request of the Corporation as a director, officer, employee or
agent. The provisions of this Section 4 shall not be deemed to be exclusive or
to limit in any way the circumstances in which a person may be deemed to have
met the applicable standard of conduct set forth in Section 1 or 2 of this
Article IX, as the case may be.
Section 5. Indemnification by a Court. Notwithstanding any contrary
--------- --------------------------
determination in the specific case under Section 3 of this Article IX, and
notwithstanding the absence of any determination thereunder, any director or
officer may apply to the Court of Chancery in the State of Delaware for
indemnification to the extent otherwise permissible under Sections 1 and 2 of
this Article IX. The basis of such indemnification by a court shall be a
determination by such court that indemnification of the director or officer is
proper in the circumstances because such person has met the applicable standards
of conduct set forth in Section 1 or 2 of this Article IX, as the case may be.
Neither a contrary determination in the specific case under Section 3 of this
Article IX nor the absence of any determination thereunder shall be a defense to
such application or create a presumption that the director or officer seeking
indemnification has not met any applicable standard of conduct. Notice of any
application for indemnification pursuant to this Section 5 shall be given to the
Corporation promptly upon the filing of such application. If successful, in
whole or in part, the director or officer seeking indemnification shall also be
entitled to be paid the expense of prosecuting such application.
Section 6. Expenses Payable in Advance. Expenses incurred by a
--------- ---------------------------
director or officer in defending any civil, criminal, administrative or
investigative action, suit or proceeding shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that such person is not entitled to
be indemnified by the Corporation as authorized in this Article IX.
Section 7. Nonexclusivity of Indemnification and Advancement of
--------- ----------------------------------------------------
Expenses. The indemnification and advancement of expenses provided by or
- --------
granted pursuant to this Article IX shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under the Certificate of Incorporation, any By-Law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in such
person's official capacity and as to action in another capacity while holding
such office, it being the policy of the Corporation that indemnification of the
persons specified in Sections 1 and 2 of this Article IX shall be made to the
fullest extent permitted by law. The provisions of this Article IX shall not be
deemed to preclude the indemnification of any person who is not specified in
Section 1 or 2 of this Article IX but whom the Corporation has the power or
obligation to indemnify under the provisions of the General Corporation Law of
the State of Delaware, or otherwise.
17
<PAGE>
Section 8. Insurance. The Corporation may purchase and maintain
--------- ---------
insurance on behalf of any person who is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise against any liability asserted against such person and incurred
by such person in any such capacity, or arising out of such person's status as
such, whether or not the Corporation would have the power or the obligation to
indemnify such person against such liability under the provisions of this
Article IX.
Section 9. Certain Definitions. For purposes of this Article IX,
--------- -------------------
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors or officers, so that any person who is or was a director or officer of
such constituent corporation, or is or was a director or officer of such
constituent corporation serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, shall stand in
the same position under the provisions of this Article IX with respect to the
resulting or surviving corporation as such person would have with respect to
such constituent corporation if its separate existence had continued. For
purposes of this Article IX, references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director or officer with
respect to an employee benefit plan, its participants or beneficiaries; and a
person who acted in good faith and in a manner such person reasonably believed
to be in the interest of the participants and beneficiaries of an employee
benefit plan shall be deemed to have acted in a manner "not opposed to the best
interests of the Corporation" as referred to in this Article IX.
Section 10. Survival of Indemnification and Advancement of Expenses.
---------- -------------------------------------------------------
The indemnification and advancement of expenses provided by, or granted pursuant
to, this Article IX shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director or officer and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
Section 11. Limitation on Indemnification. Notwithstanding anything
---------- -----------------------------
contained in this Article IX to the contrary, except for proceedings to enforce
rights to indemnification (which shall be governed by Section 5 hereof), the
Corporation shall not be obligated to indemnify any director or officer in
connection with a proceeding (or part thereof) initiated by such person unless
such proceeding (or part thereof) was authorized or consented to by the Board of
Directors of the Corporation.
Section 12. Indemnification of Employees and Agents. The Corporation
---------- ---------------------------------------
may, to the extent authorized from time to time by the Board of Directors,
provide rights to
18
<PAGE>
indemnification and to the advancement of expenses to employees and agents of
the Corporation similar to those conferred in this Article IX to directors and
officers of the Corporation.
ARTICLE X
AMENDMENTS
----------
Section 1. Amendments. The stockholders shall have the sole power by
--------- ----------
unanimous vote to make, alter, amend, change, add to or repeal the By-Laws.
ARTICLE XI
CONFLICTS
---------
Section 1. Conflicts. To the extent that any of the provisions of
--------- ---------
these By-Laws conflict with the Stockholders' Agreement, the provisions of the
Stockholders' Agreement shall control.
* * *
Adopted August 12, 1998
19
<PAGE>
================================================================================
Exhibit 4.1
Telemundo Holdings, Inc., as Issuer
and
Bank of Montreal Trust Company, as Trustee
_____________________
INDENTURE
Dated as of August 12, 1998
____________________
$218,838,000 Principal Amount at Maturity
11 1/2% Senior Discount Notes Due 2008, Series A
11 1/2% Senior Discount Notes Due 2008, Series B
================================================================================
<PAGE>
Reconciliation and tie between Trust Indenture Act of 1939,
as amended, and this Indenture
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- --------------- ---------
<S> <C> <C>
(S) 310 (a)(1)............ 6.05, 6.09
(a)(2)............ 6.05, 6.09
(a)(3)............ 6.05
(a)(4)............ 6.05
(a)(5)............ 6.05, 6.09
(b)............... 6.05, 6.08, 6.10
(c)............... Not Applicable
(S) 311 (a)............... 6.07
(b)............... 6.07
(c)............... Not Applicable
(S) 312 (a)............... 3.05, 7.01
(b)............... 7.02
(c)............... 7.02
(S) 313 (a)............... 7.03
(b)............... 6.07, 7.03
(c)............... 7.03
(d)............... 7.03
(S) 314 (a)............... 7.04, 10.09
(b)............... Not Applicable
(c)(1)............ 1.04, 4.04, 11.01, 12.01
(c)(2)............ 1.04, 4.04, 11.01, 12.01
(c)(3)............ Not Applicable
(d)............... Not Applicable
(e)............... 1.04. 10.21
(f)............... Not Applicable
(S) 315 (a)............... 6.01(a)
(b)............... 6.02
(c)............... 6.01(b)
(d)............... 6.01(c)
(e)............... 5.14
(S) 316 (a) (last sentence) 3.14
(a)(1)(A)......... 5.12
(a)(1)(B)......... 5.13
(a)(2)............ 9.02
(b)............... 5.08
(c)............... 9.07
(S) 317 (a)(1)............ 5.03
(a)(2)............ 5.04
(b)............... 10.03
(S) 318 (a)............... 1.08
</TABLE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PARTIES................................................................................ 1
RECITALS............................................................................... 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.01. Definitions............................................................. 1
Section 1.02. Other Definitions....................................................... 20
Section 1.03. Rules of Construction................................................... 21
Section 1.04. Form of Documents Delivered to Trustee.................................. 21
Section 1.05. Acts of Holders......................................................... 21
Section 1.06. Notices, etc., to the Trustee and Holdings.............................. 22
Section 1.07. Notice to Holders; Waiver............................................... 22
Section 1.08. Conflict with Trust Indenture Act....................................... 23
Section 1.09. Effect of Headings and Table of Contents................................ 23
Section 1.10. Successors and Assigns.................................................. 23
Section 1.11. Separability Clause..................................................... 23
Section 1.12. Benefits of Indenture................................................... 23
Section 1.13. Governing Law........................................................... 23
Section 1.14. No Recourse Against Others.............................................. 24
Section 1.15. Independence of Covenants............................................... 24
Section 1.16. Exhibits................................................................ 24
Section 1.17. Counterparts............................................................ 24
Section 1.18. Duplicate Originals..................................................... 24
ARTICLE TWO
NOTE FORMS
Section 2.01. Form and Dating......................................................... 24
ARTICLE THREE
THE NOTES
Section 3.01. Title and Terms......................................................... 25
Section 3.02. Registrar and Paying Agent.............................................. 25
Section 3.03. Execution and Authentication............................................ 26
Section 3.04. Temporary Notes......................................................... 27
Section 3.05. Transfer and Exchange................................................... 27
Section 3.06. Mutilated, Destroyed, Lost and Stolen Notes............................. 28
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 3.07. Payment of Interest; Interest Rights Preserved.......................... 29
Section 3.08. Persons Deemed Owners................................................... 29
Section 3.09. Cancellation............................................................ 30
Section 3.10. Computation of Interest................................................. 30
Section 3.11. Legal Holidays.......................................................... 30
Section 3.12. CUSIP and ISIN Numbers.................................................. 30
Section 3.13. Paying Agent To Hold Money in Trust..................................... 31
Section 3.14. Treasury Notes.......................................................... 31
Section 3.15. Deposits of Monies...................................................... 31
Section 3.16. Book-Entry Provisions for Global Notes.................................. 31
Section 3.17. Special Transfer Provisions............................................. 32
ARTICLE FOUR
DEFEASANCE OR COVENANT DEFEASANCE
Section 4.01. Holdings' Option To Effect Defeasance or Covenant Defeasance............ 34
Section 4.02. Legal Defeasance........................................................ 34
Section 4.03. Covenant Defeasance..................................................... 35
Section 4.04. Conditions to Legal Defeasance or Covenant Defeasance................... 35
Section 4.05. Deposited Money and U.S. Government Obligations To Be Held in Trust;
Other Miscellaneous Provisions........................................ 37
Section 4.06. Reinstatement........................................................... 37
ARTICLE FIVE
REMEDIES
Section 5.01. Events of Default....................................................... 38
Section 5.02. Acceleration of Maturity, Rescission and Annulment...................... 39
Section 5.03. Collection of Indebtedness and Suits for Enforcement by Trustee......... 40
Section 5.04. Trustee May File Proofs of Claims....................................... 40
Section 5.05. Trustee May Enforce Claims Without Possession of Notes.................. 41
Section 5.06. Application of Money Collected.......................................... 41
Section 5.07. Limitation on Suits..................................................... 42
Section 5.08. Unconditional Right of Holders To Receive Accreted Value,
Premium and Interest.................................................. 42
Section 5.09. Restoration of Rights and Remedies...................................... 42
Section 5.10. Rights and Remedies Cumulative.......................................... 43
Section 5.11. Delay or Omission Not Waiver............................................ 43
Section 5.12. Control by Majority..................................................... 43
Section 5.13. Waiver of Past Defaults................................................. 43
Section 5.14. Undertaking for Costs................................................... 44
Section 5.15. Waiver of Stay, Extension or Usury Laws................................. 44
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE SIX
THE TRUSTEE
Section 6.01. Certain Duties and Responsibilities..................................... 44
Section 6.02. Notice of Defaults...................................................... 45
Section 6.03. Certain Rights of Trustee............................................... 45
Section 6.04. Trustee Not Responsible for Recitals, Dispositions
of Notes or Application of Proceeds Thereof.......................... 46
Section 6.05. Trustee and Agents May Hold Notes; Collections; Etc..................... 47
Section 6.06. Money Held in Trust..................................................... 47
Section 6.07. Compensation and Indemnification of Trustee and Its Prior Claim......... 47
Section 6.08. Conflicting Interests................................................... 48
Section 6.09. Corporate Trustee Required; Eligibility................................. 48
Section 6.10. Resignation and Removal; Appointment of Successor Trustee............... 48
Section 6.11. Acceptance of Appointment by Successor.................................. 49
Section 6.12. Merger, Conversion, Amalgamation, Consolidation
or Succession to Business............................................. 50
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND HOLDINGS
Section 7.01. Preservation of Information; Holdings to Furnish
Trustee Names and Addresses of Holders................................ 50
Section 7.02. Communications of Holders............................................... 51
Section 7.03. Reports by Trustee...................................................... 51
ARTICLE EIGHT
CONSOLIDATION, MERGER, SALE OF ASSETS, ETC.
Section 8.01. Merger and Consolidation................................................ 51
Section 8.02. Successor Substituted................................................... 52
ARTICLE NINE
SUPPLEMENTAL INDENTURES AND WAIVERS
Section 9.01. Supplemental Indentures, Agreements and
Waivers Without Consent of Holders.................................... 52
Section 9.02. Supplemental Indentures, Agreements
and Waivers with Consent of Holders................................... 53
Section 9.03. Execution of Supplemental Indentures, Agreements and Waivers............ 54
Section 9.04. Effect of Supplemental Indentures....................................... 54
Section 9.05. Conformity with Trust Indenture Act..................................... 54
Section 9.06. Reference in Notes to Supplemental Indentures........................... 54
Section 9.07. Record Date............................................................. 55
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 9.08. Revocation and Effect of Consents....................................... 55
ARTICLE TEN
COVENANTS
Section 10.01. Payment of Principal, Premium and Interest............................. 55
Section 10.02. Maintenance of Office or Agency........................................ 55
Section 10.03. Money for Note Payments To Be Held in Trust............................ 56
Section 10.04. Corporate Existence.................................................... 57
Section 10.05. Payment of Taxes and Other Claims...................................... 57
Section 10.06. Maintenance of Properties.............................................. 57
Section 10.07. Insurance.............................................................. 57
Section 10.08. Books and Records...................................................... 58
Section 10.09. SEC Reports............................................................ 58
Section 10.10. Change of Control...................................................... 58
Section 10.11. Limitation on Indebtedness............................................. 61
Section 10.12. Statement by Officers as to Default.................................... 63
Section 10.13. Limitation on Restricted Payments...................................... 64
Section 10.14. Limitation on Affiliate Transactions................................... 65
Section 10.15. Limitation on Sales of Assets and Subsidiary Stock..................... 66
Section 10.16. Limitation on Liens.................................................... 68
Section 10.17. Limitation on Sale/Leaseback Transactions.............................. 69
Section 10.18. Limitation on Asset Swaps.............................................. 69
Section 10.19. Limitation on Restrictions on Distributions
from Restricted Subsidiaries......................................... 70
Section 10.20. Limitation on the Sale or Issuance of Capital Stock
of Restricted Subsidiaries........................................... 71
Section 10.21. Compliance Certificates and Opinions................................... 71
Section 10.22. Amendment of Affiliation Agreement..................................... 71
ARTICLE ELEVEN
SATISFACTION AND DISCHARGE
Section 11.01. Satisfaction and Discharge of Indenture................................ 72
Section 11.02. Application of Trust Money............................................. 72
ARTICLE TWELVE
REDEMPTION
Section 12.01. Notices to the Trustee................................................. 73
Section 12.02. Selection of Notes To Be Redeemed...................................... 73
Section 12.03. Notice of Redemption................................................... 73
Section 12.04. Effect of Notice of Redemption......................................... 74
Section 12.05. Deposit of Redemption Price............................................ 74
Section 12.06. Notes Redeemed or Purchased in Part.................................... 74
</TABLE>
-iv-
<PAGE>
Exhibit A-1 - Form of Series A Note
Exhibit A-2 - Form of Series B Note
Exhibit B - Form of Legend for Book-Entry Securities
Exhibit C - Form of Certificate To Be Delivered in Connection with Transfers
Pursuant to Regulation S
-v-
<PAGE>
INDENTURE, dated as of August 12, 1998, between Telemundo Holdings,
Inc., a corporation incorporated under the laws of the State of Delaware
("Holdings"), as issuer, and Bank of Montreal Trust Company, as trustee (the
---------
"Trustee").
- --------
RECITALS
Holdings has duly authorized the creation of an issue of (i) 11 1/2%
Senior Discount Notes Due 2008, Series A (the "Initial Notes"), and (ii) 11 1/2%
-------------
Senior Discount Notes Due 2008, Series B, to be issued in exchange for the
Initial Notes pursuant to the Registration Rights Agreement (the "Exchange
--------
Notes" and, together with the Initial Notes, the "Notes", treated as a single
- ----- -----
class of securities under this Indenture), of substantially the tenor and amount
hereinafter set forth, and to provide therefor Holdings has duly authorized the
execution and delivery of this Indenture.
All things necessary have been done to make the Notes, when executed
by Holdings, and authenticated and delivered hereunder and duly issued by
Holdings, the valid obligations of Holdings and to make this Indenture a valid
agreement of each of Holdings and the Trustee in accordance with the terms
hereof.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Notes
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders (as hereinafter defined) of the Notes, as
follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.01. Definitions.
-----------
"Accreted Value" means, as of any date (the "Specified Date"), the
-------------- --------------
amount provided below for each $1,000 principal amount at maturity of Notes:
(i) if the Specified Date occurs on one of the following dates
(each, a "Semi-Annual Accrual Date"), the Accreted Value will equal the
------------------------
amount set forth below for such Semi-Annual Accrual Date:
<TABLE>
<CAPTION>
SEMI-ANNUAL ACCRUAL DATE ACCRETED VALUE
------------------------ --------------
<S> <C>
February 15, 1999................................... $ 604.61
August 15, 1999..................................... $ 639.38
February 15, 2000................................... $ 676.14
August 15, 2000..................................... $ 715.02
February 15, 2001................................... $ 756.13
August 15, 2001..................................... $ 799.61
February 15, 2002................................... $ 845.59
August 15, 2002..................................... $ 894.21
</TABLE>
<PAGE>
-2-
<TABLE>
<S> <C>
February 15, 2003................................... $ 945.63
August 15, 2003..................................... $1,000.00
</TABLE>
(ii) if the Specified Date occurs before the first Semi-Annual
Accrual Date, the Accreted Value will equal the sum of (a) the original
issue price of a Note and (b) an amount equal to the product of (1) the
Accreted Value for the first Semi-Annual Accrual Date less such original
issue price multiplied by (2) a fraction, the numerator of which is the
number of days from the Issue Date to the Specified Date, using a 360-day
year of twelve 30-day months, and the denominator of which is the number of
days elapsed from the Issue Date to the first Semi-Annual Accrual Date,
using a 360-day year of twelve 30-day months;
(iii) if the Specified Date occurs between two Semi-Annual Accrual
Dates, the Accreted Value will equal the sum of (a) the Accreted Value for
the Semi-Annual Accrual Date immediately preceding such Specified Date and
(b) an amount equal to the product of (1) the Accreted Value for the
immediately following Semi-Annual Accrual Date less the Accreted Value for
the immediately preceding Semi-Annual Accrual Date multiplied by (2) a
fraction, the numerator of which is the number of days from the immediately
preceding Semi-Annual Accrual Date to the Specified Date, using a 360-day
year of twelve 30-day months, and the denominator of which is 180; or
(iv) if the Specified Date occurs after the last Semi-Annual Accrual
Date, the Accreted Value will equal $1,000.
"Acquired Indebtedness" means Indebtedness of any Person existing at
---------------------
the time such Person becomes a Restricted Subsidiary or at the time it merges or
consolidates with Holdings or any Restricted Subsidiary or assumed in connection
with the acquisition of assets from such Person and not Incurred by such Person
in connection with, or in anticipation or contemplation of, such Person becoming
a Restricted Subsidiary or such merger, consolidation or acquisition.
"Acquired Person" means, with respect to any specified Person, any
---------------
other Person which merges with or into or becomes a Subsidiary of such specified
Person.
"Acquisition" means (i) any capital contribution (by means of
-----------
transfers of cash or other property to others or payments for property or
services for the account or use of others, or otherwise) by Holdings or any
Restricted Subsidiary to any other Person, or any acquisition or purchase of
Capital Stock of any other Person by Holdings or any Restricted Subsidiary, in
either case, pursuant to which such Person shall become a Restricted Subsidiary
or shall be consolidated, merged with or into Holdings or any Restricted
Subsidiary or (ii) any acquisition by Holdings or any Restricted Subsidiary of
the assets of any Person which constitute substantially all of an operating unit
or division or a line of business of such Person or which is otherwise outside
of the ordinary course of business.
"Additional Assets" means (i) any property or assets (other than
-----------------
Indebtedness and Capital Stock) in a Related Business, (ii) the Capital Stock of
a Person that becomes a Restricted Subsidiary as a result of the acquisition of
such Capital Stock by Holdings or another Restricted Subsidiary or (iii) Capital
Stock constituting a minority interest in any Person that at such time is a
Restricted Subsidiary; provided, however, that any such Restricted Subsidiary
described in clause (ii) or (iii) above is primarily engaged in a Related
Business.
"Additional Interest" has the meaning set forth in the Registration
-------------------
Rights Agreement.
<PAGE>
-3-
"Affiliate" of any specified Person means any other Person, directly
---------
or indirectly, Controlling or Controlled by or under direct or indirect common
Control with such specified Person.
"Affiliation Agreement" means the Umbrella Affiliation Agreement, the
---------------------
Cable Payments Agreement and the Station Affiliation Agreements, each as amended
from time to time in accordance with Section 10.22 hereof.
"amend" means amend, supplement, modify, restate, amend and restate,
-----
renew or extend, including successively; and "amended," "amending" and
------- --------
"amendment" have meanings correlative thereto.
- ----------
"Apollo" means Apollo Investment Fund III, L.P., Apollo Advisors II,
------
L.P. and Apollo Management, L.P. (the "Original Apollo Entities") and any Person
------------------------
with respect to which the investment decisions, decisions as to the exercise of
voting or consensual rights and other material decisions are ultimately
controlled by substantially the same individual or individuals at the time
controlling such decisions as to any of the Original Apollo Entities (including,
without limitation, such individual or individuals themselves).
"Asset Disposition" means any sale, lease, transfer or other
-----------------
disposition (or series of related sales, leases, transfers or dispositions) by
Holdings or any Restricted Subsidiary, including any disposition by means of a
merger or consolidation (each referred to for the purposes of this definition as
a "disposition"), of (i) any shares of Capital Stock of a Restricted Subsidiary
-----------
(other than directors' qualifying shares or shares required by applicable law to
be held by a Person other than Holdings or a Restricted Subsidiary), (ii) all or
substantially all the assets (other than Capital Stock of an Unrestricted
Subsidiary) of any division or line of business of Holdings or any Restricted
Subsidiary, or (iii) any other assets (other than Capital Stock of an
Unrestricted Subsidiary) of Holdings or any Restricted Subsidiary outside of the
ordinary course of business of Holdings or such Restricted Subsidiary (other
than, in the case of (i), (ii) and (iii) above, (x) a disposition by a
Restricted Subsidiary to Holdings or by Holdings or a Restricted Subsidiary to a
Restricted Subsidiary and (y) for purposes of Section 10.15 only, a disposition
that constitutes a Restricted Payment permitted by Section 10.13 or a
disposition specifically excepted from the definition of Restricted Payments);
provided, however, that Asset Disposition shall not include (a) a transaction or
series of related transactions for which Holdings or its Restricted Subsidiaries
receive aggregate consideration less than or equal to $1.0 million, (b) the
sale, lease, conveyance, disposition or other transfer of all or substantially
all of the assets of Holdings as permitted under Section 8.01; (c) Asset Swaps
permitted under Section 10.18; (d) a disposition of Temporary Cash Investments;
(e) the Network Sale; and (f) any transaction constituting a Change of Control.
"Asset Swap" means the execution of a definitive agreement, subject
----------
only to governmental approval and other customary closing conditions, that
Holdings in good faith believes will be satisfied, for a substantially
concurrent purchase and sale, or exchange, of Productive Assets between Holdings
or any Restricted Subsidiary and another Person or group of Persons; provided
that any amendment to or waiver of any closing condition which individually or
in the aggregate is material to the Asset Swap will be deemed to be a new Asset
Swap; provided, however, that the cash and other assets to be received by
Holdings or such Restricted Subsidiary which do not constitute Productive Assets
do not constitute more than 25% of the total consideration to be received by
Holdings or such Restricted Subsidiary in such Asset Swap.
"Attributable Debt" in respect of a Sale/Leaseback Transaction means,
-----------------
as at the time of determination, the present value (discounted at the interest
rate borne by the Notes, compounded annually) of the total obligations of the
lessee for rental payments during the remaining term of the lease included in
such Sale/Leaseback Transaction (including any period for which such lease has
been extended) or until the earliest date on which the lessee may terminate such
lease without penalty.
<PAGE>
-4-
"Average Life" means, as of the date of determination, with respect to
------------
any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the
sum of the products of the numbers of years from the date of determination to
the dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Bank Credit Agreement" means the Credit Agreement, dated as of August
---------------------
4, 1998 among Holdings, TLMD Acquisition Co., as borrower, Credit Suisse First
Boston, as administrative agent, collateral agent and issuing bank, Canadian
Imperial Bank of Commerce, as documentation agent, and the lenders party
thereto, together with the related documents thereto (including, without
limitation, any guarantees, agreements and security documents), in each case, as
such agreements, in whole or in part, may be amended, increased (but only so
long as such increase is permitted under the terms of this Indenture) or
Refinanced in whole or in part by one or more separate agreements.
"Bankruptcy Law" means Title 11, United States Code or any similar
--------------
federal or state law relating to bankruptcy, insolvency, receivership, winding-
up, liquidation, reorganization or relief of debtors or the law of any other
jurisdiction relating to bankruptcy, insolvency, receivership, winding-up,
liquidation, reorganization or relief of debtors or any amendment to, succession
to or change in any such law.
"Bankruptcy Order" means any court order made in a proceeding pursuant
----------------
to or within the meaning of any Bankruptcy Law, containing an adjudication of
bankruptcy or insolvency, or providing for liquidation, receivership, winding-
up, dissolution, reorganization, or appointing a Custodian of a debtor or of all
or any substantial part of a debtor's property, or providing for the staying,
arrangement, adjustment or composition of indebtedness or other relief of a
debtor.
"Bastion" means Bastion Capital Fund, L.P., Bastion Partners L.P. and
-------
Bastion Management Corp. (the "Original Bastion Entities") and/or any other
-------------------------
Person with respect to which the investment decisions as to the exercise of
voting or consensual rights and other material decisions are ultimately
controlled by substantially the same individual or individuals at the time
controlling such decisions as to any of the Original Bastion Entities
(including, without limitation, such individual or individuals themselves.)
"Board of Directors" means the Board of Directors of Holdings or any
------------------
committee thereof duly authorized to act on behalf of such Board of Directors.
"Board Resolution" means a copy of a resolution certified by the
----------------
Secretary or an Assistant Secretary of Holdings to have been duly adopted by the
Board of Directors of Holdings and to be in full force and effect on the date of
such certification, and delivered to the Trustee.
"Business Day" means each day which is not a Legal Holiday.
------------
"Cable Payments Agreement" means the Memorandum of Agreement dated the
------------------------
Issue Date between the Network Company and Telemundo regarding certain cable
payments, as amended from time to time in accordance with Section 10.22 hereof.
"Capital Lease Obligations" means an obligation that is required to be
-------------------------
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due
<PAGE>
-5-
under such lease prior to the first date upon which such lease may be terminated
by the lessee without payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests,
-------------
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity and
excluding any Network Rights (as defined in the Stockholders Agreement).
"Change of Control" has the meaning given such term in Section 10.10
-----------------
hereof.
"Change of Control Offer" means an offer to purchase all outstanding
-----------------------
Notes pursuant to Section 10.10 hereof.
"Chicago Joint Venture Agreement" means the Amended and Restated
-------------------------------
Partnership Agreement of Video 44, dated as of February 26, 1996, by and among
Essaness Theatres Corporation, Telemundo of Chicago, Inc. and Video 44
Acquisition Corp., Inc., as in effect on the date of this Indenture.
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Consolidated EBITDA" for any period means the sum of Consolidated Net
-------------------
Income plus the following to the extent deducted in calculating such
Consolidated Net Income: (a) Consolidated Interest Expense, (b) all income tax
expense of Holdings and the Restricted Subsidiaries, (c) depreciation expense,
(d) amortization expense, (e) Merger related expenses and (f) all other non-cash
items reducing such Consolidated Net Income (excluding any non-cash item to the
extent it represents an accrual of, or reserve for, cash disbursement for any
subsequent period) less all non-cash items increasing such Consolidated Net
Income (such amount calculated pursuant to this clause (f) not to be less than
zero), in each case for such period. Notwithstanding the foregoing, the
provision for taxes based on the income or profits of, and the depreciation and
amortization of, a Subsidiary of Holdings shall be added to Consolidated Net
Income to compute EBITDA only to the extent (and in the same proportion) that
the net income of such Subsidiary was included in calculating Consolidated Net
Income and only if a corresponding amount would be permitted at the date of
determination to be paid as a dividend to Holdings by such Subsidiary without
prior approval (that has not been obtained), pursuant to the terms of its
charter and all agreements, instruments, judgments, decrees, orders, statutes,
rules and governmental regulations applicable to such Subsidiary or its
stockholders.
"Consolidated Interest Expense" means, for any period, the total
-----------------------------
interest expense, net of interest income, of Holdings and its consolidated
Restricted Subsidiaries for such period determined on a consolidated basis in
accordance with GAAP, plus, to the extent not included in such total interest
expense, and to the extent Incurred by Holdings or any Restricted Subsidiary,
(i) interest expense attributable to Capital Lease Obligations, (ii)
amortization of debt discount, (iii) capitalized interest, (iv) non-cash
interest expense, (v) commissions, discounts and other fees and charges owed
with respect to letters of credit and bankers' acceptance financing, (vi) net
costs associated with Hedging Obligations (including amortization of fees),
(vii) Preferred Stock dividends in respect of all Preferred Stock held by
Persons other than Holdings or a Restricted Subsidiary and (viii) interest
accruing on any Indebtedness of any other Person to the extent such Indebtedness
is guaranteed by Holdings or any Restricted Subsidiary minus, to the extent
included, (x) any amortization or write-off or deferred financing costs of
Holdings and the Restricted Subsidiaries during such period and (y) any charge
related to any penalty or premium paid in connection with Refinancing any
Indebtedness of Holdings or any Restricted Subsidiary prior to its Stated
Maturity.
<PAGE>
-6-
"Consolidated Leverage Ratio" means the ratio of (a) the Total
---------------------------
Consolidated Indebtedness as of the date of calculation (the "Determination
-------------
Date") to (b) the Consolidated EBITDA for the most recent four consecutive
- ----
fiscal quarters for which financial information is available immediately
preceding such Determination Date (the "Measurement Period"). For purposes of
------------------
calculating Consolidated EBITDA for the Measurement Period immediately prior to
the relevant Determination Date, (I) any Person that is a Restricted Subsidiary
on the Determination Date (or would become a Restricted Subsidiary on such
Determination Date in connection with the transaction that requires the
determination of such Consolidated EBITDA) will be deemed to have been a
Restricted Subsidiary at all times during such Measurement Period, (II) any
Person that is not a Restricted Subsidiary on such Determination Date (or would
cease to be a Restricted Subsidiary on such Determination Date in connection
with the transaction that requires the determination of such Consolidated
EBITDA) will be deemed not to have been a Restricted Subsidiary at any time
during such Measurement Period or after the end of such period and on or prior
to such Determination Date, and (III) if Holdings or any Restricted Subsidiary
shall have in any manner (x) acquired (through an Acquisition or the
commencement of activities constituting an operating business or asset) or (y)
disposed of (by way of an Asset Disposition or the Network Sale or the
termination or discontinuance of activities constituting such operating business
or asset) any operating business or asset during such Measurement Period or
after the end of such period and on or prior to such Determination Date, such
calculation will be made on a pro forma basis as if, in the case of an
Acquisition or the commencement of activities constituting such operating
business or asset, all such transactions had been consummated on the first day
of such Measurement Period and, in the case of an Asset Disposition or the
Network Sale or termination or discontinuance of activities constituting such
operating business or asset, all such transactions had been consummated prior to
the first day of such Measurement Period (it being understood that in
calculating Consolidated EBITDA the exclusions set forth in clauses (i) through
(vi) of the definition of Consolidated Net Income shall apply to an Acquired
Person as if it were a Restricted Subsidiary).
"Consolidated Net Income" means, for any period, the net income of
-----------------------
Holdings and its consolidated Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP; provided, however, that there shall
not be included in such Consolidated Net Income: (i) any net income of any
Person if such Person is not a Restricted Subsidiary, except that (A) subject to
the exclusion contained in clause (iv) below, Holdings' equity in the net income
of any such Person for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such Person
during such period (or, in the case of Video 44, in respect of such period
pursuant to the Chicago Joint Venture Agreement) to Holdings or a Restricted
Subsidiary as a dividend or other distribution (subject, in the case of a
dividend or other distribution paid to a Restricted Subsidiary, to the
limitations contained in clause (iii) below) and (B) Holdings' equity in a net
loss of any such Person for such period shall be included in determining such
Consolidated Net Income up to the aggregate amount invested by Holdings or any
Restricted Subsidiary in such Person; (ii) any net income (or loss) of any
Person acquired by Holdings or a Subsidiary of Holdings in a pooling of
interests transaction for any period prior to the date of such acquisition;
(iii) any net income of any Restricted Subsidiary to the extent that such
Restricted Subsidiary is subject to restrictions (other than the Permitted
Restrictions), directly or indirectly, on the payment of dividends or the making
of distributions by such Restricted Subsidiary, directly or indirectly, to
Holdings, except that (A) subject to the exclusion contained in clause (iv)
below, Holdings' equity in the net income of any such Restricted Subsidiary for
such period shall be included in such Consolidated Net Income up to the
aggregate amount of cash actually distributed by such Restricted Subsidiary
during such period to Holdings or another Restricted Subsidiary as a dividend or
other distribution (subject, in the case of a dividend or other distribution
paid to another Restricted Subsidiary, to the limitation contained in this
clause) and (B) Holdings' equity in a net loss of any such Restricted Subsidiary
for such period shall be included in determining such Consolidated Net Income;
(iv) any gain or loss realized upon the sale or other disposition of any assets
of Holdings or its consolidated Subsidiaries (including pursuant to any sale-
and-leaseback arrangement) which is not sold or otherwise disposed of in the
ordinary course of business and any gain or loss realized upon
<PAGE>
-7-
the sale or other disposition of any Capital Stock of any Person; (v)
extraordinary gains or losses; and (vi) the cumulative effect of a change in
accounting principles.
"Control" means the possession, directly or indirectly, of the power
-------
to direct or cause the direction of the management or policies of a Person,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "Controlling" and "Controlled" have meanings correlative thereto.
----------- ----------
"Corporate Trust Office" means the principal office of the Trustee at
----------------------
which at any particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Indenture is located
at Wall Street Plaza, 88 Pine Street, New York, New York, or at any other time
at such other address as the Trustee may designate from time to time by notice
to Holdings and the Noteholders.
"Cumulative Consolidated Interest Expense" means, as at any date of
----------------------------------------
determination, Consolidated Interest Expense during the period (taken as a
single accounting period) commencing on the Issue Date and ending on the last
day of the most recent fiscal quarter immediately preceding the date of
determination for which consolidated financial information of Holdings is
available.
"Cumulative EBITDA" means, as at any date of determination, the
-----------------
positive cumulative Consolidated EBITDA realized during the period (taken as a
single accounting period) commencing on the Issue Date and ending on the last
day of the most recent fiscal quarter immediately preceding the date of
determination for which consolidated financial information of Holdings is
available or, if such cumulative Consolidated EBITDA for such period is
negative, the negative amount by which cumulative Consolidated EBITDA is less
than zero.
"Currency Agreement" means with respect to any Person any foreign
------------------
exchange contract, currency swap agreement or other similar agreement to which
such Person is a party or a beneficiary.
"Custodian" means any receiver, interim receiver, receiver and
---------
manager, receiver-manager, trustee, assignee, liquidator, sequestrator or
similar official under any Bankruptcy Law.
"Default" means any event which is, or after notice or passage of time
-------
or both would be, an Event of Default.
"Depositary" means The Depository Trust Company, its nominees and
----------
their respective successors.
"Disqualified Stock" means, with respect to any Person, any Capital
------------------
Stock which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or upon the happening of any event
(i) matures or is mandatorily redeemable pursuant to a sinking fund obligation
or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock, or (iii) is redeemable at the option of the holder thereof,
in whole or in part, in each case on or prior to the 91st day following the
Stated Maturity of the Notes; provided, however, that any Capital Stock that
would not constitute Disqualified Stock but for provisions thereof giving
holders thereof the right to require such Person to redeem such Capital Stock
upon the occurrence of an "asset sale" or "change of control" occurring prior to
the Stated Maturity of the Notes shall not constitute Disqualified Stock if the
"asset sale" or "change of control" provisions applicable to such Capital Stock
are not more favorable to the holders of such Capital Stock than the provisions
of Section 10.10 and Section 10.15.
<PAGE>
-8-
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Exchange Notes" means the 11 1/2% Senior Discount Notes Due 2008,
--------------
Series B, to be issued in exchange for the Initial Notes pursuant to the
Registration Rights Agreement.
"Exchange Offer" has the meaning specified in the Registration Rights
--------------
Agreement.
"GAAP" means generally accepted accounting principles in the United
----
States of America as in effect from time to time applied on a consistent basis
for all applicable periods, including those set forth (i) in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants, (ii) in statements and pronouncements of the
Financial Accounting Standards Board, (iii) in such other statements by such
other entity as approved by a significant segment of the accounting profession,
and (iv) in the rules and regulations of the SEC governing the inclusion of
financial statements (including pro forma financial statements) in periodic
reports required to be filed pursuant to Section 13 of the Exchange Act,
including opinions and pronouncements in staff accounting bulletins and similar
written statements from the accounting staff of the SEC.
"Global Notes" means one or more permanent global notes in registered
------------
form representing the aggregate principal amount of Notes sold in reliance on
Rule 144A and Regulation S under the Securities Act.
"guarantee" means any obligation, contingent or otherwise, of any
--------
Person directly or indirectly guaranteeing any Indebtedness of any Person and
any obligation, direct or indirect, contingent or otherwise, of such Person (i)
to purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness of such Person (whether arising by virtue of agreements to
keep-well, to purchase assets, goods, securities or services, to take-or-pay or
to maintain financial statement conditions or otherwise) or (ii) entered into
for the purpose of assuring in any other manner the obligee of such Indebtedness
of the payment thereof or to protect such obligee against loss in respect
thereof (in whole or in part); provided, however, that the term "guarantee"
shall not include endorsements for collection or deposit in the ordinary course
of business. The term "guarantee" used as a verb (and the participle formed
therefrom) shall have a correlative meaning. The term "guarantor" shall mean
any Person guaranteeing any obligation.
"Hedging Obligations" of any Person means the obligations of such
-------------------
Person determined in accordance with GAAP pursuant to any Interest Rate
Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is
------ ----------
registered on the Registrar's books.
"Holdings" means the person named as "Holdings" in the first paragraph
--------
of this Indenture, until a successor person shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Holdings" shall
mean such successor person.
"Holdings Request" or "Holdings Order" means a written request or
---------------- --------------
order signed in the name of Holdings by any one of its Chairman of the Board,
its Vice-Chairman, its Chief Executive Officer, its President or a Vice
President, and by its Secretary or an Assistant Secretary or its Treasurer or an
Assistant Treasurer, and delivered to the Trustee.
"Incur" means issue, assume, guarantee, incur or otherwise become
-----
liable for Indebtedness; provided, however, that any Indebtedness of a Person
existing at the time such Person becomes a Subsidiary
<PAGE>
-9-
(whether by merger, consolidation, acquisition or otherwise) shall be deemed to
be Incurred by such Subsidiary at the time it becomes a Subsidiary; and
"Incurrence" has a correlative meaning thereto. Neither the accrual of interest
nor the accretion of principal of a non-interest bearing or other discount
security shall be deemed the Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
------------
determination (without duplication), (i) the principal of and premium (if any)
in respect of (A) indebtedness of such Person for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which such Person is responsible or liable; (ii) all Capital
Lease Obligations of such Person and all Attributable Debt in respect of
Sale/Leaseback Transactions entered into by such Person; (iii) all obligations
of such Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations of such Person and all obligations of such Person
under any title retention agreement (but excluding trade accounts payable or
accrued liabilities arising in the ordinary course of business); (iv) all
obligations of such Person for the reimbursement of any obligor on any letter of
credit, banker's acceptance or similar credit transaction (other than
obligations with respect to letters of credit securing obligations (other than
obligations described in clauses (i) through (iii) above) entered into in the
ordinary course of business of such Person to the extent such letters of credit
are not drawn upon, or, if and to the extent drawn upon, such drawing is
reimbursed no later than the tenth Business Day following receipt by such Person
of a demand for reimbursement following payment on the letter of credit); (v)
the amount of all obligations of such Person with respect to the redemption,
repayment or other repurchase of any Disqualified Stock or, with respect to any
Subsidiary of such Person, any Preferred Stock (but excluding, in each case, any
accrued dividends); (vi) all obligations of the type referred to in clauses (i)
through (v) of other Persons and all dividends of other Persons for the payment
of which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
guarantee (exclusive of endorsements of negotiable instruments in the ordinary
course of business) but only to the extent of the lesser of the amount of such
obligations and the maximum liability of such Person for the payment of such
obligations; (vii) all obligations of the type referred to in clauses (i)
through (vi) of other Persons secured by any Lien on any property or asset of
such Person (whether or not such obligation is assumed by such Person), the
amount of such obligation being deemed to be the lesser of the value of such
property or assets or the amount of the obligation so secured; and (viii) to the
extent not otherwise included in this definition, Hedging Obligations of such
Person (it being understood that Indebtedness shall not include ordinary course
payment obligations (not described in the foregoing clauses (i) through (viii))
pursuant to a Local Marketing Agreement). For purposes of the preceding
sentence, the maximum fixed repurchase price of any Disqualified Stock that does
not have a fixed repurchase price shall be calculated in accordance with the
terms of such Disqualified Stock as if such Disqualified Stock were repurchased
on any date on which Indebtedness shall be required to be determined pursuant to
this Indenture; provided, however, that if such Disqualified Stock is not then
permitted to be repurchased, the repurchase price shall be the book value of
such Disqualified Stock. The amount of Indebtedness of any Person at any date
shall be the outstanding balance at such date of all unconditional obligations
as described above and the maximum liability, upon the occurrence of the
contingency giving rise to the obligation, of any contingent obligations at such
date; provided, however, that for purposes of calculating the amount of any non-
interest bearing or other discount security, such indebtedness shall be deemed
to be the principal amount thereof that would be shown on the balance sheet of
the issuer dated such date prepared in accordance with GAAP.
"Indenture" means this instrument as originally executed (including
---------
all exhibits and schedules hereto) and as it may from time to time be
supplemented or amended by one or more indentures supplemental hereto entered
into pursuant to the applicable provisions hereof.
<PAGE>
-10-
"Indenture Obligations" means the obligations of Holdings under this
---------------------
Indenture or under the Notes, to pay principal of, premium, if any, and interest
on the Notes when due and payable, whether at maturity, by acceleration, call
for redemption or repurchase or otherwise, and all other amounts due or to
become due under or in connection with this Indenture or the Notes and the
performance of all other obligations to the Trustee (including, but not limited
to, payment of all amounts due the Trustee under Section 6.07 hereof) and the
Holders of the Notes under this Indenture and the Notes, according to the terms
thereof.
"Initial Notes" means the 11 1/2% Senior Discount Notes Due 2008,
-------------
Series A, of Holdings.
"Initial Purchasers" means Credit Suisse First Boston Corporation and
------------------
CIBC Oppenheimer Corp.
"interest" means, with respect to the Notes, the sum of any cash
--------
interest and any Additional Interest on the Notes.
"Interest Payment Date" means, when used with respect to any Note, the
---------------------
Stated Maturity of an installment of interest on such Note, as set forth in such
Note.
"Interest Rate Agreement" means any interest rate swap agreement,
-----------------------
interest rate cap agreement or other financial agreement or arrangement designed
solely to protect Holdings or any Restricted Subsidiary against fluctuations in
interest rates.
"Investment" in any Person means any direct or indirect advance, loan
----------
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of the Person making the
advance or loan) or other extensions of credit (including by way of guarantee or
similar arrangement or negotiable instruments held for collection) or capital
contribution to (by means of any transfer of cash or other property to others or
any payment for property or services for the account or use of others), or any
purchase or acquisition of Capital Stock, Indebtedness or other similar
instruments issued by such Person.
"Issue Date" means August 12, 1998, the date of original issuance of
----------
the Notes.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
-------------
institutions in the State of New York are authorized or required by law to
close. If a payment date is a Legal Holiday, payment shall be made on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period. If a regular record date is a Legal Holiday, the record
shall not be affected.
"Liberty" means Liberty Media Corporation and its successors, Tele-
-------
Communications Inc. and its successors, and their respective Affiliates.
"Lien" means any mortgage, pledge, security interest, encumbrance,
----
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
"Local Marketing Agreement" means a local marketing arrangement, sale
-------------------------
agreement, time brokerage agreement, management agreement or similar arrangement
pursuant to which a Person: (a) obtains the right to sell at least a majority
of the advertising inventory of a television station on behalf of a third party;
(b) purchases at least a majority of the air time of a television station to
exhibit programming and sell advertising time; (c) manages the selling
operations of a television station with respect to at least a majority of the
advertis-
<PAGE>
-11-
ing inventory of such station; (d) manages the acquisition of programming for a
television station; (e) acts as a program consultant for a television station;
or (f) manages the operation of a television station generally.
"Maturity Date" means, with respect to any Note, the date specified in
-------------
such Note as the fixed date on which the principal of such Note is due and
payable.
"Merger" means the merger of TLMD Acquisition Co., a wholly owned
------
Subsidiary of Holdings, with and into Telemundo, with Telemundo surviving the
merger and becoming a wholly owned Subsidiary of Holdings.
"Moody's" means Moody's Investors Service, Inc.
-------
"Net Available Cash" from an Asset Disposition means cash payments
------------------
received therefrom (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise,
but only as and when received, but excluding any other consideration received in
the form of assumption by the acquiring Person of Indebtedness or other
obligations relating to such properties or assets or received in any other
noncash form) in each case net of (i) all legal, title and recording tax
expenses, brokerage commissions, underwriting discounts or commissions or sales
commissions and other reasonable fees and expenses (including, without
limitation, fees and expenses of counsel, accountants and investment bankers)
related to such Asset Disposition or converting to cash any other proceeds
received, and any relocation and severance expenses as a result thereof, and all
federal, state, provincial, foreign and local taxes attributable to such Asset
Disposition, (ii) all payments made on any Indebtedness which is secured by any
assets subject to such Asset Disposition or made in order to obtain a necessary
consent to such Asset Disposition or to comply with applicable law, (iii) all
distributions and other payments required to be made to minority interest
holders in Subsidiaries or joint ventures as a result of such Asset Disposition
and (iv) appropriate amounts provided by the seller as a reserve, in accordance
with GAAP, against any liabilities associated with the property or other assets
disposed of in such Asset Disposition and retained by Holdings or any Restricted
Subsidiary after such Asset Disposition, including, without limitation, pension
and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Disposition. Further, with respect to an Asset
Disposition by a Subsidiary which is not a Wholly Owned Restricted Subsidiary,
Net Available Cash shall be reduced pro rata for the portion of the equity of
such Subsidiary which is not owned by Holdings.
"Net Cash Proceeds," with respect to any issuance or sale of Capital
-----------------
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees and expenses actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result thereof.
"Network Company" means Telemundo Network Group LLC, a Delaware
---------------
limited liability company, and its successors.
"Network Sale" means the sale by Telemundo of its network operations
------------
to the Network Company pursuant to the Network Sale Agreement.
"Network Sale Agreement" means the Purchase Agreement dated as of the
----------------------
Issue Date among Telemundo, Telemundo Network, Inc. and the Network Company.
"Non-U.S. Person" has the meaning assigned to such term in Regulation
---------------
S.
<PAGE>
-12-
"Notes" has the meaning specified in the recitals of this Indenture.
-----
"Offering Circular" means the Offering Circular, dated August 7, 1998,
-----------------
relating to, among other things, the offering and placement of the Initial
Notes.
"Officer" means, with respect to Holdings, the Chairman of the Board,
-------
a Vice Chairman, the President, the Chief Executive Officer, the Chief Operating
Officer, the Chief Financial Officer, a Vice President, the Secretary, an
Assistant Secretary, the Treasurer or an Assistant Treasurer.
"Officers' Certificate" means a certificate signed by the Chairman of
---------------------
the Board, a Vice Chairman, the President, the Chief Executive Officer, the
Chief Operating Officer, the Chief Financial Officer or a Vice President, and by
the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer,
of Holdings, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel who may be
------------------
counsel for Holdings or the Trustee, and who shall be reasonably acceptable to
the Trustee.
"Outstanding" means, as of the date of determination, all Notes
-----------
theretofore authenticated and delivered under this Indenture, except:
(a) Notes theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(b) Notes, or portions thereof, for whose payment or redemption money
in the necessary amount has been theretofore deposited with the Trustee or
any Paying Agent (other than Holdings or any Affiliate thereof) in trust or
set aside and segregated in trust by Holdings or any Affiliate thereof (if
Holdings or such Affiliate shall act as Paying Agent) for the Holders of
such Notes; provided, however, that if such Notes are to be redeemed,
notice of such redemption has been duly given pursuant to this Indenture or
provision therefor satisfactory to the Trustee has been made;
(c) Notes with respect to which Holdings has effected defeasance or
covenant defeasance as provided in Article Four, to the extent provided in
Sections 4.02 and 4.03 hereof; and
(d) Notes in exchange for or in lieu of which other Notes have been
authenticated and delivered pursuant to this Indenture, other than any such
Notes in respect of which there shall have been presented to the Trustee
proof satisfactory to it that such Notes are held by a bona fide purchaser
in whose hands the Notes are valid obligations of Holdings;
provided, however, that in determining whether the Holders of the requisite
principal amount at maturity of Outstanding Notes have given any request,
demand, authorization, direction, notice, consent or waiver hereunder, Notes
owned by Holdings or any other obligor upon the Notes or any Affiliate of
Holdings or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Notes that a Responsible Officer of the Trustee actually
knows to be so owned shall be so disregarded. Holdings shall notify the
Trustee, in writing, when it repurchases or otherwise acquires Notes and of the
aggregate principal amount at maturity of such Notes so repurchased or otherwise
acquired. Notes so owned which have been pledged in good faith may be regarded
as Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Notes and that the pledgee is not
Holdings or any other obligor upon the Notes or any Affiliate of Holdings or
such other obligor. If the Paying Agent holds, in its capacity as
<PAGE>
-13-
such, on any Maturity Date or Redemption Date money sufficient to pay all
accrued interest and principal with respect to such Notes payable on that date
and is not prohibited from paying such money to the Holders thereof pursuant to
the terms of this Indenture, then on and after that date such Notes cease to be
Outstanding and interest on them ceases to accrue. Notes may also cease to be
Outstanding to the extent expressly provided in Article Four.
"Permitted Holders" means (i) Apollo, (ii) Bastion, (iii) Liberty,
-----------------
(iv) Sony Pictures and (v) any transferee of the shares of Capital Stock of
Holdings (or any rights to purchase any such Capital Stock) owned by Station
Partners on the date of this Indenture in accordance with the express provisions
of the Stockholders Agreement.
"Permitted Investment" means (i) any Investment in Holdings or any
--------------------
Restricted Subsidiary or a Person that will, upon the making of such Investment,
become a Restricted Subsidiary; provided, however, that the primary business of
such Person is a Related Business; (ii) an Investment in any Person, if as a
result of such Investment such other Person is merged or consolidated with or
into, or transfers or conveys all or substantially all its assets to, Holdings
or any Restricted Subsidiary; provided, however, that such Person's primary
business is a Related Business; (iii) Temporary Cash Investments; (iv)
receivables owing to Holdings or any Restricted Subsidiary, if created or
acquired in the ordinary course of business and payable or dischargeable in
accordance with customary trade terms; provided, however, that such trade terms
may include such concessionary trade terms as Holdings or any such Restricted
Subsidiary deems reasonable under the circumstances; (v) payroll, travel and
similar advances to cover matters that are expected at the time of such advances
ultimately to be treated as expenses for accounting purposes and that are made
in the ordinary course of business; (vi) loans or advances to officers and
employees made in the ordinary course of business consistent with past practices
of Holdings or such Restricted Subsidiary; (vii) stock, obligations or
securities received in settlement of debts created in the ordinary course of
business and owing to Holdings or any Restricted Subsidiary or in satisfaction
of judgments or pursuant to a plan of reorganization or similar arrangement upon
the bankruptcy or insolvency of trade debtors or customers of Holdings or any
Restricted Subsidiary or upon the foreclosure, perfection or enforcement of a
Lien in favor of Holdings or any Restricted Subsidiary that arose in the
ordinary course of business of Holdings or such Restricted Subsidiary; (viii) an
Investment in any Person to the extent such Investment represents the non-cash
portion of the consideration received for an Asset Disposition as permitted
pursuant to Section 10.15; (ix) an Investment in a joint venture, any Person
engaged in a Related Business or any Unrestricted Subsidiary; provided that the
aggregate amount of all such Investments outstanding at any time shall not
exceed $35 million; (x) Hedging Obligations entered into in compliance with the
terms of this Indenture; (xi) an Investment held by any Person on the date such
Person becomes a Restricted Subsidiary so long as such Investments were not made
in contemplation of such acquisition; (xii) an Investment in any Person with
which Holdings or any Restricted Subsidiary has entered into, or has an
agreement that, subject to consummation of such agreement, entitles Holdings or
any Restricted Subsidiary to enter into a Local Marketing Agreement and in any
Person created by such a Local Market Agreement; provided that the aggregate
amount of all such Investments, together with the aggregate amount of
Indebtedness Incurred pursuant to clause (b)(12) of Section 10.11, shall not
exceed $10 million at any time outstanding; (xiii) any Investment made with
Qualified Stock or acquired as a capital contribution to Holdings; and (xiv) any
Investment required by Section 3.5(a) of the Chicago Joint Venture Agreement.
"Permitted Liens" means, with respect to any Person, (a) Liens
---------------
incurred or pledges or deposits by such Person under workers' compensation laws,
unemployment insurance laws or similar legislation, or good faith deposits in
connection with bids, tenders, contracts (other than for the payment of
Indebtedness) or leases to which such Person is a party, or deposits to secure
public or statutory obligations of such Person or deposits or cash or United
States government bonds to secure surety or appeal bonds to which such Person is
a party, per-
<PAGE>
-14-
formance bonds and other obligations of a like nature incurred in the ordinary
course of business, or deposits as security for contested taxes or import duties
or for the payment of rent, in each case incurred in the ordinary course of
business; (b) Liens imposed by law, such as carriers', warehousemen's and
mechanics' Liens, in each case for sums not yet due or being contested in good
faith by appropriate proceedings; (c) Liens arising out of judgments or awards
against such Person with respect to which such Person shall then be proceeding
with an appeal or other proceedings for review or time for appeal has not yet
expired; (d) Liens for taxes, assessments or other governmental charges not yet
subject to penalties for non-payment or which are being contested in good faith
by appropriate proceedings; (e) Liens in favor of issuers of surety bonds or
letters of credit issued pursuant to the request of and for the account of such
Person in the ordinary course of its business; provided, however, that such
letters of credit do not constitute Indebtedness; (f) survey exceptions,
encumbrances, easements or reservations of or rights of others for licenses,
rights of way, sewers, electric lines, telegraph and telephone lines and other
similar purposes, or zoning or other restrictions as to the use of real
properties or Liens incidental to the conduct of the business of such Person or
to the ownership of its properties which were not incurred in connection with
Indebtedness and which do not in the aggregate materially adversely affect the
value of said properties or materially impair their use in the operation of the
business of such Person; (g) Liens securing an Interest Rate Agreement so long
as the related Indebtedness is, and is permitted under this Indenture to be,
secured by a Lien on the same property securing the Interest Rate Agreement; (h)
Liens securing Currency Agreements so long as the related Indebtedness is, and
is permitted under this Indenture to be, secured by a Lien on the same property
securing such Currency Agreement; (i) Liens in favor of Holdings and its Wholly
Owned Restricted Subsidiaries; (j) Liens relating to any license of intellectual
property entered into in the ordinary course of business (including programming
agreements); (k) Liens pursuant to Local Marketing Agreements and not securing
any Indebtedness; (l) minor imperfections of, or encumbrances on, title that do
not impair the value of property for its intended use; and (m) Liens, leases and
subleases of real property which do not interfere with the ordinary conduct of
the business of such Person, and which are made on customary and usual terms
applicable to similar properties.
"Permitted Restrictions" means (i) the encumbrances or restrictions
----------------------
contained in the Bank Credit Agreement as in effect on the date of this
Indenture or as thereafter amended in a manner no less favorable to the Holders
in any material respect as determined in good faith by the Board of Directors of
Holdings and (ii) any encumbrance or restriction contained in any other
agreement governing Indebtedness of any Restricted Subsidiary permitted under
this Indenture which encumbrance or restriction does not prohibit (except upon a
default or event of default thereunder) the payment of dividends in an amount
sufficient to cover scheduled payments of cash interest on the Notes.
"Person" means any individual, corporation, limited liability company,
------
limited or general partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, government or any agency or political
subdivision thereof or any other entity.
"Physical Notes" means any certificate for the Notes registered in the
--------------
name of the Holder thereof and not subject to the book-entry provisions of
Section 3.16.
"Preferred Stock," as applied to the Capital Stock of any corporation,
---------------
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"principal" of a Note means the principal of the Note plus the
---------
premium, if any, payable on the Note which is due or overdue or is to become due
at the relevant time.
<PAGE>
-15-
"Private Exchange Notes" has the meaning specified in the Registration
----------------------
Rights Agreement.
"Private Placement Legend" shall mean the first paragraph of the
------------------------
legend initially set forth in the Notes in the form set forth in Exhibit A-1.
-----------
"Productive Assets" means assets used or useful in the ownership or
-----------------
operation of a Related Business of Holdings or any Restricted Subsidiary,
including any and all licenses, franchises and assets related thereto.
"Public Equity Offering" means an underwritten public offering of
----------------------
common stock of Holdings pursuant to an effective registration statement under
the Securities Act that yields not less than $25.0 million in gross proceeds,
which for purposes of the provisions described under Section 2 of the Notes only
shall be a primary offering for the account of Holdings.
"Purchase Money Indebtedness" means any Indebtedness incurred in the
---------------------------
ordinary course of business by a Person to finance the cost (including the cost
of construction) of an item of assets, the amount of which Indebtedness does not
exceed the sum of (i) 100% of the lesser of such cost or the fair market value
of such assets, as determined in good faith by the Board of Directors of
Holdings, and (ii) reasonable fees and expenses of such Person incurred in
connection therewith.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
----------------------------- ---
specified in Rule 144A.
"Qualified Stock" means any Capital Stock of Holdings that is not
---------------
Disqualified Stock.
"redeem" means redeem, repurchase, defease or otherwise acquire or
------
retire for value; and "redemption" and "redeemed" have correlative meanings
thereto.
"Redemption Date" means, with respect to any Note or part thereof to
---------------
be redeemed, the date fixed by Holdings for such redemption pursuant to this
Indenture and the Notes.
"Redemption Price" means, with respect to any Note or part thereof to
----------------
be redeemed, the price fixed for such redemption pursuant to the terms of this
Indenture and the Notes, plus accrued and unpaid interest thereon, if any, to
the Redemption Date.
"Refinance" means refinance, renew, extend, replace, defease or
---------
refund, in whole or in part, including successively; and "Refinancing" and
-----------
"Refinanced" have correlative meanings thereto.
- -----------
"Refinancing Indebtedness" means Indebtedness that Refinances any
------------------------
Indebtedness of Holdings or any Restricted Subsidiary existing on the Issue Date
or Incurred in compliance with this Indenture, including Indebtedness that
Refinances Refinancing Indebtedness; provided, however, that (i) such
Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced, (ii) such Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being Refinanced and (iii) such Refinancing Indebtedness has an aggregate
principal amount (or if Incurred with original issue discount, an aggregate
issue price) that is equal to or less than the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed (plus fees and expenses, including any premium and
defeasance costs) under the Indebtedness being Refinanced; provided, further,
however, that Refinancing Indebtedness shall not include (x) Indebtedness of a
Restricted Subsidiary that Refinances Indebtedness of Hold-
<PAGE>
-16-
ings or (y) Indebtedness of Holdings or a Restricted Subsidiary that Refinances
Indebtedness of an Unrestricted Subsidiary.
"Registration Rights Agreement" means the Registration Rights
-----------------------------
Agreement dated as of the Issue Date between Holdings and the Initial
Purchasers, as the same may be amended, supplemented or otherwise modified from
time to time in accordance with the terms thereof.
"Regular Record Date" means the record date specified on the face of
-------------------
the Notes.
"Regulation S" means Regulation S under the Securities Act (including
------------
any successor regulation thereto), as it may be amended from time to time.
"Regulation S Note" means a Physical Note issued pursuant to Section
-----------------
3.17 in transfers in accordance with Regulation S.
"Related Business" means any business related, ancillary or
----------------
complementary to the businesses of Holdings, Telemundo or any of its
Subsidiaries or the Network Company on the Issue Date.
"Responsible Officer" means, when used with respect to the Trustee,
-------------------
any officer within the Corporate Trust Office including any Vice President,
Managing Director, Assistant Vice President, Secretary, Assistant Secretary or
Assistant Treasurer or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also, with respect to a particular matter, any other officer to whom such matter
is referred because of such officer's knowledge and familiarity with the
particular subject.
"Restricted Note" means a Note that constitutes a "restricted
---------------
security" within the meaning of Rule 144(a)(3) under the Securities Act or a
Regulation S Note; provided, however, that the Trustee shall be entitled to
request and conclusively rely on an Opinion of Counsel with respect to whether
any Note constitutes a Restricted Note.
"Restricted Payment" with respect to any Person means (i) the
------------------
declaration or payment of any dividends or any other distributions of any sort
in respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving such Person), other than dividends or
distributions payable solely in Qualified Stock and dividends or distributions
payable to Holdings or a Restricted Subsidiary, and other than pro rata
dividends or other distributions made by a Subsidiary that is not a Wholly Owned
Subsidiary to minority stockholders (or owners of an equivalent interest in the
case of a Subsidiary that is an entity other than a corporation), (ii) the
purchase, redemption or other acquisition or retirement for value of any Capital
Stock of Holdings held by any Person or of any Capital Stock of a Restricted
Subsidiary held by any Affiliate of Holdings (other than a Restricted
Subsidiary), including the exercise of any option to exchange any Capital Stock
(other than into Qualified Stock), (iii) with respect to Holdings, the purchase,
repurchase, redemption, defeasance or other acquisition or retirement for value,
prior to scheduled maturity, scheduled repayment or scheduled sinking fund
payment of any Subordinated Obligations (other than the purchase, repurchase or
other acquisition of Subordinated Obligations purchased in anticipation of
satisfying of a sinking fund obligation, principal installment or final
maturity, in each case due within one year of the date of acquisition), or (iv)
the making of any Investment in any Person (other than a Permitted Investment),
including by designation of any Subsidiary as an Unrestricted Subsidiary.
<PAGE>
-17-
"Restricted Subsidiary" means any Subsidiary of Holdings that is not
---------------------
an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act (including any
---------
successor regulation thereto), as it may be amended from time to time.
"Sale/Leaseback Transaction" means an arrangement relating to property
--------------------------
now owned or hereafter acquired whereby Holdings or a Restricted Subsidiary
transfers such property to a Person and Holdings or a Restricted Subsidiary
leases it from such Person.
"SEC" means the Securities and Exchange Commission.
---
"Secured Indebtedness" means any Indebtedness of Holdings secured by a
--------------------
Lien.
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations promulgated by the SEC thereunder.
"Sharing Agreement" means the agreement expected to be entered into
-----------------
between Holdings and the Network Company, pursuant to which they will share
certain facilities, equipment and administrative services, as in effect from
time to time.
"Significant Subsidiary" means any Restricted Subsidiary that would be
----------------------
a "Significant Subsidiary" of Holdings within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Sony Pictures" means Sony Pictures Entertainment Inc. and its
-------------
successors, Sony Corporation of America and its successors, and their respective
Affiliates.
"Special Record Date" means, with respect to the payment of any
-------------------
Defaulted Interest, a date fixed by the Trustee pursuant to Section 3.07 hereof.
"Stated Maturity" means, with respect to any security, the date
---------------
specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).
"Station Affiliation Agreements" means the several Station Affiliation
------------------------------
Agreements dated the Issue Date between Telemundo Network Group LLC and certain
Subsidiaries of Telemundo and any other agreement in substantially the same form
with respect to future television stations of Telemundo or any Restricted
Subsidiary, each as amended from time to time in accordance with Section 10.22
hereof.
"Stockholders Agreement" means the Agreement dated as of the Issue
----------------------
Date among Holdings, Apollo, Bastion, Station Partners, Liberty and Sony
Pictures, as in effect on such date.
"Subordinated Obligation" means any Indebtedness of Holdings (whether
-----------------------
outstanding on the Issue Date or thereafter incurred) which is subordinate or
junior in right of payment to the Notes pursuant to a written agreement to that
effect.
<PAGE>
-18-
"Subsidiary" means, in respect of any Person, any corporation,
----------
association, limited liability company, limited or general partnership or other
business entity of which more than 50% of the total voting power of shares of
Capital Stock or other interests (including partnership interests) entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by (i) such Person, (ii) such Person and one or more
Subsidiaries of such Person, or (iii) one or more Subsidiaries of such Person.
"S&P" means Standard & Poor's Ratings Group.
---
"Telemundo" means Telemundo Group, Inc., a Delaware corporation.
---------
"Temporary Cash Investments" means any of the following: (i) any
--------------------------
investment in direct obligations of the United States of America or any agency
thereof or obligations guaranteed by the United States of America or any agency
thereof; (ii) investments in time deposit accounts, demand deposits, Eurodollar
deposits, certificates of deposit and money market deposits maturing within 365
days of the date of acquisition thereof issued by a bank or trust company which
is organized under the laws of the United States of America, any state thereof
or any foreign country recognized by the United States, and which bank or trust
company has capital, surplus and undivided profits aggregating in excess of
$50,000,000 (or the foreign currency equivalent thereof) or any money-market
fund sponsored by a registered broker dealer or mutual fund distributor; (iii)
repurchase obligations with a term of not more than 30 days for underlying
securities of the types described in clause (i) above entered into with a bank
meeting the qualifications described in clause (ii) above; (iv) investments in
commercial paper, maturing not more than 180 days after the date of acquisition,
issued by a corporation (other than an Affiliate of Holdings) organized and in
existence under the laws of the United States of America or any foreign country
recognized by the United States of America with a rating at the time as of which
any investment therein is made of "P-2" (or higher) according to Moody's or "A-
2" (or higher) according to S&P; (v) investments in securities with maturities
of six months or less from the date of acquisition issued or fully guaranteed by
any state, commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A" by S&P
or "A" by Moody's; and (vi) investments in money market funds that make
investments in instruments of the type described in clauses (i) through (v)
above in accordance with the regulations of the SEC under the Investment Company
Act of 1940, as amended.
"Total Consolidated Indebtedness" means, as at any date of
-------------------------------
determination, an amount equal to the aggregate amount of all Indebtedness of
Holdings and the Restricted Subsidiaries outstanding on a consolidated basis as
of such date of determination, after giving pro forma effect to any Incurrence
of Indebtedness and the application of the proceeds, including the repayment of
any Indebtedness, therefrom giving rise to such determination.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939,
------------------- ---
as amended.
"Trustee" means the person named as the "Trustee" in the first
-------
paragraph of this Indenture, until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Umbrella Affiliation Agreement" means the Memorandum of Agreement
------------------------------
dated the Issue Date between the Network Company and Telemundo regarding, among
other things, revenue sharing, as amended from time to time in accordance with
Section 10.22 hereof.
<PAGE>
-19-
"Unrestricted Notes" means one or more Notes that do not and are not
------------------
required to bear the Private Placement Legend in the form set forth in Exhibit
-------
A-1, including, without limitation but with certain exceptions, the Exchange
- ---
Notes.
"Unrestricted Subsidiary" means (i) any Subsidiary of Holdings that at
-----------------------
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors of Holdings in the manner provided below and (ii) any
Subsidiary of an Unrestricted Subsidiary. Video 44 shall be deemed to have been
designated an Unrestricted Subsidiary as of the Issue Date. The Board of
Directors of Holdings may designate any Subsidiary of Holdings (including any
newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary
unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or
Indebtedness of, or holds any Lien on any property of, Holdings or any other
Subsidiary of Holdings that is not a Subsidiary of the Subsidiary to be so
designated; provided, however, that either (A) the Subsidiary to be so
designated has total assets of $1,000 or less or (B) if such Subsidiary has
assets greater than $1,000, such designation would be permitted under Section
10.13. The Board of Directors of Holdings may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided, however, that immediately
after giving effect to such designation (x) if such Unrestricted Subsidiary at
such time has Indebtedness, Holdings could Incur $1.00 of additional
Indebtedness under paragraph (a) of Section 10.11 and (y) no Default shall have
occurred and be continuing. Any such designation by the Board of Directors of
Holdings shall be evidenced by Holdings to the Trustee by promptly filing with
the Trustee a copy of the Board Resolution giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"U.S. Government Obligations" means securities that are (x) direct
---------------------------
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (y) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America, which, in either
case, are not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act), as custodian with respect to any such U.S.
Government Obligation held by such custodian for the account of the holder of
such depository receipt; provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of principal
of or interest on the U.S. Government Obligation evidenced by such depository
receipt.
"Video 44" means Video 44, an Illinois general partnership formed
--------
under the Chicago Joint Venture Agreement.
"Voting Stock" of a Person means all classes of Capital Stock or other
------------
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly Owned Restricted Subsidiary" means a Restricted Subsidiary all
----------------------------------
the Capital Stock of which (other than directors' qualifying shares and shares
held by other Persons to the extent such shares are required by applicable law
to be held by a Person other than Holdings or a Restricted Subsidiary) is owned
by Holdings or one or more Wholly Owned Restricted Subsidiaries.
<PAGE>
-20-
Section 1.02. Other Definitions.
-----------------
<TABLE>
<CAPTION>
Defined in
Term Section
---- -----------
<S> <C>
"Act" 1.05
"Affiliate Transaction" 10.14
"Agent Member" 3.16
"Asset Disposition Offer" 10.15
"Asset Disposition Offer Purchase Date" 10.15
"Change of Control Date" 10.10
"Change of Control Payment Date" 10.10
"covenant defeasance" 4.03
"Defaulted Interest" 3.07
"Defeased Notes" 4.01
"Distribution Compliance Period" 3.17
"Event of Default" 5.01
"insolvent person" 4.04
"legal defeasance" 4.02
"Note Register" 3.05
"Other Debt" 10.15
"Paying Agent" or "Agent" 3.02
"Receipt Date" 10.15
"Registrar" 3.02
"Successor Company" 8.01
</TABLE>
Incorporation by Reference
--------------------------
Whenever this Indenture refers to a provision of the Trust Indenture
Act, the provision is incorporated by reference herein and made a part of this
Indenture. The following Trust Indenture Act terms used in this Indenture have
the following meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" means the Trustee; and
"obligor" on the Notes means Holdings or any other obligor on the
Notes.
All other terms used in this Indenture that are defined by the Trust
Indenture Act, defined by the Trust Indenture Act reference to another statute
or defined by SEC rule under the Trust Indenture Act have the meanings so
assigned to them.
<PAGE>
-21-
Section 1.03. Rules of Construction.
---------------------
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP;
(d) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision;
(e) all references to "$" or "dollars" refer to the lawful currency
of the United States of America; and
(f) the words "include," "included" and "including" as used herein
are deemed in each case to be followed by the phrase "without limitation."
Section 1.04. Form of Documents Delivered to Trustee.
--------------------------------------
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other Persons as to other matters, and any such Person may certify or
give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of Holdings may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion may be based, insofar as it relates
to factual matters, upon a certificate or opinion of, or representations by, an
officer or officers of Holdings stating that the information with respect to
such factual matters is in the possession of Holdings, unless such counsel
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated, with
proper identification of each matter covered therein, and form one instrument.
Section 1.05. Acts of Holders.
---------------
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more in-
<PAGE>
-22-
struments of substantially similar tenor signed by such Holders in person or by
an agent duly appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
are delivered to the Trustee and, where it is hereby expressly required, to
Holdings. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the Holders
signing such instrument or instruments. Proof of execution (as provided below in
subsection (b) of this Section 1.05) of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 6.01 hereof) conclusive in favor of the Trustee and
Holdings, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any reasonable manner which the Trustee
deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Note shall bind every future Holder
of the same Note or the Holder of every Note issued upon the transfer thereof or
in exchange therefor or in lieu thereof to the same extent as the original
Holder, in respect of anything done, suffered or omitted to be done by the
Trustee, any Paying Agent or Holdings in reliance thereon, whether or not
notation of such action is made upon such Note.
Section 1.06. Notices, etc., to the Trustee and Holdings.
------------------------------------------
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with:
(a) the Trustee by any Holder or by Holdings shall be sufficient for
every purpose hereunder if made, given, furnished or filed, in writing, to
or with the Trustee at Wall Street Plaza, 88 Pine Street, New York, New
York 10005, or to any other address previously furnished in writing to the
Holders and Holdings by the Trustee; or
(b) Holdings by the Trustee or by any Holder shall be sufficient for
every purpose (except as otherwise expressly provided herein) hereunder if
in writing and mailed, first-class postage prepaid, to Holdings addressed
to it c/o Telemundo Group, Inc., 220 West 8th Avenue, Hialeah, Florida
33010, Attention: Osvaldo F. Torres, Esq., or at any other address
previously furnished in writing to the Trustee by Holdings.
Section 1.07. Notice to Holders; Waiver.
-------------------------
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given if in writing and mailed, first-class postage
prepaid, to each Holder affected by such event, at the address of such Holder as
it appears in the Note Register, not later than the latest date, and not earlier
than the earliest date, prescribed for the giving of such notice. In any case
where notice to Holders is given by mail, neither the failure to mail such
notice, nor any defect in any notice so mailed, to any particular Holder shall
affect the sufficiency of such notice with respect to other Holders. Any notice
when mailed to a Holder in the aforesaid manner shall be conclusively deemed to
have been received by such Holder whether or not actually received by such
Holder. Where this Indenture provides for notice in any manner, such notice may
be waived in writing by the person entitled to receive such notice, either
before or after the event, and such waiver shall be the
<PAGE>
-23-
equivalent of such notice. Waivers of notice by Holders shall be filed with the
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause, it shall be impracticable to mail notice of any event
as required by any provision of this Indenture, then any method of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.
Section 1.08. Conflict with Trust Indenture Act.
---------------------------------
If any provision hereof limits, qualifies or conflicts with any
provision of the Trust Indenture Act or another provision which is required or
deemed to be included in this Indenture by any of the provisions of the Trust
Indenture Act, such provision or requirement of the Trust Indenture Act shall
control.
If any provision of this Indenture modifies or excludes any provision
of the Trust Indenture Act that may be so modified or excluded, the latter
provision shall be deemed to apply to this Indenture as so modified or excluded,
as the case may be.
Section 1.09. Effect of Headings and Table of Contents.
----------------------------------------
The Article and Section headings herein, the cross-reference table and
the Table of Contents are for convenience only and shall not affect the
construction hereof.
Section 1.10. Successors and Assigns.
----------------------
All covenants and agreements in this Indenture by Holdings shall bind
its successors and assigns, whether so expressed or not. All covenants and
agreements in this Indenture by the Trustee shall bind its successors and
assigns, whether so expressed or not.
Section 1.11. Separability Clause.
-------------------
In case any provision in this Indenture or in the Notes issued
pursuant hereto shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
Section 1.12. Benefits of Indenture.
---------------------
Nothing in this Indenture or in the Notes issued pursuant hereto,
express or implied, shall give to any person (other than the parties hereto and
their successors hereunder, any Paying Agent and the Holders) any benefit or any
legal or equitable right, remedy or claim under this Indenture.
Section 1.13. Governing Law.
-------------
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.
<PAGE>
-24-
Section 1.14. No Recourse Against Others.
--------------------------
No recourse for the payment of the principal of, premium, if any, or
interest on any of the Notes or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant or
agreement of Holdings in this Indenture, or in any of the Notes or because of
the creation of any Indebtedness represented thereby, shall be had against any
incorporator, stockholder, officer, director, employee, affiliate or controlling
person of Holdings or any successor Person or affiliate thereof. Each Holder,
by accepting the Notes, waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Notes.
Section 1.15. Independence of Covenants.
-------------------------
All covenants and agreements in this Indenture shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitations of, another covenant shall not avoid
the occurrence of a Default if such action is taken or condition exists.
Section 1.16. Exhibits.
--------
All exhibits attached hereto are by this reference made a part hereof
with the same effect as if herein set forth in full.
Section 1.17. Counterparts.
------------
This Indenture may be executed in any number of counterparts and by
telecopier, each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument.
Section 1.18. Duplicate Originals.
-------------------
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
ARTICLE TWO
NOTE FORMS
Section 2.01. Form and Dating.
---------------
The Notes and the Trustee's certificate of authentication with respect
thereto shall be in substantially the forms set forth, or referenced, in Exhibit
-------
A-1 and Exhibit A-2, respectively, annexed hereto, with such appropriate
- --- -----------
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may be
required to comply with any applicable law or with the rules of the Depositary,
any clearing agency or any securities exchange or as may, consistent herewith,
be determined by the officers executing such Notes, as evidenced by their
execution thereof.
<PAGE>
-25-
The definitive Notes shall be printed, typewritten, lithographed or
engraved or produced by any combination of these methods or may be produced in
any other manner permitted by the rules of any securities exchange on which the
Notes may be listed, all as determined by the officers executing such Notes, as
evidenced by their execution of such Notes.
Each Note shall be dated the date of its issuance and shall show the
date of its authentication. The terms and provisions contained in the Notes
shall constitute, and are expressly made, a part of this Indenture.
ARTICLE THREE
THE NOTES
Section 3.01. Title and Terms.
---------------
The aggregate principal amount at maturity of the Notes which may be
authenticated and delivered under this Indenture is limited to $218,838,000
aggregate principal amount at maturity, except for Notes authenticated and
delivered upon registration of transfer of, or in exchange for, or in lieu of,
other Notes pursuant to Section 3.03, 3.04, 3.05, 3.06, 9.06, 10.10 or 10.15
hereof.
The Notes will mature on August 15, 2008. The Notes will accrete at a
rate of 11 1/2% per annum to 100% of the principal amount at maturity by August
15, 2003. Except as set forth in the Registration Rights Agreement, no cash
interest will accrue on the Notes prior to August 15, 2003. Cash interest will
accrue on the Notes at a rate per annum of 11 1/2% from August 15, 2003, or from
the most recent Interest Payment Date to which interest has been paid. Interest
on any overdue principal, interest (to the extent lawful) or premium, if any,
shall be payable on demand.
Section 3.02. Registrar and Paying Agent.
--------------------------
Holdings shall maintain an office or agency (which shall be located in
the Borough of Manhattan in The City of New York, State of New York) where Notes
may be presented for registration of transfer or for exchange (the "Registrar"),
---------
an office or agency (which shall be located in the Borough of Manhattan in The
City of New York, State of New York) where Notes may be presented for payment
(the "Paying Agent" or "Agent") and an office or agency where notices and
------------ -----
demands to or upon Holdings in respect of the Notes and this Indenture may be
served. The Registrar shall keep a register of the Notes and of their transfer
and exchange. Holdings may have one or more co-registrars and one or more
additional paying agents. The term "Paying Agent" or "Agent" includes any
------------ -----
additional paying agent. Holdings may act as its own Paying Agent, except for
the purposes of payments on account of principal on the Notes pursuant to
Sections 10.10 and 10.15 hereof.
Holdings shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which shall incorporate the provisions of
the Trust Indenture Act. The agreement shall implement the provisions of this
Indenture that relate to such Agent. Holdings shall notify the Trustee of the
name and address of any such Agent. If Holdings fails to maintain a Registrar
or Paying Agent, or fails to give the foregoing notice, the Trustee shall act as
such and shall be entitled to appropriate compensation in accordance with
Section 6.07 hereof.
<PAGE>
-26-
Holdings initially appoints the Trustee as the Registrar and Paying
Agent and agent for service of notices and demands in connection with the Notes.
Holdings initially appoints The Depository Trust Company as Depositary
with respect to the Global Notes.
Section 3.03. Execution and Authentication.
----------------------------
The Initial Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A-1 hereto. The Exchange Notes
-----------
and the Trustee's certificate of authentication relating thereto shall be
substantially in the form of Exhibit A-2 hereto. The Notes may have such
-----------
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture and may have such letters, numbers or
other marks of identification and such legends or endorsements placed thereon as
may be required to comply with any applicable law or with the rules of the
Depositary, any clearing agency or any securities exchange or as may, consistent
herewith, be determined by the officers executing such Notes, as evidenced by
their execution thereof. Holdings shall approve the final form of the Notes.
Each Note shall be dated the date of issuance and shall show the date of its
authentication.
The terms and provisions contained in the Notes annexed hereto as
Exhibits A-1 and A-2 shall constitute, and are hereby expressly made, a part of
- ------------ ---
this Indenture and, to the extent applicable, Holdings and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
The Notes shall be issued initially in the form of one or more Global
Notes, substantially in the form set forth in Exhibit A-1, deposited with the
-----------
Trustee, as custodian for the Depositary, duly executed by Holdings and
authenticated by the Trustee as hereinafter provided and shall bear the legend
set forth in Exhibit B. The aggregate principal amount of the Global Notes may
---------
from time to time be increased or decreased by adjustments made on the records
of the Trustee, as custodian for the Depositary, as hereinafter provided.
Notes issued in exchange for interests in a Global Note pursuant to
Section 3.17 hereof may be issued in the form of permanent certificated Notes in
registered form in substantially the form set forth in Exhibit A-1.
-----------
Two Officers shall sign, or one Officer shall sign and one Officer
(each of whom shall, in each case, have been duly authorized by all requisite
corporate actions) shall attest to, the Notes for Holdings by manual or
facsimile signature.
If an Officer whose signature is on a Note was an Officer at the time
of such execution but no longer holds that office or position at the time the
Trustee authenticates the Note, the Note shall nevertheless be valid.
The Trustee shall authenticate (i) Initial Notes for aggregate
principal amount at maturity of the Notes not to exceed $218,838,000 aggregate
principal amount at maturity at any time, (ii) Private Exchange Notes from time
to time only in exchange for a like principal amount at maturity of Initial
Notes and (iii) Unrestricted Notes from time to time only in exchange for (A) a
like principal amount at maturity of Initial Notes or (B) a like principal
amount at maturity of Private Exchange Notes, in each case upon a written order
of an authorized Officer of Holdings. Each such written order shall specify the
amount of Notes to be authenticated and the date on which the Notes are to be
authenticated, whether the Notes are to be Initial Notes, Private
<PAGE>
-27-
Exchange Notes or Unrestricted Notes and whether (subject to this Section 3.03)
the Notes are to be issued as Physical Notes or Global Notes and such other
information as the Trustee may reasonably request. The aggregate principal
amount at maturity of the Notes outstanding at any time may not exceed
$218,838,000 except as provided in Section 3.06 hereof.
Notwithstanding the foregoing, all Notes issued under this Indenture
shall vote and consent together on all matters (as to which any of such Notes
may vote or consent) as one class and no series of Notes will have the right to
vote or consent as a separate class on any matter.
The Trustee may appoint an authenticating agent reasonably acceptable
to Holdings to authenticate Notes. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Notes whenever the Trustee
may do so. Each reference in this Indenture to authentication by the Trustee
includes authentication by such agent. An authenticating agent has the same
rights as an Agent to deal with Holdings and Affiliates of Holdings.
The Notes shall be issuable in fully registered form only, without
coupons, in denominations of $1,000 principal amount at maturity and any
integral multiple thereof.
Section 3.04. Temporary Notes.
---------------
Until definitive Notes are prepared and ready for delivery, Holdings
may execute and upon a Holdings Order the Trustee shall authenticate and deliver
temporary Notes. Temporary Notes shall be substantially in the form of
definitive Notes, in any authorized denominations, but may have variations that
Holdings reasonably considers appropriate for temporary Notes as conclusively
evidenced by Holdings' execution of such temporary Notes.
If temporary Notes are issued, Holdings will cause definitive Notes to
be prepared without unreasonable delay but in no event later than the date that
the Exchange Offer is consummated. After the preparation of definitive Notes,
the temporary Notes shall be exchangeable for definitive Notes upon surrender of
the temporary Notes at the office or agency of Holdings designated for such
purpose pursuant to Section 10.02 hereof, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary Notes, Holdings shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
like principal amount of definitive Notes of like tenor and of authorized
denominations. Until so exchanged the temporary Notes shall in all respects be
entitled to the same benefits under this Indenture as definitive Notes.
Section 3.05. Transfer and Exchange.
---------------------
Holdings shall cause to be kept at the Corporate Trust Office of the
Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 10.02 hereof being sometimes
referred to herein as the "Note Register") in which, subject to such reasonable
-------------
regulations as the Registrar may prescribe, Holdings shall provide for the
registration of Notes and of transfers and exchanges of Notes. The Trustee is
hereby initially appointed Registrar for the purpose of registering Notes and
transfers of Notes as herein provided.
Subject to Sections 3.16 and 3.17, when Notes are presented to the
Registrar or a co-Registrar with a request from the Holder of such Notes to
register the transfer or exchange for an equal principal amount at maturity of
Notes of other authorized denominations, the Registrar shall register the
transfer or make the exchange as requested if all applicable legal requirements
are satisfied; provided, however, that every Note pre-
<PAGE>
-28-
sented or surrendered for registration of transfer or exchange shall be duly
endorsed or be accompanied by a written instrument of transfer or exchange in
form satisfactory to Holdings and the Registrar, duly executed by the Holder
thereof or his attorney duly authorized in writing. Whenever any Notes are so
presented for exchange, Holdings shall execute, and the Trustee shall
authenticate and deliver, the Notes which the Holder making the exchange is
entitled to receive. No service charge shall be made to the Noteholder for any
registration of transfer or exchange. Holdings may require from the Noteholder
payment of a sum sufficient to cover any transfer taxes or other governmental
charge that may be imposed in relation to a transfer or exchange, but this
provision shall not apply to any exchange pursuant to Section 3.04, 9.06, 10.10,
10.15 or 12.02 hereof (in which events Holdings will be responsible for the
payment of all such taxes which arise solely as a result of the transfer or
exchange and do not depend on the tax status of the Holder). The Trustee shall
not be required to exchange or register the transfer of any Note for a period of
15 days immediately preceding the first mailing of notice of redemption of Notes
to be redeemed or of any Note selected, called or being called for redemption or
repurchase except, in the case of any Note where public notice has been given
that such Note is to be redeemed in part, the portion thereof not to be
redeemed.
All Notes issued upon any registration of transfer or exchange of
Notes shall be the valid obligations of Holdings, evidencing the same
Indebtedness, and entitled to the same benefits under this Indenture, as the
Notes surrendered upon such registration of transfer or exchange.
Any Holder of a beneficial interest in a Global Note shall, by
acceptance of such Global Note, agree that transfers of beneficial interests in
such Global Notes may be effected only through a book-entry system maintained by
the Holder of such Global Note (or its agent), and that ownership of a
beneficial interest in the Note shall be required to be reflected in a book-
entry system.
Section 3.06. Mutilated, Destroyed, Lost and Stolen Notes.
-------------------------------------------
If a mutilated Note is surrendered to the Trustee or if the Holder of
a Note of any series claims that the Note has been lost, destroyed or wrongfully
taken, Holdings shall execute and, upon a Holdings Order, the Trustee shall
authenticate and deliver, a replacement Note of like tenor and principal amount,
bearing a number not contemporaneously outstanding if the Holder of such Note so
requests before Holdings has notice that the Note has been acquired by a
protected purchaser, furnishes to Holdings and to the Trustee evidence
reasonably acceptable to them of the ownership and the destruction, loss or
theft of such Note and an indemnity bond shall be posted by such Holder,
sufficient in the judgment of Holdings or the Trustee, as the case may be, to
protect Holdings, the Trustee or any Agent from any loss that any of them may
suffer if such Note is replaced. Holdings may charge such Holder for Holdings'
expenses in replacing such Note (including (i) expenses of the Trustee charged
to Holdings and (ii) any tax or other governmental charge that may be imposed)
and the Trustee may charge Holdings for the Trustee's expenses in replacing such
Note. If a Note is replaced pursuant to this Section 3.06, it ceases to be
Outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a protected purchaser.
Every replacement Note issued pursuant to this Section in lieu of any
destroyed, lost or stolen Note shall constitute an original additional
contractual obligation of Holdings, whether or not the destroyed, lost or stolen
Note shall be at any time enforceable by anyone, and shall be entitled to all
benefits of this Indenture equally and proportionately with any and all other
Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.
<PAGE>
-29-
Section 3.07. Payment of Interest; Interest Rights Preserved.
----------------------------------------------
Interest on any Note which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the person in whose
name that Note (or one or more Predecessor Notes) is registered at the close of
business on the Regular Record Date for such interest.
Any interest on any Note which is payable, but is not punctually paid
or duly provided for, on any Interest Payment Date and interest on such
defaulted interest at the then applicable interest rate borne by the Notes, to
the extent lawful (such defaulted interest and interest thereon herein
collectively called "Defaulted Interest") shall forthwith cease to be payable to
------------------
the Holder on the Regular Record Date; and such Defaulted Interest may be paid
by Holdings, at its election in each case, as provided in subsection (a) or (b)
below:
(a) Holdings may elect to make payment of any Defaulted Interest to
the Persons in whose names the Notes (or their respective Predecessor
Notes) are registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest, which shall be fixed in the
following manner. Holdings shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each Note and the date
of the proposed payment, and at the same time Holdings shall deposit with
the Trustee an amount of money equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit on or prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as provided in
this subsection (a). Thereupon the Trustee shall fix a Special Record Date
for the payment of such Defaulted Interest which shall be not more than 15
days and not less than 10 days prior to the date of the proposed payment
and not less than 10 days after the receipt by the Trustee of the notice of
the proposed payment. The Trustee shall promptly notify Holdings in
writing of such Special Record Date. In the name and at the expense of
Holdings, the Trustee shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be mailed,
first-class postage prepaid, to each Holder at its address as it appears in
the Note Register, not less than 10 days prior to such Special Record Date.
Notice of the proposed payment of such Defaulted Interest and the Special
Record Date therefor having been so mailed, such Defaulted Interest shall
be paid to the Persons in whose names the Notes (or their respective
Predecessor Notes) are registered on such Special Record Date and shall no
longer be payable pursuant to the following subsection (b).
(b) Holdings may make payment of any Defaulted Interest in any other
lawful manner not inconsistent with the requirements of any securities
exchange on which the Notes may be listed, and upon such notice as may be
required by such exchange, if, after written notice given by Holdings to
the Trustee of the proposed payment pursuant to this subsection (b), such
payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Note
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Note shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Note.
Section 3.08. Persons Deemed Owners.
---------------------
Prior to due presentment for registration of transfer of any Note,
Holdings, the Trustee and any agent of Holdings or the Trustee may treat the
Person in whose name any Note is registered in the Note Register as the owner of
such Note for the purpose of receiving payment of principal of, premium, if any,
and (subject to
<PAGE>
-30-
Section 3.07 hereof) interest on such Note and for all other purposes
whatsoever, whether or not such Note shall be overdue, and neither Holdings, the
Trustee nor any agent of Holdings or the Trustee shall be affected by notice to
the contrary.
Section 3.09. Cancellation.
------------
All Notes surrendered for payment, redemption, registration of
transfer or exchange shall be delivered to the Trustee and, if not already
canceled, shall be promptly canceled by it. Holdings may at any time deliver to
the Trustee for cancellation any Notes previously authenticated and delivered
hereunder which Holdings may have acquired in any manner whatsoever, and all
Notes so delivered shall be promptly canceled by the Trustee. The Registrar and
the Paying Agent shall forward to the Trustee any Notes surrendered to them for
registration of transfer or exchange, redemption or payment. The Trustee and no
one else shall cancel all Notes surrendered for registration of transfer,
exchange, payment, replacement or cancellation. No Notes shall be authenticated
in lieu of or in exchange for any Notes canceled as provided in this Section
3.09, except as expressly permitted by this Indenture. All canceled Notes held
by the Trustee shall be destroyed and certification of their destruction
delivered to Holdings. The Trustee shall provide Holdings a list of all Notes
that have been canceled from time to time as requested by Holdings.
Section 3.10. Computation of Interest.
-----------------------
Interest on the Notes shall be computed on the basis of a 360-day year
of twelve 30-day months.
Section 3.11. Legal Holidays.
--------------
In any case where any Interest Payment Date, Redemption Date, date
established for the payment of Defaulted Interest or Stated Maturity of any Note
shall not be a Business Day, then (notwithstanding any other provision of this
Indenture or of the Notes) payment of principal, premium, if any, or interest
need not be made on such date, but may be made on the next succeeding Business
Day with the same force and effect as if made on the Interest Payment Date,
Redemption Date, date established for the payment of Defaulted Interest or at
the Stated Maturity, as the case may be. In such event, no interest shall
accrue with respect to such payment for the period from and after such Interest
Payment Date, Redemption Date, date established for the payment of Defaulted
Interest or Stated Maturity, as the case may be, to the next succeeding Business
Day and, with respect to any Interest Payment Date, interest for the period from
and after such Interest Payment Date shall accrue with respect to the next
succeeding Interest Payment Date.
Section 3.12. CUSIP and ISIN Numbers.
----------------------
Holdings in issuing the Notes may use "CUSIP" and "ISIN" numbers (if
then generally in use), and if so, the Trustee shall use the CUSIP or ISIN
numbers, as the case may be, in notices of redemption or exchange as a
convenience to Holders; provided, however, that any such notice may state that
no representation is made as to the correctness or accuracy of the CUSIP or ISIN
number, as the case may be, printed in the notice or on the Notes, and that
reliance may be placed only on the other identification numbers printed on the
Notes. Holdings shall promptly notify the Trustee in writing of any change in
the CUSIP or ISIN number of any type of Notes.
<PAGE>
-31-
Section 3.13. Paying Agent To Hold Money in Trust.
-----------------------------------
Each Paying Agent shall hold in trust for the benefit of the
Noteholders or the Trustee all money held by the Paying Agent for the payment of
Accreted Value, premium, if any, or interest on the Notes, and shall notify the
Trustee of any default by Holdings in making any such payment. Money held in
trust by the Paying Agent need not be segregated except as required by law and
in no event shall the Paying Agent be liable for any interest on any money
received by it hereunder. Holdings at any time may require the Paying Agent to
pay all money held by it to the Trustee and account for any funds disbursed and
the Trustee may at any time during the continuance of any Event of Default, upon
a Holdings Order to the Paying Agent, require such Paying Agent to pay forthwith
all money so held by it to the Trustee and to account for any funds disbursed.
Upon making such payment, the Paying Agent shall have no further liability for
the money delivered to the Trustee.
Section 3.14. Treasury Notes.
--------------
In determining whether the Holders of the requisite principal amount
at maturity of Outstanding Notes have given any request, demand, authorization,
direction, notice, consent or waiver hereunder, Notes owned by Holdings or any
other obligor upon the Notes or any Affilate of Holdings or such other obligor
shall be disregarded and deemed not to be Outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only Notes
that a Responsible Officer of the Trustee actually knows to be so owned shall be
so disregarded. Holdings shall notify the Trustee, in writing, when it
repurchases or otherwise acquires Notes and of the aggregate principal amount at
maturity of such Notes so repurchased or otherwise acquired.
Section 3.15. Deposits of Monies.
------------------
Prior to 12:00 Noon New York City time on each Interest Payment Date,
Redemption Date, Change of Control Payment Date, Asset Disposition Offer
Purchase Date and Stated Maturity, Holdings shall have deposited with the Paying
Agent in immediately available funds money sufficient to make cash payments, if
any, due on such Interest Payment Date, Redemption Date, Change of Control
Payment Date, Asset Disposition Offer Purchase Date and Stated Maturity, as the
case may be, in a timely manner which permits the Paying Agent to remit payment
to the Holders on such Interest Payment Date, Redemption Date, Change of Control
Payment Date, Asset Disposition Offer Purchase Date and Stated Maturity, as the
case may be.
Section 3.16. Book-Entry Provisions for Global Notes.
--------------------------------------
(a) The Global Notes initially shall (i) be registered in the name of
the Depositary or the nominee of such Depositary, (ii) be delivered to the
Trustee as custodian for such Depositary and (iii) bear legends as set forth in
Exhibit B. Members of, or participants in, the Depositary (each an "Agent
- --------- -----
Member") shall have no rights under this Indenture with respect to any Global
- ------
Note held on their behalf by the Depositary, or the Trustee as its custodian, or
under the Global Note, and the Depositary may be treated by Holdings, the
Trustee and any agent of Holdings or the Trustee as the absolute owner of the
Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent Holdings, the Trustee or any agent of Holdings or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or impair, as between the Depositary
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Note.
(b) Transfers of Global Notes shall be limited to transfers in whole,
but not in part, to the Depositary, its successors or their respective nominees.
Interests of beneficial owners in the Global Notes may be
<PAGE>
-32-
transferred or exchanged for Physical Notes in accordance with the rules and
procedures of the Depositary and the provisions of Sections 3.03 and 3.17
hereof. In addition, Physical Notes shall be transferred to all beneficial
owners, in exchange for their beneficial interests in Global Notes if (i) the
Depositary notifies Holdings that it is unwilling or unable to continue as
Depositary for any Global Note, or if at any time it ceases to be a "Clearing
Agency" registered under the Exchange Act, and in either case a successor
Depositary is not appointed by Holdings within 90 days, (ii) Holdings in its
discretion at any time determines not to have all of the Notes represented by
Global Notes or (iii) an Event of Default has occurred and is continuing and the
Registrar has received a written request from the Depositary to issue Physical
Notes.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in any Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Notes are to be
issued) reflect on its books and records the date and a decrease in the
principal amount at maturity of the Global Note in an amount equal to the
principal amount at maturity of the beneficial interest in the Global Note to be
transferred, and Holdings shall execute, and the Trustee shall authenticate and
deliver, one or more Physical Notes of like tenor and principal amount of
authorized denominations.
(d) In connection with the transfer of Global Notes as an entirety to
beneficial owners pursuant to paragraph (b), the Global Notes shall be deemed to
be surrendered to the Trustee for cancellation, and Holdings shall execute, and
the Trustee shall authenticate and deliver, to each beneficial owner identified
by the Depositary in exchange for its beneficial interest in the Global Notes,
an equal aggregate principal amount at maturity of Physical Notes of like tenor
of authorized denominations.
(e) Any Physical Note constituting a Restricted Note delivered in
exchange for an interest in a Global Note pursuant to subparagraph (b), (c) or
(d) of this Section 3.16 shall, except as otherwise provided by Section 3.17
hereof, bear the Private Placement Legend.
(f) The Holder of any Global Note may grant proxies and otherwise
authorize any person, including Agent Members and persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Notes.
Section 3.17. Special Transfer Provisions.
---------------------------
(a) Transfers to Non-U.S. Persons. The following additional
-----------------------------
provisions shall apply with respect to the registration of any proposed transfer
of an Initial Note to any Non-U.S. Person:
(i) the Registrar shall register the transfer of any Initial Note,
whether or not such Note bears the Private Placement Legend, if (x) the
requested transfer is after the second anniversary of the Issue Date;
provided, however, that neither Holdings nor any Affiliate of Holdings has
held any beneficial interest in such Note, or portion thereof, at any time
on or prior to the second anniversary of the Issue Date and such transfer
can otherwise be lawfully made under the Securities Act without registering
such Initial Notes thereunder or (y) the proposed transferor has delivered
to the Registrar a certificate substantially in the form of Exhibit C
---------
hereto;
(ii) if the proposed transferor is an Agent Member seeking to
transfer an interest in a Global Note, upon receipt by the Registrar of (x)
written instructions given in accordance with the Depositary's and the
Registrar's procedures and (y) the appropriate certificate, if any,
required by clause (y) of paragraph (i) above, together with any required
legal opinions and certifications, the Registrar shall register the
transfer and reflect on its books and records the date and a decrease in
the principal
<PAGE>
-33-
amount of the Global Note from which such interests are to be transferred
in an amount equal to the principal amount of the Notes to be transferred;
and
(iii) until the 41st day after the Issue Date (the "Distribution
------------
Compliance Period"), an owner of a Regulation S Note may not transfer such
-----------------
interest to a transferee that is a U.S. person or for the account or
benefit of a U.S. person within the meaning of Rule 902(o) of the
Securities Act.
(b) Transfers to QIBs. The following provisions shall apply with
-----------------
respect to the registration of any proposed transfer of an Initial Note to a QIB
(excluding Non-U.S. Persons):
(i) the Registrar shall register the transfer of any Initial Note,
whether or not such Note bears the Private Placement Legend, if (x) the
requested transfer is after the second anniversary of the Issue Date;
provided, however, that neither Holdings nor any Affiliate of Holdings has
held any beneficial interest in such Note, or portion thereof, at any time
on or prior to the second anniversary of the Issue Date and such transfer
can otherwise be lawfully made under the Securities Act without registering
such Initial Note thereunder or (y) such transfer is being made by a
proposed transferor who has checked the box provided for on the form of
Note stating, or has otherwise advised Holdings and the Registrar in
writing, that the sale has been made in compliance with the provisions of
Rule 144A to a transferee who has signed the certification provided for on
the form of Note stating, or has otherwise advised Holdings and the
Registrar in writing, that it is purchasing the Note for its own account or
an account with respect to which it exercises sole investment discretion
and that it and any such account is a QIB within the meaning of Rule 144A,
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding Holdings as it
has requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon its
foregoing representations in order to claim the exemption from registration
provided by Rule 144A;
(ii) if the proposed transferee is an Agent Member and the Notes to
be transferred consist of Physical Notes which after transfer are to be
evidenced by an interest in the 144A Global Note, upon receipt by the
Registrar of written instructions given in accordance with the Depositary's
and the Registrar's procedures, the Registrar shall register the transfer
and reflect on its book and records the date and an increase in the
principal amount at maturity of the 144A Global Note in an amount equal to
the principal amount at maturity of Physical Notes to be transferred, and
the Trustee shall cancel the Physical Note so transferred; and
(iii) if the proposed transferor is an Agent Member seeking to
transfer an interest in a Global Note, upon receipt by the Registrar of
written instructions given in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall register the transfer and
reflect on its books and records the date and (A) a decrease in the
principal amount of the Global Note from which interests are to be
transferred in an amount equal to the principal amount of the Notes to be
transferred and (B) an increase in the principal amount of the 144A Global
Note in an amount equal to the principal amount of the Global Note to be
transferred.
(c) Private Placement Legend. Upon the registration of transfer,
------------------------
exchange or replacement of Notes not bearing the Private Placement Legend, the
Registrar shall deliver Notes that do not bear the Private Placement Legend.
Upon the registration of transfer, exchange or replacement of Notes bearing the
Private Placement Legend, the Registrar shall deliver only Notes that bear the
Private Placement Legend unless (i) there is delivered to the Registrar an
Opinion of Counsel reasonably satisfactory to Holdings and the Trustee to the
<PAGE>
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effect that neither such legend nor the related restrictions on transfer are
required in order to maintain compliance with the provisions of the Securities
Act or (ii) such Note has been sold pursuant to an effective registration
statement under the Securities Act.
(d) General. By its acceptance of any Note bearing the Private
-------
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and under the heading "Transfer Restrictions" in the Offering Circular
and agrees that it will transfer such Note only as provided in this Indenture
and the Private Placement Legend and the restrictions set forth under the
heading "Transfer Restrictions" in the Offering Circular.
(e) Other Transfers. If a Holder proposes to transfer a Note
---------------
constituting a Restricted Note pursuant to any exemption from the registration
requirements of the Securities Act other than as provided for by Section 3.17(a)
and (b) hereof, the Registrar shall only register such transfer or exchange if
such transferor delivers an Opinion of Counsel satisfactory to Holdings and the
Registrar that such transfer is in compliance with the Securities Act and the
terms of this Indenture; provided, however, that Holdings may, based upon the
opinion of its counsel, instruct the Registrar by a Holdings Order not to
register such transfer in any case where the proposed transferee is not a QIB or
a Non-U.S. Person.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 3.16 hereof or this Section
3.17. Holdings shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon the
giving of reasonable prior written notice to the Registrar.
ARTICLE FOUR
DEFEASANCE OR COVENANT DEFEASANCE
Section 4.01. Holdings' Option To Effect Defeasance or Covenant
-------------------------------------------------
Defeasance.
----------
Holdings may, at its option by Board Resolution, at any time, with
respect to the Notes, elect to have either Section 4.02 or Section 4.03 hereof
be applied to all of the Outstanding Notes (the "Defeased Notes"), upon
--------------
compliance with the conditions set forth below in this Article Four.
Section 4.02. Legal Defeasance.
----------------
Upon Holdings' exercise under Section 4.01 hereof of the option
applicable to this Section 4.02, Holdings shall be deemed to have been
discharged from its obligations with respect to the Defeased Notes on the date
the conditions set forth below are satisfied (hereinafter, "legal defeasance").
----------------
For this purpose, such defeasance means that Holdings shall be deemed to have
paid and discharged the entire indebtedness represented by the Defeased Notes,
which shall thereafter be deemed to be "Outstanding" only for the purposes of
Section 4.05 and the other Sections of this Indenture referred to in (a) and (b)
below, and to have satisfied all its other obligations under such Notes and this
Indenture insofar as such Notes are concerned (and the Trustee, at the expense
of Holdings, and, upon Holdings Request, shall execute proper instruments
acknowledging the same), except for the following, which shall survive until
otherwise terminated or discharged hereunder: (a) the rights of Holders of
Defeased Notes to receive, solely from the trust fund described in Section 4.04
hereof and as more fully set forth in such Section, payments in respect of the
principal of, premium, if any, and interest on such
<PAGE>
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Notes when such payments are due; (b) Holdings' obligations with respect to such
Defeased Notes under Sections 3.04, 3.05, 3.06, 10.02 and 10.03 hereof; (c) the
rights, powers, trusts, duties and immunities of the Trustee hereunder,
including, without limitation, the Trustee's rights under Sections 4.05 and 6.07
hereof; (d) Article Twelve (except that no deposit of the Redemption Price will
be required); and (e) this Article Four. Subject to compliance with this Article
Four, Holdings may exercise its option under this Section 4.02 notwithstanding
the prior exercise of its option under Section 4.03 hereof with respect to the
Notes.
Section 4.03. Covenant Defeasance.
-------------------
Upon Holdings' exercise under Section 4.01 hereof of the option
applicable to this Section 4.03, Holdings shall be released from its obligations
under any covenant or provision contained in Sections 10.05 through 10.22 hereof
and any covenant added pursuant to Section 9.01(b) hereof and the provisions of
Section 8.01 shall not apply, with respect to the Defeased Notes, on and after
the date the conditions set forth below are satisfied (hereinafter, "covenant
--------
defeasance"), and the Defeased Notes shall thereafter be deemed not to be
- ----------
"Outstanding" for the purposes of any direction, waiver, consent or declaration
or Act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "Outstanding" for all other purposes
hereunder. For this purpose, such covenant defeasance means that, with respect
to the Defeased Notes, Holdings may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
Section or Article, whether directly or indirectly, by reason of any reference
elsewhere herein to any such Section or Article or by reason of any reference in
any such Section or Article to any other provision herein or in any other
document and such omission to comply shall not constitute a Default or an Event
of Default under Section 5.01(iii)(y), (iv) , (v), (vi), (vii) (with respect
only to Significant Subsidiaries), (viii) (with respect only to Significant
Subsidiaries), (ix), (x), (xi) and the limitations contained in clauses (iii)
and (iv) of Section 8.01 hereof, but, except as specified above, the remainder
of this Indenture and such Defeased Notes shall be unaffected thereby.
Section 4.04. Conditions to Legal Defeasance or Covenant Defeasance.
-----------------------------------------------------
The following shall be the conditions to application of either Section
4.02 or Section 4.03 hereof to the Defeased Notes:
(1) Holdings shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 6.09 hereof who shall agree to comply with the provisions of
this Article Four applicable to it) as trust funds in trust for the purpose
of making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Notes, (a) money in
an amount, or (b) U.S. Government Obligations which through the scheduled
payment of principal, premium, if any, and interest in respect thereof in
accordance with their terms will provide, not later than the due date of
any payment, money in an amount, or (c) a combination thereof, in any such
case, sufficient without reinvestment, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and discharge the
entire Indebtedness in respect of, and which shall be applied by the
Trustee (or other qualifying trustee) to pay and discharge, the principal
of, premium, if any, and interest on the Defeased Notes at the Stated
Maturity of such principal or installment of principal, premium, if any, or
interest or (if Holdings has made irrevocable arrangements satisfactory to
such Trustee for the giving of notice of redemption by such Trustee in the
name and at the expense of Holdings) any Redemption Date thereof specified
by Holdings, as the case may be, in accordance with the terms of this
Indenture and the Notes; provided, however, that the Trustee shall have
been irrevocably instructed
<PAGE>
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to apply such cash or the proceeds of such U.S. Government Obligations to
said payments with respect to the Notes;
(2) No Default (other than any Default resulting from the Incurrence
of Indebtedness all or a portion of the proceeds of which will be used to
defease the Notes pursuant to this Article Four concurrently with such
Incurrence) with respect to the Outstanding Notes shall have occurred and
be continuing on the date of such deposit or, insofar as Section 4.02
hereof is concerned, at any time during the period ending on the ninety-
first day after the date of such deposit (it being understood that this
condition shall not be deemed satisfied until the expiration of such
period) no Default under Section 5.01(vii) or (viii) shall have occurred
and be continuing;
(3) Such legal defeasance or covenant defeasance shall not cause the
Trustee to have a conflicting interest in violation of Section 6.08 hereof
and for purposes of the Trust Indenture Act with respect to any securities
of Holdings;
(4) Such legal defeasance or covenant defeasance shall not result in
a breach or violation of, or constitute a default under, this Indenture or
any other material agreement or instrument to which Holdings is a party or
by which it is bound;
(5) In the case of an election under Section 4.02 hereof, Holdings
shall have delivered to the Trustee an Opinion of Counsel stating that (x)
Holdings has received from, or there has been published by, the Internal
Revenue Service a ruling or (y) since the date hereof, there has been a
change in the applicable federal income tax law, in either case to the
effect that, and based thereon such opinion shall confirm that, the Holders
of the Outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit, legal defeasance
and discharge to be effected with respect to the Notes and will be subject
to federal income tax on the same amount, in the same manner and at the
same times as would have been the case if such deposit, legal defeasance
and discharge had not occurred;
(6) In the case of an election under Section 4.03 hereof, Holdings
shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Holders of the Outstanding Notes will not recognize income, gain
or loss for federal income tax purposes as a result of the deposit and
covenant defeasance to be effected with respect to the Notes and will be
subject to federal income tax on the same amount, in the same manner and at
the same times as would have been the case if such deposit and covenant
defeasance had not occurred;
(7) Holdings shall have delivered to the Trustee, an Opinion of
Counsel to the effect that, immediately following the ninety-first day
after the deposit, the trust funds established pursuant to this Article
should not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally under any applicable U.S. Federal or state law;
(8) Holdings shall have delivered to the Trustee an Officers'
Certificate stating that the deposit made by Holdings pursuant to its
election under Section 4.02 or 4.03 hereof was not made by Holdings with
the intent of preferring the Holders over the other creditors of Holdings
or with the intent of defeating, hindering, delaying or defrauding
creditors of Holdings or others;
(9) Holdings shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that (i) all conditions
precedent (other than conditions requiring the passage of
<PAGE>
-37-
time) provided for relating to either the legal defeasance under Section
4.02 or the covenant defeasance under Section 4.03 (as the case may be)
have been complied with as contemplated by this Section 4.04 and (ii) if
any other Indebtedness of Holdings shall then be outstanding or committed,
such legal defeasance or covenant defeasance will not violate the
provisions of the agreements or instruments evidencing such Indebtedness;
and
(10) Such legal defeasance or covenant defeasance shall not
result in a trust arising from such deposit constituting an investment
company within the meaning of the Investment Company Act of 1940, as
amended, unless such trust shall be registered under the Act or exempt from
registration thereunder.
Opinions required to be delivered under this Section may have such
qualifications as are customary for opinions of the type required and reasonably
acceptable to the Trustee.
Section 4.05. Deposited Money and U.S. Government Obligations To Be
Held in Trust; Other Miscellaneous Provisions.
-----------------------------------------------------
Subject to the proviso of the last paragraph of Section 10.03, all
money and U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee (or other qualifying trustee, collectively for purposes of this
Section 4.05, the "Trustee") pursuant to Section 4.04 in respect of the Defeased
-------
Notes shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (other than Holdings) as the Trustee may determine, to
the Holders of such Notes of all sums due and to become due thereon in respect
of principal, premium, if any, and interest, but such money need not be
segregated from other funds except to the extent required by law.
Holdings shall pay and indemnify the Trustee, its officers, directors
and agents and hold such persons harmless against any tax, fee or other charge
imposed on or assessed against the U.S. Government Obligations deposited
pursuant to Section 4.04 or the principal, premium, if any, and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of the Defeased Notes.
Anything in this Article Four to the contrary notwithstanding, the
Trustee shall deliver or pay to Holdings from time to time upon a Holdings
Request any money or U.S. Government Obligations held by it as provided in
Section 4.04 which, in the opinion of an internationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent legal defeasance or covenant
defeasance.
Section 4.06. Reinstatement.
-------------
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 4.02 or 4.03 hereof, as the
case may be, by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, then
the obligations of Holdings under this Indenture and the Notes shall be revived
and reinstated as though no deposit had occurred pursuant to Section 4.02 or
4.03 hereof, as the case may be, until such time as the Trustee or Paying Agent
is permitted to apply all such money and U.S. Government Obligations in
accordance with Section 4.02 or 4.03 hereof, as the case may be; provided,
however, that if Holdings makes any payment of Accreted Value, premium, if any,
or interest on any Note following the reinstatement of its obligations, Holdings
shall be subro-
<PAGE>
-38-
gated to the rights of the Holders of such Notes to receive such payment from
the money and U.S. Government Obligations held by the Trustee or Paying Agent.
Any money deposited with the Trustee or any Paying Agent, or then held
by Holdings, in trust for the payment of the principal or Accreted Value of,
premium, if any, or interest on any Note and remaining unclaimed for two years
after such principal or Accreted Value, premium, if any, or interest has become
due and payable shall be paid to Holdings upon receipt of a Holdings Request
therefor, or (if then held by Holdings) will be discharged from such trust; and
the Holder of such Note will thereafter, as an unsecured general creditor, look
only to Holdings for payment thereof, and all liability of the Trustee or such
Paying Agent with respect to such trust money, and all liability of Holdings as
trustee thereof, will thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the
expense of Holdings cause to be published once, at the option of Holdings in The
New York Times or The Wall Street Journal (national edition), notice that such
money remains unclaimed and that, after a date specific therein, which shall not
be less than 30 days from the date of such publication, any unclaimed balance of
such money then remaining shall be repaid to Holdings.
ARTICLE FIVE
REMEDIES
Section 5.01. Events of Default.
-----------------
"Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(i) a default in the payment of interest on the Notes when due,
continued for 30 days;
(ii) a default in the payment of principal of any Note when due at
its Stated Maturity, upon optional redemption, upon required repurchase,
upon acceleration or otherwise;
(iii) the failure by Holdings to comply with its obligations under
(x) Section 8.01 or (y) Section 10.22;
(iv) the failure by Holdings to comply for 30 days after notice with
any of its obligations under Section 10.10 (other than a failure to
purchase Notes) or under Sections 10.11, 10.13, 10.14, 10.15, 10.18, 10.19
or 10.20;
(v) the failure by Holdings to comply for 60 days after notice with
its other agreements contained in this Indenture;
(vi) Indebtedness of Holdings or any Significant Subsidiary is not
paid within any applicable grace period after final maturity or is
accelerated by the holders thereof because of a default and the total
amount of such Indebtedness unpaid or accelerated exceeds $10.0 million and
such non-payment continues or such acceleration is not rescinded within ten
days after notice thereof;
<PAGE>
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(vii) Holdings or any Significant Subsidiary of Holdings pursuant
to or under or within the meaning of any Bankruptcy Law:
(a) commences a voluntary case or proceeding;
(b) consents to the making of a Bankruptcy Order in an
involuntary case or proceeding or the commencement of any case against it;
(c) consents to the appointment of a Custodian of it or for
any substantial part of its property;
(d) makes a general assignment for the benefit of its
creditors;
(e) files an answer or consent seeking reorganization or
relief;
(f) shall admit in writing its inability to pay its debts
generally as they become due; or
(g) consents to the filing of a petition in bankruptcy;
(viii) a court of competent jurisdiction in any involuntary case or
proceeding enters a Bankruptcy Order against Holdings or any Significant
Subsidiary, and such Bankruptcy Order remains unstayed and in effect for 60
consecutive days;
(ix) any judgment or decree (not covered by insurance or an
indemnity by a person other than Holdings or a Restricted Subsidiary, which
indemnitor is solvent) for the payment of money in excess of $10.0 million
is entered against Holdings or any Significant Subsidiary, remains
outstanding for a period of 60 days following such judgment and is not
discharged, bonded, waived or stayed within 30 days after notice;
(x) the Umbrella Affiliation Agreement shall cease to be in full
force and effect; or
(xi) any one or more Station Affiliation Agreements shall cease to
be in full force and effect and such cessation shall be materially adverse
to Holdings; provided, however, that no such cessation shall be deemed
materially adverse to Holdings if the Board of Directors of Holdings shall
have determined in good faith that such cessation is not materially adverse
to Holdings (such determination of the Board of Directors of Holdings to
include the affirmative vote of at least two members who have been
designated as independent directors pursuant to the Stockholders
Agreement).
However, a default under clause (iv) or (v) will not constitute an Event of
Default until the Trustee or the Holders of 25% in principal amount at maturity
of the Outstanding Notes notify Holdings and, if applicable, the Trustee of the
default and Holdings does not cure such default within the time specified after
receipt of such notice.
Section 5.02. Acceleration of Maturity, Rescission and Annulment.
--------------------------------------------------
If an Event of Default (other than under Section 5.01(vii) or (viii)
relating to Holdings) occurs and is continuing, the Trustee or the Holders of at
least 25% in principal amount at maturity of the Outstanding
<PAGE>
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Notes may declare the Accreted Value of and accrued but unpaid interest on all
the Notes to be due and payable. Upon such a declaration, such Accreted Value
and interest shall be due and payable immediately. If an Event of Default under
Section 5.01(vii) or (viii) relating to Holdings occurs and is continuing, the
Accreted Value of and interest on all the Notes will ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holders.
After a declaration of acceleration or any ipso facto acceleration as
related to clause (vii) or (viii) of Section 5.01, the Holders of a majority in
principal amount at maturity of the Outstanding Notes may, by notice to the
Trustee, rescind such declaration of acceleration and its consequences if all
existing Events of Default, other than nonpayment of the Accreted Amount of the
Notes that has become due solely as a result of such acceleration, have been
cured or waived and if the rescission of acceleration would not conflict with
any judgment or decree.
In the event of a declaration of acceleration because an Event of
Default set forth in clause (vi) of Section 5.01 has occurred and is continuing,
such declaration of acceleration shall be automatically rescinded and annulled
if (A) either (x) the holders of the Indebtedness which is the subject of such
Event of Default have waived such failure to pay at final maturity or have
rescinded the acceleration in respect of such Indebtedness within 60 days of
such maturity or declaration of acceleration, as the case may be, and no other
Event of Default has occurred during such 60-day period that has not been cured
or waived, or (y) such Indebtedness shall have been discharged or the maturity
thereof shall have been extended such that it is not then due and payable, or
the underlying default has been cured (and any acceleration based thereon of
such other Indebtedness has been rescinded), within 60 days of such maturity or
declaration of acceleration, as the case may be, and (B) no judgment or decree
for the payment of the money due on the Notes has been obtained by the Trustee
as provided in the Indenture.
Section 5.03. Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Trustee.
-------
Subject to the provisions of this Indenture relating to the duties of
the Trustee, in case an Event of Default occurs and is continuing, the Trustee
will be under no obligation to exercise any of the rights or powers under this
Indenture at the request or direction of any of the Holders unless such Holders
have offered to the Trustee reasonable indemnity or security against any loss,
liability or expense.
Section 5.04. Trustee May File Proofs of Claims.
---------------------------------
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to Holdings or any other obligor upon the Notes or
the property of Holdings or of such other obligor or their creditors, the
Trustee (irrespective of whether the Accreted Value of the Notes shall then be
due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand on Holdings for
the payment of overdue Accreted Value or interest) shall be entitled and
empowered, by intervention in such proceeding or otherwise,
(a) to file and prove a claim for the whole amount of Accreted Value,
premium, if any, and interest owing and unpaid in respect of the Notes and
to file such other papers or documents as may be necessary or advisable in
order to have the claims of the Trustee (including any claim for the
reasonable compensation, fees, expenses, disbursements and advances of the
Trustee, its agents and counsel) and of the Holders allowed in such
judicial proceeding, and
<PAGE>
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(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any Custodian, in any such judicial proceeding, is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee as administrative expenses associated with any such proceeding, and in
the event that the Trustee shall consent to the making of such payments directly
to Holders, any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 6.07 hereof.
To the extent that the payment of any such compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 6.07 hereof out of the estate in any such
proceeding, shall be denied for any reason, payment of the same shall be secured
by a Lien on, and shall be paid out of, any and all distributions, dividends,
money, securities and other properties that the Holders may be entitled to
receive in such proceeding whether in liquidation or under any plan of
reorganization or arrangement or otherwise.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Holder in any such proceeding.
Section 5.05. Trustee May Enforce Claims Without Possession of Notes.
------------------------------------------------------
All rights of action and claims under this Indenture, or the Notes may
be prosecuted and enforced by the Trustee without the possession of any of the
Notes or the production thereof in any proceeding relating thereto, and any such
proceeding instituted by the Trustee shall be brought in its own name and as
trustee of an express trust, and any recovery of judgment shall, after provision
for the payment of the reasonable compensation, fees, expenses, disbursements
and advances of the Trustee, its agents and counsel, be for the ratable benefit
of the Holders of the Notes in respect of which such judgment has been
recovered.
Section 5.06. Application of Money Collected.
------------------------------
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal, premium, if
any, or interest, upon presentation of the Notes and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:
First: to the Trustee for amounts due under Section 6.07;
Second: to Holders for interest accrued on the Notes, ratably,
without preference or priority of any kind, according to the amounts due
and payable on the Notes for interest;
Third: to Holders of Accreted Value and premium, if any, owing under
the Notes, ratably, without preference or priority of any kind, according
to the amounts due and payable on the Notes for Accreted Value; and
Fourth: the balance, if any, to Holdings.
<PAGE>
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The Trustee, upon prior written notice to Holdings, may fix a record
date and payment date for any payment to Noteholders pursuant to this Section
5.06.
Section 5.07. Limitation on Suits.
-------------------
No Holder of any Notes shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless:
(a) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(b) the Holders of not less than 25% in aggregate principal amount at
maturity of the Outstanding Notes shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in its
own name as Trustee hereunder;
(c) such Holder or Holders have offered to the Trustee indemnity or
security reasonably satisfactory to it against the costs, expenses and
liabilities to be incurred in compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity or security has failed to institute any such
proceeding; and
(e) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority
in aggregate principal amount at maturity of the Outstanding Notes;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture or any Note to affect, disturb or prejudice the rights of any
other Holders, or to obtain or to seek to obtain priority or preference over any
other Holders or to enforce any right under this Indenture or any Note, except
in the manner provided in this Indenture and for the equal and ratable benefit
of all the Holders.
Section 5.08. Unconditional Right of Holders To Receive Accreted
Value, Premium and Interest.
--------------------------------------------------
Notwithstanding any other provision in this Indenture, the Holder of
any Note shall have the right, which is absolute and unconditional, to receive
cash payment of the Accreted Value of, premium, if any, and (subject to Section
3.07 hereof) interest on such Note on the respective due dates therefor (or, in
the case of redemption, on the respective Redemption Date) and to institute suit
for the enforcement of any such payment, and such rights shall not be impaired
without the consent of such Holder.
Section 5.09. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture or any Note and such proceeding has
been discontinued or abandoned for any reason, or has been determined adversely
to the Trustee or to such Holder, then and in every such case Holdings, the
Trustee and the Holders shall, subject to any determination in such proceeding,
be restored severally and respectively to
<PAGE>
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their former positions hereunder, and thereafter all rights and remedies of the
Trustee and the Holders shall continue as though no such proceeding had been
instituted.
Section 5.10. Rights and Remedies Cumulative.
------------------------------
Except as provided in Section 3.06, no right or remedy herein
conferred upon or reserved to the Trustee or to the Holders is intended to be
exclusive of any other right or remedy, and every right and remedy shall, to the
extent permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
Section 5.11. Delay or Omission Not Waiver.
----------------------------
No delay or omission of the Trustee or of any Holder of any Note to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article Five or by
law to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
Section 5.12. Control by Majority.
-------------------
The Holders of a majority in aggregate principal amount at maturity of
the Outstanding Notes shall have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, provided, however, that:
(a) such direction shall not be in conflict with any rule of law or
with this Indenture or any Note or expose the Trustee to personal
liability;
(b) the Trustee may refuse to follow any direction that the Trustee
determines is unduly prejudicial to the rights of any other Holder or that
would involve the Trustee in personal liability; and
(c) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
Section 5.13. Waiver of Past Defaults.
-----------------------
The Holders of not less than a majority in aggregate principal amount
at maturity of the Outstanding Notes may on behalf of the Holders of all the
Notes waive any past Default hereunder and its consequences, except a Default:
(a) in the payment of the principal of, premium on or interest on any
Outstanding Note; or
(b) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Note affected thereby.
<PAGE>
-44-
Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereon.
Section 5.14. Undertaking for Costs.
---------------------
All parties to this Indenture agree, and each Holder of any Note by
his acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 5.14 shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding in
the aggregate more than 10% in aggregate principal amount at maturity of the
Outstanding Notes, or to any suit instituted by any Holder for the enforcement
of the payment of the Accreted Value of, premium, if any, or interest on any
Note on or after the due dates therefor (or, in the case of redemption, on or
after the respective Redemption Dates).
Section 5.15. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
Holdings covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury or
other law wherever enacted, now or at any time hereafter in force, which would
prohibit or forgive Holdings from paying all or any portion of the Accreted
Value of, premium, if any, or interest on the Notes contemplated herein or in
the Notes or which may affect the covenants or the performance of this
Indenture; and Holdings (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
ARTICLE SIX
THE TRUSTEE
Section 6.01. Certain Duties and Responsibilities.
-----------------------------------
(a) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture; but in
the case of any such certificates or opinions which by provision hereof are
specifically required to be furnished to
<PAGE>
-45-
the Trustee, the Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this
Indenture.
(b) During the existence of an Event of Default, the Trustee is
required to exercise such rights and powers vested in it under this Indenture
and use the same degree of care and skill in its exercise thereof as a prudent
person would exercise under the circumstances in the conduct of such person's
own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that no provision of this
Indenture shall require the Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section 6.01.
Section 6.02. Notice of Defaults.
------------------
If a Default occurs and is continuing and is known to the Trustee, the
Trustee shall mail to each Holder notice of the Default within 90 days after it
occurs. Except in the case of a Default in the payment of Accreted Value of,
premium or interest on any Note, the Trustee may withhold notice if and so long
as the board of directors, the executive committee or a committee of its
Responsible Officers determines that withholding notice is not opposed to the
interest of the Holders.
Section 6.03. Certain Rights of Trustee.
-------------------------
Subject to Section 6.01 hereof and the provisions of Section 315 of
the Trust Indenture Act:
(a) the Trustee may conclusively rely and shall be fully protected in
acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or
other paper or document believed by it to be genuine and to have been
signed or presented by the proper party or parties;
(b) any request or direction of Holdings mentioned herein shall be
sufficiently evidenced by a Holdings Request or Holdings Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution thereof;
(c) with respect to legal matters relating to this Indenture and the
Notes, the Trustee may consult with counsel and any advice of such counsel
or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon in accordance with such
advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity satisfactory
to it against the
<PAGE>
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costs, expenses and liabilities which might be incurred by the Trustee in
compliance with such request or direction;
(e) the Trustee shall not be liable for any action taken or omitted
by it in good faith and believed by it to be authorized or within the
discretion, rights or powers conferred upon it by this Indenture other than
any liabilities arising out of its own negligence or willful misconduct;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
approval, appraisal, bond, debenture, note, coupon, security, other
evidence of indebtedness or other paper or document unless requested in
writing so to do by the Holders of not less than a majority in aggregate
principal amount at maturity of the Notes then Outstanding; provided,
however, that, if the payment within a reasonable time to the Trustee of
the costs, expenses or liabilities likely to be incurred by it in the
making of such investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security afforded to it by the
terms of this Indenture, the Trustee may require indemnity satisfactory to
it against such expenses or liabilities as a condition to proceeding; the
reasonable expenses of every such investigation shall be paid by Holdings
or, if paid by the Trustee or any predecessor Trustee, shall be repaid by
Holdings upon demand; provided, further, the Trustee in its discretion may
make such further inquiry or investigation into such facts or matters as it
may deem fit, and, if the Trustee shall determine to make such further
inquiry or investigation, it shall be entitled to examine the books,
records and premises of Holdings, personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents,
attorneys, custodian or nominees and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent, attorney,
custodian or nominee appointed with due care by it hereunder;
(h) except with respect to Section 10.01, the Trustee shall have no
duty to inquire as to the performance of Holdings' covenants in Article
Ten. In addition, the Trustee shall not be deemed to have knowledge of any
Default except (i) any Event of Default occurring pursuant to Sections
5.01(i), 5.01(ii) and 10.01 or (ii) any Default of which the Trustee shall
have received written notification or a Responsible Officer obtained actual
knowledge; and
(i) if the Trustee is acting in the capacity of Registrar and/or
Paying Agent, then the rights afforded to the Trustee under this Section
6.03 shall also be afforded to such Registrar and/or Paying Agent.
Section 6.04. Trustee Not Responsible for Recitals, Dispositions
of Notes or Application of Proceeds Thereof.
--------------------------------------------------
The recitals contained herein and in the Notes, except the Trustee's
certificate of authentication, shall be taken as the statements of Holdings, and
the Trustee assumes no responsibility for their correctness. The Trustee makes
no representations as to the validity or sufficiency of this Indenture or of the
Notes except that the Trustee represents that it is duly authorized to execute
and deliver this Indenture, authenticate the Notes and perform its obligations
hereunder and that the statements made by it in a Statement of Eligibility and
Qualification on Form T-1, if any, to be supplied to Holdings are true and
accurate subject to the qualifications set forth therein. The Trustee shall not
be accountable for the use or application by Holdings of Notes or the proceeds
thereof.
<PAGE>
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Section 6.05. Trustee and Agents May Hold Notes; Collections; Etc.
---------------------------------------------------
The Trustee, any Paying Agent, Registrar or any other agent of
Holdings, in its individual or any other capacity, may become the owner or
pledgee of Notes, with the same rights it would have if it were not the Trustee,
Paying Agent, Registrar or such other agent and, subject to Section 6.08 hereof
and Sections 310 and 311 of the Trust Indenture Act, may otherwise deal with
Holdings and receive, collect, hold and retain collections from Holdings with
the same rights it would have if it were not the Trustee, Paying Agent,
Registrar or such other agent.
Section 6.06. Money Held in Trust.
-------------------
All moneys received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were
received, but need not be segregated from other funds except to the extent
required herein or by law. The Trustee shall not be under any liability for
interest on any moneys received by it hereunder.
Section 6.07. Compensation and Indemnification of Trustee and Its
Prior Claim.
----------------------------------------------------
Holdings covenants and agrees: (a) to pay to the Trustee from time to
time, and the Trustee shall be entitled to, compensation as agreed to by the
parties from time to time for all services rendered by it hereunder (which shall
not be limited by any provision of law in regard to the compensation of a
trustee of an express trust); (b) to reimburse the Trustee and each predecessor
Trustee upon its request for all reasonable expenses, fees, disbursements and
advances incurred or made by or on behalf of it in accordance with any of the
provisions of this Indenture (including the reasonable compensation, fees and
the expenses and disbursements of its counsel and of all agents and other
persons not regularly in its employ), except any such expense, disbursement or
advance as may arise from its negligence or bad faith; and (c) to indemnify the
Trustee and any of its officers, directors, employees and agents and each
predecessor Trustee for, and to hold it harmless against any loss, liability or
expense (including attorneys' fees and expenses incurred in defending
themselves) incurred without negligence or bad faith on its part, arising out of
or in connection with the acceptance or administration of this Indenture or the
trusts hereunder and its duties hereunder, including enforcement of this Section
6.07.
To secure Holdings' payment obligations in this Section 6.07, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture so long as any amounts payable by Holdings pursuant
to this Section 6.07 remain outstanding and are not contested in good faith by
Holdings.
The obligations of Holdings under this Section to compensate and
indemnify the Trustee and each predecessor Trustee and to pay or reimburse the
Trustee and each predecessor Trustee for expenses, disbursements and advances
shall constitute an additional obligation hereunder and shall survive the
satisfaction and discharge of this Indenture or the rejection or termination of
this Indenture under bankruptcy law. Such additional indebtedness shall be a
senior claim to that of the Notes upon all property and funds held or collected
by the Trustee as such, except funds held in trust for the benefit of the
Holders of particular Notes, and the Notes are hereby subordinated to such
senior claim. If the Trustee renders services and incurs expenses following an
Event of Default under Section 5.01(vii) or (viii) hereof, the parties hereto
and the Holders by their acceptance of the Notes hereby agree that such expenses
are intended to constitute expenses of administration under any bankruptcy law.
<PAGE>
-48-
The Trustee shall comply with the provisions of Section 313(b)(2) of
the Trust Indenture Act to the extent applicable.
Section 6.08. Conflicting Interests.
---------------------
The Trustee shall be subject to and comply with the provisions of
Section 310(b) of the Trust Indenture Act; provided, however, that there shall
be excluded from the operation of TIA Section 310(b)(1) any indenture or
indentures under which other securities or certificates of interest or
participation in other securities of Holdings are outstanding if the
requirements for such exclusion set forth in TIA Section 310(b)(1) are met.
Section 6.09. Corporate Trustee Required; Eligibility.
---------------------------------------
There shall at all times be a Trustee hereunder which shall be
eligible to act as Trustee under Trust Indenture Act Sections 310(a)(1), (2) and
(5) and which shall have, or which shall be a wholly owned Subsidiary of a bank
holding company which has, a combined capital and surplus of at least
$50,000,000. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of any Federal, state,
territorial or District of Columbia supervising or examining authority, then for
the purposes of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section,
the Trustee shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
Section 6.10. Resignation and Removal; Appointment of Successor
Trustee.
-------------------------------------------------
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 6.11.
(b) The Trustee, or any trustee or trustees hereafter appointed, may
at any time resign by giving written notice thereof to Holdings at least 20
Business Days prior to the date of such proposed resignation; provided such
trustee shall agree to cooperate with Holdings with respect to the appointment
of a successor trustee and ongoing matters. Upon receiving such notice of
resignation, Holdings shall, after all monies due and owing have been paid to
the Trustee, promptly appoint a successor trustee by written instrument executed
by authority of the Board of Directors, a copy of which shall be delivered to
the resigning Trustee and a copy to the successor Trustee. If an instrument of
acceptance by a successor Trustee shall not have been delivered to the Trustee
within 20 Business Days after the giving of such notice of resignation, the
resigning Trustee may, or any Holder who has been a bona fide Holder of a Note
for at least six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the appointment of a
successor Trustee. Such court may thereupon, after such notice, if any, as it
may deem proper, appoint a successor Trustee.
(c) The Trustee may be removed at any time by an Act of the Holders
of a majority in aggregate principal amount of the Outstanding Notes, delivered
to the Trustee and to Holdings.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of
Section 310(b) of the Trust Indenture Act in accordance with Section 6.08
hereof after written request therefor by Holdings or by any Holder who has
been a bona fide Holder of a Note for at least six months;
<PAGE>
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(2) the Trustee shall cease to be eligible under Section 6.09
hereof and shall fail to resign after written request therefor by Holdings
or by any Holder who has been a bona fide Holder of a Note for at least six
months; or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose or
rehabilitation, conservation or liquidation
then, in any case, (i) Holdings by a Board Resolution may remove the Trustee, or
(ii) subject to Section 5.14, the Holder of any Note who has been a bona fide
Holder of a Note for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee. Such court
may thereupon, after such notice, if any, as it may deem proper and prescribe,
remove the Trustee and appoint a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause,
Holdings, by a Board Resolution, shall promptly appoint a successor Trustee.
If, within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in aggregate principal amount at maturity of the
Outstanding Notes delivered to Holdings, the successor Trustee so appointed
shall, forthwith upon its acceptance of such appointment, become the successor
Trustee and supersede the successor Trustee appointed by Holdings. If no
successor Trustee shall have been so appointed by Holdings or the Holders of the
Notes and accepted appointment in the manner hereinafter provided, the Holder of
any Note who has been a bona fide Holder for at least six months may, subject to
Section 5.14, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the appointment of a successor Trustee.
(f) Holdings shall use reasonable efforts to give notice of each
resignation and each removal of the Trustee and each appointment of a successor
Trustee by mailing written notice of such event by first-class mail, postage
prepaid, to the Holders of Notes as their names and addresses appear in the Note
Register. Each notice shall include the name of the successor Trustee and the
address of its Corporate Trust Office.
Section 6.11. Acceptance of Appointment by Successor.
--------------------------------------
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to Holdings and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee as if originally named as Trustee hereunder; but,
nevertheless, on the written request of Holdings or the successor Trustee, upon
payment of amounts due to it pursuant to Section 6.07, such retiring Trustee
shall duly assign, transfer and deliver to the successor Trustee all moneys and
property at the time held by it hereunder and shall execute and deliver an
instrument transferring to such successor Trustee all the rights, powers, duties
and obligations of the retiring Trustee. Upon request of any such successor
Trustee, Holdings shall execute any and all instruments for more fully and
certainly vesting in and confirming to such successor Trustee all such rights
and powers. Any Trustee ceasing to act shall, nevertheless, retain a prior
claim upon all property or funds held or collected by such Trustee to secure any
amounts then due it pursuant to the provisions of Section 6.07.
<PAGE>
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No successor Trustee with respect to the Notes shall accept
appointment as provided in this Section 6.11 unless at the time of such
acceptance such successor Trustee shall be eligible to act as Trustee under this
Article.
Upon acceptance of appointment by any successor Trustee as provided in
this Section 6.11, the successor shall give notice thereof to the Holders of the
Notes, by mailing such notice to such Holders at their addresses as they shall
appear on the Note Register. If the acceptance of appointment is substantially
contemporaneous with the resignation, then the notice called for by the
preceding sentence may be combined with the notice called for by Section 6.10.
If Holdings fails to give such notice within 10 days after acceptance of
appointment by the successor Trustee, the successor Trustee shall cause such
notice to be given at the expense of Holdings.
Section 6.12. Merger, Conversion, Amalgamation, Consolidation
or Succession to Business.
-----------------------------------------------
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated or amalgamated, or any corporation resulting
from any merger, conversion, amalgamation or consolidation to which the Trustee
shall be a party, or any corporation succeeding to all or substantially all of
the corporate trust business of the Trustee, shall be the successor of the
Trustee hereunder without the execution or filing of any paper or any further
act on the part of any of the parties hereto; provided that such corporation
shall be eligible under this Article Six to serve as Trustee hereunder.
In case at the time such successor to the Trustee under this Section
6.12 shall succeed to the trusts created by this Indenture any of the Notes
shall have been authenticated but not delivered, any such successor to the
Trustee may adopt the certificate of authentication of any predecessor Trustee
and deliver such Notes so authenticated; and, in case at that time any of the
Notes shall not have been authenticated, any successor to the Trustee under this
Section 6.12 may authenticate such Notes either in the name of any predecessor
hereunder or in the name of the successor Trustee; and in all such cases such
certificate shall have the full force which it is anywhere in the Notes or in
this Indenture; provided that the certificate of the Trustee shall have been
authenticated.
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND HOLDINGS
Section 7.01. Preservation of Information; Holdings to Furnish
Trustee Names and Addresses of Holders.
------------------------------------------------
(a) The Trustee shall preserve the names and addresses of the
Noteholders and otherwise comply with TIA Section 312(a). If the Trustee is not
the Registrar, Holdings shall furnish or cause the Registrar to furnish to the
Trustee before each Interest Payment Date, and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Noteholders.
(b) Holdings will furnish or cause to be furnished to the Trustee:
<PAGE>
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(i) semi-annually, not more than 15 days after each Regular
Record Date, a list, in such form as the Trustee may reasonably require, of
the names and addresses of the Holders as of such Regular Record Date; and
(ii) at such other times as the Trustee may reasonably request
in writing, within 30 days after receipt by Holdings of any such request, a
list of similar form and content as of a date not more than 15 days prior
to the time such list is furnished;
provided, however, that if and so long as the Trustee shall be the Registrar, no
such list need be furnished pursuant to this Subsection 7.01(b).
Section 7.02. Communications of Holders.
-------------------------
Holders may communicate with other Holders with respect to their
rights under this Indenture or under the Notes pursuant to Section 312(b) of the
Trust Indenture Act. Holdings and the Trustee and any and all other persons
benefited by this Indenture shall have the protection afforded by Section 312(c)
of the Trust Indenture Act.
Section 7.03. Reports by Trustee.
------------------
Within 60 days after August 1 of each year commencing with the first
August 1 following the date of this Indenture, the Trustee shall mail to all
Holders, as their names and addresses appear in the Note Register, a brief
report dated as of such date, in accordance with, and to the extent required
under Section 313 of the Trust Indenture Act. At the time of its mailing to
Holders, a copy of each such report shall be filed by the Trustee with Holdings,
the SEC and with each stock exchange on which the Notes are listed. Holdings
shall notify the Trustee when the Notes are listed on any stock exchange.
ARTICLE EIGHT
CONSOLIDATION, MERGER, SALE OF ASSETS, ETC.
Section 8.01. Merger and Consolidation.
------------------------
Holdings shall not consolidate with or merge with or into any other
Person, and Holdings shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, sell, convey, transfer or lease, in one transaction
or a series of transactions, all or substantially all of the assets of Holdings
and the Restricted Subsidiaries, taken as a whole, to any Person, unless: (i)
either Holdings shall be the surviving Person or the resulting, surviving or
transferee Person (the "Successor Company") shall be a Person organized and
-----------------
existing under the laws of the United States of America, any State thereof or
the District of Columbia and the Successor Company (if not Holdings) shall
expressly assume, by an indenture supplemental thereto, executed and delivered
to the Trustee, in form reasonably satisfactory to the Trustee, all the
obligations of Holdings under the Notes, this Indenture and the Registration
Rights Agreement; (ii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor Company
or any Subsidiary as a result of such transaction as having been Incurred by
such Successor Company or such Subsidiary at the time of such transaction), no
Default shall have occurred and be continuing; (iii) immediately after giving
effect to such transaction, the Successor Company would be able to Incur an
additional $1.00 of Indebtedness pursuant to
<PAGE>
-52-
paragraph (a)(x) of Section 10.11 (if Holdings shall not be the Successor
Company, all references to Holdings or any Restricted Subsidiary in the
definitions used to calculate the Consolidated Leverage Ratio shall be to the
Successor Company and its Subsidiaries (other than any Unrestricted
Subsidiary)); and (iv) Holdings shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger or transfer and such supplemental indenture (if any) comply with this
Indenture.
Section 8.02. Successor Substituted.
---------------------
The Successor Company shall succeed to, and be substituted for, and
may exercise every right and power of, Holdings under this Indenture, but, in
the case of a conveyance, transfer or lease, Holdings shall not be released from
the obligation to pay the principal of, premium and interest on the Notes.
Notwithstanding clauses (ii) and (iii) of Section 8.01, (x) any
Restricted Subsidiary may consolidate or merge with and into or transfer all or
part of its properties and assets to Holdings or another Restricted Subsidiary
and (y) Holdings may consolidate or merge with and into Telemundo.
If the Successor Company shall have succeeded to and been substituted
for Holdings, such Successor Company may cause to be signed, and may issue
either in its own name or in the name of Holdings prior to such succession any
or all of the Notes issuable hereunder which theretofore shall not have been
signed by Holdings and delivered to the Trustee; and, upon the order of such
Successor Company, instead of Holdings, and subject to all the terms, conditions
and limitations in this Indenture prescribed, the Trustee shall authenticate and
shall deliver any Notes which previously shall have been signed and delivered by
the Officers of Holdings to the Trustee for authentication, and any Notes which
such Successor Company thereafter shall cause to be signed and delivered to the
Trustee for that purpose. All of the Notes so issued and so endorsed shall in
all respects have the same legal rank and benefit under this Indenture as the
Notes theretofore or thereafter issued and endorsed in accordance with the terms
of this Indenture as though all such Notes had been issued and endorsed at the
date of the execution hereof.
ARTICLE NINE
SUPPLEMENTAL INDENTURES AND WAIVERS
Section 9.01. Supplemental Indentures, Agreements and
Waivers Without Consent of Holders.
---------------------------------------
Without the consent of any Holder, Holdings, when authorized by the
Board of Directors as evidenced by a Board Resolution, and the Trustee, at any
time and from time to time, may amend, waive, modify or supplement this
Indenture or the Notes for any of the following purposes:
(a) to evidence the succession of another person to Holdings, and the
assumption by any such successor of the covenants of Holdings in the Notes;
(b) to add to the covenants of Holdings for the benefit of the
Holders, or to surrender any right or power herein conferred upon Holdings,
herein or in the Notes;
(c) to cure any ambiguity, omission, defect or inconsistency;
<PAGE>
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(d) to comply with the requirements of the SEC in connection with the
qualification of this Indenture under the Trust Indenture Act, as
contemplated by Section 9.05 hereof or otherwise;
(e) to evidence and provide for the acceptance of appointment under
this Indenture of a successor Trustee;
(f) to mortgage, pledge, hypothecate or grant a security interest in
any property or assets in favor of the Trustee for the benefit of the
Holders as security for the payment and performance of the Indenture
Obligations;
(g) to make any other change that does not adversely affect the
rights of any Holder;
(h) to add guarantees with respect to the Notes; or
(i) to provide for uncertificated Notes in addition to or in place of
certificated Notes (provided that the uncertificated Notes are issued in
registered form for purposes of Section 163(f) of the Code, or in a manner
such that the uncertificated Notes are described in Section 163(f)(2)(B) of
the Code).
Section 9.02. Supplemental Indentures, Agreements
and Waivers with Consent of Holders.
------------------------------------
With the written consent of the Holders of not less than a majority of
the aggregate principal amount at maturity of the Outstanding Notes delivered to
Holdings and the Trustee, Holdings when authorized by a Board Resolution,
together with the Trustee, may amend, waive, modify or supplement any other
provision of this Indenture or the Notes; provided, however, that no such
amendment, waiver, modification or supplement may, without the written consent
of the Holder of each Outstanding Note affected thereby:
(i) reduce the amount of Notes whose Holders must consent to an
amendment;
(ii) reduce the rate of or extend the time for payment of interest
on any Note;
(iii) reduce the principal or Accreted Value of or change the Stated
Maturity of any Note;
(iv) reduce the premium payable upon the redemption of any Note or
change the time at which any Note may be redeemed as described under
Section 2 of the Notes;
(v) make any Note payable in money other than that stated in the
Notes;
(vi) impair the right of any Holder to receive payment of principal
of and interest on such Holder's Notes on or after the due dates therefor
or to institute suit for the enforcement of any payment on or with respect
to such Holder's Notes;
(vii) make any change in the amendment provisions which require each
Holder's consent or in the waiver provisions; or
(viii) subordinate the Notes in right of payment to any other
Indebtedness.
<PAGE>
-54-
Upon the written request of Holdings accompanied by a copy of a Board
Resolution authorizing the execution of any such supplemental indenture or other
agreement, instrument or waiver, and an Officers' Certificate and an Opinion of
Counsel upon which the Trustee may rely as conclusive evidence that such change,
agreement, supplement or waiver is permitted by this Indenture and upon the
filing with the Trustee of evidence of the consent of Holders as aforesaid, the
Trustee shall join with Holdings in the execution of such supplemental indenture
or other agreement, instrument or waiver.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture or other
agreement, instrument or waiver, but it shall be sufficient if such Act shall
approve the substance thereof.
Section 9.03. Execution of Supplemental Indentures, Agreements and
----------------------------------------------------
Waivers.
-------
In executing or accepting the additional trusts created by any
supplemental indenture, agreement, instrument or waiver permitted by this
Article Nine or the modifications thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and may rely upon, an
Opinion of Counsel and an Officers' Certificate from each obligor under the
Notes entering into such supplemental indenture, agreement, instrument or
waiver, each stating that the execution of such supplemental indenture,
agreement, instrument or waiver (a) is authorized or permitted by this Indenture
and (b) does not violate the provisions of any agreement or instrument
evidencing any other Indebtedness of Holdings or any other Subsidiary of
Holdings. The Trustee may, but shall not be obligated to, enter into any such
supplemental indenture, agreement, instrument or waiver which affects the
Trustee's own rights, duties or immunities under this Indenture, the Notes or
otherwise.
Section 9.04. Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any supplemental indenture under this Article
Nine, this Indenture and/or the Notes, if applicable, shall be modified in
accordance therewith, and such supplemental indenture shall form a part of this
Indenture and/or the Notes, if applicable, as the case may be, for all purposes;
and every Holder of Notes theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
After an amendment under this Indenture becomes effective, Holdings
shall mail to the Holders a notice briefly describing such amendment. However,
the failure to give such notice to all Holders, or any defect therein, will not
impair or affect the validity of the amendment.
Section 9.05. Conformity with Trust Indenture Act.
-----------------------------------
Every supplemental indenture executed pursuant to this Article Nine
shall conform to the requirements of the Trust Indenture Act as then in effect.
Section 9.06. Reference in Notes to Supplemental Indentures.
---------------------------------------------
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If Holdings shall so determine,
new Notes so modified as to conform, in the opinion of the Trustee and the Board
of Directors, to any such supplemental indenture may be prepared and executed by
Holdings and authenticated and delivered by the Trustee upon a Holdings Order in
exchange for Outstanding Notes.
<PAGE>
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Section 9.07. Record Date.
-----------
Holdings may, but shall not be obligated to, fix, a record date for
the purpose of determining the Holders entitled to consent to any supplemental
indenture, agreement or instrument or any waiver, and shall promptly notify the
Trustee of any such record date. If a record date is fixed those persons who
were Holders at such record date (or their duly designated proxies), and only
those persons, shall be entitled to consent to such supplemental indenture,
agreement or instrument or waiver or to revoke any consent previously given,
whether or not such persons continue to be Holders after such record date. No
such consent shall be valid or effective for more than 90 days after such record
date.
Section 9.08. Revocation and Effect of Consents.
---------------------------------
Until an amendment or waiver becomes effective, a consent to it by a
Holder of a Note is a continuing consent by the Holder and every subsequent
Holder of a Note or portion of a Note that evidences the same debt as the
consenting Holder's Note, even if a notation of the consent is not made on any
Note. However, any such Holder, or subsequent Holder, may revoke the consent as
to his Note or portion of a Note if the Trustee receives written notice of
revocation before the date the amendment or waiver becomes effective. An
amendment or waiver shall become effective in accordance with its terms and
thereafter bind every Holder.
ARTICLE TEN
COVENANTS
Section 10.01. Payment of Principal, Premium and Interest.
------------------------------------------
Holdings shall duly and punctually pay the principal of, premium, if
any, and interest on the Notes in accordance with the terms of the Notes and
this Indenture.
Section 10.02. Maintenance of Office or Agency.
-------------------------------
Holdings shall maintain in the Borough of Manhattan in The City of New
York, State of New York, an office or agency where Notes may be presented or
surrendered for payment, where Notes may be surrendered for registration of
transfer or exchange and where notices and demands to or upon Holdings in
respect of the Notes and this Indenture may be served. The office of the
Trustee at its Corporate Trust Office will be such office or agency of Holdings,
unless Holdings shall designate and maintain some other office or agency for one
or more of such purposes. Holdings will give prompt written notice to the
Trustee of any change in the location of any such office or agency. If at any
time Holdings shall fail to maintain any such required office or agency or shall
fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee, and Holdings hereby appoints the Trustee as its agent to
receive all such presentations, surrenders, notices and demands.
Holdings may also from time to time designate one or more other
offices or agencies (in or outside of The City of New York, State of New York)
where the Notes may be presented or surrendered for any or all such purposes,
and may from time to time rescind such designation; provided, however, that no
such designation or rescission shall in any manner relieve Holdings of its
obligation to maintain an office or agency in
<PAGE>
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The City of New York, State of New York for such purposes. Holdings will give
prompt written notice to the Trustee of any such designation or rescission and
any change in the location of any such other office or agency.
Section 10.03. Money for Note Payments To Be Held in Trust.
-------------------------------------------
If Holdings shall at any time act as its own Paying Agent, it will, on
or before each due date of the Accreted Value of, premium, if any, or interest
on any of the Notes, segregate and hold in trust for the benefit of the Holders
entitled thereto a sum sufficient to pay the Accreted Value , premium, if any,
or interest so becoming due until such sums shall be paid to such persons or
otherwise disposed of as herein provided, and will promptly notify the Trustee
of its action or failure so to act.
If Holdings is not acting as Paying Agent, Holdings will, on or before
each due date of the Accreted Value of, premium, if any, or interest on, any
Notes, deposit with a Paying Agent a sum in same day funds sufficient to pay the
Accreted Value, premium, if any, or interest so becoming due, such sum to be
held in trust for the benefit of the Holders entitled to such principal, premium
or interest, and (unless such Paying Agent is the Trustee) Holdings will
promptly notify the Trustee of such action or any failure so to act.
If Holdings is not acting as Paying Agent, Holdings will cause each
Paying Agent other than the Trustee to execute and deliver to the Trustee an
instrument in which such Paying Agent will agree with the Trustee, subject to
the provisions of this Section 10.03, that such Paying Agent will:
(a) hold all sums held by it for the payment of the Accreted Value
of, premium, if any, or interest on Notes in trust for the benefit of the
Holders entitled thereto until such sums shall be paid to such Holders or
otherwise disposed of as herein provided;
(b) give the Trustee notice of any Default by Holdings (or any other
obligor upon the Notes) in the making of any payment of Accreted Value of,
premium, if any, or interest on the Notes;
(c) at any time during the continuance of any such Default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent; and
(d) acknowledge, accept and agree to comply in all aspects with the
provisions of this Indenture relating to the duties, rights and liabilities
of such Paying Agent.
Holdings may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Holdings Order direct any Paying Agent to pay, to the Trustee all sums held
in trust by Holdings or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by Holdings or such
Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such
Paying Agent will be released from all further liability with respect to such
money.
Any money deposited with the Trustee or any Paying Agent, or then held
by Holdings, in trust for the payment of the principal or Accreted Value of,
premium, if any, or interest on any Note and remaining unclaimed for two years
after such principal or Accreted Value, premium, if any, or interest has become
due and payable shall be paid to Holdings upon receipt of a Holdings Request
therefor, or (if then held by Holdings) will be discharged from such trust; and
the Holder of such Note will thereafter, as an unsecured general creditor, look
only to Holdings for payment thereof, and all liability of the Trustee or such
Paying Agent with respect to such trust money, and all liability of Holdings as
trustee thereof, will thereupon cease; provided, however, that the
<PAGE>
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Trustee or such Paying Agent, before being required to make any such repayment,
may at the expense of Holdings cause to be published once, at the option of
Holdings in The New York Times or The Wall Street Journal (national edition),
notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such publication,
any unclaimed balance of such money then remaining shall be repaid to Holdings.
Section 10.04. Corporate Existence.
-------------------
Subject to Article Eight, Holdings shall do or cause to be done all
things necessary to preserve and keep in full force and effect the corporate
existence, rights (charter and statutory), licenses and franchises of Holdings
and each of the Restricted Subsidiaries; provided, however, that Holdings will
not be required to preserve any such right, license or franchise or the
corporate or other existence of a Restricted Subsidiary if the Board of
Directors shall determine that the preservation thereof is no longer desirable
in the conduct of the business of Holdings and the Restricted Subsidiaries as a
whole and that the loss thereof is not adverse in any material respect to the
Holders; provided, further, that the foregoing will not prohibit a sale,
transfer or conveyance of a Subsidiary of Holdings or any of its assets in
compliance with the terms of this Indenture.
Section 10.05. Payment of Taxes and Other Claims.
---------------------------------
Holdings shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all material taxes, assessments and
governmental charges levied or imposed (i) upon Holdings or any of its
Restricted Subsidiaries or (ii) upon the income, profits or property of Holdings
or any of the Restricted Subsidiaries and (b) all material lawful claims for
labor, materials and supplies, which, if unpaid, could reasonably be expected to
become a Lien upon the property of Holdings or any of the Restricted
Subsidiaries; provided, however, that Holdings will not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim (x) whose amount, applicability or validity is being contested in good
faith by appropriate proceedings properly instituted and diligently conducted or
(y) if the failure to so pay, discharge or cause to be paid or discharged could
not reasonably be expected to have a material adverse effect on the condition
(financial or other), business, properties, results of operations or prospects
of Holdings and the Restricted Subsidiaries, taken as a whole.
Section 10.06. Maintenance of Properties.
-------------------------
Holdings shall cause all material properties owned by Holdings or any
of the Restricted Subsidiaries or used or held for use in the conduct of their
respective businesses to be maintained and kept in good condition, repair and
working order (reasonable wear and tear excepted) and supplied with all
necessary equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
Holdings may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that nothing in this Section 10.06 will prevent Holdings or any of its
Restricted Subsidiaries from discontinuing the maintenance of any of such
properties if such discontinuance is, in the judgment of Holdings or the
Restricted Subsidiary so concerned, desirable in the conduct of its business or
the business of any of the Restricted Subsidiaries and is not disadvantageous in
any material respect to the Holders.
Section 10.07. Insurance.
---------
To the extent available at commercially reasonable rates, Holdings
shall at all times keep all of its and the Restricted Subsidiaries' properties
which are of an insurable nature insured with insurers, believed by
<PAGE>
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Holdings in good faith to be financially sound and responsible, against loss or
damage to the extent that property of similar character is usually and
customarily so insured by corporations similarly situated and owning like
properties.
Section 10.08. Books and Records.
-----------------
Holdings shall keep proper books of record and account, in which full
and correct entries will be made of all financial transactions and the assets
and business of Holdings and each Restricted Subsidiary and each Restricted
Affiliate of Holdings in material compliance with GAAP.
Section 10.09. SEC Reports.
-----------
Notwithstanding that Holdings may not be required to remain subject to
the reporting requirements of Section 13 or 15(d) of the Exchange Act, Holdings
shall file with the SEC (unless the SEC will not accept such a filing, in which
case, Holdings shall provide such documents to the Trustee) and provide within
15 days to the Trustee and make available to the Holders such annual reports and
such information, documents and other reports as are specified in Sections 13
and 15(d) of the Exchange Act and applicable to a U.S. corporation subject to
such Sections, such information, documents and other reports to be so filed and
provided at the times specified for the filing of such information, documents
and reports under such Sections. In addition, for so long as any Notes remain
outstanding, Holdings shall furnish to the Holders and to securities analysts
and prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act, and, to any
beneficial holder of Notes, if not obtainable from the SEC, information of the
type that would be filed with the SEC pursuant to the foregoing provisions, upon
the request of any such holder.
Section 10.10. Change of Control.
-----------------
Upon the occurrence of any of the following events (each a "Change of
---------
Control"), each Holder shall have the right to require that Holdings purchase
- -------
all or any part of such Holder's Notes at a purchase price in cash equal to 101%
of the Accreted Value thereof, plus accrued and unpaid interest, if any, at the
date of purchase, if such purchase occurs prior to August 15, 2003, or 101% of
the aggregate principal amount thereof, plus accrued and unpaid interest, if
any, to the date of purchase (subject to the right of Holders of record on the
relevant record date to receive accrued and unpaid interest due on the relevant
Interest Payment Date), if such purchase occurs thereafter:
(i) prior to a Public Equity Offering, the Permitted Holders cease
to beneficially own (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act) in the aggregate Capital Stock representing more than 50% of the
outstanding equity and the aggregate voting power represented by the
outstanding Capital Stock of Holdings, whether as a result of the issuance
of securities, merger or consolidation, transfer of securities or
otherwise;
(ii) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than one or more Permitted Holders, is or
becomes the beneficial owner (as defined above, except that for purposes of
this clause (ii) such person shall be deemed to have beneficial ownership
of all shares that such person has the right to acquire, whether such right
is exercisable immediately or only after the passage of time), directly or
indirectly, of more than 35% of the total voting power of the then
outstanding Voting Stock of Holdings, and the Permitted Holders
beneficially own (as defined in clause (i) above) in the aggregate Voting
Stock representing a lesser percentage of the total voting power of the
Voting Stock of Holdings;
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(iii) during any period of two consecutive years after the initial
Public Equity Offering, individuals who at the beginning of such period
constituted the Board of Directors of Holdings (together with any new
directors whose election by such Board of Directors was made pursuant to
the Stockholders Agreement or whose nomination for election by the
shareholders of Holdings was approved by a vote of the majority of the
directors of Holdings then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of
the Board of Directors then in office;
(iv) Holdings consolidates with, or merges with or into, another
Person or Holdings and/or one or more Restricted Subsidiaries sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of the assets of Holdings and the Restricted
Subsidiaries, taken as a whole, in one transaction or series of related
transactions, to any Person (other than a Wholly Owned Restricted
Subsidiary of Holdings), or any Person consolidates with, or merges with or
into, Holdings, in any such event other than pursuant to a transaction in
which the Person or Persons that beneficially owned (as defined in clause
(ii) above), directly or indirectly, Voting Stock representing a majority
of the total voting power of the Voting Stock of Holdings immediately prior
to such transaction or series of related transactions beneficially own (as
defined in clause (ii) above), directly or indirectly, Voting Stock
representing a majority of the total voting power of the Voting Stock of
the surviving or transferee Person;
(v) Sony Pictures ceases to beneficially own (as defined in Rules
13d-3 and 13d-5 under the Exchange Act) Capital Stock of Holdings
representing at least 15% of the outstanding equity represented by the
outstanding Capital Stock of Holdings, whether as a result of the issuance
of securities, merger or consolidation, transfer of securities or
otherwise; provided, however, that any transfer by Sony Pictures necessary
in order to comply with restrictions imposed upon the ownership by Sony
Pictures of the Capital Stock of Holdings by any federal or state court or
regulatory authority or agency with applicable jurisdiction that would, but
for this proviso, result in a Change of Control under this clause (v), will
not result in a Change of Control so long as (x) Liberty continues to own
Capital Stock of Holdings representing at least 20% of the outstanding
equity represented by the outstanding Capital Stock of Holdings and (y)
Sony Pictures continues to own Capital Stock of the Network Company
representing 25% of the equity and the aggregate voting power represented
by the outstanding Capital Stock of the Network Company;
(vi) Liberty ceases to beneficially own (as defined in Rules 13d-3
and 13d-5 under the Exchange Act) Capital Stock of Holdings representing at
least 15% of the outstanding equity represented by the outstanding Capital
Stock of Holdings, whether as a result of the issuance of securities,
merger or consolidation, transfer of securities or otherwise; provided,
however, that any transfer by Liberty necessary in order to comply with
restrictions imposed upon the ownership by Liberty of the Capital Stock of
Holdings by any federal or state court or regulatory authority or agency
with applicable jurisdiction that would, but for this proviso, result in a
Change of Control under this clause (vi), will not result in a Change of
Control so long as (x) Sony Pictures continues to own Capital Stock of
Holdings representing at least 20% of the outstanding equity represented by
the outstanding Capital Stock of Holdings and (y) Liberty continues to own
Capital Stock of the Network Company representing 25% of the equity and the
aggregate voting power represented by the outstanding Capital Stock of the
Network Company;
(vii) Liberty and Sony Pictures together cease to beneficially own
(as defined in Rules 13d-3 and 13d-5 under the Exchange Act) Capital Stock
of the Network Company representing at least
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50% of the equity of the Network Company, whether as a result of the
issuance of securities, merger or consolidation, transfer of securities or
otherwise; or
(viii) following the Merger, Telemundo shall not be a wholly owned
Subsidiary of Holdings (other than by virtue of a merger or consolidation
with Holdings).
For the purposes of this definition of Change of Control, "equity"
shall be determined after giving effect to the exercise of all options, warrants
or other rights to acquire or purchase Capital Stock and the conversion or
exchange of all securities convertible into or exchangeable for Capital Stock,
less any exercise, conversion or exchange price therefor.
Within 30 days following the date on which a Change of Control occurs
(the "Change of Control Date"), unless Holdings has mailed a notice of
----------------------
redemption with respect to all the Outstanding Notes pursuant to Section 12.03,
notice of a Change of Control Offer shall be mailed by Holdings to the Holders
of Notes at their last registered addresses with a copy to the Trustee and the
Paying Agent. The Change of Control Offer shall remain open from the time of
mailing of the notice thereof until 5:00 p.m., New York City time, on the
Business Day preceeding the date on which the purchase price for the Notes will
be paid by Holdings (the "Change of Control Payment Date") (which shall be no
------------------------------
earlier than 30 days nor later than 60 days from the date such notice is
mailed). The notice, which shall govern the terms of the Change of Control
Offer, shall include such disclosures as are required by law and shall state:
(a) that the Change of Control Offer is being made pursuant to this
Section 10.10 and that all Notes validly tendered into the Change of
Control Offer will be accepted for payment;
(b) the purchase price (including the amount of accrued interest, if
any) for each Note, the Change of Control Payment Date and the date on
which the Change of Control Offer expires;
(c) that any Note not validly tendered for payment will continue to
increase in Accreted Value or accrue interest in accordance with the terms
thereof;
(d) that, unless Holdings shall default in the payment of the
purchase price, any Note accepted for payment pursuant to the Change of
Control Offer shall cease to increase in Accreted Value or accrue interest
after the Change of Control Payment Date;
(e) that any Holder electing to have a Note puchased pursuant to any
Change of Control Offer shall be required to surrender the Note, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Note completed, or transfer by book-entry transfer, to Holdings, a
depositary, if appointed by Holdings, or a Paying Agent at the address
specified in the notice on or prior to 5:00 p.m., New York City time, on
the Business Day preceding the Change of Control Payment Date;
(f) that Holders of Notes will be entitled to withdraw their election
if the Paying Agent receives, not later than 5:00 p.m., New York City time,
on the Business Day preceding the Change of Control Payment Date, a
facsimile transmission or letter setting forth the name of the Holders, the
principal amount of Notes the Holders delivered for purchase, the Note
certificate number (if any) and a statement that such Holder is withdrawing
his election to have such Notes purchased;
<PAGE>
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(g) that Holders whose Notes are purchased only in part will be
issued Notes of like tenor equal in Accreted Value and principal amount at
maturity to the unpurchased portion of the Notes surrendered;
(h) the instructions that Holders must follow in order to tender
their Notes; and
(i) a description of the transaction or transactions constituting
such Change of Control.
On the Change of Control Payment Date, Holdings will (i) accept for
payment Notes or portions thereof tendered pursuant to the Change of Control
Offer, (ii) deposit with the Paying Agent money, in immediately available funds,
sufficient to pay the purchase price of all Notes or portions thereof so
tendered and accepted and (iii) deliver to the Trustee the Notes so accepted
together with an Officers' Certificate setting forth the Notes or portions
thereof tendered to and accepted for payment by Holdings. The Paying Agent will
promptly mail or deliver to the Holders of Notes so accepted payment in an
amount equal to the purchase price, and the Trustee shall promptly authenticate
and mail or deliver to such Holders a new Note of like tenor equal in Accreted
Value and principal amount to any unpurchased portion of the Note surrendered.
Upon surrender and cancellation of a Physical Note that is purchased in part
pursuant to the Change of Control Offer, Holdings shall promptly issue and the
Trustee shall authenticate and mail (or cause to be transferred by book entry)
to the surrendering Holder of such Physical Note, a new Physical Note equal in
Accreted Value and principal amount at maturity to the unpurchased portion of
such surrendered Physical Note; provided that each such new Physical Note shall
be in a principal amount at maturity of $1,000 or an integral multiple thereof.
Any Notes not so accepted shall be promptly mailed or delivered by Holdings to
the Holder thereof. Holdings will publicly announce the results of the Change
of Control Offer not later than the first Business Day following the Change of
Control Payment Date.
If Holdings is required to make a Change of Control Offer, Holdings
will comply with all applicable tender offer laws and regulations, including, to
the extent applicable, Section 14(e) and Rule 14e-1 under the Exchange Act and
any other applicable securities laws and regulations. To the extent that the
provisions of any securities laws or regulations conflict with the provisions of
this Section 10.10, Holdings will comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 10.10 by virtue thereof.
Holdings will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in this Indenture applicable to a Change of Control Offer made by Holdings and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
The provisions under this Indenture relating to Holdings' obligation
to make an offer to purchase the Notes as a result of a Change of Control may be
waived or modified with the written consent of the Holders of a majority in
principal amount of the Notes then Outstanding.
Section 10.11. Limitation on Indebtedness.
--------------------------
(a) Holdings shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, Incur any Indebtedness; provided,
however, that (x) Holdings or any Restricted Subsidiary (other than Telemundo or
any of its Subsidiaries) may Incur Indebtedness if at the time of such
Incurrence and after giving effect thereto, the Consolidated Leverage Ratio is
less than or equal to 8.5 to 1.0 and (y) Telemundo or any of its Subsidiaries
may Incur Indebtedness if at the time of such Incurrence and after giving effect
thereto, the Con-
<PAGE>
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solidated Leverage Ratio is less than or equal to 7.0 to 1.0 (for purposes of
this clause (y), all references to Holdings or any Restricted Subsidiary in the
definitions used to calculate the Consolidated Leverage Ratio shall be to
Telemundo and its Subsidiaries (other than any Unrestricted Subsidiary)).
(b) Notwithstanding the foregoing paragraph (a), Holdings or any
Restricted Subsidiary, as applicable, may Incur any or all of the following
Indebtedness:
(1) Indebtedness of Holdings or any Restricted Subsidiary Incurred
under the Bank Credit Agreement in an aggregate amount not to exceed an
aggregate principal amount of $350 million at any time outstanding, less
the aggregate amount of any scheduled amortization payments or mandatory
prepayments made on term loans thereunder;
(2) the Notes, the Exchange Notes or any Indebtedness (including the
Exchange Notes) the proceeds of which are used to Refinance the Notes or
the Exchange Notes;
(3) Indebtedness of Telemundo or any of its Subsidiaries outstanding
on the Issue Date (other than Indebtedness referred to in clause (1) or (2)
of this Section 10.11(b));
(4) Refinancing Indebtedness in respect of Indebtedness Incurred
pursuant to paragraph (a) of this Section 10.11 or pursuant to clause (2)
or (3) of this Section 10.11(b) or this clause (4);
(5) (i) Indebtedness of any Restricted Subsidiary owed to and held by
Holdings or any Restricted Subsidiary and (ii) Indebtedness of Holdings
owed to and held by any Restricted Subsidiary which is unsecured and
subordinated in right of payment to the payment and performance of
Holdings' obligations under the Notes; provided, however, that an
incurrence of Indebtedness that is not permitted by this clause (5) shall
be deemed to have occurred upon (x) any sale or other disposition of any
Indebtedness of Holdings or any Restricted Subsidiary referred to in this
clause (5) to any Person other than Holdings or any Restricted Subsidiary
or (y) any Restricted Subsidiary that holds Indebtedness of Holdings or
another Restricted Subsidiary ceasing to be a Restricted Subsidiary;
(6) Hedging Obligations consisting of Interest Rate Agreements or
Currency Agreements directly related to Indebtedness permitted to be
Incurred by Holdings or a Restricted Subsidiary pursuant to this Indenture;
(7) Capital Lease Obligations, Acquired Indebtedness, Purchase Money
Indebtedness and Attributable Debt with respect to Sale/Leaseback
Transactions, and Refinancing Indebtedness thereof, in an aggregate
principal amount not exceeding $25 million at any one time outstanding;
(8) Indebtedness of Holdings or any Restricted Subsidiary Incurred or
Incurrable in respect of reimbursement obligations related to letters of
credit, banker's acceptances or similar facilities entered into in the
ordinary course of business;
(9) Indebtedness of Holdings or any Restricted Subsidiary in respect
of bid, performance, surety and appeal bonds and obligations provided in
the ordinary course of business;
(10) Indebtedness of Telemundo of Chicago, Inc. and Video 44
Acquisition Corp., Inc., pursuant to Section 3.5(a) of the Chicago Joint
Venture Agreement;
<PAGE>
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(11) any guarantee by Holdings of any Indebtedness (not prohibited
under this Indenture) of any Wholly Owned Restricted Subsidiary, and any
guarantee by any Wholly Owned Restricted Subsidiary of any Indebtedness
(not prohibited under this Indenture) of Holdings or any Wholly Owned
Restricted Subsidiary;
(12) Indebtedness of any Restricted Subsidiary Incurred in the
ordinary course of business under any Local Marketing Agreement in an
aggregate amount, together with the aggregate amount of Investments
pursuant to clause (xii) of the definition of "Permitted Investment," not
to exceed $10 million at any one time outstanding; and
(13) other Indebtedness in an aggregate principal amount not to exceed
$35 million at any one time outstanding.
(c) Notwithstanding the foregoing, Holdings shall not incur any
Indebtedness pursuant to the foregoing paragraph (b) of this Section 10.11 if
the proceeds thereof are used, directly or indirectly, to refinance any
Subordinated Obligations unless such Indebtedness shall be subordinated to the
Notes to at least the same extent as such Subordinated Obligations.
(d) For purposes of determining compliance with this Section 10.11,
(i) in the event that an item of Indebtedness meets the criteria of more than
one of the types of Indebtedness described above, Holdings, in its sole
discretion, will classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of the above clauses and
(ii) an item of Indebtedness may be divided and classified in more than one of
the types of Indebtedness described above. A guarantee of Indebtedness
permitted by this covenant to be Incurred by Holdings or a Restricted Subsidiary
otherwise permitted to be Incurred pursuant to this covenant is not considered a
separate Incurrence for purposes of this covenant.
Section 10.12. Statement by Officers as to Default.
-----------------------------------
Holdings will deliver to the Trustee, within 120 days after the end of
each fiscal year of Holdings ending after the date hereof, a written statement
signed by the chairman or a chief executive officer, the principal financial
officer or principal accounting officer of Holdings, stating (i) that a review
of the activities of Holdings during the preceding fiscal year has been made
under the supervision of the signing officers with a view to determining whether
Holdings has kept, observed, performed and fulfilled its obligations under this
Indenture, and (ii) that, to the best knowledge of each officer signing such
certificate, Holdings has kept, observed, performed and fulfilled each and every
covenant and condition contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions, conditions and
covenants hereof (or, if a Default shall have occurred, describing all such
Defaults of which such officers may have knowledge, their status and what action
Holdings is taking or proposes to take with respect thereto). When any Default
under this Indenture has occurred and is continuing, or if the Trustee or any
Holder or the trustee for or the holder of any other evidence of Indebtedness of
Holdings or any Restricted Subsidiary gives any notice or takes any other action
with respect to a claimed default, Holdings will promptly notify the Trustee of
such Default, notice or action and will deliver to the Trustee by registered or
certified mail or by telegram, or facsimile transmission followed by hard copy
by registered or certified mail an Officers' Certificate specifying such event,
notice or other action within 30 days after the occurrence thereof and what
action Holdings is taking or proposes to take with respect thereto.
<PAGE>
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Section 10.13. Limitation on Restricted Payments.
---------------------------------
(a) Holdings shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, make a Restricted Payment if at the time
Holdings or such Restricted Subsidiary makes, and after giving effect to, the
proposed Restricted Payment: (i) a Default shall have occurred and be
continuing (or would result therefrom); (ii) Holdings is not able to incur an
additional $1.00 of Indebtedness pursuant to paragraph (a)(x) of Section 10.11;
or (iii) the aggregate amount of such Restricted Payment and all other
Restricted Payments since the Issue Date would exceed the sum of:
(A) (x) the Cumulative EBITDA less (y) 1.4 times Cumulative
Consolidated Interest Expense, each as determined at the time of
such Restricted Payment;
(B) the aggregate Net Cash Proceeds (including Net Cash Proceeds
received upon the conversion of non-cash proceeds) received by
Holdings from capital contributions or the issuance or sale of
Qualified Stock subsequent to the Issue Date or any options,
warrants or rights to purchase Qualified Stock, together with the
aggregate cash received by Holdings at the time of exercise of
such options, warrants or rights (other than any such issuance or
sale to a Subsidiary of Holdings);
(C) the amount by which Indebtedness of Holdings is reduced on
Holdings' balance sheet upon the conversion or exchange (other
than by a Subsidiary of Holdings) of any Indebtedness of Holdings
or a Restricted Subsidiary issued subsequent to the Issue Date
for Qualified Stock (less the amount of any cash, or the fair
value of any other property, distributed by Holdings upon such
conversion or exchange), whether pursuant to the terms of such
Indebtedness or pursuant to an agreement with a creditor to
engage in an equity for debt exchange; and
(D) an amount equal to the sum of (i) the net reduction in
Investments in Unrestricted Subsidiaries or Investments
constituting Restricted Payments resulting from interest on debt,
dividends, repayments of loans or advances or other transfers of
assets or proceeds from the disposition of Capital Stock or other
distributions or payments, in each case to Holdings or any
Restricted Subsidiary from, or with respect to an Investment in,
Unrestricted Subsidiaries, and (ii) the portion (proportionate to
Holdings' equity interest in such Subsidiary) of the fair market
value of the net assets of an Unrestricted Subsidiary at the time
such Unrestricted Subsidiary is designated a Restricted
Subsidiary; provided, however, that the foregoing sum shall not
exceed, in the case of any Unrestricted Subsidiary, the aggregate
amount of Investments previously made (and treated as a
Restricted Payment) by Holdings or any Restricted Subsidiary in
such Unrestricted Subsidiary subsequent to the Issue Date and the
aggregate amount of Investments in such Person constituting
Restricted Payments.
(b) The provisions of the foregoing paragraph (a) of this Section
10.13 shall not prohibit:
(i) any purchase or redemption of Capital Stock of Holdings or any
Restricted Subsidiary or Subordinated Obligations of Holdings made by
exchange for, or out of the proceeds of the substantially concurrent
issuance and sale of, Qualified Stock (other than any such issuance and
sale to a Subsidiary of Holdings) or out of the proceeds of a substantially
concurrent capital contribution to Holdings; provided, however, that (x)
such purchase, capital contribution or redemption shall be ex-
<PAGE>
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cluded in the calculation of the amount of Restricted Payments and (y) the
Net Cash Proceeds from such sale of Capital Stock or capital contribution
shall be excluded from clause (iii)(B) of paragraph (a) of this Section
10.13;
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations in whole or
in part (including premium, if any, and accrued and unpaid interest) made
by exchange for, or out of the proceeds of the substantially concurrent
sale of, Indebtedness of Holdings which is permitted to be Incurred
pursuant to Section 10.11; provided, however, that such purchase,
repurchase, redemption, defeasance or other acquisition or retirement for
value shall be excluded in the calculation of the amount of Restricted
Payments;
(iii) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with this covenant; provided, however, that such dividend shall be included
in the calculation of the amount of Restricted Payments if not already
taken into consideration for determining such amount upon the declaration
thereof; and
(iv) the redemption of Capital Stock of Holdings from present or
former directors, officers or employees of Holdings and its Subsidiaries or
their estates or beneficiaries pursuant to the terms of an employee benefit
plan or employment or other agreement; provided that the aggregate amount
of all such repurchases shall not exceed $3 million in any fiscal year and
$10 million since the Issue Date plus the aggregate cash proceeds received
by Holdings from any reissuance of such Capital Stock to directors,
officers and employees of Holdings and its Subsidiaries; provided, further,
that such redemption shall be excluded in the calculation of the amount of
Restricted Payments.
Section 10.14. Limitation on Affiliate Transactions.
------------------------------------
(a) Holdings shall not, and shall not permit any Restricted
Subsidiary to, enter into any transaction (including the purchase, sale, lease
or exchange of any property or the rendering of any service) with or for the
benefit of any Affiliate of Holdings (an "Affiliate Transaction") unless the
---------------------
terms thereof (1) are no less favorable to Holdings or such Restricted
Subsidiary than those that could be obtained at the time of such transaction in
a comparable transaction in arm's-length dealings with a Person who is not such
an Affiliate, (2) if such Affiliate Transaction involves an amount in excess of
$2.5 million, (i) are set forth in writing and (ii) have been approved by a
majority of the members of the Board of Directors of Holdings having no material
personal financial stake in such Affiliate Transaction and (3) if such Affiliate
Transaction involves an amount in excess of $10.0 million, have been determined
by a nationally recognized investment banking firm or nationally recognized
independent appraisal firm qualified to perform such task to be fair to Holdings
or such Restricted Subsidiary, as the case may be, from a financial point of
view.
(b) The provisions of the foregoing paragraph (a) of this Section
10.14 shall not prohibit (i) any Permitted Investment or Restricted Payment
permitted to be made pursuant to Section 10.13, or any payment or transaction
specifically excepted from the definition of Restricted Payment, (ii)
transactions exclusively between or among Holdings and one or more Restricted
Subsidiaries or exclusively between or among Restricted Subsidiaries; (iii)
customary directors' fees, indemnification and similar arrangements, employee
salaries, bonuses or employment agreements, compensation or retirement or
employee benefit arrangements and incentive arrangements with any officer,
director or employee of Holdings or any Restricted Subsidiary entered into in
the ordinary course of business; (iv) agreements (and transactions pursuant to
agreements), in effect on the Issue Date, including, without limitation, the
Affiliation Agreement, the Network Sale Agreement and the Stockholders Agreement
(but excluding the Sharing Agreement), as such agreements are in effect on such
date
<PAGE>
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or as thereafter amended in a manner not materially adverse to Holdings in
the good faith judgment of the Board of Directors; (v) issuances of Qualified
Stock; or (vi) loans and advances to officers, directors and employees of
Holdings or any Restricted Subsidiary for travel, entertainment, moving and
other relocation expenses, in each case made in the ordinary course of business
and consistent with past business practices in an aggregate principal amount not
to exceed $2 million at any one time outstanding.
(c) The provisions of clauses (2) and (3) of the foregoing paragraph
(a) of this Section 10.14 shall not be applicable to any transaction between
Holdings and/or one or more Restricted Subsidiaries, on the one hand, and one or
more Affiliates of Holdings, on the other hand, for the provision of goods and
services in the ordinary course of business of Holdings and the Restricted
Subsidiaries and in the ordinary course of business of such Affiliate or
Affiliates (including any such transaction pursuant to the Sharing Agreement).
Section 10.15. Limitation on Sales of Assets and Subsidiary Stock.
--------------------------------------------------
(a) Holdings shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, consummate any Asset Disposition unless
(i) Holdings or such Restricted Subsidiary receives consideration at the time of
such Asset Disposition at least equal to the fair market value (including the
value of all non-cash consideration), as determined in good faith by the Board
of Directors of Holdings, of the shares and assets subject to such Asset
Disposition, and at least 75% of the consideration thereof received by Holdings
or such Restricted Subsidiary is in the form of cash or cash equivalents and
(ii) an amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by Holdings (or such Restricted Subsidiary, as the case
may be) (A) first, to the extent Holdings elects (or is required by the terms of
any Indebtedness), to prepay, repay or redeem (and permanently reduce the
commitments under) Indebtedness under the Bank Credit Agreement or Indebtedness
of any Restricted Subsidiary within one year from the later of the date of such
Asset Disposition or the receipt of such Net Available Cash (the "Receipt Date")
------------
and/or to acquire Additional Assets; provided, however, that Holdings shall be
required to commit such Net Available Cash to the acquisition of Additional
Assets within nine months from the later of the date of such Asset Disposition
or the Receipt Date and shall be required to consummate the acquisition of such
Additional Assets within fifteen months from the Receipt Date; provided,
further, that if the other party to such acquisition refuses or fails, after the
first anniversary of the Receipt Date, to consummate such acquisition, Holdings
shall apply such Net Available Cash, within fifteen months from the Receipt
Date, as provided in the first part of this clause (A) or clause (B); (B)
second, to the extent of the balance of such Net Available Cash after
application in accordance with clause (A), to make an offer (an "Asset
-----
Disposition Offer") pursuant to paragraph (b) below (x) to the Holders to
- -----------------
purchase Notes pursuant to and subject to the conditions contained in this
Indenture and (y) if applicable, to the holders of other Indebtedness of
Holdings that ranks pari passu with the Notes (the "Other Debt") and that by its
----------
terms requires Holdings to make an offer to purchase such Other Debt upon
consummation of an Asset Disposition, to purchase such Other Debt on a pro rata
basis with the Notes; and (C) third, to the extent of the balance of such Net
Available Cash after application in accordance with clauses (A) and (B) to any
other application or use not prohibited by this Indenture. Notwithstanding the
foregoing provisions of this paragraph, Holdings and the Restricted Subsidiaries
shall not be required to apply the Net Available Cash in accordance with this
paragraph until the aggregate Net Available Cash from all Asset Dispositions
which is not applied in accordance with this paragraph exceeds $10.0 million (at
which time, the entire unutilized Net Available Cash, and not just the amount in
excess of $10.0 million, shall be applied pursuant to this paragraph).
For the purposes of this Section 10.15, the following are deemed to be
cash or cash equivalents: (x) the express assumption of Indebtedness of
Holdings or any Restricted Subsidiary and the release of Holdings or such
Restricted Subsidiary from all liability on such Indebtedness in connection with
such Asset Disposition; (y) securities received by Holdings or any Restricted
Subsidiary from the transferee that are con-
<PAGE>
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verted by Holdings or such Restricted Subsidiary into cash within 180 days of
closing the transaction; and (z) Temporary Cash Investments.
(b) In the event of an Asset Disposition that requires the purchase
of the Notes and, if applicable, Other Debt pursuant to clause (a)(ii)(B) of
this Section 10.15, Holdings will be required to purchase (i) Notes tendered
pursuant to an offer by Holdings for the Notes at a purchase price of 100% of
their aggregate Accreted Value, plus accrued and unpaid interest, if any, at the
date of purchase, if such purchase occurs prior to August 15, 2003, or 100% of
their aggregate principal amount, plus accrued but unpaid interest, if any, to
the date of purchase, if such purchase occurs thereafter, and (ii) if
applicable, Other Debt to the extent required thereby and provided there is a
permanent reduction in the principal amount thereof, in each case, in accordance
with the procedures (including prorating in the event of oversubscription) set
forth in this Indenture.
(c) Notice of an Asset Disposition Offer shall be mailed by Holdings
not more than 20 Business Days after the obligation to make such Asset
Disposition Offer arises to the Holders of Notes at their last registered
addresses with a copy to the Trustee and the Paying Agent. The Asset
Disposition Offer shall remain open from the time of mailing for at least 20
Business Days and until 5:00 p.m., New York City time, on the date fixed for
purchase of Notes validly tendered and not withdrawn, which date shall be not
later than the 30th Business Day following the mailing of such Asset Disposition
Offer (the "Asset Disposition Offer Purchase Date"). The notice, which shall
-------------------------------------
govern the terms of the Asset Disposition Offer, shall include such disclosures
as are required by law and shall state:
(i) that the Asset Disposition Offer is being made pursuant to this
Section 10.15 and that the Asset Disposition Offer shall remain open for a
period of 20 Business Days or such longer period as may be required by law;
(ii) the purchase price (including the amount of accrued interest,
if any) for each Note, the Asset Disposition Offer Purchase Date and the
date on which the Asset Disposition Offer expires;
(iii) that any Note not tendered for payment will continue to
increase in Accreted Value or accrue interest in accordance with the terms
thereof;
(iv) that, unless Holdings shall default in the payment of the
purchase price, any Note accepted for payment pursuant to the Asset
Disposition Offer shall cease to increase in Accreted Value or accrue
interest after the Asset Disposition Offer Purchase Date;
(v) that Holders electing to have Notes purchased pursuant to an
Asset Disposition Offer will be required to surrender their Notes to the
Paying Agent at the address specified in the notice prior to 5:00 p.m., New
York City time, on the Asset Disposition Offer Purchase Date and must
complete any form letter of transmittal proposed by Holdings and acceptable
to the Trustee and the Paying Agent;
(vi) that Holders of Notes will be entitled to withdraw their
election if the Paying Agent receives, not later than 5:00 p.m., New York
City time, on the Asset Disposition Offer Purchase Date, a facsimile
transmission or letter setting forth the name of the Holders, the principal
amount of Notes the Holders delivered for purchase, the Note certificate
number (if any) and a statement that such Holder is withdrawing his
election to have such Notes purchased;
<PAGE>
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(vii) that Holders whose Notes are purchased only in part will be
issued Notes of like tenor equal in principal amount to the unpurchased
portion of the Notes surrendered;
(viii) the instructions that Holders must follow in order to tender
their Notes; and
(ix) a description of the transaction or transactions resulting in
such Asset Disposition Offer.
On the Asset Disposition Offer Purchase Date, Holdings will (i) accept
for payment Notes or portions thereof tendered pursuant to the Asset Disposition
Offer, (ii) deposit with the Paying Agent money, in immediately available funds,
sufficient to pay the purchase price of all Notes or portions thereof so
tendered and accepted and (iii) deliver to the Trustee the Notes so accepted
together with an Officers' Certificate setting forth the Notes or portions
thereof tendered to and accepted for payment by Holdings. The Paying Agent will
promptly mail or deliver to the Holders of Notes so accepted payment in an
amount equal to the purchase price, and the Trustee shall promptly authenticate
and mail or deliver to such Holders a new Note of like tenor equal in principal
amount to any unpurchased portion of the Note surrendered. Any Notes not so
accepted shall be promptly mailed or delivered by Holdings to the Holder
thereof. Holdings will publicly announce the results of the Asset Disposition
Offer not later than the first Business Day following the Asset Disposition
Offer Purchase Date.
(d) Holdings shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, Holdings shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this clause by virtue thereof.
Section 10.16. Limitation on Liens.
-------------------
Holdings shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, create or permit to exist any Lien upon any of its
property or assets, now owned or hereafter acquired, securing any obligation
unless concurrently with the creation of such Lien effective provision is made
to secure the Notes equally and ratably with such obligation for so long as such
obligation is so secured; provided, that, if such obligation is a Subordinated
Obligation, the Lien securing such obligation shall be subordinated and junior
to the Lien securing the Notes with the same or lesser relative priority as such
Subordinated Obligation shall have been with respect to the Notes. The
preceding restriction shall not require Holdings or any Restricted Subsidiary to
secure the Notes if the Lien consists of the following:
(a) Liens created by this Indenture or otherwise securing the Notes,
Liens securing Indebtedness Incurred under the Bank Credit Agreement and
Liens on assets of Telemundo or any of its Subsidiaries existing as of the
Issue Date;
(b) Permitted Liens;
(c) Liens securing any Indebtedness of any Restricted Subsidiary
permitted to be Incurred pursuant to this Indenture;
(d) Liens to secure Purchase Money Indebtedness issued by Holdings or
a Restricted Subsidiary; provided, however, that (a) the Indebtedness
secured by such Liens shall have been permitted to be
<PAGE>
-69-
Incurred under Section 10.11 and (b) such Liens shall not encumber any
property of Holdings or any Restricted Subsidiary other than the property
acquired or any improvement or accessions on or proceeds of such property
and shall attach to such property within 180 days of the acquisition or
completion of construction of such property;
(e) Liens on the assets or property of a Restricted Subsidiary
existing at the time such Restricted Subsidiary becomes a Restricted
Subsidiary and not incurred as a result of (or in connection with or in
anticipation of) such Restricted Subsidiary becoming a Restricted
Subsidiary; provided, however, that such Liens do not extend to or cover
any other property of Holdings or any other Restricted Subsidiary;
(f) Liens deemed to exist by virtue of the buyout provisions
contained in Sections 6 and 7 of the Chicago Joint Venture Agreement;
(g) Liens on property at the time of acquisition thereof by Holdings
or any Restricted Subsidiary provided such Liens were not given as a result
of, in connection with or in anticipation of such acquisition;
(h) Liens securing Capital Lease Obligations, Acquired Indebtedness
and Attributable Debt Incurred pursuant to clause (b)(7) of Section 10.11;
(i) Liens securing Indebtedness Incurred to Refinance Indebtedness
which has been secured by a Lien permitted under this Indenture and is
permitted to be Refinanced under this Indenture; provided, however, that
such Liens do not extend to or cover any property of Holdings or any
Restricted Subsidiary not securing the Indebtedness so Refinanced; or
(j) Liens on assets of Holdings or any Restricted Subsidiary securing
Indebtedness in an aggregate amount not to exceed $10 million.
Section 10.17. Limitation on Sale/Leaseback Transactions.
-----------------------------------------
Holdings shall not, and shall not permit any Restricted Subsidiary to,
enter into any Sale/Leaseback Transaction with respect to any property unless
(i) Holdings or such Restricted Subsidiary would be (A) in compliance with
Section 10.11 immediately after giving effect to such Sale/Leaseback Transaction
and (B) entitled to create a Lien on such property securing the Attributable
Debt with respect to such Sale/Leaseback Transaction without securing the Notes
pursuant to Section 10.16, (ii) the net proceeds received by Holdings or any
Restricted Subsidiary in connection with such Sale/Leaseback Transaction are at
least equal to the fair market value (as determined by the Board of Directors)
of such property and (iii) Holdings or such Restricted Subsidiary applies the
proceeds of such transaction in compliance with Section 10.15.
Section 10.18. Limitation on Asset Swaps.
-------------------------
Holdings will not, and will not permit any Restricted Subsidiary to,
engage in any Asset Swaps, unless:
(i) at the time of entering into the agreement with respect thereto
and immediately after giving effect to the proposed Asset Swap, no Default
shall have occurred and be continuing;
<PAGE>
-70-
(ii) the respective fair market values of the Productive Assets (to
be determined in good faith by the Board of Directors of Holdings and to be
evidenced by a resolution of such Board of Directors set forth in an
Officer's Certificate delivered to the Trustee) being purchased and sold by
Holdings or any Restricted Subsidiary are substantially the same at the
time of entering into such agreement; and
(iii) the cash payments, if any, received by Holdings or such
Restricted Subsidiary in connection with such Asset Swap are treated as Net
Available Cash received from an Asset Disposition.
Section 10.19. Limitation on Restrictions on Distributions
from Restricted Subsidiaries.
-----------------------------
Holdings shall not, and shall not permit any Restricted Subsidiary to,
create or otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary (a) to
pay dividends or make any other distributions on its Capital Stock to Holdings
or a Restricted Subsidiary or pay any Indebtedness owed to Holdings, (b) to make
any loans or advances to Holdings or (c) to transfer any of its property or
assets to Holdings, except: (i) any Permitted Restriction; (ii) any encumbrance
or restriction pursuant to any agreement in effect at or entered into on the
date of this Indenture as such agreement is in effect on such date; (iii) any
encumbrance or restriction with respect to a Person pursuant to an agreement
relating to any Indebtedness Incurred by such Person prior to the date on which
such Person became a Restricted Subsidiary and not Incurred by such Person in
connection with, or in anticipation or contemplation of, such Person becoming a
Restricted Subsidiary; (iv) any encumbrance or restriction pursuant to an
agreement effecting Refinancing Indebtedness Incurred pursuant to an agreement
referred to in clause (ii) or (iii) above or this clause (iv) or contained in
any amendment to an agreement referred to in clause (ii) or (iii) above or this
clause (iv); provided, however, that the encumbrances and restrictions with
respect to any such Restricted Subsidiary contained in any such refinancing
agreement or amendment are no less favorable to the Holders in any material
respect as determined in good faith by the Board of Directors of Holdings than
encumbrances and restrictions with respect to such Restricted Subsidiary
contained in such agreements; (v) any such encumbrance or restriction (A)
consisting of customary non-assignment provisions in leases to the extent such
provisions restrict the subletting, assignment or transfer of the lease or the
property leased thereunder or in purchase money financings or (B) by virtue of
any Indebtedness, transfer, option or right with respect to, or any Lien on, any
property or assets of Holdings or any Restricted Subsidiary not otherwise
prohibited by this Indenture; (vi) in the case of clause (c) above, restrictions
contained in security agreements or mortgages securing Indebtedness of a
Restricted Subsidiary to the extent such restrictions restrict the transfer of
the property subject to such security agreements or mortgages; (vii)
encumbrances or restrictions imposed by operation of any applicable law, rule,
regulation or order; (viii) any restriction with respect to assets imposed
pursuant to an agreement entered into for the sale or disposition of such assets
pending the closing of such sale or disposition; (ix) customary non-assignment
provisions in licenses of intellectual property entered into in the ordinary
course of business (including programming agreements) and in Local Marketing
Agreements; (x) Capitalized Lease Obligations that are otherwise permitted
hereunder; provided, however, that such encumbrance or restriction does not
extend to any property other than that subject to the underlying lease; (xi) any
restriction imposed by Liens permitted under this Indenture; and (xii) any
encumbrance or restriction relating to an agreement relating to the acquisition
of assets or property so long as such encumbrances and restrictions relate
solely to the assets so acquired (and any improvements thereon).
<PAGE>
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Section 10.20. Limitation on the Sale or Issuance of Capital Stock
of Restricted Subsidiaries.
---------------------------
Holdings shall not sell or otherwise dispose of any shares of Capital
Stock of a Restricted Subsidiary, and shall not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of any
shares of its Capital Stock except (i) to Holdings or a Wholly Owned Restricted
Subsidiary; (ii) directors' qualifying shares or shares required by applicable
law to be held by a person other than Holdings or a Restricted Subsidiary; (iii)
the sale of all of the Capital Stock of a Restricted Subsidiary in accordance
with Section 10.15; (iv) in the case of issuance of Capital Stock by a non-
Wholly Owned Restricted Subsidiary if, after giving effect to such issuance,
such Restricted Subsidiary remains a Restricted Subsidiary; or (v) shares of
Capital Stock in any Restricted Subsidiary the assets of which are limited to a
low-power television station, the station license therefor and assets directly
related thereto.
Section 10.21. Compliance Certificates and Opinions.
------------------------------------
Upon any application or request by Holdings to the Trustee to take any
action under any provision of this Indenture, Holdings will furnish to the
Trustee an Officers' Certificate stating that all conditions precedent, if any,
provided for in this Indenture (including any covenants compliance with which
constitutes a condition precedent) relating to the proposed action have been
complied with, and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that, in the case of any such application or request as to which the furnishing
of such documents, certificates and/or opinions is specifically required by any
provision of this Indenture relating to such particular application or request,
no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture will include:
(i) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(iii) a statement that, in the opinion of each such individual, he
has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether such covenant or condition has
been complied with; and
(iv) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 10.22. Amendment of Affiliation Agreement.
----------------------------------
Holdings shall not amend the Affiliation Agreement except in a manner
that the Board of Directors of Holdings determines in good faith is not
materially adverse to Holdings (such determination of the Board of Directors of
Holdings to include the affirmative vote of at least two members who have been
designated as independent directors pursuant to the Stockholders Agreement).
<PAGE>
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ARTICLE ELEVEN
SATISFACTION AND DISCHARGE
Section 11.01. Satisfaction and Discharge of Indenture.
---------------------------------------
The Indenture will cease to be of further effect (except as to
surviving rights of registration of transfer or exchange of the Notes, as
expressly provided for in the Indenture) as to all outstanding Notes when: (i)
either (a) all the Notes theretofore authenticated and delivered (except lost,
stolen or destroyed Notes which have been replaced or paid) have been delivered
to the Trustee for cancellation or (b) all Notes not theretofore delivered to
the Trustee for cancellation have become due and payable, will become due and
payable within one year or are to be called for redemption within one year under
irrevocable arrangements reasonably satisfactory to the Trustee for the giving
of notice of redemption by the Trustee and Holdings has irrevocably deposited or
caused to be deposited with the Trustee an amount in United States dollars
sufficient to pay and discharge the entire indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for the Accreted Value
of, premium, if any, and interest to the date of deposit or maturity or
redemption date; (ii) Holdings has paid or caused to be paid all other sums then
due and payable under the Indenture by Holdings; and (iii) Holdings has
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel each
stating that all conditions precedent under the Indenture relating to the
satisfaction and discharge of the Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of Holdings to the Trustee under Sections 4.05 and 6.07 and, if
money shall have been deposited with the Trustee pursuant to subclause (1)(b) of
this Section 11.01, the obligations of the Trustee under Section 11.02 and the
last paragraph of Section 10.03 shall survive.
Section 11.02. Application of Trust Money.
--------------------------
Subject to the provisions of the last paragraph of Section 10.03, all
money deposited with the Trustee pursuant to Section 11.01 shall be held in
trust and applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent
(including Holdings acting as its own Paying Agent) as the Trustee may
determine, to the persons entitled thereto, of the Accreted Value of, premium,
if any, and interest on the Notes for whose payment such money has been
deposited with the Trustee.
Any money deposited with the Trustee or any Paying Agent, or then held
by Holdings, in trust for the payment of the principal or Accreted Value of,
premium, if any, or interest on any Note and remaining unclaimed for two years
after such principal or Accreted Value, premium, if any, or interest has become
due and payable shall be paid to Holdings upon receipt of a Holdings Request
therefor, or (if then held by Holdings) will be discharged from such trust; and
the Holder of such Note will thereafter, as an unsecured general creditor, look
only to Holdings for payment thereof, and all liability of the Trustee or such
Paying Agent with respect to such trust money, and all liability of Holdings as
trustee thereof, will thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the
expense of Holdings cause to be published once, at the option of Holdings in The
New York Times or The Wall Street Journal (national edition), notice that such
money remains unclaimed and that, after a date specific therein, which shall not
be less than 30 days from the date of such publication, any unclaimed balance of
such money then remaining shall be repaid to Holdings.
<PAGE>
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ARTICLE TWELVE
REDEMPTION
Section 12.01. Notices to the Trustee.
----------------------
If Holdings elects to redeem Notes pursuant to Section 2 of the
Initial Notes or the Exchange Notes, it shall notify the Trustee of the
Redemption Date and principal amount of Notes to be redeemed. Holdings shall
notify the Trustee of any redemption at least 45 days before the Redemption Date
(unless a shorter period is acceptable to the Trustee) by an Officers'
Certificate, stating that such redemption will comply with the provisions hereof
and of the Notes.
Section 12.02. Selection of Notes To Be Redeemed.
---------------------------------
In the event that less than all of the Notes are to be redeemed at any
time, selection of such Notes for redemption will be made by the Trustee in
compliance with any applicable requirements of the principal national securities
exchange, if any, on which the Notes are listed or, if the Notes are not then
listed on a national securities exchange (or if the Notes are so listed but the
exchange does not impose requirements with respect to the selection of debt
securities for redemption), on a pro rata basis, by lot or by such method as the
Trustee in its sole discretion shall deem fair and appropriate;
provided, however, that no Notes of a principal amount at maturity of $1,000 or
less shall be redeemed in part. The Trustee shall promptly notify Holdings and
the Registrar in writing of the Notes selected for redemption and, in the case
of any Notes selected for partial redemption, the principal amount at maturity
thereof to be redeemed. For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to redemption of Notes shall relate,
in the case of any Note redeemed or to be redeemed only in part, to the portion
of the principal amount of such Note which has been or is to be redeemed.
Section 12.03. Notice of Redemption.
--------------------
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Notes to be redeemed, at the address of such Holder
appearing in the Note Register maintained by the Registrar. All notices of
redemption shall identify the Notes to be redeemed and shall state:
(a) the Redemption Date;
(b) the Redemption Price, including the amount of accrued and unpaid
interest, if any, to be paid;
(c) that, unless Holdings defaults in making the redemption payment,
Accreted Value on Notes called for redemption ceases to increase and
interest on Notes called for redemption ceases to accrue on and after the
Redemption Date, and the only remaining right of the Holders of such Notes
is to receive payment of the Redemption Price plus accrued and unpaid
interest on the Notes through the Redemption Date, upon surrender to the
Paying Agent of the Notes redeemed;
(d) if any Note is to be redeemed in part, the portion of the
principal amount at maturity (equal to $1,000 or any integral multiple
thereof) of such Note to be redeemed and that on and after the
<PAGE>
-74-
Redemption Date, upon surrender for cancellation of such Note to the Paying
Agent, a new Note or Notes in the aggregate Accreted Value and principal
amount at maturity equal to the unredeemed portion thereof will be issued
without charge to the Noteholder;
(e) that Notes called for redemption (other than a Global Note) must
be surrendered to the Paying Agent to collect the Redemption Price and the
name and address of the Paying Agent; and
(f) the CUSIP or ISIN number, if any, relating to such Notes.
Notice of redemption of Notes to be redeemed at the election of
Holdings shall be given by Holdings or, at Holdings' written request, by the
Trustee in the name and at the expense of Holdings.
Section 12.04. Effect of Notice of Redemption.
------------------------------
Once notice of redemption is mailed, Notes called for redemption
become due and payable on the Redemption Date and at the Redemption Price. Upon
surrender to the Paying Agent, such Notes called for redemption shall be paid at
the Redemption Price plus accrued interest, if any, to the Redemption Date, but
interest installments whose maturity is on or prior to such Redemption Date will
be payable on the relevant Interest Payment Dates to the Holders of record at
the close of business on the relevant record dates referred to in the Notes.
Section 12.05. Deposit of Redemption Price.
---------------------------
On or prior to any Redemption Date, Holdings shall deposit with the
Paying Agent an amount of money in same day funds sufficient to pay the
Redemption Price of, and any accrued interest on, all the Notes or portions
thereof which are to be redeemed on that date, other than Notes or portions
thereof called for redemption on that date which have been delivered by Holdings
to the Trustee for cancellation. The Trustee or the Paying Agent shall promptly
return to Holdings any money deposited with the Trustee or the Paying Agent by
Holdings in excess of the amounts necessary to pay the Redemption Price of all
Notes to be redeemed.
If Holdings complies with the preceding paragraph, then, unless
Holdings defaults in the payment of such Redemption Price, Accreted Value or
interest on the Notes to be redeemed will cease to increase or accrue, as the
case may be, on and after the applicable Redemption Date, whether or not such
Notes are presented for payment, and the Holders of such Notes shall have no
further rights with respect to such Notes except for the right to receive the
Redemption Price, plus accrued and unpaid interest, if any, on the Notes through
the Redemption Date, upon surrender of such Notes. If any Note called for
redemption shall not be so paid upon surrender thereof for redemption, the
Accreted Value, premium, if any, and, to the extent lawful, accrued interest
thereon shall, until paid, bear interest from the Redemption Date at the rate
provided in the Notes.
Section 12.06. Notes Redeemed or Purchased in Part.
-----------------------------------
Upon surrender to the Paying Agent of a Note which is to be redeemed
in part, Holdings shall execute and the Trustee shall authenticate and deliver
to the Holder of such Note without service charge, a new Note or Notes, of any
authorized denomination as requested by such Holder in aggregate Accreted Value
and principal amount equal to, and in exchange for, the unredeemed portion of
the principal of the Note so surrendered that is not redeemed.
<PAGE>
-75-
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the day and year first written above.
TELEMUNDO HOLDINGS, INC.
By: /s/ Bruce H. Spector
--------------------------------------
Name: Bruce H. Spector
Title: Vice President
BANK OF MONTREAL TRUST COMPANY,
as Trustee
By: /s/ Amy Roberts
--------------------------------------
Name: Amy Roberts
Title: Vice President
<PAGE>
EXHIBIT 4.2
-----------
[FORM OF NOTE]
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE OF A DEPOSITARY OR A SUCCESSOR DEPOSITARY. THIS NOTE IS NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITARY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE, AND NO TRANSFER OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A
WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE
REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO HOLDINGS OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANS-ACTION
EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE
"SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF
THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF
THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS NOTE
AGREES FOR THE BENEFIT OF THE ISSUER HEREOF THAT (A) THIS NOTE MAY BE OFFERED,
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (I) TO THE ISSUER OR ITS
SUBSIDIARIES, (II) INSIDE THE UNITED STATES TO A PERSON WHOM THE SELLER REASONA-
BLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(III) OUT-SIDE OF THE UNITED STATES IN A TRANSACTION COMPLYING WITH THE
PROVISIONS OF RULE 904 UNDER THE SECURITIES ACT, (IV) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE) OR (V) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS
NOTE FROM IT OF THE RE-SALE RESTRICTIONS REFERRED TO IN (A) ABOVE.
THIS NOTE HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR U.S.
FEDERAL INCOME TAX PURPOSES. FOR INFORMATION REGARDING THE ISSUE PRICE,
DETERMINATION OF ORIGINAL ISSUE DISCOUNT, THE ISSUE DATE AND THE YIELD TO
1
<PAGE>
MATURITY OF THE NOTES, PLEASE CONTACT THE CHIEF FINANCIAL OFFICER OF THE ISSUER
AT THE ADDRESS SET FORTH ON THE REVERSE OF THIS NOTE.
2
<PAGE>
TELEMUNDO HOLDINGS, INC.
_________________
11 1/2% SENIOR DISCOUNT NOTES DUE 2008, SERIES A
CUSIP No. 87944F AA O
No. ___________ $
Telemundo Holdings, Inc., a corporation incorporated under the laws of
the State of Delaware (herein called "Holdings," which term includes any
successor corporation under the Indenture hereinafter referred to), for value
received, hereby promises to pay to _______________ or registered assigns, the
principal sum of _______________ Dollars on August 15, 2008, at the office or
agency of Holdings referred to below. The Notes are general unsecured
obligations of Holdings, limited to $218,838,000 aggregate principal amount at
maturity, and will mature on August 15, 2008. The Notes will accrete at a rate
of 11 1/2% per annum to 100% of the principal amount at maturity by August 15,
2003. Except as described below under "Registration Rights," no cash interest
will accrue on the Notes prior to August 15, 2003. Cash interest will accrue on
the Notes at the rate per annum shown above from August 15, 2003, or from the
most recent date to which interest has been paid or provided for, payable
semiannually on February 15 and August 15 of each year, commencing February 15,
2004 (each, an "Interest Payment Date"), to Holders of record at the close of
business on the February 1 or August 1 immediately preceding the Interest
Payment Date. Interest shall be computed on the basis of a 360-day year of
twelve 30-day months.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in the Indenture referred to on the
reverse hereof, be paid to the person in whose name this Note (or one or more
predecessor Notes) is registered at the close of business on February 1 and
August 1 (each, a "Regular Record Date"), whether or not a Business Day, as the
case may be, next preceding such Interest Payment Date. Any such interest not
so punctually paid, or duly provided for, and interest on such defaulted
interest at the then applicable interest rate borne by the Notes, to the extent
lawful, shall forthwith cease to be payable to the Holder on such Regular Record
Date, and may be paid to the person in whose name this Note (or one or more
predecessor Notes) is registered at the close of business on a Special Record
Date for the payment of such defaulted interest to be fixed by the Trustee,
notice of which shall be given to Holders of Notes not less than 10 days prior
to such Special Record Date, or may be paid at any time in any other lawful
manner not inconsistent with the requirements of any securities exchange on
which the Notes may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in the Indenture.
Payment of the principal of, premium, if any, and interest on this
Note will be made at the office or agency of Holdings maintained for that
purpose in the Borough of Manhattan in The City of New York, State of New York,
or at such other office or agency of Holdings as may be maintained for such
purpose, in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts; provided,
however, that payment of interest may be made at the option of Holdings by check
mailed to the address of the person entitled thereto as such address shall
appear on the Note Register.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof.
3
<PAGE>
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof by manual signature, this Note
shall not be entitled to any benefit under the Indenture, or be valid or
obligatory for any purpose.
[Remainder of Page Intentionally Left Blank]
4
<PAGE>
IN WITNESS WHEREOF, Holdings has caused this instrument to be duly
executed.
TELEMUNDO HOLDINGS, INC.
Dated:
By: ____________________________________________
Name:
Title:
By: ____________________________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the 11 1/2% Senior Discount Notes Due 2008, Series A,
referred to in the within-mentioned Indenture.
BANK OF MONTREAL TRUST COMPANY,
as Trustee
By: ____________________________________________
Authorized Signatory
5
<PAGE>
[REVERSE OF NOTE]
1. Indenture. This Note is one of a duly authorized issue of Notes
---------
of Holdings designated as its 11 1/2% Senior Discount Notes Due 2008, Series A
(herein called the "Initial Notes"). The Notes are limited (except as otherwise
provided in the Indenture referred to below) in aggregate principal amount at
maturity to $218,838,000, which may be issued under an indenture (herein called
the "Indenture"), dated as of August 12, 1998, between Holdings and Bank of
Montreal Trust Company, as trustee (herein called the "Trustee," which term
includes any successor Trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties, obligations and immunities
thereunder of Holdings, the Trustee and the Holders of the Notes, and of the
terms upon which the Notes are, and are to be, authenticated and delivered. The
Notes include the Initial Notes, the Private Exchange Notes and the Unrestricted
Notes (including the Exchange Notes referred to below), issued in exchange for
the Initial Notes pursuant to the Registration Rights Agreement. The Initial
Notes, the Private Exchange Notes and the Unrestricted Notes are treated as a
single class of securities under the Indenture.
All terms used in this Note which are defined in the Indenture and not
otherwise defined herein shall have the meanings assigned to them in the
Indenture.
The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939 (the
"TIA"). Notwithstanding anything to the contrary herein, the Notes are subject
to all such terms, and Holders of Notes are referred to this Indenture and the
TIA for a statement of such terms.
No reference herein to this Indenture and no provisions of this Note
or of the Indenture shall alter or impair the obligation of Holdings, which is
absolute and unconditional, to pay the principal of, premium, if any, and
interest on this Note at the times, place, and rate, and in the coin or
currency, herein prescribed.
2. Optional Redemption. Except as set forth in the following
-------------------
paragraph, the Notes will not be redeemable at the option of Holdings prior to
August 15, 2003. Thereafter, the Notes will be redeemable, at Holdings' option,
in whole or in part, at any time or from time to time, upon not less than 30 nor
more than 60 days' prior notice mailed by first-class mail to each Holder's
registered address, at the following redemption prices (expressed in percentages
of principal amount), plus accrued and unpaid interest to the Redemption Date
(subject to the right of Holders of record on the relevant Regular Record Date
to receive interest due on the relevant Interest Payment Date), if redeemed
during the 12-month period commencing on August 15 of the years set forth below:
<TABLE>
<CAPTION>
Redemption
Period Price
------ ----------
<S> <C>
2003......................................................................... 105.750%
2004......................................................................... 103.833%
2005......................................................................... 101.917%
2006 and thereafter.......................................................... 100.000%
</TABLE>
In addition, at any time and from time to time prior to August 15,
2001, Holdings may redeem in the aggregate up to 35% of the aggregate principal
amount at maturity of the Notes with the Net Cash Proceeds of one or more Public
Equity Offerings at a redemption price equal to 111 1/2% of their Accreted
Value, plus accrued and unpaid interest, if any, at the Redemption Date;
provided, however, that not less than 65% of
6
<PAGE>
the aggregate principal amount at maturity of Notes originally issued must
remain outstanding after each such redemption.
In the event that less than all of the Notes are to be redeemed at any
time, selection of such Notes for redemption will be made by the Trustee in
compliance with any applicable requirements of the principal national securities
exchange, if any, on which the Notes are listed or, if the Notes are not then
listed on a national securities exchange (or if the Notes are so listed but the
exchange does not impose requirements with respect to the selection of debt
securities for redemption), on a pro rata basis, by lot or by such method as the
Trustee in its sole discretion shall deem fair and appropriate;
provided, however, that no Notes of a principal amount at maturity of $1,000 or
less shall be redeemed in part. The Trustee shall promptly notify Holdings and
the Registrar in writing of the Notes selected for redemption and, in the case
of any Notes selected for partial redemption, the principal amount at maturity
thereof to be redeemed. A new Note in Accreted Value and principal amount equal
to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Note.
3. Registration Rights. Pursuant to the Registration Rights
-------------------
Agreement by and among Holdings and the Initial Purchasers, Holdings will be
obligated to consummate an exchange offer pursuant to which the Holder of this
Note shall have the right to exchange this Note for 11 1/2% Senior Discount
Notes Due 2008, Series B, of Holdings (herein called the "Exchange Notes"),
which have been registered under the Securities Act, in like principal amount at
maturity and Accreted Value and having identical terms as the Notes (other than
as set forth in this paragraph). The Holders of Notes shall be entitled to
receive certain additional interest payments in the event such exchange offer is
not consummated and upon certain other conditions, all pursuant to and in
accordance with the terms of the Registration Rights Agreement.
4. Offers to Purchase. Sections 10.10 and 10.15 of the Indenture
------------------
provide that upon the occurrence of a Change of Control and following certain
Asset Dispositions, and subject to certain conditions and limitations contained
therein, Holdings shall make an offer to purchase all or a portion of the Notes
in accordance with the procedures set forth in this Indenture.
5. Defaults and Remedies. If an Event of Default occurs and is
---------------------
continuing, the Accreted Value of all of the Outstanding Notes, plus all accrued
and unpaid interest, if any, to and including the date the Notes are paid, may
be declared due and payable in the manner and with the effect provided in this
Indenture.
6. Defeasance. The Indenture contains provisions (which provisions
----------
apply to this Note) for defeasance at any time of (a) the entire indebtedness of
Holdings on this Note and (b) certain restrictive covenants and related Defaults
and Events of Default, in each case upon compliance by Holdings with certain
conditions set forth therein.
7. Amendments and Waivers. The Indenture permits, with certain
----------------------
exceptions as provided therein, the amendment thereof and the modification of
the rights and obligations of Holdings and the rights of the Holders under the
Indenture at any time by Holdings and the Trustee with the consent of the
Holders of not less than a majority of the aggregate principal amount at
maturity of the Notes at the time Outstanding. The Indenture also contains
provisions permitting the Holders of specified percentages of the principal
amount at maturity of the Notes at the time Outstanding, on behalf of the
Holders of all the Notes, to waive compliance by Holdings with certain
provisions of the Indenture and certain past Defaults under the Indenture and
this Note and their consequences. Any such consent or waiver by or on behalf of
the Holder of the Note shall be conclusive and binding upon such Holder and upon
all future Holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent or waiver is made upon this Note.
7
<PAGE>
8. Denominations, Transfer and Exchange. The Notes are issuable only
------------------------------------
in registered form without coupons in denominations of $1,000 principal amount
at maturity and any integral multiple thereof. As provided in the Indenture and
subject to certain limitations therein set forth, the Notes are exchangeable for
a like aggregate principal amount at maturity and Accreted Value of Notes of a
different authorized denomination, as requested by the Holder surrendering the
same.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Note is registrable on the Note Register
of Holdings, upon surrender of this Note for registration of transfer at the
office or agency of Holdings maintained for such purpose in the Borough of
Manhattan in The City of New York, State of New York, or at such other office or
agency of Holdings as may be maintained for such purpose, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to Holdings
and the Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Notes, of authorized
denominations and for the same aggregate principal amount at maturity and
Accreted Value, will be issued to the designated transferee or transferees.
No service charge shall be made for any registration of transfer or
exchange or redemption of Notes, but Holdings may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
9. Persons Deemed Owners. Prior to and at the time of due
---------------------
presentment of this Note for registration of transfer, Holdings, the Trustee and
any agent of Holdings or the Trustee may treat the person in whose name this
Note is registered as the owner hereof for all purposes, whether or not this
Note shall be overdue, and neither Holdings, the Trustee nor any agent shall be
affected by notice to the contrary.
10. Governing Law. THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY,
-------------
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
Holdings will furnish to any Holder of a Note upon written request and
without charge a copy of the Indenture. Requests may be made to: TELEMUNDO
HOLDINGS, INC., c/o Telemundo Group, Inc., 2290 West 8th Avenue, Hialeah,
Florida 33010, Attention: Osvaldo F. Torres, Esq.
8
<PAGE>
ASSIGNMENT FORM
If you the holder want to assign this Note, fill in the form below and have your
signature guaranteed:
I or we assign and transfer this Note to
________________________________________________________________________________
(Insert assignee's social security or tax ID number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code) and irrevocably appoint
________________________________________________________________________________
agent to transfer this Note on the books of Holdings. The agent may substitute
another to act for such agent.
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date of the declaration by the SEC of the
effectiveness of a registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) the date two years (or such shorter period of time as
permitted by Rule 144 under the Securities Act or any successor provision
thereunder) after the later of the original issuance date appearing on the face
of this Note (or any predecessor Note) or the last date on which Holdings or any
Affiliate of Holdings was the owner of this Note (or any predecessor Note), the
undersigned confirms that it has not utilized any general solicitation or
general advertising in connection with the transfer and that:
[Check One]
---------
[ ] (a) this Note is being transferred in compliance with the exemption from
registration under the Securities Act provided by Rule 144A
thereunder.
or
--
[ ] (b) this Note is being transferred other than in accordance with (a) above
and documents are being furnished which comply with the conditions of
transfer set forth in this Note and the Indenture.
9
<PAGE>
If none of the foregoing boxes is checked and, in the case of (b) above, if the
appropriate document is not attached or otherwise furnished to the Trustee, the
Trustee or Registrar shall not be obligated to register this Note in the name of
any person other than the Holder hereof unless and until the conditions to any
such transfer of registration set forth herein and in Section 3.16 and Section
3.17 of this Indenture shall have been satisfied.
________________________________________________________________________________
Date: _________________ Your signature: ____________________________________
(Sign exactly as your name appears on
the other side of this Note)
By: ___________________________________
NOTICE: To be executed
by an executive officer
Signature Guarantee: ___________________________________________________________
SIGNATURE GUARANTEE
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding Holdings as the
undersigned has requested pursuant to Rule 144A (including the information
specified in Rule 144A(d)(4)) or has determined not to request such information
and that it is aware that the transferor is relying upon the undersigned's
foregoing representations in order to claim the exemption from registration
provided by Rule 144A.
Dated:_____________________ ________________________________________
NOTICE: To be executed by
an executive officer
10
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by Holdings pursuant to
Section 10.10 or 10.15 of the Indenture, check the appropriate box:
Section 10.10 [ ] Section 10.15 [ ]
If you wish to have a portion of this Note purchased by Holdings
pursuant to Section 10.10 or 10.15 of the Indenture, state the amount:
$____________________________________________________________________________
_____________________________________________________________________________
Date: ______________ Your signature: __________________________________
(Sign exactly as your name appears on
the other side of this Note)
By:_________________________________
NOTICE: To be executed
by an executive officer
Signature Guarantee: ____________________
SIGNATURE GUARANTEE
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
11
<PAGE>
TELEMUNDO HOLDINGS, INC.
_________________
11 1/2% SENIOR DISCOUNT NOTES DUE 2008, SERIES B
CUSIP No. 87944F AB 8
No. ___________ $
Telemundo Holdings, Inc., a corporation incorporated under the laws of
the State of Delaware (herein called "Holdings," which term includes any
successor corporation under the Indenture hereinafter referred to), for value
received, hereby promises to pay to _______________ or registered assigns, the
principal sum of _______________ Dollars on August 15, 2008, at the office or
agency of Holdings referred to below. The Notes are general unsecured
obligations of Holdings, limited to $218,838,000 aggregate principal amount at
maturity, and will mature on August 15, 2008. The Notes will accrete at a rate
of 11 1/2% per annum to 100% of the principal amount at maturity by August 15,
2003. Except as described below under "Registration Rights," no cash interest
will accrue on the Notes prior to August 15, 2003. Cash interest will accrue on
the Notes at the rate per annum shown above from August 15, 2003, or from the
most recent date to which interest has been paid or provided for, payable
semiannually on February 15 and August 15 of each year, commencing February 15,
2004 (each, an "Interest Payment Date"), to Holders of record at the close of
business on the February 1 or August 1 immediately preceding the Interest
Payment Date. Interest shall be computed on the basis of a 360-day year of
twelve 30-day months.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in the Indenture referred to on the
reverse hereof, be paid to the person in whose name this Note (or one or more
predecessor Notes) is registered at the close of business on February 1 and
August 1 (each, a "Regular Record Date"), whether or not a Business Day, as the
case may be, next preceding such Interest Payment Date. Any such interest not
so punctually paid, or duly provided for, and interest on such defaulted
interest at the then applicable interest rate borne by the Notes, to the extent
lawful, shall forthwith cease to be payable to the Holder on such Regular Record
Date, and may be paid to the person in whose name this Note (or one or more
predecessor Notes) is registered at the close of business on a Special Record
Date for the payment of such defaulted interest to be fixed by the Trustee,
notice of which shall be given to Holders of Notes not less than 10 days prior
to such Special Record Date, or may be paid at any time in any other lawful
manner not inconsistent with the requirements of any securities exchange on
which the Notes may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in the Indenture.
Payment of the principal of, premium, if any, and interest on this
Note will be made at the office or agency of Holdings maintained for that
purpose in the Borough of Manhattan in The City of New York, State of New York,
or at such other office or agency of Holdings as may be maintained for such
purpose, in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts; provided,
however, that payment of interest may be made at the option of Holdings by check
mailed to the address of the person entitled thereto as such address shall
appear on the Note Register.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof.
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof by manual signature, this Note
shall not be entitled to any benefit under the Indenture, or be valid or
obligatory for any purpose.
1
<PAGE>
[Remainder of Page Intentionally Left Blank]
2
<PAGE>
IN WITNESS WHEREOF, Holdings has caused this instrument to be duly
executed.
Dated: TELEMUNDO HOLDINGS, INC.
By: ___________________________________
Name:
Title:
By: ___________________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the 11 1/2% Senior Discount Notes Due 2008, Series B,
referred to in the within-mentioned Indenture.
BANK OF MONTREAL TRUST COMPANY
as Trustee
By: ____________________________________
Authorized Signature
3
<PAGE>
[REVERSE OF NOTE]
1. Indenture. This Note is one of a duly authorized issue of Notes
---------
of Holdings designated as its 11 1/2% Senior Discount Notes Due 2008, Series B
(herein called the "Initial Notes"). The Notes are limited (except as otherwise
provided in the Indenture referred to below) in aggregate principal amount at
maturity to $218,838,000, which may be issued under an indenture (herein called
the "Indenture"), dated as of August 12, 1998, between Holdings and Bank of
Montreal Trust Company, as trustee (herein called the "Trustee," which term
includes any successor Trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties, obligations and immunities
thereunder of Holdings, the Trustee and the Holders of the Notes, and of the
terms upon which the Notes are, and are to be, authenticated and delivered. The
Notes include the Initial Notes, the Private Exchange Notes and the Unrestricted
Notes (including the Exchange Notes referred to below), issued in exchange for
the Initial Notes pursuant to the Registration Rights Agreement. The Initial
Notes, the Private Exchange Notes and the Unrestricted Notes are treated as a
single class of securities under the Indenture.
All terms used in this Note which are defined in the Indenture and not
otherwise defined herein shall have the meanings assigned to them in the
Indenture.
The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939 (the
"TIA"). Notwithstanding anything to the contrary herein, the Notes are subject
to all such terms, and Holders of Notes are referred to the Indenture and the
TIA for a statement of such terms.
No reference herein to the Indenture and no provisions of this Note or
of the Indenture shall alter or impair the obligation of Holdings, which is
absolute and unconditional, to pay the principal of, premium, if any, and
interest on this Note at the times, place, and rate, and in the coin or
currency, herein prescribed.
2. Optional Redemption. Except as set forth in the following
-------------------
paragraph, the Notes will not be redeemable at the option of Holdings prior to
August 15, 2003. Thereafter, the Notes will be redeemable, at Holdings' option,
in whole or in part, at any time or from time to time, upon not less than 30 nor
more than 60 days' prior notice mailed by first-class mail to each Holder's
registered address, at the following redemption prices (expressed in percentages
of principal amount), plus accrued and unpaid interest to the Redemption Date
(subject to the right of Holders of record on the relevant Regular Record Date
to receive interest due on the relevant Interest Payment Date), if redeemed
during the 12-month period commencing on August 15 of the years set forth below:
<TABLE>
<CAPTION>
Redemption
Period Price
------ ----------
<S> <C>
2003...................................................... 105.750%
2004...................................................... 103.833%
2005...................................................... 101.917%
2006 and thereafter....................................... 100.000%
</TABLE>
In addition, at any time and from time to time prior to August 15,
2001, Holdings may redeem in the aggregate up to 35% of the aggregate principal
amount at maturity of the Notes with the Net Cash Proceeds of one or more Public
Equity Offerings at a redemption price equal to 111 1/2% of their Accreted
Value, plus accrued and unpaid interest, if any, at the Redemption Date;
provided, however, that not less than 65% of the aggregate principal amount at
maturity of Notes originally issued must remain outstanding after each such
redemption.
In the event that less than all of the Notes are to be redeemed at any
time, selection of such Notes for redemption will be made by the Trustee in
compliance with any applicable requirements of the principal national securities
exchange, if any, on which the Notes are listed or, if the Notes are not then
listed on a national securities exchange (or if the Notes are so listed but the
exchange does not impose requirements with respect to the selection
4
<PAGE>
of debt securities for redemption), on a pro rata basis, by lot or by such
method as the Trustee in its sole discretion shall deem fair and appropriate;
provided, however, that no Notes of a principal amount at maturity of $1,000 or
less shall be redeemed in part. The Trustee shall promptly notify Holdings and
the Registrar in writing of the Notes selected for redemption and, in the case
of any Notes selected for partial redemption, the principal amount at maturity
thereof to be redeemed. A new Note in Accreted Value and principal amount equal
to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Note.
3. Offers to Purchase. Sections 10.10 and 10.15 of the Indenture
------------------
provide that upon the occurrence of a Change of Control and following certain
Asset Dispositions, and subject to certain conditions and limitations contained
therein, Holdings shall make an offer to purchase all or a portion of the Notes
in accordance with the procedures set forth in the Indenture.
4. Defaults and Remedies. If an Event of Default occurs and is
---------------------
continuing, the Accreted Value of all of the Outstanding Notes, plus all accrued
and unpaid interest, if any, to and including the date the Notes are paid, may
be declared due and payable in the manner and with the effect provided in the
Indenture.
5. Defeasance. The Indenture contains provisions (which provisions
----------
apply to this Note) for defeasance at any time of (a) the entire indebtedness of
Holdings on this Note and (b) certain restrictive covenants and related Defaults
and Events of Default, in each case upon compliance by Holdings with certain
conditions set forth therein.
6. Amendments and Waivers. The Indenture permits, with certain
----------------------
exceptions as provided therein, the amendment thereof and the modification of
the rights and obligations of Holdings and the rights of the Holders under the
Indenture at any time by Holdings and the Trustee with the consent of the
Holders of not less than a majority of aggregate principal amount at maturity of
the Notes at the time Outstanding. The Indenture also contains provisions
permitting the Holders of specified percentages of the principal amount at
maturity of the Notes at the time Outstanding, on behalf of the Holders of all
the Notes, to waive compliance by Holdings with certain provisions of the
Indenture and certain past Defaults under the Indenture and this Note and their
consequences. Any such consent or waiver by or on behalf of the Holder of the
Note shall be conclusive and binding upon such Holder and upon all future
Holders of this Note and of any Note issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof whether or not notation of such
consent or waiver is made upon this Note.
7. Denominations, Transfer and Exchange. The Notes are issuable only
------------------------------------
in registered form without coupons in denominations of $1,000 principal amount
at maturity and any integral multiple thereof. As provided in the Indenture and
subject to certain limitations therein set forth, the Notes are exchangeable for
a like aggregate principal amount at maturity and Accreted Value of Notes of a
different authorized denomination, as requested by the Holder surrendering the
same.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Note is registrable on the Note Register
of Holdings, upon surrender of this Note for registration of transfer at the
office or agency of Holdings maintained for such purpose in the Borough of
Manhattan in The City of New York, State of New York, or at such other office or
agency of Holdings as may be maintained for such purpose, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to Holdings
and the Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Notes, of authorized
denominations and for the same aggregate principal amount at maturity and
Accreted Value, will be issued to the designated transferee or transferees.
No service charge shall be made for any registration of transfer or
exchange or redemption of Notes, but Holdings may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
8. Persons Deemed Owners. Prior to and at the time of due
---------------------
presentment of this Note for registration of transfer, Holdings, the Trustee and
any agent of Holdings or the Trustee may treat the person in whose name this
Note is registered as the owner hereof for all purposes, whether or not this
Note shall be overdue, and neither Holdings, the Trustee nor any agent shall be
affected by notice to the contrary.
5
<PAGE>
9. Governing Law. THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY,
-------------
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
Holdings will furnish to any Holder of a Note upon written request and
without charge a copy of this Indenture. Requests may be made to: TELEMUNDO
HOLDINGS, INC., c/o Telemundo Group, Inc., 2290 West 8th Avenue, Hialeah,
Florida 33010, Attention: Osvaldo F. Torres, Esq.
6
<PAGE>
ASSIGNMENT FORM
If you the holder want to assign this Note, fill in the form below and have your
signature guaranteed:
I or we assign and transfer this Note to
________________________________________________________________________________
(Insert assignee's social security or tax ID number)____________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code) and irrevocably appoint
________________________________________________________________________________
agent to transfer this Note on the books of Holdings. The agent may substitute
another to act for such agent.
Date:____________ Your signature: ____________________________________
(Sign exactly as your name appears on
the other side of this Note)
By:__________________________________
NOTICE: To be executed
by an executive officer
Signature Guarantee:___________________________
SIGNATURE GUARANTEE
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
7
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by Holdings pursuant to
Section 10.10 or 10.15 of the Indenture, check the appropriate box:
Section 10.10 [ ] Section 10.15 [ ]
If you wish to have a portion of this Note purchased by Holdings
pursuant to Section 10.10 or 10.15 of the Indenture, state the amount:
$_______________________________________________________________________________
________________________________________________________________________________
Date: __________ Your signature: _____________________________________
(Sign exactly as your name appears on
the other side of this Note)
By:___________________________________
NOTICE: To be executed
by an executive officer
Signature Guarantee:____________________
SIGNATURE GUARANTEE
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
8
<PAGE>
EXHIBIT 4.3
$125,000,266 (GROSS PROCEEDS)
-----------------------------
TELEMUNDO HOLDINGS, INC.
11 1/2% SENIOR DISCOUNT NOTES DUE 2008
REGISTRATION RIGHTS AGREEMENT
-----------------------------
August 12, 1998
CREDIT SUISSE FIRST BOSTON CORPORATION
CIBC OPPENHEIMER CORP.
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010-3629
Ladies and Gentlemen:
This Registration Rights Agreement is dated as of August 12, 1998 among
Telemundo Holdings, Inc., a Delaware corporation (the "Company"), and Credit
-------
Suisse First Boston Corporation and CIBC Oppenheimer Corp. (collectively, the
"Initial Purchasers"). The Company proposes to issue and sell to the Initial
------------------
Purchasers, upon the terms set forth in a purchase agreement dated as of August
7, 1998 (the "Purchase Agreement"), $218,838,000 aggregate principal amount at
------------------
maturity of its 11 1/2% Senior Discount Notes Due 2008 (the "Initial
-------
Securities"). The Initial Securities will be issued pursuant to an Indenture,
- ----------
dated as of even date herewith (the "Indenture"), between the Company and Bank
---------
of Montreal Trust Company, as trustee (the "Trustee"). As an inducement to the
-------
Initial Purchasers to enter into the Purchase Agreement, the Company agrees with
the Initial Purchasers, for the benefit of the holders of the Initial Securities
(including, without limitation, the Initial Purchasers), the Exchange Securities
(as defined below) and the Private Exchange Securities (as defined below)
(collectively, the "Holders"), as follows:
-------
1. Registered Exchange Offer. Unless clause (i) of the first sentence of
Section 2 shall apply, the Company shall, at its own cost, prepare and, not
later than 60 days after (or if the 60th day is not a business day, the first
business day thereafter) the date of original issue of the Initial Securities
(the "Issue Date") file with the Securities and Exchange Commission (the
----------
"Commission") a registration statement (the "Exchange Offer Registration
---------- ---------------------------
Statement") on an appropriate form under the Securities Act of 1933, as amended
- ---------
(the "Securities Act"), with respect to a proposed offer (the "Registered
-------------- ----------
Exchange Offer") to the Holders of Transfer Restricted Securities (as defined in
- --------------
Section 6 hereof), who are not prohibited by any law or policy of the Commission
from participating in the Registered Exchange Offer, to issue and deliver to
such Holders, in exchange for the Initial Securities, debt securities (the
"Exchange Securities") of the Company, issued under the Indenture and identical
-------------------
in all material respects to the Initial Securities (except for the transfer
restrictions relating to the Initial Securities and the provisions relating to
the matters described in Section 6 hereof) that would be registered under the
Securities Act. For each Initial Security surrendered to the Company pursuant
to the Registered Exchange Offer, the Holder of such Initial Security shall
receive an Exchange Security having a principal amount at maturity and Accreted
Value (as defined in the Indenture) on the date of exchange equal to that of the
surrendered Initial Security. The Company shall use all reasonable efforts to
cause such Exchange Offer Registration Statement to become effective under the
Securities Act within 150 days after (or if the 150th day is not a business day,
the
<PAGE>
-2-
first business day thereafter) the Issue Date and shall keep the Exchange Offer
Registration Statement effective for not less than 30 days (or longer, if
required by applicable law) after the date notice of the Registered Exchange
Offer is mailed to the Holders (such period being called the "Exchange Offer
--------------
Registration Period").
- -------------------
If the Company effects the Registered Exchange Offer, the Company will be
entitled to close the Registered Exchange Offer 30 days after the commencement
thereof provided that the Company has accepted all the Initial Securities
theretofore validly tendered in accordance with the terms of the Registered
Exchange Offer.
Following the declaration of the effectiveness of the Exchange Offer
Registration Statement, the Company shall promptly commence the Registered
Exchange Offer, it being the objective of such Registered Exchange Offer to
enable each Holder of Transfer Restricted Securities (as defined in Section 6
hereof) electing to exchange the Initial Securities for Exchange Securities
(assuming that such Holder is not an affiliate of the Company within the meaning
of the Securities Act, acquires the Exchange Securities in the ordinary course
of such Holder's business and has no arrangements with any person to participate
in the distribution of the Exchange Securities and is not prohibited by any law
or policy of the Commission from participating in the Registered Exchange Offer)
to trade such Exchange Securities from and after their receipt without any
limitations or restrictions under the Securities Act and without material
restrictions under the securities laws of the several states of the United
States.
The Company acknowledges that, pursuant to current interpretations by the
Commission's staff of Section 5 of the Securities Act, in the absence of an
applicable exemption therefrom, (i) each Holder which is a broker-dealer
electing to exchange Initial Securities, acquired for its own account as a
result of market making activities or other trading activities, for Exchange
Securities (an "Exchanging Dealer"), is required to deliver a prospectus
-----------------
containing the information set forth in (a) Annex A hereto on the cover, (b)
Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of
the Exchange Offer" section, and (c) Annex C hereto in the "Plan of
Distribution" section of such prospectus in connection with a sale of any such
Exchange Securities received by such Exchanging Dealer pursuant to the
Registered Exchange Offer and (ii) an Initial Purchaser that elects to sell
Securities (as defined below) acquired in exchange for Initial Securities
constituting any portion of an unsold allotment is required to deliver a
prospectus containing the information required by Items 507 or 508 of Regulation
S-K under the Securities Act, as applicable, in connection with such sale.
The Company shall use all reasonable efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the prospectus
contained therein, in order to permit such prospectus to be lawfully delivered
by all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Securities; provided, however, that (i) in the
-------- -------
case where such prospectus and any amendment or supplement thereto must be
delivered by an Exchanging Dealer or an Initial Purchaser, such period shall be
the lesser of 180 days (unless such period is extended pursuant to Section 3(j)
below) and the date on which all Exchanging Dealers and the Initial Purchasers
have sold all Exchange Securities held by them and (ii) the Company shall make
such prospectus and any amendment or supplement thereto available to any broker-
dealer for use in connection with any resale of any Exchange Securities for a
period of not less than 180 days after the consummation of the Registered
Exchange Offer.
If, upon consummation of the Registered Exchange Offer, any Initial
Purchaser holds Initial Securities acquired by it as part of its initial
distribution, the Company, simultaneously with the delivery of the Exchange
Securities pursuant to the Registered Exchange Offer, shall issue and deliver to
such Initial Purchaser upon the written request of such Initial Purchaser, in
exchange (the "Private Exchange") for the Initial Securities held by such
----------------
Initial Purchaser, debt securities of the Company, issued under the Indenture
and identical in all material
<PAGE>
-3-
respects (including the existence of restrictions on transfer under the
Securities Act and the securities laws of the several states of the United
States, but excluding provisions relating to the matters described in Section 6
hereof) to the Initial Securities (the "Private Exchange Securities"). Each
---------------------------
Private Exchange Security issued in exchange for an Initial Security shall have
a principal amount at maturity and Accreted Value on the date of exchange equal
to that of the Initial Security for which it is exchanged. The Initial
Securities, the Exchange Securities and the Private Exchange Securities are
herein collectively called the "Securities."
----------
In connection with the Registered Exchange Offer, the Company shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 30 days
(or longer, if required by applicable law) after the date notice thereof is
mailed to the Holders;
(c) utilize the services of a depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York,
which may be the Trustee or an affiliate of the Trustee;
(d) permit Holders to withdraw tendered Initial Securities at any
time prior to the close of business, New York time, on the last business
day on which the Registered Exchange Offer shall remain open; and
(e) otherwise comply with all applicable laws.
As soon as practicable after the close of the Registered Exchange Offer or
the Private Exchange, as the case may be, the Company shall:
(x) accept for exchange all the Initial Securities validly tendered
and not withdrawn pursuant to the Registered Exchange Offer and/or the
Private Exchange;
(y) deliver to the Trustee for cancellation all the Initial
Securities so accepted for exchange; and
(z) cause the Trustee to authenticate and deliver promptly to each
Holder of the Initial Securities, Exchange Securities or Private Exchange
Securities, as the case may be, equal in principal amount to the Initial
Securities of such Holder so accepted for exchange.
The Indenture will provide that the Exchange Securities will not be subject
to the transfer restrictions set forth in the Indenture and that all the
Securities will vote and consent together on all matters as one class and that
none of the Securities will have the right to vote or consent as a class
separate from one another on any matter.
Interest on each Exchange Security and each Private Exchange Security
issued pursuant to the Registered Exchange Offer and in the Private Exchange
will accrue from the last interest payment date on which interest was paid on
the Initial Securities surrendered in exchange therefor or, if no interest has
been paid on the Initial Securities, from August 15, 2003.
<PAGE>
-4-
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company that (i) any Exchange Securities to be
received by such Holder will be acquired in the ordinary course of its business,
(ii) at the time of the commencement of the Registered Exchange Offer such
Holder has no arrangement or understanding with any person to participate in the
distribution (within the meaning of the Securities Act) of the Securities, (iii)
such Holder is not an "affiliate," as defined in Rule 405 of the Securities Act,
of the Company or if it is an affiliate, such Holder will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable, (iv) if such Holder is not a broker-dealer, that it is not
engaged in, and does not intend to engage in, the distribution of the Exchange
Securities and (v) if such Holder is a broker-dealer, that it will receive
Exchange Securities for its own account in exchange for Initial Securities that
were acquired as a result of market-making activities or other trading
activities and that it will be required to acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities.
Notwithstanding any other provisions hereof, the Company will ensure that
(i) any Exchange Offer Registration Statement and any amendment thereto and any
prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations
thereunder, (ii) any Exchange Offer Registration Statement and any amendment
thereto does not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any prospectus
forming part of any Exchange Offer Registration Statement, and any supplement to
such prospectus, does not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
2. Shelf Registration. If, (i) because of any change in applicable law
or in interpretations thereof by the staff of the Commission, the Company is not
permitted to effect a Registered Exchange Offer, as contemplated by Section 1
hereof, (ii) for any other reason the Registered Exchange Offer is not
consummated within 180 days of (or if the 180th day is not a business day, the
first business day thereafter) the Issue Date, (iii) any Initial Purchaser so
requests with respect to the Initial Securities (or the Private Exchange
Securities) not eligible to be exchanged for Exchange Securities in the
Registered Exchange Offer and held by it following consummation of the
Registered Exchange Offer or (iv) any Holder notifies the Company within 30 days
after commencement of the Registered Exchange Offer that such Holder (x) is
prohibited by applicable law or Commission policy from participating in the
Registered Exchange Offer, (y) may not resell Exchange Securities acquired by it
to the public without delivery of a prospectus and that the prospectus contained
in the Exchange Offer Registration Statement is not appropriate for resales by
such Holder or (z) is a broker-dealer and holds Securities acquired directly
from the Company or an affiliate of the Company, the Company shall take the
following actions:
(a) The Company shall, at its cost, as promptly as practicable,
file with the Commission and thereafter shall use all reasonable efforts to
cause to be declared effective a registration statement (the "Shelf
-----
Registration Statement" and, together with the Exchange Offer Registration
----------------------
Statement, a "Registration Statement") on an appropriate form under the
----------------------
Securities Act relating to the offer and sale of the Transfer Restricted
Securities by the Holders thereof from time to time in accordance with the
methods of distribution set forth in the Shelf Registration Statement and
Rule 415 under the Securities Act (hereinafter, the "Shelf Registration");
------------------
provided, however, that no Holder (other than an Initial Purchaser) shall
-------- -------
be entitled to have the Securities held by it covered by such Shelf
Registration Statement unless such Holder agrees in writing to be bound by
all the provisions of this Agreement applicable to such Holder.
(b) The Company shall use all reasonable efforts to keep the Shelf
Registration Statement continuously effective in order to permit the
prospectus included therein to be lawfully delivered by the
<PAGE>
-5-
Holders of the relevant Securities, for a period of two years (or for such
longer period if extended pursuant to Section 3(j) below) from the Issue
Date or such shorter period that will terminate when all the Securities
covered by the Shelf Registration Statement (i) have been sold pursuant
thereto or (ii) are no longer restricted securities (as defined in Rule 144
under the Securities Act, or any successor rule thereof) (the "Shelf
-----
Registration Period"). The Company shall be deemed not to have used all
-------------------
reasonable efforts to keep the Shelf Registration Statement effective
during the requisite period if it voluntarily takes any action that would
result in Holders of Securities covered thereby not being able to offer and
sell such Securities during such period, unless such action is required by
applicable law.
(c) Notwithstanding any other provisions of this Agreement to the
contrary, the Company shall cause the Shelf Registration Statement and the
related prospectus and any amendment or supplement thereto, as of the
effective date of the Shelf Registration Statement, amendment or
supplement, (i) to comply in all material respects with the applicable
requirements of the Securities Act and the rules and regulations of the
Commission and (ii) not to contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(d) A Holder of Transfer Restricted Securities may not include any
of its Transfer Restricted Securities in any Shelf Registration Statement
pursuant to this Agreement unless and until such Holder furnishes to the
Company in writing, within ten business days after receipt of a written
request therefor, such information specified in Item 507 of Regulation S-K
under the Securities Act, and any other similar information reasonably
requested by the Company, for use in connection with any Shelf Registration
Statement, prospectus or preliminary prospectus included therein. Each
Holder as to which any Shelf Registration Statement is being effected
agrees to furnish promptly to the Company all information required to be
disclosed in order to make the information previously furnished to the
Company by such Holder not materially misleading. A Holder of Notes shall
not be entitled to receive Additional Interest pursuant to Section 6 to the
extent that such Holder fails to comply with any obligation under this
subsection and the failure by such Holder to comply with any obligation
under this subsection and the failure by such Holder to comply with such
obligation is the sole reason for the accrual of Additional Interest
pursuant to Section 6.
3. Registration Procedures. In connection with any Shelf Registration
contemplated by Section 2 hereof and, to the extent applicable, any Registered
Exchange Offer contemplated by Section 1 hereof, the following provisions shall
apply:
(a) The Company shall (i) furnish to each Initial Purchaser, prior
to the filing thereof with the Commission, a copy of the Registration
Statement and each amendment thereof and each supplement, if any, to the
prospectus included therein and, in the event that an Initial Purchaser
(with respect to any portion of an unsold allotment from the original
offering) is participating in the Registered Exchange Offer or the Shelf
Registration Statement, the Company shall use all reasonable efforts to
reflect in each such document, when so filed with the Commission, such
comments as such Initial Purchaser reasonably may propose; (ii) include the
information set forth in Annex A hereto on the cover, in Annex B hereto in
the "Exchange Offer Procedures" section and the "Purpose of the Exchange
Offer" section and in Annex C hereto in the "Plan of Distribution" section
of the prospectus forming a part of the Exchange Offer Registration
Statement and include the information set forth in Annex D hereto in the
Letter of Transmittal delivered pursuant to the Registered Exchange Offer;
(iii) if reasonably requested by an Initial Purchaser, include the
information required by Items 507 or 508 of Regulation S-K under the
Securities Act, as applicable, in the prospectus forming a part of the
Exchange Offer Registration
<PAGE>
-6-
Statement; (iv) include within the prospectus contained in the Exchange
Offer Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Initial Purchasers, which shall contain a
summary statement of the positions taken or policies made by the staff of
the Commission with respect to the potential "underwriter" status of any
broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of
------------
Exchange Securities received by such broker-dealer in the Registered
Exchange Offer (a "Participating Broker-Dealer"), whether such positions or
---------------------------
policies have been publicly disseminated by the staff of the Commission or
such positions or policies, in the reasonable judgment of the Initial
Purchasers based upon advice of counsel (which may be in-house counsel),
represent the prevailing views of the staff of the Commission; and (v) in
the case of a Shelf Registration Statement, include the names of the
Holders who propose to sell Securities pursuant to the Shelf Registration
Statement as selling security holders.
(b) The Company shall give written notice to the Initial
Purchasers, the Holders of the Securities and any Participating Broker-
Dealer from whom the Company has received prior written notice that it will
be a Participating Broker-Dealer in the Registered Exchange Offer (which
notice pursuant to clauses (ii)-(v) hereof shall be accompanied by an
instruction to suspend the use of the prospectus until the requisite
changes have been made):
(i) when the Registration Statement or any amendment
thereto has been filed with the Commission and when the
Registration Statement or any post-effective amendment thereto has
become effective;
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the prospectus
included therein or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Company or its legal counsel of
any notification with respect to the suspension of the
qualification of the Securities for sale in any jurisdiction or the
initiation or, to the Company's knowledge, threatening of any
proceeding for such purpose; and
(v) of the happening of any event that requires the
Company to make changes in the Registration Statement or the
prospectus in order that the Registration Statement or the
prospectus does not contain an untrue statement of a material fact
nor omit to state a material fact required to be stated therein or
necessary to make the statements therein (in the case of the
prospectus, in light of the circumstances under which they were
made) not misleading.
(c) The Company shall make every reasonable effort to obtain the
withdrawal at the earliest possible time, of any order suspending the
effectiveness of the Registration Statement.
(d) The Company shall furnish to each Holder of Securities
included within the coverage of the Shelf Registration, without charge, at
least one copy of the Shelf Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, and, if
the Holder so requests in writing, any exhibits thereto (including those,
if any, incorporated by reference).
<PAGE>
-7-
(e) The Company shall deliver to each Exchanging Dealer and each
Initial Purchaser, and to any other Holder who so requests, without charge,
at least one copy of the Exchange Offer Registration Statement and any
post-effective amendment thereto, including financial statements and
schedules, and, if any Initial Purchaser or any such Holder requests, all
exhibits thereto (including those incorporated by reference).
(f) The Company shall, during the Shelf Registration Period,
deliver to each Holder of Securities included within the coverage of the
Shelf Registration, without charge, as many copies of the prospectus
(including each preliminary prospectus) included in the Shelf Registration
Statement and any amendment or supplement thereto as such person may
reasonably request. The Company consents, subject to the provisions of this
Agreement, to the use of the prospectus or any amendment or supplement
thereto by each of the selling Holders of the Securities in connection with
the offering and sale of the Securities covered by the prospectus, or any
amendment or supplement thereto, included in the Shelf Registration
Statement.
(g) The Company shall deliver to each Initial Purchaser, any
Exchanging Dealer, any Participating Broker-Dealer and such other persons
required to deliver a prospectus following the Registered Exchange Offer,
without charge, as many copies of the final prospectus included in the
Exchange Offer Registration Statement and any amendment or supplement
thereto as such persons may reasonably request. The Company consents,
subject to the provisions of this Agreement, to the use of the prospectus
or any amendment or supplement thereto by any Initial Purchaser, if
necessary, any Participating Broker-Dealer and such other persons required
to deliver a prospectus following the Registered Exchange Offer in
connection with the offering and sale of the Exchange Securities covered by
the prospectus, or any amendment or supplement thereto, included in such
Exchange Offer Registration Statement.
(h) Prior to any public offering of the Securities pursuant to any
Registration Statement, the Company shall qualify or cooperate with the
Holders of the Securities included therein and their respective counsel in
connection with the qualification of the Securities for offer and sale
under the securities or "blue sky" laws of such states of the United States
as any Holder of the Securities reasonably requests in writing and do any
and all other acts or things necessary or advisable to enable the offer and
sale in such jurisdictions of the Securities covered by such Registration
Statement; provided that the Company shall not be required to qualify as a
foreign corporation or as a dealer in securities or take any action which
would subject it to general service of process or to taxation in any such
jurisdiction.
(i) The Company shall cooperate with the Holders of the Securities
to facilitate the timely preparation and delivery of certificates
representing the Securities to be sold pursuant to any Registration
Statement free of any restrictive legends and in such denominations and
registered in such names as the Holders may request a reasonable period of
time prior to sales of the Securities pursuant to such Registration
Statement.
(j) Upon the occurrence of any event contemplated by paragraphs
(ii) through (v) of Section 3(b) above during the period for which the
Company is required to maintain an effective Registration Statement, the
Company shall promptly prepare and file a post-effective amendment to the
Registration Statement or a supplement to the related prospectus and any
other required document so that, as thereafter delivered to Holders of the
Securities or purchasers of Securities, the prospectus will not contain an
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
If the Company notifies the Initial Purchasers, the Holders of the
Securities and any
<PAGE>
-8-
known Participating Broker-Dealer in accordance with paragraphs (ii)
through (v) of Section 3(b) above to suspend the use of the prospectus
until the requisite changes to the prospectus have been made, then the
Initial Purchasers, the Holders of the Securities and any such
Participating Broker-Dealers shall suspend use of such prospectus, and the
period of effectiveness of the Shelf Registration Statement provided for in
Section 2(b) above and the Exchange Offer Registration Statement provided
for in Section 1 above shall each be extended by the number of days from
and including the date of the giving of such notice to and including the
date when the Initial Purchasers, the Holders of the Securities and any
known Participating Broker-Dealer shall have received such amended or
supplemented prospectus pursuant to this Section 3(j). If so directed by
the Company, each Holder will use all reasonable efforts to deliver to the
Company (at the Company's expense) all copies, other than permanent file
copies then in such Holder's possession, of the prospectus covering such
Transfer Restricted Securities that was current at the time of receipt of
such notice.
(k) Not later than the effective date of the applicable
Registration Statement, the Company will provide a CUSIP number for the
Exchange Securities or the Private Exchange Securities, as the case may be,
and provide the Trustee with printed certificates for the Exchange
Securities or the Private Exchange Securities, as the case may be, in a
form eligible for deposit with The Depository Trust Company.
(l) The Company will comply with all rules and regulations of the
Commission to the extent and so long as they are applicable to the
Registered Exchange Offer or the Shelf Registration and will make generally
available to its security holders (or otherwise provide in accordance with
Section 11(a) of the Securities Act) an earnings statement satisfying the
provisions of Section 11(a) of the Securities Act, no later than 45 days
after the end of a 12-month period (or 90 days, if such period is a fiscal
year) beginning with the first month of the Company's first fiscal quarter
commencing after the effective date of the Registration Statement, which
statement shall cover such 12-month period.
(m) The Company shall cause the Indenture to be qualified under the
Trust Indenture Act of 1939, as amended, in a timely manner and cooperate
with the Trustee and the Holders to effect such changes, if any, as shall
be necessary for such qualification. In the event that such qualification
would require the appointment of a new Trustee under the Indenture, the
Company shall appoint a new Trustee thereunder pursuant to the applicable
provisions of the Indenture.
(n) The Company may require each Holder of Securities to be sold
pursuant to the Shelf Registration Statement to furnish to the Company such
information regarding the Holder and the distribution of the Securities as
the Company may from time to time reasonably require for inclusion in the
Shelf Registration Statement, and the Company may exclude from such
registration the Securities of any Holder that fails to furnish such
information within a reasonable time after receiving such request.
(o) The Company shall enter into such customary agreements
(including, if requested, an underwriting agreement in customary form) and
take all such other action, if any, as any Holder of the Securities shall
reasonably request in order to facilitate the disposition of the Securities
pursuant to any Shelf Registration.
(p) In the case of any Shelf Registration, the Company shall (i)
make reasonably available for inspection by the Holders of the Securities
selling pursuant to such Shelf Registration, any underwriter participating
in any disposition pursuant to the Shelf Registration Statement and any
attorney, accountant or other agent retained by the Holders of the
Securities selling pursuant to such Shelf Registration
<PAGE>
-9-
or any such underwriter all relevant financial and other records, pertinent
corporate documents and properties of the Company and (ii) cause the
Company's officers, directors, employees, accountants and auditors to
supply all relevant information reasonably requested by the Holders of the
Securities or any such underwriter, attorney, accountant or agent in
connection with the Shelf Registration Statement, in each case, as shall be
reasonably necessary to enable such persons, to conduct a reasonable
investigation within the meaning of Section 11 of the Securities Act;
provided, however, that the foregoing inspection and information gathering
shall be coordinated on behalf of the Initial Purchasers by you and on
behalf of the other parties, by one counsel designated by and on behalf of
such other parties as described in Section 4 hereof; provided, however,
that such Holders, underwriters, attorneys, accountants or agents agree to
keep confidential any records, information or documents that are designated
by the Company in writing as confidential and to use such information
obtained pursuant to this provision only in connection with the transaction
for which such information was obtained, and not for any other purpose,
unless (i) such records, information or documents (x) are available to the
public, (y) were already in such Holders', underwriters', attorneys',
accountants' or agents' possession prior to its receipt from the Company
and they do not otherwise have any obligation to keep such records,
information or documents confidential or (z) are obtained by such Holders,
underwriters, attorneys, accountants or agents from a third person who,
insofar as is known to such Holders, underwriters, attorneys, accountants
or agents after due inquiry, is not prohibited from transmitting the
information to such Holders, underwriters, attorneys, accountants or agents
by a contractual, legal or fiduciary obligation to the Company or a third
party, or (ii) disclosure of such records, information or documents is
required by law.
(q) In the case of any Shelf Registration, the Company, if
reasonably requested by any Holder of Securities covered thereby, shall
cause (i) its counsel to deliver an opinion and updates thereof relating to
the Securities in customary form addressed to such Holders and the managing
underwriters, if any, thereof and dated, in the case of the initial
opinion, the effective date of such Shelf Registration Statement (it being
agreed that the matters to be covered by such opinion shall include matters
customarily covered in opinions requested in underwritten offerings), (ii)
its officers to execute and deliver customary documents and certificates
and updates thereof requested by any underwriters of the applicable
Securities and (iii) its independent public accountants and the independent
public accountants with respect to any other entity for which financial
information is provided in the Shelf Registration Statement to provide to
the selling Holders of the applicable Securities and any underwriter
therefor a comfort letter in customary form and covering matters of the
type customarily covered in comfort letters in connection with primary
underwritten offerings, subject to receipt of appropriate documentation as
contemplated, and only if permitted, by Statement of Auditing Standards No.
72.
(r) In the case of the Registered Exchange Offer, if requested by
any Initial Purchaser or any known Participating Broker-Dealer, the Company
shall cause (i) its counsel to deliver to such Initial Purchaser or such
Participating Broker-Dealer a signed opinion in the form set forth in
Section 6(c) and (d) of the Purchase Agreement with such changes as are
customary in connection with the preparation of a Registration Statement
and (ii) its independent public accountants and the independent public
accountants with respect to any other entity for which financial
information is provided in the Registration Statement to deliver to such
Initial Purchaser or such Participating Broker-Dealer a comfort letter, in
customary form, meeting the requirements as to the substance thereof as set
forth in Section 6(a) and (i) of the Purchase Agreement, with appropriate
date changes.
(s) If a Registered Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Initial Securities by Holders to the
Company (or to such other Person as directed by the
<PAGE>
-10-
Company) in exchange for the Exchange Securities or the Private Exchange
Securities, as the case may be, the Company shall mark, or caused to be
marked, on the Initial Securities so exchanged that such Initial Securities
are being canceled in exchange for the Exchange Securities or the Private
Exchange Securities, as the case may be; in no event shall the Initial
Securities be marked as paid or otherwise satisfied.
(t) The Company will use all reasonable efforts to (i) if the
Initial Securities have been rated prior to the initial sale of such
Initial Securities, confirm such ratings will apply to the Securities
covered by a Registration Statement, or (ii) if the Initial Securities were
not previously rated, cause the Securities covered by a Registration
Statement to be rated with the appropriate rating agencies, if so requested
by Holders of a majority in aggregate principal amount of Securities
covered by such Registration Statement, or by the managing underwriters, if
any.
(u) In the event that any broker-dealer registered under the
Exchange Act shall underwrite any Securities or participate as a member of
an underwriting syndicate or selling group or "assist in the distribution"
(within the meaning of the Conduct Rules (the "Rules") of the National
-----
Association of Securities Dealers, Inc. ("NASD")) thereof, whether as a
----
Holder of such Securities or as an underwriter, a placement or sales agent
or a broker or dealer in respect thereof, or otherwise, the Company will
assist such broker-dealer in complying with the requirements of such Rules,
including, without limitation, by (i) if such Rules, including Rule 2720,
shall so require, engaging a "qualified independent underwriter" (as
defined in Rule 2720) to participate in the preparation of the Registration
Statement relating to such Securities, to exercise usual standards of due
diligence in respect thereto and, if any portion of the offering
contemplated by such Registration Statement is an underwritten offering or
is made through a placement or sales agent, to recommend the yield of such
Securities, (ii) indemnifying any such qualified independent underwriter to
the extent of the indemnification of underwriters provided in Section 5
hereof and (iii) providing such information to such broker-dealer as may be
required in order for such broker-dealer to comply with the requirements of
the Rules.
(v) The Company shall use its reasonable best efforts to take all
other steps necessary to effect the registration of the Securities covered
by a Registration Statement contemplated hereby.
4. Registration Expenses. The Company shall bear all fees and expenses
incurred in connection with the performance of its obligations under Sections 1
through 3 hereof (including the reasonable fees and expenses, if any, of Cahill
Gordon & Reindel, counsel for the Initial Purchasers, incurred in connection
with the Registered Exchange Offer), whether or not the Registered Exchange
Offer or a Shelf Registration is filed or becomes effective, and, in the event
of a Shelf Registration, shall bear or reimburse the Holders of the Securities
covered thereby for the reasonable fees and disbursements of one firm of counsel
designated by the Holders of a majority in principal amount of the Initial
Securities covered thereby to act as counsel for the Holders of the Initial
Securities in connection therewith.
5. Indemnification. (a) The Company agrees to indemnify and hold
harmless each Holder of the Securities, any Participating Broker-Dealer and each
person, if any, who controls such Holder or such Participating Broker-Dealer
within the meaning of the Securities Act or the Exchange Act (each Holder, any
Participating Broker-Dealer and such controlling persons are referred to
collectively as the "Indemnified Parties") from and against any losses, claims,
-------------------
damages or liabilities, joint or several, or any actions in respect thereof
(including, but not limited to, any losses, claims, damages, liabilities or
actions relating to purchases and sales of the Securities) to which each
Indemnified Party may become subject under the Securities Act, the Exchange Act
or otherwise, insofar as such losses, claims, damages, liabilities or actions
arise out of or are based upon any untrue statement
<PAGE>
-11-
or alleged untrue statement of a material fact contained in a Registration
Statement or prospectus or in any amendment or supplement thereto or in any
preliminary prospectus relating to a Shelf Registration, or arise out of, or are
based upon, the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading, and shall reimburse, as incurred, the Indemnified
Parties for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action in respect thereof, provided, however, that (i) the Company
shall not be liable in any such case to the extent that such loss, claim, damage
or liability arises out of or is based upon any untrue statement or alleged
untrue statement or omission or alleged omission made in a Registration
Statement or prospectus or in any amendment or supplement thereto or in any
preliminary prospectus relating to a Shelf Registration in reliance upon and in
conformity with written information pertaining to such Holder and furnished to
the Company by or on behalf of such Holder specifically for inclusion therein
and (ii) with respect to any untrue statement or omission or alleged untrue
statement or omission made in any preliminary prospectus relating to a Shelf
Registration Statement, the indemnity agreement contained in this subsection (a)
shall not inure to the benefit of any Holder or Participating Broker-Dealer from
whom the person asserting any such losses, claims, damages or liabilities
purchased the Securities concerned, to the extent that a prospectus relating to
such Securities was required to be delivered by such Holder or Participating
Broker-Dealer under the Securities Act in connection with such purchase and any
such loss, claim, damage or liability of such Holder or Participating Broker-
Dealer results from the fact that there was not sent or given to such person, at
or prior to the written confirmation of the sale of such Securities to such
person, a copy of the final prospectus if the Company had previously furnished
copies thereof to such Holder or Participating Broker-Dealer; provided further,
however, that this indemnity agreement will be in addition to any liability
which the Company may otherwise have to such Indemnified Party. The Company
shall also indemnify underwriters, their officers and directors and each person
who controls such underwriters within the meaning of the Securities Act or the
Exchange Act to the same extent as provided above with respect to the
indemnification of the Holders of the Securities if requested by such Holders.
Any amounts advanced by the Company to an indemnified party pursuant to this
Section 5 as a result of such losses shall be returned to the Company if it
shall be finally determined by a court of competent jurisdiction in a judgment
not subject to appeal or final review that such indemnified party was not
entitled to indemnification by the Company.
(b) Each Holder of the Securities, severally and not jointly, will
indemnify and hold harmless the Company, its partners, directors and officers
and each person, if any, who controls the Company within the meaning of the
Securities Act or the Exchange Act from and against any losses, claims, damages
or liabilities or any actions in respect thereof, to which the Company or any
such partners, directors, officers or controlling persons may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as such losses,
claims, damages, liabilities or actions arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in a
Registration Statement or prospectus or in any amendment or supplement thereto
or in any preliminary prospectus relating to a Shelf Registration, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact necessary in order to make the statements therein (or, with
respect to any prospectus or supplement thereto, in light of the circumstances
under which they were made) not misleading, but in each case only to the extent
that the untrue statement or omission or alleged untrue statement or omission
was made in reliance upon and in conformity with written information pertaining
to such Holder and furnished to the Company by or on behalf of such Holder
specifically for inclusion therein; and, subject to the limitation set forth
immediately preceding this clause, shall reimburse, as incurred, the Company for
any legal or other expenses reasonably incurred by it or any such partners,
directors, officers or controlling persons in connection with investigating or
defending any loss, claim, damage, liability or action in respect thereof. This
indemnity agreement will be in addition to any liability which such Holder may
otherwise have to the Company or any of its partners, directors, officers and
controlling persons.
<PAGE>
-12-
(c) Promptly after receipt by an indemnified party under this Section 5 of
notice of the commencement of any action or proceeding (including a governmental
investigation), such indemnified party will, if a claim in respect thereof is to
be made against the indemnifying party under this Section 5, notify the
indemnifying party of the commencement thereof; but the omission so to notify
the indemnifying party will not, in any event, relieve the indemnifying party
from any obligations to any indemnified party other than the indemnification
obligation provided in paragraph (a) or (b) above. In case any such action is
brought against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party (who shall not, except with the consent
of the indemnified party, be counsel to the indemnifying party), and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof the indemnifying party will not be liable to such
indemnified party under this Section 5 for any legal or other expenses, other
than reasonable costs of investigation, subsequently incurred by such
indemnified party in connection with the defense thereof. In no event shall the
indemnifying parties be liable for fees and expenses of more than one counsel
(in addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any pending
or threatened action in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party unless such settlement includes an unconditional release of such
indemnified party from all liability on any claims that are the subject matter
of such action.
(d) If the indemnification provided for in this Section 5 is unavailable
or insufficient to hold harmless an indemnified party under subsections (a) or
(b) above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to in subsection (a) or (b)
above (i) in such proportion as is appropriate to reflect the relative benefits
received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the exchange of the Securities, pursuant to
the Registered Exchange Offer, or (ii) if the allocation provided by the
foregoing clause (i) is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the indemnifying party or parties on
the one hand and the indemnified party on the other in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative fault of the parties shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
such Holder or such other indemnified party, as the case may be, on the other,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid
by an indemnified party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any action or
claim which is the subject of this subsection (d). Notwithstanding any other
provision of this Section 5(d), the Holders of the Securities shall not be
required to contribute any amount in excess of the amount by which the net
proceeds received by such Holders from the sale of the Securities pursuant to a
Registration Statement exceeds the amount of damages which such Holders have
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this paragraph (d), each person,
if any, who controls such indemnified party within the meaning of the Securities
Act or the Exchange Act shall have the same rights to contribution as such
<PAGE>
-13-
indemnified party and each person, if any, who controls the Company within the
meaning of the Securities Act or the Exchange Act shall have the same rights to
contribution as the Company.
(e) The agreements contained in this Section 5 shall survive the sale of
the Securities pursuant to a Registration Statement and shall remain in full
force and effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of any indemnified party.
6. Additional Interest Under Certain Circumstances. (a) If:
(i) on or prior to 60 days after (or if the 60th day is not a
business day, the first business day thereafter) the Issue Date, neither
the Exchange Offer Registration Statement nor the Shelf Registration
Statement has been filed with the Commission; or
(ii) on or prior to 150 days after (or if the 150th day is not a
business day, the first business day thereafter) the Issue Date, neither
the Exchange Offer Registration Statement nor the Shelf Registration
Statement has been declared effective under the Securities Act; or
(iii) on or prior to 180 days after (or if the 180th day is not a
business day, the first business day thereafter) the Issue Date, neither
the Registered Exchange Offer has been consummated nor the Shelf
Registration Statement has been declared effective; or
(iv) the Shelf Registration Statement has not been filed with the
Commission and declared effective under the Securities Act within 90 days
after (or if the 90th day is not a business day, the first business day
thereafter) the obligation to so file arises under clause (iii) or (iv) of
the first sentence of Section 2 (but in any event not earlier than 180 days
after the Issue Date); or
(v) after either the Exchange Offer Registration Statement or the
Shelf Registration Statement is declared effective, (A) such Registration
Statement thereafter ceases to be effective or (B) subject to the
exceptions in Section 6(b), such Registration Statement or the related
prospectus ceases to be usable in connection with resales of Securities in
accordance with and during the periods specified herein
(each such event referred to in clauses (i), (ii), (iii), (iv) and (v) above a
"Registration Default") additional cash interest ("Additional Interest") will
-------------------- -------------------
accrue on the Securities at the rate of 0.50% per annum (the "Additional
----------
Interest Rate"), from and including the date on which any such Registration
- -------------
Default shall occur to, but excluding, the next Semi-Annual Accrual Date (as
defined in the Indenture) (calculated on the Accreted Value (as defined in the
Indenture) on such Semi-Annual Accrual Date); and shall continue to accrue from
and including such Semi-Annual Accrual Date, and be payable on each successive
Semi-Annual Accrual Date (calculated on the Accreted Value on such Semi-Annual
Accrual Date) to, but excluding, the earlier of (i) the date on which such
Registration Default has been cured or (ii) the date on which all the Securities
otherwise become freely transferable by Holders other than affiliates of
Holdings without further registration under the Securities Act. Such interest
is payable in cash in addition to any other interest payable from time to time
with respect to the Securities on each Semi-Annual Accrual Date after any
accrual of such interest to the Holders of record (as determined pursuant to the
Indenture), notwithstanding that cash interest may not otherwise be payable on
Securities on each such date. Notwithstanding the foregoing, (i) the amount of
Additional Interest payable shall not increase because more than one
Registration Default has occurred and is pending, (ii) a Holder of Securities
who is not entitled to the benefits of the Shelf Registration Statement (i.e.,
such Holder has not elected to include information) shall not be entitled to
Additional Interest with respect to a Registration Default that pertains to the
Shelf Registration Statement, and (iii) a Holder of Securities constituting an
unsold allotment from the original sale of the
<PAGE>
-14-
Securities or who otherwise is not entitled to participate in the Registered
Exchange Offer shall not be entitled to Additional Interest by reason of a
Registration Default that pertains to the Registered Exchange Offer.
Payment of Additional Interest is the sole remedy available to Holders in
the event the Company does not comply with the deadlines set forth herein with
respect to the conduct of the Registered Exchange Offer for the Initial
Securities or the registration of the Securities for resale under the Shelf
Registration Statement.
(b) A Registration Default referred to in Section 6(a)(v)(B) hereof shall
be deemed not to have occurred and be continuing in relation to a Shelf
Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to such Shelf Registration Statement to incorporate annual audited
financial information with respect to the Company where such post-effective
amendment is not yet effective and needs to be declared effective to permit
Holders to use the related prospectus or (y) other material events, with respect
to the Company that would need to be described in such Shelf Registration
Statement or the related prospectus and (ii) in the case of clause (y), the
Company is proceeding promptly and in good faith to amend or supplement such
Shelf Registration Statement and related prospectus to describe such events;
provided, however, that in any case if such Registration Default occurs for a
continuous period in excess of 15 days, Additional Interest shall be payable in
accordance with the above paragraph from the day such Registration Default
occurs until such Registration Default is cured.
(c) Any amounts of Additional Interest accrued will be payable in cash on
each Semi-Annual Accrual Date. The amount of Additional Interest will be
determined by multiplying the Additional Interest Rate by the Accreted Value of
the Securities on such Semi-Annual Accrual Date, multiplied by a fraction, the
numerator of which is the number of days the Additional Interest Rate was
applicable during such period (determined on the basis of a 360-day year
comprised of twelve 30-day months), and the denominator of which is 360.
(d) "Transfer Restricted Securities" means each Security until (i) the
------------------------------
date on which such Transfer Restricted Security has been exchanged by a person
other than a broker-dealer for a freely transferable Exchange Security in the
Registered Exchange Offer, (ii) following the exchange by a broker-dealer in the
Registered Exchange Offer of a Initial Security for an Exchange Note, the date
on which such Exchange Note is sold to a purchaser who receives from such
broker-dealer on or prior to the date of such sale a copy of the prospectus
contained in the Exchange Offer Registration Statement, (iii) the date on which
such Initial Security has been effectively registered under the Securities Act
and disposed of in accordance with the Shelf Registration Statement or (iv) the
date on which such Initial Securities are distributed to the public pursuant to
Rule 144 under the Securities Act or may be sold pursuant to Rule 144(k) under
the Securities Act.
7. Rules 144 and 144A. The Company shall file the reports required to be
filed by it under the Securities Act and the Exchange Act in a timely manner
and, if at any time the Company is not required to file such reports, it will,
upon the request of any Holder of Initial Securities, make publicly available
other information so long as necessary to permit sales of their securities
pursuant to Rules 144 and 144A. The Company covenants that it will take such
further action as any Holder of Initial Securities may reasonably request, all
to the extent required from time to time to enable such Holder to sell Initial
Securities without registration under the Securities Act within the limitation
of the exemptions provided by Rules 144 and 144A (including the requirements of
Rule 144A(d)(4)). The Company will provide a copy of this Agreement to
prospective purchasers of Initial Securities identified to the Company by the
Initial Purchasers upon request. Upon the request of any Holder of Initial
Securities, the Company shall deliver to such Holder a written statement as to
whether it has complied with such requirements. Notwithstanding the foregoing,
nothing in this Section 7 shall be deemed to require the Company to register any
of its securities pursuant to the Exchange Act.
<PAGE>
-15-
8. Underwritten Registrations. If any of the Transfer Restricted
Securities covered by any Shelf Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering ("Managing Underwriters") will be selected by
---------------------
the Holders of a majority in aggregate principal amount of such Transfer
Restricted Securities to be included in such offering, which Managing
Underwriters shall be reasonably satisfactory to the Company.
No person may participate in any underwritten registration hereunder unless
such person (i) agrees to sell such person's Transfer Restricted Securities on
the basis reasonably provided in any underwriting arrangements approved by the
persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements. Nothing in this Agreement shall give any Holder any
right to join in any offering by the Company of its securities (other than any
Securities) to the public.
9. Miscellaneous.
(a) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, except by the Company and the written
consent of the Holders of a majority in principal amount of the Securities
affected by such amendment, modification, supplement, waiver or consents.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, first-class mail,
facsimile transmission, or air courier which guarantees overnight delivery:
(1) if to a Holder of the Securities, at the most current address
given by such Holder to the Company.
(2) if to any Initial Purchaser;
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010
Fax No.: (212) 325-8278
Attention: Transactions Advisory Group
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Fax No.: (212) 269-5420
Attention: James J. Clark, Esq.
(3) if to the Company, at the following address:
Telemundo Holdings, Inc.
c/o Telemumdo Group, Inc.
2290 West 8th Avenue
<PAGE>
-16-
Hialeah, Florida 33010
Fax No.: (305) 889-7980
Attention: Osvaldo F. Torres, Esq.
with a copy to:
Apollo Management, L.P.
1301 Avenue of the Americas
New York, New York 10019
Fax No.: (212) 261-4070
Attention: Aaron Stone
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Fax No.: (212) 872-1002
Attention: Patrick J. Dooley, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; three business
days after being deposited in the mail, postage prepaid, if mailed; when receipt
is acknowledged by recipient's facsimile machine operator, if sent by facsimile
transmission; and on the day delivered, if sent by overnight air courier
guaranteeing next day delivery.
(c) No Inconsistent Agreements. The Company has not, as of the date
hereof, entered into, nor shall it, on or after the date hereof, enter into, any
agreement with respect to their securities that is inconsistent with the rights
granted to the Holders herein or otherwise conflicts with the provisions hereof.
(d) Successors and Assigns. This Agreement shall be binding upon the
Company and its successors and assigns. A Holder of Securities takes such
Securities subject to the terms of this Agreement.
(e) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS.
(h) Severability. If any one or more of the provisions contained herein,
or the application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby.
(i) Securities Held by the Company. Whenever the consent or approval of
Holders of a specified percentage of principal amount of Securities is required
hereunder, Securities held by the Company or its affiliates
<PAGE>
-17-
(other than subsequent Holders of Securities if such subsequent Holders are
deemed to be affiliates solely by reason of their holdings of such Securities)
shall not be counted in determining whether such consent or approval was given
by the Holders of such required percentage.
<PAGE>
-18-
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement among
the several Initial Purchasers and the Company in accordance with its terms.
Very truly yours,
TELEMUNDO HOLDINGS, INC.
By: /s/ Bruce H. Spector
---------------------------------
Name: Bruce H. Spector
Title: Vice President
The foregoing Registration Rights Agreement is hereby
confirmed and accepted as of the date first above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
CIBC OPPENHEIMER CORP.
By: CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ Jeff Howe
----------------------------------
Name: Jeff Howe
Title: Director
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Securities received in exchange for
Initial Securities where such Initial Securities were acquired by such broker-
dealer as a result of market-making activities or other trading activities. The
Company has agreed that, for a period of 180 days after the Expiration Date (as
defined herein), it will make this Prospectus available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution."
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Securities for its own account in
exchange for Initial Securities, where such Initial Securities were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution."
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Securities received in
exchange for Initial Securities where such Initial Securities were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that, for a period of 180 days after the Expiration Date, it will make
this prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until , 199 ,
all dealers effecting transactions in the Exchange Securities may be required
to deliver a prospectus./l/
The Company will not receive any proceeds from any sale of Exchange
Securities by broker-dealers. Exchange Securities received by broker-dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Securities or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such Exchange
Securities. Any broker-dealer that resells Exchange Securities that were
received by it for its own account pursuant to the Exchange Offer and any broker
or dealer that participates in a distribution of such Exchange Securities may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of Exchange Securities and any commission or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that,
by acknowledging that it will deliver and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
Holders of the Securities) other than commissions or concessions of any brokers
or dealers and will indemnify the Holders of the Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
________________________
/l/ In addition, the legend required by Item 502(e) of Regulation S-K will
appear on the back cover page of the Exchange Offer prospectus.
<PAGE>
ANNEX D
[_] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: _________________________________
Address: _________________________________
_________________________________
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Initial Securities that were
acquired as a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
<PAGE>
Exhibit 5.1
[LETTERHEAD OF AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.]
September 29, 1998
Telemundo Holdings, Inc.
2290 West 8th Avenue
Hialeah, Florida 33010
Re: Telemundo Holdings, Inc.
11 1/2% Senior Discount Notes due 2008, Series B
------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Telemundo Holdings, Inc., a Delaware
corporation (the "Company"), in connection with the Company's offer to exchange
(the "Exchange Offer") $1,000 principal amount of 11 1/2% Senior Discount Notes
due 2008, Series B (the "New Notes") of the Company for each $1,000 principal
amount of its issued and outstanding 11 1/2% Senior Discount Notes due 2008,
Series A (the "Old Notes") pursuant to a Registration Statement on Form S-4 (the
"Registration Statement") being filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Securities Act").
The Old Notes have been and the New Notes will be issued pursuant to the
provisions of an Indenture, dated as of August 12, 1998 (the "Indenture"), by
and between the Company and The Bank of Montreal Trust Company, as trustee (the
"Trustee").
As such counsel, we have examined and are familiar with originals or
copies, certified or otherwise identified to our satisfaction, of such corporate
documents of the Company, certificates of public officials and certificates of
officers of the Company and such other documents and agreements and records and
papers as we have deemed necessary or appropriate in order to render this
opinion. Capitalized terms used herein but not otherwise defined herein shall
have the meaning ascribed to such terms in the Indenture.
In our examination, we have assumed the authenticity of all documents
submitted to us as originals, the signature of all parties (other than the
Company) to documents, the legal right and power of all parties (other than the
Company) to enter into and execute the documents to which they are a party and
to consummate the transactions contemplated therein, and the conformity to
original documents of all documents submitted to us as certified or photostatic
copies.
<PAGE>
Telemundo Holdings, Inc.
September 29, 1998
Page 2
Based on the foregoing and subject to the qualifications set forth herein,
we are of the opinion that the Company has duly authorized the New Notes and,
when issued and authenticated in accordance with the terms of the Indenture and
delivered in exchange for the Old Notes in accordance with the terms of the
Exchange Offer, the New Notes will be the legally valid and binding obligations
of the Company, enforceable against the Company in accordance with their terms,
subject (i) to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights
generally and (ii) to general principles of equity, (including, without
limitation, standards of materiality, good faith, fair dealing and commercial
reasonableness), whether such principles are considered in a proceeding at law
or in equity.
We express no opinion concerning: (A) the enforceability of any waiver of
rights or defenses contained in the Indenture or (B) any right to
indemnification that may be limited by public policy considerations or court
decisions.
This law firm is a registered limited liability partnership organized under
the laws of the State of Texas. Our opinion relates only to the laws of the
State of New York and the federal law of the United States of America. We
express no opinion of the law of any other jurisdiction.
This opinion is limited to the matters stated herein, and no opinion is
implied or may be inferred beyond the matters expressly stated. We assume herein
no obligation, and hereby disclaim any obligation, to make any inquiry after the
date hereof or to advise you of any future changes in the foregoing or of any
facts or circumstances that may hereafter come to our attention. This opinion
letter is solely for your benefit and no other persons shall be entitled to rely
upon the opinions herein expressed.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the Prospectus forming a part of the Registration Statement.
In giving such consent, we do not hereby admit that we come within the category
of persons whose consent is required under Section 7 of the Securities Act or
the rules and regulations of the Securities and Exchange Commission thereof.
Very truly yours,
/S/ Akin, Gump, Strauss, Hauer & Feld, L.L.P.
<PAGE>
EXHIBIT 10.1
MEMORANDUM OF AGREEMENT
This Memorandum of Agreement is being entered into as of this 12th day of
August, 1998 between Telemundo Network Group LLC ("Telemundo") and Telemundo
----------
Group, Inc. ("Licensee").
Whereas, Telemundo and various subsidiaries of Licensee are concurrently
entering into a number of Station Affiliation Agreements ("Affiliation
-----------
Agreements") pursuant to which, on the terms and subject to the conditions
- ----------
therein set forth, Telemundo has agreed to provide to Licensee's free television
stations in the United States, and Licensee has agreed to carry on its free
television stations in the United States, the daily programming which Telemundo
makes available over its United States national network ("Network").
-------
Capitalized terms used but not defined herein shall have the meanings ascribed
thereto in the Affiliation Agreements, as in effect as of the date hereof.
Now therefore, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Telemundo and Licensee agree as
follows:
1. Capital Expenditure, Marketing and Programming Commitments:
----------------------------------------------------------
(a) Budgeted Commitments: Schedule "B-1" attached hereto (and
--------------------
incorporated herein by this reference) sets forth the projected annual
marketing/promotional expenditures, programming expenditures and capital
expenditures for Telemundo for the period beginning on the date hereof and
ending on December 31, 2003 ("Initial Plan Period"). Schedule "B-2" attached
-------------------
hereto (and incorporated herein by this reference) sets forth the projected
annual marketing/promotional expenditures, programming expenditures and capital
expenditures for the "Station Group" (as defined below) for the Initial Plan
Period. As used herein, the term "Station Group" collectively refers to the
-------------
Station and all other United States free broadcast stations owned by Licensee
during the Term of this Agreement, other than station WKAQ in Puerto Rico;
provided, however, that the term "Station Group" shall include station WKAQ when
referring to the aggregate annual capital expenditures of the Station Group.
(b) Licensee's Obligations: During the Initial Plan Period, Licensee
----------------------
agrees that it will incur annual expenditures on behalf of the Station Group for
local marketing\promotional efforts, local programming and capital expenditures
in the minimum annual amounts set forth in Schedule "B-2". Licensee, in its
reasonable discretion, shall allocate such annual expenditures across each of
the stations comprising the Station Group. Further, Licensee's foregoing
obligations to fund the stated level of annual expenditures for local
marketing\promotional efforts, local programming and capital expenditures shall
be subject to the provisions of Paragraph 1.(d) below and shall only apply so
long as each of Telemundo Holdings, Inc. and Licensee (i) is not (and would not,
by meeting these funding requirements, be) in noncompliance with any of the
material financial covenants under its outstanding indebtedness (without giving
effect to any waivers or modifications effected
<PAGE>
within the preceding twelve (12) months) and (ii) after funding such amounts,
and taking into consideration all relevant facts and circumstances would be left
with sufficient working capital to conduct its business in the ordinary course;
provided, that to the extent that the "funding relief" provisions of clause (i)
or (ii) would excuse Licensee from funding any particular expenditure, Licensee
shall nevertheless be required to fund such expenditure to the full extent that
Licensee can do so without triggering the "funding relief" provisions of clauses
(i) or (ii). Each calendar year after the expiration of the Initial Plan Period,
in advance of such year, Telemundo and Licensee shall discuss and agree upon the
minimum aggregate annual expenditures for local marketing/promotional programs,
local programming and capital improvements for the Station Group for such year;
these discussions shall commence not later than October 15 of the year prior to
the applicable year. If, as of the date which is fifteen (15) days prior to the
commencement of any such year, Telemundo and Licensee have been unable to agree
upon the minimum aggregate annual expenditures for local marketing/promotional
programs, local programming and capital improvements for the Station Group for
such year, then the minimum aggregate annual expenditures for local
marketing/promotional programs, local programming and capital improvements, as
applicable, for the Station Group for such year shall equal one hundred and five
percent (105%) of the minimum aggregate annual expenditures for local
marketing/promotional programs, local programming and\or capital improvements,
as applicable, for the Station Group for the immediately preceding year.
(c) Telemundo's Obligations: During the Initial Plan Period,
-----------------------
Telemundo agrees that it will incur annual expenditures for
marketing\promotional efforts, programming and capital improvements in the
minimum amounts set forth in Schedule "B-1". [*** CONFIDENTIAL ***] Each
calendar year after the expiration of the Initial Plan Period, in advance of
such year, Telemundo and Licensee shall discuss and agree upon the minimum
aggregate annual expenditures for marketing, programming and capital
expenditures for Telemundo for such year; these discussions shall commence not
later than October 15 of the year prior to the applicable year. If, as of the
date which is fifteen (15) days prior to the commencement of any such year,
Telemundo and Licensee have been unable to agree upon the minimum aggregate
annual expenditures for marketing, programming and capital expenditures for
Telemundo for such year, then the minimum aggregate annual expenditures for
marketing, capital expenditures and/or programming, as applicable, for Telemundo
for such year shall equal one hundred and five percent (105%) of the minimum
aggregate annual expenditures for marketing, programming and/or capital
expenditures, as applicable, for Telemundo for the immediately preceding year.
2
<PAGE>
(d) Certain Spending Flexibility: Each of Telemundo and Station Group
----------------------------
shall have the right to re-allocate its aggregate annual expenditures for
marketing, programming and capital expenditures, as applicable, within the
Initial Plan Period in accordance with the following, it being understood and
agreed, however, that the spending flexibility hereinafter set forth in this
Paragraph 1.(d) only provides and is only intended to provide flexibility in
spending within each particular "category" of expenditures (each of marketing,
programming or capital expenditures, as the case may be, shall be deemed to be a
separate "Category" for this purpose) and does not and is not intended to
--------
provide any right on the part of the parties to re-allocate their respective
annual expenditures between any one or more of the Categories. Each of Telemundo
and Station Group shall have the right to reallocate its aggregate annual
expenditures for each particular Category within the annual periods covered by
Schedules "B-1" and "B-2" and, in that regard, to reduce its annual expenditures
for each particular Category by up to [*** CONFIDENTIAL ***] in any given annual
period, with the express understanding that any "excess" amounts spent on a
particular Category in any given annual period may be applied against and used
to satisfy any "deficiency" in the amounts spent on such Category in any other
subsequent annual period within the Initial Plan Period, but (I) in no event
shall the "deficiency" in the amounts spent in such Category in any given annual
period (before applying against any such "deficiency" the aggregate of any
"excess" amounts spent in any prior annual period(s)) be more than [***
CONFIDENTIAL ***] of the applicable amount provided in Schedule "B-1" or "B-2"
(as applicable) for such Category for such annual period and (II) in no event
shall either party have a "deficiency", after applying available "excess" sums
from prior annual periods, in any particular Category for more than two (2)
consecutive annual periods during the Initial Plan Period. By way of
clarification, while the spending flexibility provided by this Paragraph 1.(d)
allows each of the parties to re-allocate its aggregate annual expenditures for
each Category within the Initial Plan Period, it does not affect or reduce the
parties' respective obligations to fully fund, within the Initial Plan Period,
one hundred percent (100%) of the aggregate amounts for such Category set forth
in Schedule "B-1" or "B-2", as applicable.
2. Station Compensation/Allocation of Advertising Revenues:
-------------------------------------------------------
(a) Network Ad Sales Revenues: Telemundo shall be responsible for the
-------------------------
sale of all national Network "spots". The adjusted gross advertising revenues
payable to Telemundo from the sale of such advertising time (including, without
limitation, adjusted gross revenues payable to Telemundo from the sale of
national paid programming, such as infomercials), after first deducting
therefrom the following items, shall be included into "Net Advertising
--- -----------
Receipts": any and all third party advertising or marketing costs (including,
- --------
without limitation, ad agency fees and commissions, but subject to the
provisions of Paragraph 2.(d) below) incurred by Telemundo in connection
therewith. For purposes of this calculation (and the calculations set forth in
Paragraphs 2.(b), 2.(c) and 2.(e) below), adjusted gross revenues are included
on an accrual basis, but shall be subject to adjustment for "bad debt".
(b) Affiliate Time Ad Sales Revenues: Telemundo shall also be
--------------------------------
responsible for the sale of all "Affiliate Time" (as defined in the Affiliation
Agreements) on behalf of the Network's participating affiliated stations (in
accordance with the provisions of the Affiliation Agreements), including the
Station Group. The adjusted gross advertising revenues payable to
3
<PAGE>
(or on behalf of) Licensee from Telemundo's sale of Affiliate Time during the
Primary Programmed Time Periods and the Discretionary Programmed Time Periods,
after first deducting therefrom the following items, shall be included into "Net
---
Advertising Receipts": Licensee's share of any and all third party advertising
- ----------- --------
or marketing costs (including, without limitation, ad agency fees and
commissions, but subject to the provisions of Paragraph 2.(d) below) incurred by
Telemundo in connection therewith.
(c) Local Ad Sales Revenues: Licensee shall be responsible for the
-----------------------
sale of all local advertising over the Station Group. The adjusted gross
advertising revenues payable to (or on behalf of) Licensee from the sale of
local advertising during the Primary Programmed Time Periods and the
Discretionary Programmed Time Periods (including, without limitation, revenues
received from local paid programming, such as infomercials), after first
deducting therefrom the following items, shall be included into "Net Advertising
--- -----------
Receipts": any and all third party advertising or marketing costs (including,
- --------
without limitation, ad agency fees and commissions, but subject to the
provisions of Paragraph 2.(d) below) incurred by Licensee in connection
therewith.
(d) Use of Internal Sales Staff: With respect to Paragraphs 2.(a)-(c)
---------------------------
above, it is intended that Telemundo and Licensee will conduct their own
relevant advertising sales activities, rather than through a third party sub-
contractor. Accordingly, the type of third party costs and fees for which
Telemundo and Licensee are entitled to reimbursement under those Paragraphs are
those typically incurred in connection with the placement of a particular
advertisement or a group of advertisements (such as an advertising agency
commission), rather than the fees that might be paid to a third party
advertising sales agent engaged on a sub-contractor or similar basis. In no
event can either party charge any of its general ad sales overhead or allocated
internal costs as third party costs and expenses under Paragraph 2.(a)-(c)
above.
(e) Station Group Compensation: Telemundo agrees to pay Licensee (on
--------------------------
behalf of the Station Group), and Licensee (on behalf of the Station Group)
agrees to accept, compensation (the "Station Group Compensation") equal to a
--------------------------
percentage share of the aggregate pool of all of the following sources of Net
- ---------- -----
Advertising Receipts ("Aggregate Net Advertising Receipts"): (i) sixty-one
----------------------------------
percent (61%) of the Net Advertising Receipts payable to Telemundo pursuant to
the sale of advertising time under Paragraph 2.(a) above; plus (ii) one hundred
percent (100%) of the Net Advertising Receipts payable to (or on behalf of)
Licensee pursuant to Telemundo's sale of Affiliate Time under Paragraph 2.(b)
above; plus (iii) one hundred percent (100%) of the Net Advertising Receipts
payable to (or on behalf of) Licensee pursuant to the sale of local advertising
time under Paragraph 2.(c) above. Licensee's percentage share of the pool of
Aggregate Net Advertising Receipts shall be determined in accordance with the
compensation formula (the "Compensation Formula") set forth on Appendix "1".
--------------------
Notwithstanding the foregoing, in the event that the Affiliation Agreement with
one or more (but not all of) the stations in the Station Group shall be
terminated, in accordance with the terms and conditions thereof, by reason of
(i) "Unauthorized Preemptions" (as that term is defined in the Affiliation
------------------------
Agreements) or (ii) a "Change in Operations" (as that term is defined in the
--------------------
Affiliation Agreements), the sixty-one percent (61%) figure set forth in clause
(i) above shall be reduced to a percentage figure equal to sixty one percent
(61%) multiplied by a
4
<PAGE>
fraction, the denominator of which is equal to the Station Group's aggregate
then prevailing "network" coverage in U.S. Hispanic television households (as
measured by objective demographic data obtained from the Nielsen ratings
association or such other source as the parties may mutually agree upon) and the
numerator of which is the Station Group's aggregate then prevailing "network"
coverage in U.S. Hispanic television households excluding the "network" coverage
---------
in U.S. Hispanic television households provided by the terminated station(s). By
way of example, if the terminated station's network coverage in U.S. Hispanic
television households represented twenty percent (20%) of the Station Group's
aggregate network coverage in U.S. Hispanic television households, the figure to
be utilized, prospectively, for purposes of clause (i) above would be 48.8% (61%
x 0.80).
(f) Accountings:
-----------
i. From Telemundo: In order to enable Licensee to make timely
--------------
calculations and payments of the Aggregate Net Advertising
Receipts (as provided in Paragraph 2.(f)(2) below), Telemundo
shall provide reasonably detailed accounting statements to
Licensee for each calendar quarter (or portion thereof), not
later than thirty (30) days after the end of the applicable
quarter, setting forth (i) Telemundo's calculation of the Net
Advertising Receipts for national Network "spots" during such
quarter that are payable to Telemundo, and indicating the portion
thereof which is includable in "Aggregate Net Advertising
Receipts" pursuant to Paragraph 2.(e) above (the "Included
---------
Network Receipts") and (ii) Telemundo's calculation of the
----------------
reimbursable third party advertising or marketing costs incurred
by Telemundo in connection with the sale of Affiliate Time during
such quarter (if the amounts received by Licensee from the sale
of Affiliate Time was not theretofore reduced by such amount)
(the "Reimbursable Costs"). Initially, Telemundo shall retain
------------------
one hundred percent (100%) of the Included Network Receipts, but
the same shall be subject to the provisions of Paragraph 2.(f)(2)
below.
ii. From Licensee: Aggregate Net Advertising Receipts will be
-------------
calculated by Licensee on a quarterly basis. Licensee will
provide reasonably detailed accounting statements to Telemundo
for each such quarter (or portion thereof), not later than forty-
five (45) days after the end of the applicable quarter, setting
forth Licensee's calculation of the Aggregate Net Advertising
Receipts for such quarter and accompanied by any payment of
Telemundo's share of Aggregate Net Advertising Receipts then due
and owing hereunder; in addition, such accounting statement shall
be accompanied by a separate payment equal to Telemundo's
Reimbursable Costs for the applicable quarter (as reported by
Telemundo pursuant to Paragraph 2.(f)(1) above). Payment of
Telemundo's share of the Aggregate Net Advertising Receipts in a
given quarter shall, however, be reduced by an amount equal to
the Included Network Receipts for such quarter being retained by
Telemundo pursuant to the last sentence of Paragraph 2.(f)(1)
above. If, in any
5
<PAGE>
particular quarter, Telemundo's share of the Aggregate Net
Advertising Receipts hereunder for such quarter is less than the
Included Network Receipts for the same period being held by
Telemundo, Telemundo shall promptly following its receipt of
Licensee's accounting statement for such quarter pay the
"difference" to Licensee.
iii Reevaluation Procedure: Prior to the end of each year during
----------------------
the Term, Telemundo and Licensee shall meet to evaluate the
accounting procedures described above and to mutually determine
which of the two (2) parties is better able to discharging the
"paymaster" servicing function described in Paragraph 2.(f)(2).
iv. Audit Rights: Telemundo and Licensee shall have reciprocal
------------
audit rights with respect to one another's relevant books and
records in order to verify and validate the information provided
in the accounting statements. Each party (the "Auditing Party")
--------------
shall have the right to audit the other (the "Audited Party")
-------------
once a year, during normal business hours and for a period of not
more than thirty (30) consecutive days (provided that the
Auditing Party has been provided with the necessary information
on a timely basis). Information contained in an accounting
statement shall become incontestable (provided such information
is not subsequently amended) twelve (12) months after the date of
delivery of the applicable accounting statement, unless the
receiving party shall provide a formal written objection thereto
(a "Written Objection") prior to the expiration of such twelve
-----------------
(12) month period setting forth in reasonable detail the basis
for the receiving party's objection; provided, that any claim
timely asserted within such twelve (12) month period (if not
otherwise resolved between the parties) shall be deemed waived by
the receiving party if the receiving party has not instituted an
arbitration proceeding with respect to such claim (in accordance
with this Paragraph 2.(f)(4)) within the twelve (12) month period
immediately following the date of delivery of the receiving
party's Written Objection. Any claim made under this provision
shall be submitted to binding arbitration in Los Angeles Country
or New York City under the rules and procedures of the American
Arbitration Association, with the arbitrator being a partner in
one of the so-called Big 5 national accounting firms who is an
expert in broadcast network television business (to the extent
that such an arbitrator is available and can be agreed upon by
the parties). The arbitration shall be conducted as a "baseball"
arbitration, with (i) each party being obligated to prepare and
submit to the arbitrator its relevant calculations and (ii) the
arbitrator being instructed that he/she must choose whichever of
the submitted calculations is closest to the arbitrator's own
calculations.
6
<PAGE>
3. Termination:
-----------
(a) Termination Under This Agreement: Neither party may terminate
--------------------------------
this Agreement by reason of any breach or default on the part of the other, or
otherwise, except in the event of a "material breach of a material provision" of
this Agreement, and then only pursuant to the express provisions set forth below
in this Paragraph 3. For purposes of this Paragraph 3, the term "material
breach of a material provision" will mean and be limited to (i) a material
breach of a party's obligations as set forth in Paragraph 1. above; and/or (ii)
in the case of Telemundo, the failure of the equity owners of Telemundo to make
aggregate capital contributions to Telemundo equal to the expected negative cash
flow amounts set forth in the Schedule "B-1" [*** CONFIDENTIAL ***] and/or
(iii) in the case of Telemundo, Telemundo's unexcused failure, for a continuous
period of not less than thirty (30) days, to transmit a regular daily Network
programming signal. In the event a party ("Claimant") believes that a material
--------
breach by the other ("Alleged Non-Performer") of a material provision of this
---------------------
Agreement has occurred and the Claimant intends to terminate this Agreement by
reason thereof, Claimant shall provide the Alleged Non-Performer with written
notice of such belief and intention (an "Alleged Material Breach Notice"),
------------------------------
setting forth, with particularity, the basis for Claimant's's belief and
specifying Claimant's intention to terminate this Agreement by reason thereof;
provided, that the Alleged Non-Performer shall be entitled to cure such material
breach, provided that the Alleged Non-Performer shall do so within thirty (30)
business days of the date of the Alleged Non-Performer's receipt of an Alleged
Material Breach Notice (which thirty (30) business day period shall be extended
if the nature of the alleged material breach is not curable within such thirty
(30) business day period, so long as the Alleged Non-Performer shall have
nevertheless commenced efforts to effect a cure during such thirty (30) day
business period) (as applicable, the "Cure Period"). If the Alleged Non-
-----------
Performer shall cure the material breach within the Cure Period, Claimant shall
have no further right to seek to terminate this Agreement by reason of such
material breach. If the Alleged Non-Performer fails to cure the material breach
within the Cure Period, Claimant shall have the right, not later than five (5)
days following the expiration of the Cure Period, to provide the Alleged Non-
Performer with written notice ("Termination Notice") of its termination of this
------------------
Agreement, effective at 11:59 pm EST on the fifth (5th) business day after the
date of the Alleged Non-Performer's receipt of the Termination Notice (the
"Effective Time"); provided, however, that if the Alleged Non-Performer shall
--------------
cure the material breach
7
<PAGE>
on or prior to on or prior to the date which is fifteen (15) days following the
Effective Time, then Claimant shall have no further right to seek to terminate
this Agreement by reason of such material breach. By way of clarification,
Claimant may not terminate this Agreement except in the case where (a) there is
a material breach by the Alleged Non-Performer of a material provision of this
Agreement, (b) Claimant delivers an Alleged Material Default Notice to the
Alleged Non-Performer, (c) the Alleged Non-Performer fails to cure the material
breach within the Cure Period, (d) Claimant provides a Termination Notice not
later than five (5) days following the expiration of the Cure Period and (e)
Telemundo fails to cure the material breach on or prior to the date which is
fifteen (15) days following the Effective Time. Notwithstanding the foregoing, a
"material breach of a material provision" shall also include, and the "non-
defaulting" party shall have the right to terminate this Agreement in the event
of, a party's unexcused material breach of the payment provisions set forth in
Paragraph 2 above, if, but only if, (xx) the non-paying party shall fail to
comply, within ten (10) days of issuance, with an order or award by a court or
arbitrator of competent jurisdiction finding the non-paying party to be in
default of its payment obligations hereunder and setting forth the amount due
and owing by the non-paying party and (yy) thereafter, the non-paying party
shall fail to cure its non-compliance with the applicable order or award within
the five (5) business days period immediately following its receipt of written
demand for such payment from the non-defaulting party hereto.
(b) Effect of Termination: A termination of this Agreement by a
---------------------
party hereto in accordance with Paragraph 3.(a) above shall constitute an
election by the terminating party to concurrently terminate each of the
Affiliation Agreements.
(c) Cross-Defaults: Neither Telemundo nor Licensee (itself or through
--------------
any subsidiary of Licensee which is party to an Affiliation Agreement) shall
have the right to terminate an Affiliation Agreement by reason of an Event of
Force Majeure (as defined in the Affiliation Agreements) without concurrently
terminating each of the Affiliation Agreements. If Telemundo shall have the
right to terminate a Station Affiliation Agreement by reason of (i)
"Unauthorized Preemptions" or (ii) a "Change in Operations", Telemundo shall
- ------------------------- --------------------
have the right to terminate just the applicable Affiliation Agreement or to
terminate all of the Affiliation Agreements.
4. Low Power Stations With respect to each of the stations in the Station
------------------
Group that are low power television stations, Telemundo shall have the right to
terminate the Affiliation Agreement for such station (a "Replaced Station") if
----------------
Telemundo desires to enter into an affiliation agreement with another free
television broadcast station which is in the same licensed community as the
Replaced Station and which has improved signal coverage ("Replacement
-----------
Affiliation Agreement").
- ---------------------
5. Warranties: Each of the parties hereto represents and warrants to the
----------
other that it has the authority to enter into this Memorandum of Agreement and
that there are no restrictions, agreements or limitations on its ability to
perform all of its obligations hereunder. Each of the parties hereto hereby
further represents and warrants to the other that this Memorandum of Agreement
constitutes the legal, valid and binding obligation of such party, enforceable
against such party in accordance with its terms, except as limited by
bankruptcy,
8
<PAGE>
insolvency or other similar rights of general application relating to or
affecting the enforcement of creditors' rights generally and subject to general
principles of equity.
6. Applicable Law: The obligations of the parties hereto under this
--------------
Agreement are subject to all applicable federal, state, and local laws, rules
and regulations (including, but not limited to, the Communications Act of 1934,
as amended, and the rules and regulations of the FCC) and this Memorandum of
Agreement and all matters or issues collateral thereto shall be governed by the
law of the State of New York applicable to contracts negotiated, executed and
performed entirely therein.
7. Notices: All notices to each party required or permitted hereunder to
-------
be in writing shall be deemed given when personally delivered, upon delivery by
overnight courier or other messenger, upon receipt of facsimile copy, or three
business days after the date of mailing postage prepaid, addressed as specified
below, or addressed to such other address as such party may hereafter specify in
a written notice given as provided herein. Such notices to Licensee shall be to:
2290 West 8th Avenue, Hialeah, Florida 33010, Attention: General Counsel. Such
notices to Telemundo shall be to: 2290 West 8th Avenue, Hialeah, Florida 33010,
Attention: General Counsel.
8. Miscellaneous: This Memorandum of Agreement may be executed in two
-------------
or more counterparts, each of which shall constitute an original and all of
which, taken together, shall constitute one and the same agreement. This
Memorandum of Agreement may not be amended, modified, changed, renewed, extended
or discharged except by an instrument in writing signed by Telemundo and
Licensee.
In Witness Whereof, the parties hereto have duly executed this Memorandum
of Agreement as of the day and year first above written.
Telemundo Network
Group LLC Telemundo Group, Inc.
("Telemundo") ("Licensee")
By: /s/ Leah Weil By: /s/ Peter Housman
------------- -----------------
Title: Senior Vice President Title: Chief Financial Officer & Treasurer
SPE Mundo Investment Inc.,
Managing Member
9
<PAGE>
APPENDIX "1"
1. Allocation Between Telemundo and the Station Group:
--------------------------------------------------
Aggregate Net Advertising Receipts shall first be allocated between
Telemundo, on the one hand, and the Licensee (on behalf of the Station Group, in
all cases, excluding station WKAQ in Puerto Rico), on the other hand, according
to the formula set forth below.
First Year: During the first Year of the Term, the Aggregate Net
----------
Advertising Receipts allocated to Licensee shall be as follows:
(a) eighty percent (80%) of the first one hundred thirty million
dollars ($130,000,000) of Aggregate Net Advertising Receipts for such Year;
(b) fifty-five percent (55%) of the incremental Aggregate Net
Advertising Receipts for such Year beyond the first one hundred thirty million
dollars ($130,000,000) until the Aggregate Net Advertising Receipts for such
Year reach two hundred thirty million dollars ($230,000,000); and
(c) forty-five percent (45%) of the incremental Aggregate Net
Advertising Receipts for such Year beyond the first two hundred thirty million
dollars ($230,000,000).
Subsequent Years: Aggregate Net Advertising Receipts for each
----------------
subsequent Year shall be allocated, on a Year-to-Year basis, in accordance with
the formula set forth above; provided, however, that dollar figures set forth
above (i.e., $130,000,000 and $230,000,000) shall be increased each Year,
beginning with the second Year, by three percent (3%).
1
<PAGE>
EXHIBIT 10.2
MEMORANDUM OF AGREEMENT
This Memorandum of Agreement is being entered into as of this 12th day of
August, 1998 between Telemundo Network Group LLC ("Telemundo") and Telemundo
----------
Group, Inc. ("Station Group").
-------------
Whereas, Telemundo and various subsidiaries of Station Group are
concurrently entering into a number of Station Affiliation Agreements pursuant
to which, on the terms and subject to the conditions therein set forth,
Telemundo has agreed to provide to Station Group's free television stations in
the United States, and Station Group has agreed to carry on its free television
stations in the United States, the daily programming which Telemundo makes
available over its United States national network ("Network").
-------
Now therefore, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Telemundo and Station Group agree
as follows:
1. Cable Payments: If, as and when Telemundo hereafter pays to
--------------
TeleCommunications, Inc. ("TCI") carriage fees for delivering new Hispanic
---
surname households as subscribers to the Network on TCI cable systems ("TCI
---
Hispanic Subscribers"), Station Group shall reimburse Telemundo for (a) one-half
- --------------------
of the fees actually paid by Telemundo (up to $2.50 per TCI Hispanic Subscriber)
for the first 400,000 TCI Hispanic Subscribers (on a one-time only basis) and
(b) the Specified Percentage of such fees for TCI Hispanic Subscribers in
excess of the first 400,000. In addition, Station Group shall reimburse
Telemundo for the Specified Percentage of carriage fees hereafter paid by
Telemundo to other non-TCI cable systems for new subscribers to the Network on
such other cable and/or direct broadcast satellite system. Notwithstanding the
foregoing, Station Group's maximum aggregate payment obligation under clause (b)
of the initial sentence of this Paragraph 1 and under the second sentence of
this Paragraph 1 shall be $1,000,000. "Specified Percentage" shall be determined
--------------------
at the time such payment is due and shall be computed as (i) sixty-one percent
(61%) multiplied by: (ii) .8, if the "Aggregate Net Advertising Receipts" (as
that term is defined in the Station Affiliation Agreements being concurrently
entered into by the parties hereto) for the trailing twelve (12) months (the
"ANAR") is less than one hundred and thirty million dollars ($130,000,000); .55,
- -----
if the ANAR is equal to or greater than one hundred and thirty million dollars
($130,000,000) but is less than two hundred thirty million dollars
($230,000,000); and .45, if the ANAR is equal to or greater than two hundred
thirty million dollars ($230,000,000).
<PAGE>
2. No Amendment: The provisions of Paragraph 1 shall constitute an
------------
independent obligation of Station Group and do not, and shall not be deemed to,
constitute an amendment to the Station Affiliation Agreements.
3 Warranties: Each of the parties hereto represents and warrants to
----------
the other that it has the authority to enter into this Memorandum of Agreement
and that there are no restrictions, agreements or limitations on its ability to
perform all of its obligations hereunder. Each of the parties hereto hereby
further represents and warrants to the other that this Memorandum of Agreement
constitutes the legal, valid and binding obligation of such party, enforceable
against such party in accordance with its terms, except as limited by
bankruptcy, insolvency or other similar rights of general application relating
to or affecting the enforcement of creditors' rights generally and subject to
general principles of equity.
4. Applicable Law: The obligations of the parties hereto under this
--------------
Agreement are subject to all applicable federal, state, and local laws, rules
and regulations (including, but not limited to, the Communications Act of 1934,
as amended, and the rules and regulations of the FCC) and this Memorandum of
Agreement and all matters or issues collateral thereto shall be governed by the
law of the State of New York applicable to contracts negotiated, executed and
performed entirely therein.
5. Miscellaneous: This Memorandum of Agreement may be executed in
-------------
two or more counterparts, each of which shall constitute an original and all of
which, taken together, shall constitute one and the same agreement. This
Memorandum of Agreement may not be amended, modified, changed, renewed, extended
or discharged except by an instrument in writing signed by Telemundo and Station
Group.
In Witness Whereof, the parties hereto have duly executed this Memorandum
of Agreement as of the day and year first above written.
Telemundo Network
Group LLC Telemundo Group, Inc.
("Telemundo") ("Station Group")
By: /s/ Leah Weil By: /s/ Peter Housman
------------- -----------------
Title: Senior Vice President, Title: Chief Financial Officer & Treasurer
SPE Mundo Investment Inc.
Managing Member
2
<PAGE>
EXHIBIT 10.3
TELEMUNDO NETWORK GROUP, LLC
STATION AFFILIATION AGREEMENT
_______, 199_
[INSERT NAME OF STATION OWNER]
______________________
______________________
______________________
Attention: General Manager
This sets forth the terms and conditions of the agreement between Telemundo
Network Group, LLC ("Telemundo") and [_________________] ("Licensee") for the
--------- --------
carriage of programming over the facilities of Licensee's television station
[Insert "call" letters] ("Station"). As used in this Agreement, the terms
-------
"program," "programming", "network programming" and "Telemundo programming" and
any derivations thereof shall mean, unless specifically indicated otherwise, the
programming of Telemundo.
1. Telemundo Programming: Telemundo will deliver to the Station for free
---------------------
television broadcasting in the community for which the Station is presently
licensed by the Federal Communications Commission ("FCC"), which is ____________
---
("Covered Community") and which is part of the __________ designated market area
-----------------
("Covered DMA"), all programming which Telemundo makes available for
-----------
broadcasting on its United States national network ("Network"); provided, that
-------
if and to the extent that the FCC permits the Station's Network affiliation
"exclusivity" against other free broadcast stations to be expanded into
portions of the Covered DMA which are outside of the Covered Community, the
definition of Covered Community will be deemed expanded to include such
additional portions of the Covered DMA. The selection, scheduling, substitution
and withdrawal of any program or portion thereof supplied by Telemundo shall at
all times remain within the sole discretion and control of Telemundo (except and
to the extent otherwise expressly provided in this Agreement). Licensee shall
not and shall not authorize others to broadcast or otherwise use any program (or
part thereof) or other material supplied by Telemundo except as specified in
this Agreement, and without limiting the foregoing, Station may broadcast
Telemundo programming only: (i) as scheduled by Telemundo, (ii) over the
facilities of Station in the Covered Community, (iii) by free television
broadcasting and (iv) under retransmission arrangements within the Covered
Community involving the Station and entered into in accordance with the
provisions of Paragraph 20 below.
Telemundo's daily programming during the hours of 7:00 am through 10:00 am
Monday through Friday will be in the Spanish language. Telemundo's daily
programming during the Primary Programmed Time Periods (as defined in Paragraph
5.(b) below) will be predominantly in the Spanish language. Telemundo's daily
programming during all other hours, may, but need not, be in the Spanish
language. Telemundo will not air infomercials or other so-called "paid
programming" (collectively, "Paid Programming") on the Network during the
----------------
Primary
<PAGE>
Programmed Time Periods nor during the hours of 7:00 am through 10:00 am Monday
through Friday. Notwithstanding Licensee's right to select and schedule its own
programming on the Station during the Discretionary Programmed Time Periods (as
defined in Paragraph 5.(b) below), the Station's daily programming during the
hours of 7:00 am through 10:00 am Monday through Friday shall be in the Spanish
language.
2. Affiliation Territory: Telemundo covenants and agrees that, during
---------------------
the "Term" (as defined in Paragraph 13 below) of this Agreement, Licensee shall
be the free broadcast television Network affiliate of Telemundo in the Covered
Community and, except as otherwise provided in this Agreement, shall have the
first call on all program material which Telemundo makes available for broadcast
on the Network, for free broadcast television in the Covered Community.
Licensee understands and agrees that Telemundo may additionally authorize
carriage of Telemundo's daily Network programming by any means of transmission,
other than free broadcast television, but including without limitation, by means
- ----- ----
of cable television, direct broadcast satellite, private or master antenna
services or similar video or audio transmission services, which serve
communities located within the Covered Community and/or the Covered DMA (each,
an "Alternative Transmission Network Affiliate"); provided, however, that such
------------------------------------------
Alternative Transmission Network Affiliates, other than any direct broadcast
satellite systems, may only be so authorized if they are available only in areas
outside the Grade B Contour of the Station or unless the Station otherwise
consents. If an Alternative Transmission Network Affiliate, other than any
direct broadcast satellite system, is available within the Covered Community
and/or the Covered DMA and is available in areas that are both within and
outside the Grade B Contour of the Station (any such Alternative Transmission
Network Affiliate being referred to as a "Community Affiliate"), then Telemundo
-------------------
will work with Licensee to attempt to secure carriage of the Station on such
Community Affiliate. If Licensee is unwilling to seek carriage of the Station
on any such Community Affiliate or is unwilling to pay required carriage fees in
order to secure such carriage, then, notwithstanding the proviso in the
immediately prior sentence, Telemundo shall be entitled to authorize carriage of
Telemundo's daily Network programming on such Community Affiliate (in addition
to having the right to authorize carriage of Telemundo's daily Network
programming on an Alternative Transmission Network Affiliate that is available
only in areas outside the Grade B Contour of the Station), if (and only if) such
Community Affiliate is available to not more than five percent (5%) of the
Hispanic households within the Grade B Contour of the Station (determined in
accordance with the Nielsen Hispanic Television Index, or such other source as
the parties may mutually agree upon; such measurement to be made at the time of
initial carriage authorization and at the time of any renewal or extension of
such carriage arrangement by Telemundo, as distinguished from any unilateral
extension or renewal by the Community Affiliate of such carriage arrangement).
Any license or affiliation agreement with a direct broadcast satellite system
shall include provisions regarding transmission within the Covered Community as
are customarily included in agreements with United States free broadcast
television networks.
3. Program Exclusivity: During the Term, Telemundo agrees not to license
-------------------
any individual program or contiguous block of programs (as contrasted with the
Network feed) which is included in its Network programming during the Primary
Programmed Time Periods or the Discretionary Programmed Time Periods (provided,
that this reference shall exclude any
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2
<PAGE>
program(s) which are included in the Network programming during the
Discretionary Programmed Time Periods for which Station has demonstrated a
pattern of not carrying) (an "Uncarried Program") to third parties for telecast
-----------------
in the Covered Community at any time during the fifteen (15) day period
following the day upon which such program or block of programs is/are aired as
part of the Network programming; provided, that the foregoing shall not apply
to: (i) any telecast by any Alternative Transmission Network Affiliate referred
to in (and permitted by) the second paragraph of Paragraph 2 above, so long as
such program or block of programs is/are telecast by such Alternative
Transmission Network Affiliate at the time that the Telemundo Network "feed"
thereof is intended to be aired; and/or (ii) to any program which the Station
preempts (whether as an "Authorized Preemption" or an "Unauthorized Preemption"
under Section 5.(f) below); and/or (iii) to any "perishable" program
("Perishable Network Programs"), such as a current news program or other types
---------------------------
of programming that focus (such "focus" to be determined, in the case of a
series or other recurring program, from the perspective of such series/program's
over-all format, rather than from the perspective of any particular episode)
primarily on current issues and events (e.g., "Occurrio Asi"); provided, that in
----
the case of the telecast of Perishable Network Programs by other than an
Alternative Transmission Network Affiliate, (w) such telecast, with respect to
each particular Perishable Network Program, is at a time at least 3 hours later
than the time that the Station is required to air such Perishable Network
Program, (x) no more than three (3) hours of Perishable Network Programs which
air during the Primary Programmed Time Periods, excluding any live sports, live
awards shows or other live one-time events that otherwise constitute Perishable
Network Programs ("Event Programming"), is telecast by other than an Alternative
-----------------
Transmission Network Affiliate on any single day, (y) no more than three (3)
hours of Perishable Network Programs which air during the Discretionary
Programmed Time Periods, excluding any Event Programming, is telecast by other
than an Alternative Transmission Network Affiliate on any single day, and (z) if
the applicable licensee is an advertiser-supported television programming
service, the Station is entitled to one minute of promotional time for each hour
of Perishable Network Programs (excluding Event Programming) telecast by such
advertiser-supported television programming service and one minute of
advertising time (to be sold by Telemundo) for each hour of Perishable Network
Programs (excluding Event Programming) telecast by such advertiser-supported
television programming service; provided further, however, that Telemundo may
only utilize the "exclusions" for Event Programming set forth in the foregoing
clauses (x), (y) and (z) on a total of not more than two (2) occasions in any
calendar week, it being agreed that beyond such two (2) occasions in any
calendar week, Event Programming shall be treated like all other Perishable
Network Programming for purposes of clauses (x), (y) and (z).
4. Delivery: Telemundo will, initially, transmit the programming
--------
hereunder by satellite and shall keep Licensee apprised of both the satellite
and transponder being used for such transmission. Currently, Telemundo is
uplinking its programming from facilities located in Miami to a transponder for
satellite delivery. Any and all costs of whatever kind or nature incurred with
respect to the pickup of the Telemundo programming from the satellite (or any
replacement satellite) and its rebroadcast by the Station shall be borne by and
shall be the sole responsibility of Licensee. Telemundo reserves the right, at
any time and from time to time, to modify its method of delivering the
programming hereunder, it being understood and agreed by the parties that, in
any such case, Telemundo will continue to be responsible for the costs of
initially transmitting the programming hereunder and Licensee will continue to
be responsible for
3
<PAGE>
the costs relating to the pickup of the Telemundo programming and its
rebroadcast by the Station. Notwithstanding the foregoing, if Telemundo modifies
its method of delivering the programming hereunder to a method that is unique or
which otherwise falls outside of (or is different from) the generally accepted
methods of delivering television signals within the U.S. free broadcast
television industry, then Telemundo will provide the Station with a level of
cost assistance (to be negotiated in good faith by the parties at the time) in
connection with expenditures incurred by the Station in making the necessary
adaptations and/or enhancements to the Station's signal reception equipment.
Telemundo will provide Licensee with as much advance notice as is reasonably
practicable of any changes in Telemundo's method of delivering the programing
hereunder, unless and to the extent that such changes are made in response to
exigent circumstances.
5. Carriage & Preemption:
---------------------
(a) Commitment to Broadcast Supplied Programming: During the Primary
--------------------------------------------
Programmed Time Periods (subject to the provisions of Paragraph 5.(d) below),
Licensee agrees to broadcast over the facilities of the Station all Telemundo
programs in their entirety, including, but not limited to, all commercial
announcements, Telemundo's Network identification spots and transparent over-
lays, promotional spots and credits, all without interruption, deletion or
addition (except for the addition of Licensee's local commercial announcements
as provided hereunder and required station identification spots) on the date and
at the times the same is scheduled by Telemundo. The foregoing shall also apply
to any Telemundo programing during the Discretionary Programmed Time Periods, to
the extent that the Network "feed" is carried by the Station during such time
periods. Notwithstanding the foregoing provisions: (i) Licensee shall have
certain rights to substitute localized promotional spots for promotional spots
supplied by Telemundo (as more particularly described in Paragraph 6 below);
(ii) Licensee shall have certain rights to substitute local advertisements for
national "spot" advertisements supplied by Telemundo (as more particularly
described in Paragraph 8.(c) below); (iii) Licensee shall have certain rights to
substitute local advertisements for "excess" Telemundo promotional spots (as
more particularly described in Paragraph 8.(a) below); and (iv) Licensee shall
have the general right, with respect to programs airing during the Discretionary
Programmed Time Periods, to join or leave such programs "in progress" (a
"Partially Carried Program"). Licensee agrees to consult with Telemundo, as far
- --------------------------
in advance as is reasonably practicable, regarding any program which Licensee
intends to be a Partially Carried Program; provided, that Licensee's decision
shall be final and controlling, other than in connection with any program for
which Telemundo advises Licensee that Licensee's joining or leaving (as
applicable) such program "in progress" would constitute a violation of any
applicable guild or union agreement or the rights of any third party involved
with such program ("Restricted PC Program"); provided further, however, that
---------------------
with respect to any Restricted PC Program, upon Licensee's request, Telemundo
will use reasonable efforts (appropriate under the circumstances, but without
obligation to incur any material costs) to seek to obtain the applicable third
party's consent to Licensee's joining or leaving (as applicable) such Restricted
PC Program "in progress".
(b) Programmed Time Periods: Telemundo commits to supply programming
-----------------------
throughout the Term of this Agreement on a twenty-four (24) hour per day basis.
Telemundo's programming day will be divided into two (2) parts: the "Primary
--------
Programmed Time Periods",
- -----------------------
4
<PAGE>
during which time the Station (and other Network affiliates) will be required to
air the Network "feed" (subject to the provisions of Paragraph 5.(d) below) and
the "Discretionary Programmed Time Periods", defined as the portion of the
-------------------------------------
programming day that is outside of the Primary Programmed Time Periods and
during which time the Station (and other Network affiliates) will have the
right, but not the obligation, to air the Network "feed".
Initially, the Primary Programmed Time Periods will be as follows (the
specified times apply for the Eastern Time Zone, the Pacific Time Zone and the
Mountain Time Zone; for the Central Time Zone, the times shall be one hour
earlier):
Monday-Friday 10:00 am to 6:00 pm; 6:30 pm to 11:00 pm
Saturday 2:00 pm to midnight
Sunday 2:00 pm to 11:30 pm
Currently, only an Eastern Time Zone feed of the Telemundo programming
is being transmitted. Unless and until additional Time Zone feeds are being
transmitted by Telemundo, and unless otherwise determined by Telemundo as
necessary for the broadcast of live sports or other live events, affiliated
stations in the Central Time Zone are required to pick-up and broadcast the
Eastern Time Zone feed "live" (albeit one hour earlier local time) and
affiliated stations in the Pacific and Mountain Time Zones are required to delay
their broadcast of such programming and to thereafter rebroadcast the
programming at the same time (local time) as the time (Eastern Time) that such
programming is originally transmitted. For example, programming transmitted by
Telemundo which is intended for broadcast in the Eastern Time Zone at 8:00 pm,
(x) in the case of affiliated stations located in the Pacific Time Zone, shall
be delayed by such stations and thereafter be rebroadcast at 8:00 pm (Pacific
Time) on the same day, (y) in the case of affiliated stations located in the
Mountain Time Zone, shall be delayed by such stations and thereafter be
rebroadcast at 8:00 pm (Mountain Time) on the same day and (z) in the case of
affiliated stations in the Central Time Zone, shall be picked-up by such
stations and rebroadcast "live" at 7:00 pm (Central Time) on the same day.
(c) Modifications to Primary Programmed Time Periods: Telemundo
------------------------------------------------
reserves the right to expand the Primary Programmed Time Periods (and agrees to
use its reasonable efforts to so expand the Primary Programmed Time Periods)
and/or to modify the hours included within the Primary Programmed Time Periods;
provided, that Telemundo agrees not to expand the Primary Programmed Time
Periods for the purpose of brokering such additional time to a third party
(e.g., no such expansion shall be for the purpose of airing Paid Programming),
without the approval of Licensee. Telemundo agrees to consult with Licensee,
in advance, regarding any proposed expansions or modifications of the hours
included in the Primary Programmed Time Periods (provided that Telemundo's
determination will be final and conclusive). From and after the time of any
such expansion or modification, the then applicable hours shall constitute the
"Primary Programmed Time Periods" hereunder. To the extent that Telemundo
elects to expand the Primary Programmed Time Periods beyond the aggregate number
of hours currently set forth in Paragraph 5.(b), Telemundo will have the right
to thereafter reduce such aggregate number of hours, provided, that in no event
shall the aggregate number of hours included in the Primary
5
<PAGE>
Programmed Time Periods following any such contraction be less than the
aggregate number of hours currently set forth in Paragraph 5.(b).
Notwithstanding the foregoing, Telemundo agrees that in no event shall
Licensee be provided with less than eighteen (18) hours per week for the airing
of local programming on the Station (i.e., there shall at all times the
Discretionary Programmed Time Periods will aggregate to not less than eighteen
(18) hours per week). As provided above, Telemundo agrees to consult with
Licensee, in advance, regarding the designation (or any change in the
designation) of hours designated as the Discretionary Programmed Time Periods
(provided that Telemundo's determination shall be final and conclusive).
(d) No Conflicting Obligations: Licensee hereby confirms that, except
--------------------------
for the commitments set forth on Schedule "A" attached hereto (the "Existing
--------
Conflicting Commitments"), Licensee has no third party programming obligations
- -----------------------
or commitments as of the date hereof that will or could interfere or conflict
with Licensee broadcasting over the Station during the Primary Programmed Time
Periods (as presently in effect), throughout the Term of this Agreement, all
Telemundo programming specified by Telemundo for airing during the Primary
Programmed Time Periods, and Licensee hereby agrees that, subject only to the
preemption rights contained in Paragraph 16 below and to the provisions of
Paragraph 10 below, Licensee shall broadcast all Telemundo programming during
the Primary Programmed Time Periods specified by Telemundo for airing during the
Primary Programmed Time Periods. Licensee represents and warrants that, except
as expressly set forth on Schedule "A", each of the Existing Conflicting
Commitments is terminable by Licensee, without penalty, on not more than ninety
(90) days prior notice to the other party thereto. If, upon a proposed
expansion or modification of the Primary Programmed Time Periods by Telemundo,
Station has a conflicting obligation or commitment relating to any hour(s) newly
included in the Primary Programmed Time Periods (each, a "Newly Designated
----------------
Hour"), Station shall terminate such obligation or commitment as soon as Station
is contractually entitled to do so, but in no event, except as expressly set
forth on Schedule "A", later than the date which is the later of (i) ninety (90)
days from the date of written notice of Telemundo's proposed
expansion/modification of the Primary Programmed Time Periods or (ii) the date
on which the Newly Designated Hour first is programmed by Telemundo as part of
the Primary Programmed Time Periods (as applicable, the "Interim Period").
--------------
During the Interim Period, the Station may continue to program the Newly
Designated Hour(s) in accordance with the conflicting commitment and the
"exclusivity" provisions of Paragraph 3 shall apply with respect to the Network
programming during such Newly Designated Hour(s), to the same extent that such
provisions would apply if the Station was carrying such Network programming.
After the Interim Period, Licensee's and Station's obligations with respect to
such Newly Designated Hour shall be as provided in Paragraph 5.(a) above. In
order to ensure its ability to comply with the provisions of this Paragraph
5.(d), Licensee agrees that all programming agreements which Licensee hereafter
enters into will be terminable by Licensee, without penalty, on not more than
ninety (90) days prior notice to the other party thereto.
(e) Preempted Programming: Except as otherwise approved by Telemundo,
---------------------
in the event that Licensee, for any reason, fails to telecast or advises
Telemundo that it will not telecast any Telemundo programming during the Primary
Programmed Time Periods, then, in
6
<PAGE>
each case, Licensee, upon notice from Telemundo to Licensee, will telecast such
omitted programming and the commercial announcements contained therein (or any
replacement programming and the commercial announcements contained therein)
during a time period(s) which the parties shall promptly and mutually agree upon
and which shall be of quality and rating value comparable to that of the time
period(s) at which such omitted programming was not telecast as provided herein;
provided, that the foregoing shall not apply, however, to any programming which
Licensee has not telecast pursuant to the exercise of the rights described in
clause (a) of Paragraph 16 below; provided further, that Licensee may telecast
the omitted programming in such other time period(s) without the commercial
announcements originally contained in the omitted programming, provided that
Licensee shall be responsible for all "make goods" to advertisers arising as a
result of the decision to replace such commercial announcements. In the event
that the parties do not promptly agree upon a time period as provided in the
preceding sentence, then, without limitation to any other rights of Telemundo
under this Agreement or otherwise, Telemundo shall have the right to license the
broadcast rights to the applicable omitted programming (or replacement
programming) to another free broadcast television station located in Covered
Community. The foregoing provisions of this Paragraph 5.(e) shall not be
construed so as to limit Telemundo's rights elsewhere provided in this Agreement
or otherwise in the event of the failure by Station to broadcast any particular
Telemundo programming.
(f) Preemptions\Approved and Unauthorized: For the purposes of this
-------------------------------------
Agreement, an "Approved Preemption" shall mean: any failure to broadcast due to
-------------------
a Force Majeure Event as provided for in Paragraph 10 below and any preemption
permitted by Paragraph 16 below. Any other preemption or failure to broadcast
any Telemundo programming during the Primary Programmed Time Periods (other than
a de minimis interruption caused by technical difficulties and lasting not
-- -------
longer than fifteen (15) seconds) shall be deemed an "Unauthorized Preemption",
-----------------------
with Unauthorized Preemptions being subdivided into two (2) categories: "Willful
-------
Unauthorized Preemptions" (defined as Unauthorized Preemptions resulting from
- ------------------------
the willful act (intentionally undertaken to cause a failure to broadcast) of,
or other overt act constituting the gross negligence of Licensee, Station or any
of their respective officers, employees, independent contractors or agents
(provided that such independent contractors or agents are not otherwise
officers, employees, independent contractors or agents of Telemundo) and "Other
-----
Unauthorized Preemptions" (defined as all Unauthorized Preemptions other than
- ------------------------
any Willful Unauthorized Preemptions). Without limiting any other rights of
Telemundo under this Agreement or otherwise, if, during the Term, Station makes
two (2) Willful Unauthorized Preemptions or if, within any twelve (12) month
period during the Term, Station makes three (3) or more Other Unauthorized
Preemptions of the Telemundo programming, Telemundo may, upon thirty (30) days
prior written notice to Licensee, elect, with respect to each such preempted
program, to either: (1) terminate Station's right to broadcast such preempted
program and, to the extent and for the period(s) that Telemundo elects,
thereafter license the broadcast rights to such program to any other free
broadcast television station or stations located in the Covered Community; or
(2) hold Licensee responsible for two hundred percent (200%) of any loss
(whether in the form of foregone advertising revenues, resulting "make goods" in
favor of advertisers, etc.) resulting from each such Unauthorized Preemption
(for purposes of determining the extent of any such "loss", the advertising
revenues that could have been obtained for the preempted program shall be
assumed to equal the greater of (x) the corresponding advertising revenue for
Telemundo programming during the preempted time period for the applicable day of
the week over the
7
<PAGE>
immediately prior four (4) weeks or (y) the advertising revenue actually
obtained for the preempted program throughout the balance of the Telemundo
Network multiplied by a percentage equal to the Station's percentage share of
the Station's Group's then prevailing "network" coverage). If, during the Term,
(I) Station makes a third and fourth (or further) Willful Unauthorized
Preemption or (II) having theretofore made three (3) or more Other Unauthorized
Preemptions within an earlier twelve (12) month period, Station again makes
three (3) or more Other Unauthorized Preemptions of the Telemundo programming
within a twelve (12) month period (unless three (3) or more intervening annual
twelve (12) month periods have elapsed between such annual period and such
earlier annual period), or (III) Station makes two (2) or more Willful
Unauthorized Preemptions and they occur in the same twelve (12) month period in
which, or in a twelve (12) month period adjacent to a twelve (12) month period
in which, Station makes three (3) or more Other Unauthorized Preemptions, then,
without limiting any other rights of Telemundo under this Agreement or
otherwise, Telemundo may elect, on each such occasion and upon thirty (30) days
prior written notice to Licensee, to exercise the rights described in clauses
(1) or (2) above and/or to terminate this Agreement. Licensee shall provide
Telemundo with written notice of any occurrence which Licensee believes
constitutes an Unauthorized Preemption. If Telemundo believes that an
Unauthorized Preemption has occurred, but has not been notified of such
occurrence by Licensee, Telemundo shall, within ninety (90) days of Telemundo's
becoming aware that a preemption has occurred that Telemundo reasonably believes
constitutes an Unauthorized Preemption, provide Licensee with written notice of
such belief. Within ninety (90) days of Telemundo's becoming aware that it is
entitled to exercise its remedies under this Paragraph 5.(f) by reason of the
occurrence of the requisite Unauthorized Preemptions, Telemundo shall provide
Licensee with written notice as to whether Telemundo has elected the remedy set
forth in clause (1) or (2) above or, if appropriate, has elected to terminate
this Agreement; Telemundo failure to provide timely written notice of its
election will not constitute a waiver of Telemundo's rights, but Telemundo will
be deemed to have elected the remedy set forth in clause (2) above (and may not
elect to terminate this Agreement by reason of such particular circumstance).
In every case, in the event of an Other Unauthorized Preemption, Telemundo
shall have its right to recover damages by reason of any "loss" incurred.
However, in counting the number of occurrences of Other Unauthorized
Preemptions for purposes of determining whether Telemundo has the right to
exercise the additional remedies set forth in clauses (1) or (2) of the
preceding paragraph and/or to terminate this Agreement, "Remedied Other
--------------
Unauthorized Preemptions" will not be included. In order for an Other
- ------------------------
Unauthorized Preemption to be eligible to be a Remedied Other Unauthorized
Preemption, Licensee must promptly (but in no event more than ten (10) days
after Licensee becomes aware of such Other Unauthorized Preemption or twenty
(20) days after such Other Unauthorized Preemption, whichever is earlier)
provide Telemundo with written notice setting forth the time and extent of such
Other Unauthorized Preemption, the cause of such Other Unauthorized Preemption
and an explanation of the reasonable steps that Licensee has taken or is
prepared to take to prevent a recurrence. If Telemundo is satisfied, in its
reasonable judgment, that such remedial steps will prevent a recurrence, and
provided that such remedial steps have been taken or are promptly thereafter
implemented by Licensee, then such preemption will constitute a "Remedied Other
Unauthorized Preemption". Telemundo shall advise Licensee of Telemundo's
position promptly following receipt of Licensee's written notice. If Telemundo
is not satisfied, in its reasonable judgment,
8
<PAGE>
with the remedial steps suggested by Licensee, Telemundo may suggest alternative
remedial steps and a time frame within which they must be achieved. If Licensee
thereafter takes such remedial steps within the time frame indicated by
Telemundo, then such preemption will constitute a "Remedied Other Unauthorized
Preemption".
(g) Non-Telemundo Time Periods/Station's Programming Obligations: The
------------------------------------------------------------
Station shall have the right to program, and shall program, the portion of each
twenty-four (24) hour broadcast day which is not part of the Primary Programmed
Time Periods (i.e., the Discretionary Programmed Time Periods), including by
carrying and re-transmitting the Network feed during such time period (in which
case the applicable provisions of Paragraph 5.(a) will apply to any programming
included within such carried Network feed). As between Telemundo and Station,
Station shall be responsible for complying with all FCC licensing/exhibition
requirements regarding programming content, including, without limitation,
regulations addressing public service programming and children's or educational
programming for all time periods (it being understood and agreed, however, that
the Network programming provided by Telemundo to the Station may be taken into
account by the Station in connection with assessing its compliance with such FCC
programming content requirements, to the full extent permissible under
applicable FCC rules and regulations). Telemundo agrees to provide, as part of
the weekly Network feed, not less than three (3) hours per week of programming
that will satisfy the FCC requirements for "children's educational and
informational programming".
6. Promotion:
---------
(a) Telemundo Promos:
----------------
(i) During Locally Programmed Time Periods: Telemundo will provide
--------------------------------------
Licensee with on-air promotional announcements (which may be for any Telemundo
programming) ("Telemundo Promos") for broadcast during all or any portion of the
----------------
Discretionary Programmed Time Periods during which the Station is not carrying
the Network feed ("Locally Programmed Time Periods"); provided, that the
-------------------------------
foregoing shall not apply with respect to any Paid Programming or any other
program which does not contain commercial/promotional announcements. Subject to
the immediately preceding proviso, each hour during the Locally Programmed Time
Periods, Station agrees to air not less than one minute ten seconds (1:10) of
Telemundo Promos per half-hour and not less than two minutes twenty seconds
(2:20) of Telemundo Promos per hour, provided that in no event shall the
aggregate amount of time represented by Telemundo Promos in any given hour
during the Locally Programmed Time Periods represent less than fifty percent
(50%) of all of the promotional "spot" time aired during such hour (provided,
that so long as the running time of Telemundo Promos per half-hour and per hour
at least equals one minute ten seconds (1:10) per half-hour and two minutes
twenty seconds (2:20) per hour, respectively, Licensee will be deemed to have
satisfied the foregoing provision so long as Licensee uses all reasonable
efforts, to the extent practicable, to satisfy the aforesaid fifty percent (50%)
minimum requirement). The foregoing allocations of promotional "spots" as
between Telemundo Promos and the Station's other promotional "spots" shall be
adjusted from time-to-time during the Term, so as to remain consistent with the
then prevailing general practices of other comparable United States free
broadcast television networks. With respect to the promotional "spots"
allocated to the Telemundo Promos, Telemundo shall have the right to
9
<PAGE>
determine which particular Telemundo Promos are to be used during any particular
program (provided, that the Station will have the right to determine the
particular promotional "spot" within such program in which to insert the
designated Telemundo Promo); provided, that Licensee shall have the right to
replace up to one-half (1/2) (based upon running time, not number) of the
Telemundo Promos solely with localized promotional announcements regarding
Network programming which airs during the Primary Programmed Time Periods;
provided further, that Telemundo shall have the right to "tag" up to one-half
(1/2) (based upon running time, not number) of the Telemundo Promos in each
half-hour as being non-replaceable, in which case Licensee's aforesaid right to
replace the Telemundo Promos with localized promos of Network programming may
only be exercised with respect to the "untagged" Telemundo Promos.
(ii) During the Network Feed: Telemundo will include Telemundo Promos
-----------------------
in its daily Network programming feed; provided that the foregoing shall not
apply with respect to any infomercials or any other program which does not
contain commercial/promotional announcements). Subject to the immediately
preceding proviso, during each hour of the Network feed (other than during
infomercials), Telemundo will include not less than one minute ten seconds
(1:10) of Telemundo Promos per half-hour and not less than two minutes twenty
seconds (2:20) of Telemundo Promos per hour. The foregoing minimums may be
adjusted by Telemundo from time-to-time during the Term, so as to remain
consistent with the then prevailing general practices of other comparable United
States free broadcast television networks. With respect to such Telemundo
Promos, Telemundo shall have the right to determine which particular Telemundo
Promos are to be used for each applicable promotional "spot" within the Network
feed; provided, that Licensee shall have the right to replace up to one-half
(1/2) (based upon running time, not number) of the Telemundo Promos solely with
localized promotional announcements regarding Network programming which airs
during the Primary Programmed Time Periods; provided further, that Telemundo
shall have the right to "tag" up to one-half (1/2) (based upon running time, not
number) of the Telemundo Promos in each half-hour as being non-replaceable, in
which case Licensee's aforesaid right to replace the Telemundo Promos with
localized promos of Network programming may only be exercised with respect to
the "untagged" Telemundo Promos. By way of clarification, the provisions of this
Paragraph 6.(a)(ii) shall apply with respect to all Network programming during
the Primary Programmed Time Periods and during any portion of the Discretionary
Programmed Time Periods during which the Station is carrying the Network feed;
during those portions of the Discretionary Programmed Time Periods during which
the Station is not carrying the Network feed, the provisions of Paragraph
6.(a)(i) above, rather than the provisions of this Paragraph 6.(a)(ii), will be
applicable.
(b) Additional Promotional Materials: In addition to providing the
--------------------------------
Telemundo Promos referred to above, Telemundo shall make available to Licensee
Telemundo's standard "on-air" promotional materials (e.g., "on-air" promotional
"beds") for utilization in connection with local promos; provided, that if
Licensee requests that Telemundo customize such "on-air" promotional materials
for Licensee, then Licensee shall reimburse Telemundo for the costs of such
customizing. Telemundo and Licensee shall mutually determine which other
promotional and sales materials (e.g., still photographs/biographies of on-air
talent, story synopsis, etc.) Telemundo will provide to Licensee; Licensee shall
reimburse Telemundo for Telemundo's actual costs in making such mutually-agreed
upon materials available to Licensee. Licensee shall not delete any copyright,
trademark, logo or other notice, or any credit, included in any materials
10
<PAGE>
delivered pursuant to this Paragraph or otherwise, and Licensee shall not
exhibit, display, distribute or otherwise use any trademark, logo or other
material or item delivered pursuant to this Paragraph or otherwise, except as
instructed by Telemundo at the time.
7. Capital Expenditure, Marketing and Programming Commitments:
----------------------------------------------------------
(a) Certain Commitments: Pursuant to that certain Umbrella Agreement
-------------------
dated as of the date hereof between Telemundo and Telemundo Group, Inc. ("TGI")
(the "Umbrella Agreement"), Telemundo, on its behalf, and TGI, on its behalf and
------------------
on behalf of Licensee and all of TGI's's other United States free broadcast
television stations, have each committed to incur certain minimum amounts of
marketing/promotional expenditures, programming expenditures and capital
expenditures during the Term.
(b) Market Research/Advertising Support: As between Telemundo and
-----------------------------------
Licensee, Telemundo shall be responsible for all market research and advertising
support for the Network. Telemundo shall also be responsible for all market
research for national "spot" sales and will share all information derived from
such research with the Station for use in the Station's local sales efforts.
Licensee shall be responsible for all market research for local "spot" sales and
will share all information derived from such research with Telemundo.
8. Commercial Announcements:
------------------------
(a) Allocation of Ad Time: With respect to each hour of Telemundo
---------------------
programming, not less than fifty percent (50%) of the available advertising time
will be made available for local advertising and national "spot" advertising (as
more particularly discussed in Paragraph 8.(c) below), with Telemundo reserving
the balance of the advertising time; provided, that the foregoing shall not
apply with respect to any Paid Programming or any other program which does not
contain commercial/promotional announcements. It is currently contemplated that
the average aggregate amount of advertising (exclusive of any Promo "spots")
will be twelve (12) to thirteen (13) minutes per hour. Solely with respect to
Telemundo programming during the Discretionary Programmed Time Periods, if
Telemundo does not intend to utilize its full fifty percent (50%) of the
available advertising time for commercial announcements, Telemundo shall so
advise Licensee; to the extent that Telemundo has elected to run incremental
Telemundo Promos in such otherwise un-utilized ad spots, Licensee shall have the
right to replace such incremental Telemundo Promos with local advertising; the
parties shall work together to develop a methodology for identify and
distinguishing the "incremental", replaceable Telemundo Promos from other
Telemundo Promos.
(b) Changes in the Amount of Ad Time: Telemundo shall have the right,
--------------------------------
at any time and from time to time (including on a program-specific basis), to
change the aggregate amount of commercial advertising time per hour, provided
that the allocation of such advertising time (whether increased or decreased)
between Telemundo's reserved time, on the one hand, and local advertising and
national "spot" advertising, on the other hand, shall at all times remain
consistent with the percentage figures set forth in the first sentence of
Paragraph 8.(a) above and any such change shall be consistent with industry
standards for United States free broadcast television networks for the
particular type of programming (e.g., children's programming, late-
11
<PAGE>
night programming, etc.) involved. Telemundo shall consult with Licensee
regarding any plans to so change the aggregate amount of commercial advertising
time (although Telemundo's determination shall be final and controlling), and
shall provide Licensee with reasonable advance notice before implementing any
such change.
(c) Affiliate Time: Of the aggregated commercial time allocated to
--------------
local advertising and national "spot" sales, a portion of such commercial time
shall be reserved for national "spot" time ("Affiliate Time"), it being the
--------------
present intention of the parties to allocate such time between local advertising
and Affiliate Time in a manner consistent with (and to adjust such allocation
from time-to-time during the Term, if necessary, to remain consistent with) the
then prevailing practices of other United States free broadcast television
networks (but taking into account the practices of the Network as of the date
hereof). Notwithstanding the foregoing, the Station shall have the right, in its
good faith business judgement, to elect not to participate in any particular
national "spot" sale of Affiliate Time and to instead utilize the particular
"spot" for a local advertisement, as hereafter provided. Telemundo shall advise
the Station which particular "spots" it intends to utilize for Affiliate Time
and the Station shall advise Telemundo whether it intends to participate in such
national "spots", all at times and on a basis consistent with customary
practices between free broadcast networks and their affiliated stations.
Telemundo shall administer the sale, on behalf of all of the Network's
participating affiliated stations, including the Station, of any and all
Affiliate Time (subject to the foregoing provisions). Telemundo shall be
entitled to be reimbursed for any third party advertising or marketing costs
(including, without limitation, ad agency fees and commissions) incurred by
Telemundo in connection with its sale of Affiliate Time (as more particularly
described in the Umbrella Agreement.
(d) Obligation to Broadcast: With respect to all Telemundo programming
-----------------------
broadcast by Licensee, Licensee's broadcast over the Station of the commercial
announcements included by Telemundo in such programming is of the essence of
this Agreement, and nothing contained in Paragraphs 5.(e) and 5.(f) above or
elsewhere in this Agreement (other than Paragraphs 10 and 16 below) shall limit
Telemundo's rights or remedies at law or otherwise relating to failure to so
broadcast said commercial announcements. Licensee agrees to maintain complete
and accurate records of all commercial announcements broadcast as provided
herein. Within two (2) weeks following each request by Telemundo therefor,
Licensee will submit copies of all such records to Telemundo.
(e) Sales Incentives. In connection with its sales of national
-----------------
advertising time, Telemundo shall not discriminate against sales of national
Affiliate Time "spots" undertaken on behalf of the Network affiliates in favor
of sales of national Network "spots" undertaken on Telemundo's own behalf,
taking into account all relevant facts and circumstances (it being understood
that the demand for and price paid for any particular ad "spot" will be a
function of numerous factors, including the popularity of any particular
program, the time of airing of any particular program and the subject matter of
any particular program, and inevitably will be a function of customer demands
and preferences). In furtherance of the foregoing, Telemundo has adopted
certain ad sales policies and procedures, a copy of which has been provided to
Licensee, which are designed to ensure that Telemundo's ad sales force is not
incentivized to sell national Network "spots" in lieu of Affiliate Time "spots".
From time to time during the Term Telemundo
12
<PAGE>
and Licensee will meet to review and discuss Telemundo's then current national
ad sales policies and procedures and agree to reasonably cooperate with one
another to refine and/or modify the same to the extent reasonably necessary to
achieve the parties' intended purpose.
9. Station Compensation/Allocation of Advertising Revenues: Telemundo
-------------------------------------------------------
shall be responsible for the sale of all national Network "spots" and for the
sale of all Affiliate Time on behalf of the Network's participating affiliated
stations, including the Station Group, and Licensee shall be responsible for the
sale of all local advertising over the Station Group, all as is more
particularly provided for in the Umbrella Agreement. The compensation to the
Station for carrying the Network programming and the compensation to Telemundo
for providing the Network programming are set forth in the Umbrella Agreement.
10. Force Majeure: Telemundo shall not be liable to Licensee (or Station)
-------------
for any failure to supply any programming or any part thereof, nor shall
Licensee (nor Station) be liable to Telemundo for failure to broadcast any such
programming or any part thereof, by reason of any act of God, labor dispute,
non-delivery by program suppliers or others, failure or breakdown of satellite
or other facilities, legal enactment, governmental order or regulation or any
other similar or dissimilar cause beyond their respective control ("Force
-----
Majeure Event"). If a party (the "Affected Party") determines that it will be
- ------------- --------------
unable to perform its obligations hereunder by reason of a Force Majeure Event,
the Affected Party shall provide written notice thereof to the other party (the
"Unaffected Party") explaining the reason therefor and the Affected Party's best
----------------
estimate as to the anticipated period of its non-performance; it being agreed,
however, that the Affected Party shall have a duty to take reasonable steps,
appropriate under the relevant circumstances, to minimize the adverse impact to
the Unaffected Party of the particular Force Majeure Event that is causing the
Affected Party's non-performance. As promptly as practicable following the
cessation of the particular Force Majeure Event, the Affected Party shall
provide the Unaffected Party with written notice thereof. If due to any Force
Majeure Event(s), Telemundo substantially fails to provide the programming to be
delivered to Licensee under Paragraph 1 above, or the Station substantially
fails to broadcast such programming as scheduled by Telemundo, for twelve (12)
consecutive weeks, or for six (6) months in the aggregate during any twelve (12)
month period, then the Unaffected Party (as applicable) may terminate this
Agreement upon thirty (30) days prior written notice to the Affected Party,
which written notice may be given at any time prior to the expiration of the two
(2) day period immediately following the date of the Unaffected Party's receipt
of actual written notice (given in accordance with Paragraph 19 below) that the
Force Majeure Event(s) has ended.
11. Assignment: This Agreement shall not be assigned by Licensee without
----------
the prior written consent of Telemundo, and any permitted assignment shall not
relieve Licensee of its obligations hereunder; provided, that the foregoing
restriction shall exclude any such assignment made pursuant to and in accordance
with the following (each, a "Permitted Assignment"): (a) the Put/Call Agreement
--------------------
between Station Partners, LLC., Sony Pictures Entertainment Inc. and Liberty
Media Corporation or (b) the Security Documents (as defined in the Credit
Agreement dated as of August 4, 1998 among TLMD Acquisition Co., a Delaware
corporation; Telemundo Holdings, Inc. ("Holdings"); the financial institutions
--------
from time to time party thereto; Credit Suisse First Boston, a bank organized
under the laws of Switzerland, acting through its New York Branch, as
administrative agent, collateral agent, and issuing bank; and Canadian Imperial
Bank
13
<PAGE>
of Commerce, as documentation agent) ("Credit Agreement"). Any purported
----------------
assignment by Licensee without such consent (other than a Permitted Assignment)
shall be null and void and not enforceable against Telemundo.
12. Unauthorized Copying: Licensee shall not, and shall not authorize
--------------------
others to, record, copy or duplicate any programming and other material
furnished by Telemundo hereunder, in whole or in part, and shall take all
reasonable precautions to prevent any such recordings, copying or duplicating.
Notwithstanding the foregoing, if Station is located in a time zone other than
the Eastern Time Zone or Central Time Zone, Licensee may pre-record programming
from the satellite feed for later telecast at the times scheduled by Telemundo
(in accordance with Paragraph 5.(b) above). Licensee shall erase all such pre-
recorded programming promptly after its scheduled telecast.
13. Term: The term of this Agreement shall commence as of the date hereof
----
(the "Commencement Date") and shall continue for a period of ten (10) years
-----------------
thereafter (the "Initial Period"). After the Initial Period, the term of this
--------------
Agreement may be extended by Telemundo (in its sole discretion) beyond the
Initial Period for an additional period of five (5) years (the "Initial
-------
Extension"), upon Telemundo giving written notice of such extension (the
- ---------
"Extension Notice") to Licensee at least one hundred twenty (120) days prior to
- -----------------
the expiration of the Initial Period; provided, however, that if Telemundo has
failed to satisfy the performance goals set forth in Paragraph 1 of Appendix "1"
attached hereto, then Licensee may, in its sole discretion and within thirty
(30) days of Licensee's receipt of the Extension Notice, give Telemundo written
notice that Licensee rejects such extension, in which case Telemundo's Extension
Notice shall be ineffective and the term of this Agreement shall terminate upon
the expiration of the Initial Period. If the Initial Period is extended by the
Initial Extension, then, after the Initial Extension, the Term of this Agreement
may be extended by Telemundo (in its sole discretion) for an additional period
of five (5) years beyond the end of the Initial Extension (the "Further
-------
Extension"), by Telemundo giving an Extension Notice to Licensee at least one
- ---------
hundred twenty (120) days prior to the expiration of the Initial Extension;
provided, however, that if Telemundo has failed to satisfy the performance goals
set forth in Paragraph 2 of Appendix "1" attached hereto, then Licensee may, in
its sole discretion within thirty (30) days of Licensee's receipt of the
Extension Notice, give Telemundo written notice that Licensee rejects such
extension, in which case Telemundo's Extension Notice shall be ineffective and
the term of this Agreement shall terminate upon the expiration of the Initial
Extension. The Initial Period, together with the Initial Extension (if
applicable) and the Further Extension (if applicable) shall constitute the
"Term" of this Agreement. Any presently existing Station Affiliation Agreements
----
between Telemundo and Licensee with respect to the Station shall be deemed to
have been terminated and superseded in all respects by mutual consent of the
parties as of the Commencement Date.
14. Service Marks: Licensee hereby acknowledges that "Telemundo" is a
-------------
trademark, service mark, trade name and the property of Telemundo and that all
uses of said trademark, service mark, trade name and property, now known or
hereafter developed or created shall inure to the benefit of Telemundo.
Licensee is hereby granted a non-exclusive, royalty-free license to use the
Telemundo trademark, service mark and trade name, during the Term of this
Agreement, solely in connection with the presentation of the "on-air" look of
the Station and the advertising and promotion of the Station and of the Network
programming; provided, that such advertising
14
<PAGE>
and promotional rights do not extend to commercial merchandising or similar
rights, although Licensee shall have the limited right and license to create
incidental, promotional "give-aways" which include the "Telemundo" trademark,
service mark or trade name, subject to the provisions set forth below. Any
promotional materials which Licensee develops or distributes which incorporate
the Telemundo trademark, service mark and trade name shall clearly identify
"Telemundo" as the trademark, service mark and/or trade name of Telemundo
through appropriate identification (e.g., the use of the symbol "TM", etc.) or
----
equivalent language clearly identifying Telemundo as the owner thereof. At the
request of Telemundo, specimens of such materials must be submitted in
representative form by Licensee to Telemundo for Telemundo's prior written
approval. In addition, Licensee, TGI and Holdings shall each have the right to
use the name "Telemundo" on a limited basis as part of its corporate name;
provided, that in no event shall such use entitle Licensee, TGI or Holdings, to
use the name "Telemundo" (i) except as provided in clause (ii), other than with
the words "Group, Inc." or "Holdings, Inc." immediately adjacent thereto, (ii)
other than in any communication in which it is clear that the reference to
"Telemundo" is a reference to Licensee or Telemundo Holdings, Inc. (and not
Telemundo, the Network or otherwise), (iii) in conjunction with the words
"Network" or "Channel", (iv) in connection with any production or distribution
businesses or (v) in connection with any merchandising, interactive, publishing
or music businesses or activities or any other business or activities which are
ancillary to the motion picture and television production and distribution
businesses. Telemundo hereby consents to Licensee, along with TGI and Holdings,
granting a non-exclusive license with respect to the foregoing licensed rights
to the collateral agent under the Security Agreement (as defined in the Credit
Agreement) pursuant to, and solely for purposes of, Section 6.03 of the Security
Agreement, subject to the terms and conditions of Section 6.03 of the Security
Agreement (as currently in effect) and subject to the terms and conditions of
this Agreement. Notwithstanding anything to the contrary contained in this
Agreement, upon the termination or expiration of the Term of this Agreement, all
of Licensee's, TGI's, Holdings', Station's and Licensee's aforementioned
permitted sub-licensee's rights under this Agreement to broadcast or otherwise
use any Telemundo program or any trademark, service mark, trade name, logo or
other material or item hereunder shall immediately cease and none of the
foregoing entities shall have any further rights whatsoever under this Agreement
with respect to any such program, material or item.
15. Licenses: Licensee shall at all times during the Term maintain such
--------
licenses and authorizations, including performing rights licenses, as now are or
may hereafter be in general use by United States free broadcast television
stations and necessary for Licensee's broadcast of the Telemundo programming on
the Station. In this regard, Licensee hereby represents and warrants to
Telemundo that Licensee currently maintains all such licenses and
authorizations, including performing rights licenses, as are ordinarily and
customarily obtained by United States free broadcast television stations and
necessary for Licensee's broadcast of the Telemundo programming on the Station.
16. Applicable Law: The obligations of Licensee and Telemundo under this
--------------
Agreement are subject to all applicable federal, state, and local laws, rules
and regulations (including, but not limited to, the Communications Act of 1934,
as amended, and the rules and regulations of the FCC) and this Agreement and all
matters or issues collateral thereto shall be governed by the law of the State
of New York applicable to contracts negotiated, executed and performed entirely
15
<PAGE>
therein. With respect to programs offered by Telemundo pursuant to this
Agreement, nothing in any other Paragraph hereof shall be construed to prevent
or hinder Licensee from (a) rejecting or refusing Telemundo programs which
Licensee reasonably believes to be unsatisfactory, unsuitable or contrary to the
public interest, or (b) substituting a program which, in Licensee's opinion, is
of greater local or national importance (it being understood and agreed that
local sporting events shall not constitute programming of a greater local or
national importance); provided, however, Licensee shall use its reasonable best
efforts to give Telemundo written notice of each such rejection or substitution,
and the justification therefor, at least seventy-two (72) hours in advance of
the scheduled broadcast (or, if Telemundo's initial program log identifying the
applicable program is provided to Licensee less than seventy-two (72) hours
before the scheduled broadcast, then Licensee shall have twenty-four (24) hours
from its receipt of such program log), including an explanation of the cause for
any lesser notice. Programming will be deemed to be unsatisfactory or
unsuitable only if it (i) is delivered in a form which does not meet accepted
standards of good engineering practice; (ii) does not comply with the rules and
regulations of the FCC; or (iii) differs substantially in style and content from
Telemundo programming which Licensee has broadcast previously and Telemundo
programming which Telemundo has announced for its new fall 1998 programming
line-up and which Licensee reasonably believes would not meet prevailing
contemporary standards of good taste in its community of license. Licensee
confirms that no programming will be deemed to be unsatisfactory, unsuitable or
contrary to the public interest based on programming performance or ratings,
advertiser or audience reactions or the availability of alternative programming
(including sporting events and other special entertainment events) which
Licensee believes to be more profitable or more attractive.
17. Change in Operations: If the Station shall for any reason cease to be
--------------------
licensed by the FCC as a free television broadcaster in the Covered Community,
or if changes in the Station's operations shall cause the Station to fall
materially below its current operating standards (other than in the case that
the degraded operating standards of the Station nevertheless are within then
customary operating standards for United States free broadcast television
station affiliates of United States free broadcast television networks) or if
the Station's signal service area shall be reduced materially below its current
area (other than in the case that the signal service area reduction is
consistent with similar reductions generally being imposed by the FCC upon
United States free broadcast television stations) or if the Station shall
otherwise hereafter cease to be operated in accordance with then customary
operating standards for the United States free broadcast television station
affiliates of United States free broadcast television networks (each, a "Change
------
in Operations"), then such occurrence shall constitute a default by Licensee
- -------------
hereunder and Telemundo, in addition to its other rights and remedies, at law
and in equity, shall have the right to terminate this Agreement upon thirty
(30) days prior written notice to Licensee; provided, that if Licensee shall
commence efforts to cure the applicable default within the thirty (30) day
period commencing on the date of Licensee's receipt of Telemundo's written
notice and if Licensee shall cure the applicable default to the reasonable
satisfaction of Telemundo within the one hundred and twenty (120) day period
commencing on the date of Licensee's receipt of Telemundo's written notice, then
this Agreement shall continue in effect; otherwise, this Agreement shall
terminate upon the expiration of such thirty (30) day period (if Licensee did
not commence efforts to cure the applicable default within such period) or such
one hundred and twenty (120) day cure period, as applicable. The aforesaid one
hundred and twenty (120) day cure period shall be subject to reduction if
Licensee shall, during such period, cease to use efforts
16
<PAGE>
to cure the applicable default; in such instance, the cure period shall expire
(and, at Telemundo's election, this Agreement shall expire) as of the day that
Licensee ceases to use efforts to cure the applicable default. If Licensee
disagrees with Telemundo's contention that Telemundo is entitled to terminate
this Agreement pursuant to this Paragraph, the matter shall be submitted to
binding arbitration in Los Angeles County or New York City under the rules and
procedures of the American Arbitration Association, with the arbitrator being an
expert in the area of free broadcast network television affiliation agreements
(to the extent that such an arbitrator is available and can be agreed upon by
the parties). If Licensee initiates an arbitration proceeding in accordance with
this Paragraph on or prior to the otherwise effective date of Telemundo's
termination, then Telemundo's termination will be stayed pending the outcome of
such arbitration. A termination pursuant to this Paragraph 17 is sometime
referred to as a "Change in Operations Termination". If the underlying cause of
--------------------------------
the matter giving rise to a Change in Operation under this Paragraph 17 is also
a Force Majeure Event under Paragraph 10, then the provisions of Paragraph 10
shall control regarding the consequences of such occurrence on the parties'
rights and obligations under this Agreement.
18. Warranties and Indemnities:
--------------------------
(a) Each of the parties hereto represents and warrants to the other
that it has the authority to enter into this Agreement, that there are no
restrictions, agreements or limitations on its ability to perform all of its
obligations hereunder and that the execution and delivery of this Agreement and
the performance by it of its obligations hereunder have been duly authorized by
its board of directors or other governing body and no other corporate or
partnership proceedings on its part are necessary for the execution and delivery
of this Agreement and the performance of its obligations provided for herein.
Each of the parties hereto hereby further represents and warrants to the other
that this Agreement constitutes the legal, valid and binding obligation of such
party, enforceable against such party in accordance with its terms, except as
limited by bankruptcy, insolvency or other similar rights of general application
relating to or affecting the enforcement of creditors' rights generally and
subject to general principles of equity.
(b) Telemundo represents and warrants that the broadcasting by
Station, in accordance with this Agreement, of any Telemundo programming
provided by Telemundo to Station shall not violate or infringe upon the trade
name, trademark, copyright, literary or dramatic right, or right of privacy or
publicity of any person or entity, or constitute a libel or slander of any
person or entity; provided, however, that the foregoing representations and
warranties shall not apply: (i) to public performance rights in music, (ii) to
any material furnished or added by any person or entity other than Telemundo
after delivery of the programming to Station or (iii) to the extent such
programming is changed or otherwise affected by deletion, addition or alteration
of any material by any person or entity other than Telemundo after delivery of
the programming to Station. Telemundo agrees to indemnify and hold harmless
Station and its parents, affiliates, subsidiaries, successors and assigns, and
the respective owners, officers, directors, agents and employees of each, from
and against all liability, actions, claims, demands, losses, damages or expenses
(including reasonable attorneys' fees, but excluding Licensee's or Station's
lost profits or consequential damages, if any) caused by or arising out of
Telemundo's breach of the representations and warranties set forth in the
foregoing sentence or any breach of any of Telemundo's other representations,
warranties or agreements hereunder. Telemundo
17
<PAGE>
makes no representations, warranties or indemnities with respect to the
Telemundo programming, express or implied, except as expressly set forth in this
Paragraph 18.(b). Telemundo further agrees to carry errors-and-omissions
insurance covering its programming, with coverage limits and deductibles within
industry standards, and to add and maintain Licensee and the Station as an
additional insured in connection therewith during the Term.
(c) Without limitation to any of Licensee's other obligations and
agreements under this Agreement, Licensee agrees to indemnify and hold harmless
Telemundo and its parents, affiliates, subsidiaries, successors and assigns, and
the respective owners, officers, directors, agents and employees of each, from
and against all liability, actions, claims, demands, losses, damages or expenses
(including reasonable attorneys' fees, but excluding Telemundo's lost profits or
Telemundo's consequential damages, if any) caused by or arising out of any
matters excluded from Telemundo's representations and warranties by clauses (i),
(ii) or (iii) of Paragraph 18.(b) above, or any breach of any of Licensee's
representations, warranties or agreements hereunder or any programming broadcast
by Station other than that provided by Telemundo hereunder.
(d) The indemnitor may assume, and if the indemnitee requests in
writing shall assume, the defense of any third party claim, demand or action
covered by indemnity hereunder, and upon the written request of the indemnitee,
shall allow the indemnitee to cooperate in the defense at the indemnitee's sole
cost and expense. The indemnitee shall give the indemnitor prompt written notice
of any claim, demand or action covered by indemnity hereunder. If the indemnitee
settles or consents to entry of judgment of any claim, demand or action without
the prior written consent of the indemnitor, the indemnitor shall be released
from the indemnity in that instance.
19. Notices: All notices to each party required or permitted hereunder to
-------
be in writing shall be deemed given when personally delivered, upon delivery by
overnight courier or other messenger, upon receipt of facsimile copy, or three
business days after the date of mailing postage prepaid, addressed as specified
below, or addressed to such other address as such party may hereafter specify in
a written notice given as provided herein. Such notices to Licensee shall be to
the address set forth for Licensee on page 1 of this Agreement. Such notices to
Telemundo shall be to: Telemundo Network Group LLC, 2290 West 8th Avenue,
Hialeah, Florida 33010, Attn: Chief Operating Officer.
20. Retransmission Consent. If Licensee is accorded the right under any
----------------------
local, state or federal rule, regulation or law to elect to require any cable
television system or other distribution system to obtain Licensee's consent to
such system's transmission or retransmission of Station's broadcast of any
Telemundo programming, or is given any similar right (including, without
limitation, the right to compel payment from such a distribution system as a
condition of such distribution system's retransmission of the Telemundo
programming), then, to the full extent permitted under applicable law (including
applicable FCC regulations), Telemundo shall have the exclusive right, on behalf
of Licensee, to conduct all negotiations in connection with and to otherwise
administer all such retransmission decisions, as follows. The initial decision
whether to elect for "must carry" or to negotiate for "retransmission consent"
shall be made by Licensee (following prior good faith consultation with
Telemundo). If Licensee shall elect to negotiate for "retransmission consent",
then: (i) in connection with any retransmission decision
18
<PAGE>
which deals solely with the retransmission of the Station's signal and for which
direct economic benefits are obtained, Licensee will be entitled to such
benefits; (ii) in connection with any retransmission decision which deals solely
with the retransmission of the Station's signal and for which payments or other
consideration would be payable to a distribution system in exchange for
carriage, Telemundo will provide Licensee with written notice setting forth the
terms of such carriage, which terms Licensee may accept or decline in its
discretion; if Licensee accepts such terms, the costs of such carriage will be
borne by Licensee; if Licensee declines, Telemundo may nevertheless enter into
the applicable arrangement, but will be responsible for the costs of obtaining
such carriage on such distribution system (in which case, Telemundo shall have
the right to recoup such costs out of any resulting economic benefits and shall
split the post-recoupment balance 50/50 with Licensee); and (iii) if Telemundo
desires to (and is legally entitled to) bundle the retransmission of the
Station's signal with the retransmission or carriage of another programming
service or channel, Telemundo shall first obtain Licensee's consent to such
arrangement, which Licensee may grant or withhold in its discretion; if Licensee
withholds its consent, and thereafter seeks to bundle the retransmission of the
Station's signal with the retransmission or carriage of a programming service or
channel of a third party (a "Third Party Arrangement"), Telemundo shall have a
-----------------------
right to "match" the terms (using a channel or channels designated by Telemundo)
of any such bona fide Third Party Arrangement. Telemundo will consult in good
faith with Licensee with respect to any actions that Telemundo may desire to
take in connection with its administration of retransmission decisions
hereunder. In connection with any retransmission arrangement under clause (i)
and any retransmission arrangement under clauses (ii) or (iii) which Licensee
elects to accept or consent to, Licensee shall, upon Telemundo's request,
execute such documentation and instruments as may be reasonably necessary for
Telemundo to properly document and evidence such arrangement (and/or Licensee's
acceptance of or consent to such arrangement).
21. Future Channels: If Licensee has received or shall hereafter during
---------------
the Term receive digital spectrum frequency allocations by reason of its
ownership of the Station, and if Licensee shall utilize such additional
frequency space for the transmission of additional television channels, then, at
Telemundo's election, Licensee shall cause each such channel to enter into an
affiliation agreement with Telemundo for the carriage of programming to be
provided by Telemundo. The terms and conditions of such affiliation agreement
shall be the same as the terms and conditions of this Agreement, provided that
the consideration received by Station for entering into and under each such
affiliation agreement ("Future Channel Affiliate Consideration") shall be in
------------------------ -------------
accordance with then prevailing market terms for similar arrangements for the
carriage of television programming which have been negotiated on an "arms-
length" basis. The parties will enter into good faith negotiations, for a
period of not less than sixty (60) days (or such other period as the parties may
mutually agree upon) (as applicable, the "Negotiation Period") regarding the
------------------
Future Channel Affiliate Consideration payable to the Station for such
affiliation agreement (consistent with the immediately preceding sentence). If
the parties are unable to reach agreement within such Negotiation Period, then
either party may submit the matter to binding arbitration in Los Angeles County
or New York City under the rules and procedures of the American Arbitration
Association, with the arbitrator being an expert in the area of free over-the-
air broadcast network television affiliation agreements (to the extent that such
an arbitrator is available and can be agreed upon by the parties). The
arbitration shall be conducted as a "baseball" arbitration, with (i) each party
being obligated to prepare and submit to the arbitrator
19
<PAGE>
its proposal for the Future Channel Affiliate Consideration and (ii) the
arbitrator being instructed that he/she must choose whichever of the submitted
proposals most closely sets forth the prevailing market terms for similar
arrangements which have been negotiated on an "arms-length" basis (and without
any discretion on the part of the Arbitrator to select any other form of
affiliation agreement or to make any changes or modifications to the submitted
forms).
22. Termination Right: In the event of a termination by TGI of the
-----------------
Umbrella Agreement by reason of a "material default of a material provision" by
Telemundo thereunder, this Agreement will terminate; neither Licensee nor TGI
may otherwise terminate this Agreement by reason of any breach or default on the
part of Telemundo, or otherwise. In the event of a termination by Telemundo of
the Umbrella Agreement by reason of a "material default of a material provision"
by TGI thereunder, Telemundo may terminate this Agreement; Telemundo may not
otherwise terminate this Agreement by reason of any breach or default on the
part of Licensee or TGI, or otherwise, except in the specific circumstances set
forth in this Agreement for which Telemundo is expressly granted a termination
right.
23. Miscellaneous:
-------------
(a) Nothing contained in this Agreement shall create any partnership,
association, joint venture, fiduciary or agency relationship between Telemundo
and Licensee.
(b) No waiver of any failure of any condition or of the breach of any
obligation hereunder shall be deemed to be a waiver of any preceding or
succeeding failure of the same or any other condition, or a waiver of any
preceding or succeeding breach of the same or any other obligation.
(c) In connection with Telemundo programming, Station shall at all
times permit Telemundo, without charge, to place, maintain and use on Station's
premises, at Telemundo's expense, such reasonable amounts of devices and
equipment as Telemundo shall require, in such location and manner, as to allow
Telemundo to economically, efficiently and accurately achieve the purposes of
such equipment. Station shall operate such equipment for Telemundo, to the
extent Telemundo reasonably requests, and no fee shall be charged by Station
therefor.
(d) This Agreement constitutes the entire understanding between
Telemundo and Licensee concerning the subject matter hereof and may not be
amended, modified, changed, renewed, extended or discharged except by an
instrument in writing signed by Telemundo and Licensee or as otherwise expressly
provided herein. Telemundo and Licensee each hereby acknowledges that neither is
entering into this Agreement in reliance upon any term, condition,
representation or warranty not stated herein, and that this Agreement replaces
any and all prior and contemporaneous agreements, whether oral or written,
pertaining to the subject matter hereof.
(e) Each and all of the several rights and remedies of each party
hereto under or contained in or by reason of this Agreement shall be cumulative,
and the exercise of one or more of said rights or remedies shall not preclude
the exercise of any other right or remedy under
20
<PAGE>
this Agreement, at law, or in equity. Notwithstanding anything to the contrary
contained in this Agreement, in no event shall either party hereto be entitled
to or recover any lost profits or consequential damages because of a breach or
failure by the other party (except as otherwise provided in this Agreement).
(f) Paragraph headings are inserted for convenience only and shall not
be used to interpret this Agreement or any of the provisions hereof. or given
any legal or other effect whatsoever.
(g) This Agreement may be executed in two or more counterparts, each
of which shall constitute an original and all of which, taken together, shall
constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
Telemundo Network
Group, LLC [__________________]
("Telemundo") ("Licensee")
By:__________________________ By: ________________________________
Title: ______________________ Title: _____________________________
21
<PAGE>
APPENDIX "1"
PERFORMANCE GOALS
1. Telemundo shall be deemed to have achieved its "Performance Goals"
necessary to preclude Licensee from rejecting Telemundo's exercise of its right
to extend the Initial Term by the Initial Extension, if the average "Market
------
Share" of Telemundo's Network programming during the Programmed Time Period
- -----
either (i) during the first six (6) months of the last year in the Initial
Period or (ii) during the twelve (12) month period commencing eighteen (18)
months prior to the expiration of the Initial Period, equals or exceeds twenty-
five percent (25%); provided, that in the event that during the applicable
measuring period a third Spanish-language network then exists which services at
least seventy percent (70%) of the U.S. Hispanic households, then the aforesaid
percentage shall be twenty percent (20%) rather than twenty-five percent (25%).
As used in this Appendix "2", "Market Share" shall mean the share of viewership
of all U.S. Hispanic households viewing Spanish-language television programming
and shall be determined by reference to the Nielsen Hispanic Television Index
(or such other source as the parties may mutually agree upon).
2. Telemundo shall be deemed to have achieved its "Performance Goals"
necessary to preclude Licensee from rejecting Telemundo's exercise of its right
to extend the Initial Extension by the Further Extension, if the average "Market
------
Share" of Telemundo's Network programming during the Programmed Time Period
- -----
either (i) during the first six (6) months of the last year in the Initial
Extension or (ii) during the twelve (12) month period commencing eighteen (18)
months prior to the expiration of the Initial Extension equals or exceeds
twenty-five percent (25%); provided, that in the event that during the
applicable measuring period a third Spanish-language network then exists which
services at least seventy percent (70%) of the U.S. Hispanic households, then
the aforesaid percentage shall be twenty percent (20%) rather than twenty-five
percent (25%).
22
<PAGE>
EXHIBIT 10.4
TELEMUNDO HOLDINGS, INC.
STOCKHOLDERS' AGREEMENT
DATED AS OF AUGUST 12, 1998
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE(S)
-------
<S> <C>
ARTICLE 1
DEFINITIONS............................................................. -2-
ARTICLE 2
CORPORATE GOVERNANCE.................................................... -9-
2.1 Board of Directors................................................. -9-
2.1.1 Composition of Board........................................ -9-
2.1.2 Agreement to Vote........................................... -10-
2.1.3 Removal..................................................... -10-
2.1.4 Filling Vacancies........................................... -10-
2.1.5 Additional Agreements....................................... -11-
2.2 Cooperation........................................................ -11-
2.3 Size of Board of Directors......................................... -11-
2.4 Board Procedures................................................... -11-
2.4.1 Meetings.................................................... -11-
2.4.2 Agenda...................................................... -12-
2.4.3 Powers of the Board......................................... -12-
2.4.4 Voting...................................................... -12-
2.4.5 Subsidiaries................................................ -12-
2.5 Officers........................................................... -12-
2.6 Major Decisions.................................................... -13-
2.7 Conduct of Business; Approval of Business Plan and Budget.......... -13-
2.7.1 Conduct of Business......................................... -13-
2.7.2 Approval of Business Plan................................... -13-
2.7.3 Approval of the Budget...................................... -13-
2.8 Affiliation Agreement.............................................. -14-
ARTICLE 3
RESTRICTIONS ON TRANSFER................................................ -14-
3.1 General Prohibition on Transfer of Common Stock.................... -14-
3.2 Permitted Transferees.............................................. -14-
3.3 Permitted Transfers................................................ -15-
3.3.1 Station Partners............................................ -15-
3.3.2 SPE or Liberty.............................................. -16-
3.3.3 Bastion..................................................... -18-
ARTICLE 4
REPRESENTATIONS AND WARRANTIES.......................................... -18-
4.1 Mutual Representations and Warranties.............................. -18-
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
ARTICLE 5
COVENANTS............................................................... -20-
5.1 Mutual Covenants................................................... -20-
5.2 Station Partners Covenants......................................... -20-
5.3 SPE and Liberty Covenants.......................................... -21-
ARTICLE 6
MISCELLANEOUS........................................................... -21-
6.1 Term............................................................... -21-
6.2 Remedies........................................................... -21-
6.3 Legends............................................................ -21-
6.4 Notices............................................................ -22-
6.5 Complete Agreement................................................. -24-
6.6 Governing Law...................................................... -24-
6.7 Binding Effect..................................................... -24-
6.8 Pronouns; Statutory References..................................... -24-
6.9 Headings........................................................... -25-
6.10 Interpretation..................................................... -25-
6.11 References to this Agreement....................................... -25-
6.12 Jurisdiction....................................................... -25-
6.13 Severability....................................................... -25-
6.14 Additional Documents and Acts...................................... -25-
6.15 Amendments......................................................... -25-
6.16 Reliance on Authority of Person Signing Agreement.................. -25-
6.17 Multiple Counterparts.............................................. -25-
6.18 No Third Party Beneficiary......................................... -26-
</TABLE>
-ii-
<PAGE>
SCHEDULES
2.7A -- BUSINESS PLAN
-iii-
<PAGE>
EXHIBITS
Exhibit A -- Liberty Proxy
Exhibit B -- Put/Call Agreement
-iv-
<PAGE>
STOCKHOLDERS' AGREEMENT
This STOCKHOLDERS' AGREEMENT ("AGREEMENT") is made as of August 12, 1998
("EFFECTIVE DATE") by and among Telemundo Holdings, Inc., a Delaware corporation
(the "COMPANY"), Station Partners, LLC, a Delaware limited liability company
("STATION PARTNERS"), Apollo Investment Fund III, L.P. ("APOLLO"), Bastion
Capital Fund, L.P. ("BASTION"), Sony Pictures Entertainment Inc., a Delaware
corporation ("SPE") and Liberty Media Corporation, a Delaware corporation
("LIBERTY") (Station Partners, SPE and Liberty are hereinafter sometimes
referred to as the "STOCKHOLDERS") (together, the Company, Apollo, Bastion and
the Stockholders are the "PARTIES"), with reference to the following facts:
A. SPE owns, in the aggregate, 2,495 shares of the common stock, par
value $0.01 per share, of the Company (the "COMMON STOCK"), representing 24.95%
of the outstanding Common Stock.
B. Liberty owns, in the aggregate, 2,495 shares of the Common Stock,
representing 24.95% of the outstanding Common Stock.
C. Station Partners owns, in the aggregate, 5,010 shares of the Common
Stock, representing 50.1% of the outstanding Common Stock.
D. The Company and TLMD Acquisition Co., a Delaware corporation and
wholly owned Subsidiary of the Company ("ACQUISITION CO."), entered into an
Agreement and Plan of Merger with Telemundo Group, Inc., a Delaware corporation
("TELEMUNDO"), dated November 24, 1997 (the "MERGER AGREEMENT"). The Parties
are entering into this Agreement in connection with the merger, pursuant to
which Telemundo will become a wholly owned Subsidiary of the Company.
E. The Stockholders desire to maximize the long-term strategic values of
their respective companies, and have determined that it is in their respective
best interests to achieve this objective by entering into this Agreement for the
purpose of setting forth certain of the terms which shall govern their
relationship.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound
hereby, the Parties hereto agree as follows:
<PAGE>
ARTICLE 1
DEFINITIONS
When used in this Agreement, the following terms shall have the meanings
set forth below (all terms used in this Agreement that are not defined in this
Article 1 shall have the meanings set forth elsewhere in this Agreement):
"ACQUISITION CO." shall have the meaning given in Recital D to this
---------------
Agreement.
"ACQUISITION DATE" means August 12, 1998.
----------------
"AFFILIATE" means, with respect to any Person, any other Person that,
---------
directly or indirectly, through one or more intermediaries, Controls, is
Controlled by or is under common Control with, such specified Person.
"AFFILIATION AGREEMENT" means together, the Station Affiliation Agreements
---------------------
between the Network Group and each of the Company's owned and operated stations,
the Memorandum of Agreement relating to cable payments between the Network Group
and the Company, the Memorandum of Agreement (also referred to as the Umbrella
Agreement) between the Network Group and the Company and the Memorandum of
Agreement relating to low power stations between SPE and Liberty, on the one
hand, and Station Partners, Apollo and Bastion, on the other hand, all dated as
of the Effective Date, as amended from time to time hereafter.
"APOLLO" means Apollo Investment Fund III, L.P.
------
"APOLLO ENTITY" means any of Apollo Advisors, L.P., Apollo Management,
-------------
L.P., or any investment fund or investment account over which Apollo Advisors,
L.P., Apollo Management, L.P., or any of their respective Affiliates or
principals have the power to direct (directly or through an investment
management or investment advisory arrangement) the investment decisions.
"APPRAISED PRICE" of shares of Common Stock means the cash price that an
---------------
unrelated third party would pay to acquire all of the shares of Common Stock of
the Company (computed on a fully diluted basis after giving effect to the
exercise of any and all outstanding conversion rights, exchange rights, warrants
and options) in an arm's-length transaction, assuming that the Company was being
sold in a manner reasonably designed to solicit all possible participants and
permit all interested Persons an opportunity to participate and to achieve the
best value reasonably available to the Stockholders at that time, taking into
account all existing circumstances, including, without limitation, the terms and
conditions of all agreements (including this Agreement and all affiliation and
programming agreements) to which the Company or any of its Subsidiaries is then
a party, as determined in accordance with the provisions of this paragraph.
Within ten (10) days following an event set forth herein requiring determination
of Appraised Price (the "NOTICE DATE"), each affected Stockholder shall
designate an Investment Banking Firm to determine the Appraised Price. The
parties recognize that EBITDA is only one of the factors that is relevant
-2-
<PAGE>
in determining the Appraised Price; however, to the extent that the appraisers
utilize EBITDA in their valuation analysis, the parties agree that they will
instruct the appraisers to take into account, and to make appropriate
adjustments to, EBITDA for increases in programming and marketing expenditures
during the twelve month period ending on the last day of the calendar month
immediately prior to the Notice Date (the "LTM PERIOD"), compared to the level
of such programming and marketing expenditures during the twelve month period
immediately prior to the LTM Period which increased programming and marketing
expenditures are reasonably expected to disproportionately benefit periods
subsequent to the Notice Date. Within thirty (30) days after the Notice Date,
each Investment Banking Firm shall determine its initial view as to the
Appraised Price and consult with one another with respect thereto. Within 45
days after the Notice Date, each Investment Banking Firm shall have determined
its final view as to the Appraised Price. If the difference between the higher
of the respective final views of the Investment Banking Firms (the "HIGHER
APPRAISED PRICE") and the lower of the respective final views of the Investment
Banking Firms (the "LOWER APPRAISED PRICE") is less than 10% of the Higher
Appraised Price, the Appraised Price determined shall be the average of those
views. Otherwise, the Investment Banking Firms shall jointly designate another
Investment Banking Firm (the "MUTUALLY DESIGNATED APPRAISER") to determine the
final Appraised Price. Within 15 days of such designation, the Mutually
Designated Appraiser shall determine its final view as to the Appraised Price
(the "MUTUAL APPRAISED PRICE") and the final determination of the Appraised
Price shall be the average of (i) the Mutual Appraised Price and (ii) the Higher
Appraised Price or the Lower Appraised Price, whichever is closer to the Mutual
Appraised Price. The Company shall provide reasonable access to each of the
designated Investment Banking Firms to members of management of the Company and
its Subsidiaries and to the books and records of the Company and its
Subsidiaries so as to allow such Investment Banking Firms to conduct due
diligence examinations in scope and duration as are customary in valuations of
this kind. Each of the Parties and any Permitted Transferee (on its own behalf
and on behalf of its respective Affiliates) agrees to cooperate with each of the
Investment Banking Firms and to provide such information as may reasonably be
requested. Each Party shall pay the costs and expenses incurred in connection
with its designated Investment Banking Firm. The costs and expenses incurred in
connection with the Mutually Designated Appraiser shall be paid by the party
whose designated Investment Banking Firm submitted the appraised price farthest
away from the Mutual Appraised Price.
"BASTION" shall have the meaning given in the preamble to this Agreement.
-------
"BASTION CONTROLLED AFFILIATE" shall mean Bastion Partners, L.P. and
----------------------------
Bastion Management Corp. and/or any other Person with respect to which the
investment decisions as to the exercise of voting or consensual rights and other
material decisions are ultimately controlled by substantially the same
individual or individuals at the time controlling such decisions as to any of
such entities (including, without limitation, such individual or individuals
themselves).
"BENEFICIALLY OWNED" shall have the meaning given such term in Rule 13d-3
------------------
under the Exchange Act.
"BOARD" means the Board of Directors of the Company.
-----
"BUDGET" shall have the meaning given in Section 2.7.3.
------
-3-
<PAGE>
"BUSINESS DAY" means any day that is not a Saturday, a Sunday or any day on
------------
which banks are required or authorized by law to be closed in the City of New
York.
"BUSINESS PLAN" shall have the meaning given in Section 2.7.2.
-------------
"BYLAWS" means the Bylaws of the Company in existence at the date hereof or
------
amended from time to time hereafter, with the approval of the Board of Directors
and the unanimous approval of the Stockholders.
"CERTIFICATE OF INCORPORATION" means the Certificate of Incorporation of
----------------------------
the Company in existence at the date hereof or amended from time to time
hereafter, with the approval of the Board of Directors and the unanimous
approval of the Stockholders.
"CHANGE IN CONTROL" shall be deemed to occur if the shares of Common Stock
-----------------
held by a Stockholder are not Beneficially Owned at least 50% by the Ultimate
Beneficial Owner of such Stockholder.
"COMMON STOCK" shall have the meaning given in Recital A to this Agreement.
------------
"COMMUNICATIONS ACT" means the Communications Act of 1934, as amended and
------------------
the FCC rules and regulations promulgated thereunder.
"CONTROL" (and the related terms "Controlling" and "Controlled") means the
------- ----------- ----------
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"CONTROLLED AFFILIATE" shall mean (I) with respect to SPE, Sony Corporation
--------------------
of America, Sony Corporation and any Person which is Controlled, directly or
indirectly, by SPE, Sony Corporation of America or Sony Corporation, and (ii)
with respect to Liberty, TCI and any Person which is Controlled, directly or
indirectly, by Liberty or TCI. The parties acknowledge that if a business
combination transaction is consummated between TCI and AT&T Corp. ("AT&T"), the
----
definition of Controlled Affiliate shall also include, as to Liberty, AT&T and
any Person which is controlled, directly or indirectly, by AT&T.
"DGCL" means the General Corporation Law of the State of Delaware, as in
----
effect from time to time.
"EBITDA" means earnings before interest, taxes, depreciation and
------
amortization, as computed in accordance with then applicable United States
generally accepted accounting principles.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
------------
"EFFECTIVE DATE" shall have the meaning given in the preamble to this
--------------
Agreement.
"FCC" means the Federal Communications Commission.
---
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<PAGE>
"FIRST REFUSAL ELECTION NOTICE" shall have the meaning given in Section
-----------------------------
3.3.2(d).
"FIRST REFUSAL NOTICE" shall have the meaning given in Section 3.3.2(d)(2).
--------------------
"FIRST REFUSAL PERIOD" shall have the meaning given in Section 3.3.2(d)(2).
--------------------
"GOVERNMENTAL ENTITY" shall mean any federal, state or local government or
-------------------
regulatory agency, authority, commission or instrumentality.
"HIGHER APPRAISED PRICE" shall have the meaning given in the definition of
----------------------
Appraised Price.
"INDENTURE" means that certain Indenture dated as of August 12, 1998
---------
between the Company and Bank of Montreal Trust Company, as Trustee.
"INDEPENDENT DIRECTOR" means a director of the Company designated as an
--------------------
independent director pursuant to the provisions of Section 2.1 hereof.
"INSOLVENCY EVENT" means the taking of any of the following actions by the
----------------
Company or any of its Subsidiaries: (a) the Company or any of its Subsidiaries
institutes proceedings to be adjudicated voluntarily bankrupt; (b) the Company
or any of its Subsidiaries consents to the filing of a bankruptcy proceeding
against the Company or such Subsidiary; (c) the Company or any of its
Subsidiaries files a petition or answer or consent seeking reorganization under
any bankruptcy or similar law or statute; (d) the Company or any of its
Subsidiaries consents to the filing of any petition, or to the appointment of a
custodian, receiver, liquidator, trustee or assignee in bankruptcy or insolvency
of the Company or such Subsidiary or any substantial part of its assets or
property; or (e) the Company or any of its Subsidiaries makes a general
assignment for the benefit of creditors, or takes any corporate action in
furtherance of any of the foregoing.
"INVESTMENT BANKING FIRM" means an investment banking firm of recognized
-----------------------
national standing.
"LIBERTY" shall have the meaning given in the preamble to this Agreement.
-------
"LIBERTY NOMINATED DIRECTOR" shall have the meaning given in Section 2.1.1.
--------------------------
"LIBERTY PROXY" means the proxy granted by Liberty to Station Partners to
-------------
vote all of the shares of the Common Stock held by Liberty, a copy of which is
attached hereto as Exhibit A.
"LOWER APPRAISED PRICE" shall have the meaning given in the definition of
---------------------
Appraised Price.
"LTM PERIOD" shall have the meaning given in the definition of Appraised
----------
Price.
"MAJOR DECISION" means any of the following actions or transactions or the
--------------
entering into of any contract or agreement to do any of the following actions or
transactions described in
-5-
<PAGE>
clauses (a) - (h) below, or any modification, amendment, enforcement, waiver,
extension, or renewal thereof (except as limited by the terms of said clauses
(a) - (h)):
(a) Any substantial change in the nature or scope of the Company's
broadcast business, which provides predominantly Spanish-language or Hispanic-
themed programming, or the acquisition of an additional broadcast station or
other substantial business;
(b) Issuing or redeeming any equity or debt securities, or any
options, warrants or other securities which provide a right to purchase or are
convertible into equity or debt securities of the Company;
(c) Entering into any agreement with respect to or consummating any
merger, consolidation or reorganization of the Company or any of its
Subsidiaries;
(d) Sale or other transfer by the Company or any of its Subsidiaries
in a single transaction or series of related transactions, of all or
substantially all of the assets of the Company, of any broadcast station or any
other assets in a single transaction or series of related transactions with a
purchase price in excess of $10 million;
(e) Taking any action relating to the termination, liquidation,
dissolution or winding up of the Company;
(f) Taking any action by the Company or any of its Subsidiaries that
would constitute an Insolvency Event for the Company or any of its Subsidiaries;
(g) Any related party transaction between any station or the Company
or any of its Subsidiaries and any of the Stockholders or Affiliates thereof,
but excluding transactions between the Company or any of its Subsidiaries and
the Network Group; and
(h) Except as set forth in Section 2.8, permitting any station owned,
directly or indirectly by the Company or any of its Subsidiaries to enter into,
extend, amend, terminate or fail to renew any affiliation agreement with a
broadcast network (the approval of which action pursuant to Section 2.6 hereof
shall not be unreasonably withheld by any party after applying commercial
standards of review prevailing among investors in companies comparable to the
Company).
"MANAGEMENT" shall have the meaning given in Section 2.5.
----------
"MARKETABLE SECURITIES" means marketable securities (i) issued by an issuer
---------------------
with a public float equal to or greater than $2 billion, (ii) that are of a
class of securities listed on a major national or international stock exchange,
(iii) that constitute, in the aggregate, not more than 5% of the outstanding
securities of such class and (iv) that have been registered for sale under the
Securities Act or are otherwise freely tradable under the Securities Act and
applicable "blue sky" or state securities laws.
"MERGER AGREEMENT" shall have the meaning given in Recital D to this
----------------
Agreement.
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<PAGE>
"MUTUAL APPRAISED PRICE" shall have the meaning given in the definition of
----------------------
Appraised Price.
"MUTUALLY DESIGNATED APPRAISER" shall have the meaning given in the
-----------------------------
definition of Appraised Price.
"NETWORK GROUP" means Telemundo Network Group LLC, a Delaware limited
-------------
liability company.
"NETWORK GROUP OPERATING AGREEMENT" means the Operating Agreement for the
---------------------------------
Network Group dated as of the date hereof.
"NOTICE DATE" shall have the meaning given in the definition of Appraised
-----------
Price.
"OFFEREE STOCKHOLDER" shall have the meaning given in Section 3.3.2(d)(2).
-------------------
"PARTIES" shall have the meaning given in the preamble to this Agreement.
-------
"PERMITTED TRANSFEREE" means the assignee of Common Stock who acquires such
--------------------
Common Stock in a Permitted Transfer.
"PERMITTED TRANSFERS" shall have the meaning given in Section 3.3.
-------------------
"PERSON" means any individual, limited or general partnership, limited
------
liability company, limited liability partnership, corporation, joint venture,
business trust, joint stock company, trust, estate, unincorporated association,
Governmental Entity or other entity of whatsoever nature.
"PROPOSED PRICE" shall have the meaning given in Section 3.3.2(d)(2).
--------------
"PUT/CALL AGREEMENT" shall have the meaning given in Section 3.3.1
------------------
"ROLL-OVER BUDGET" shall have the meaning given in Section 2.7.3.
----------------
"SECURITIES ACT" means the Securities Act of 1933, as amended.
--------------
"SENIOR CREDIT FACILITY" means that certain Credit Agreement dated as of
----------------------
August 4, 1998, among Acquisition Co., as Borrower, the Company, as Parent
Guarantor, Credit Suisse First Boston, as Administrative Agent, as Collateral
Agent and as Issuing Bank and Canadian Imperial Bank of Commerce, as
Documentation Agent, and the lenders party thereto, together with the related
documents thereto (including, without limitation, any guarantees, agreements and
security documents), in each case, as such agreements, in whole or in part, may
be amended, increased (but only so long as such increase is permitted under the
terms of the Indenture) or refinanced in whole or in part by one or more
separate agreements.
"SONY CORPORATION" means Sony Corporation, a corporation organized under
----------------
the laws of Japan.
-7-
<PAGE>
"SONY CORPORATION OF AMERICA" means Sony Corporation of America, a New York
---------------------------
corporation.
"SPE" shall have the meaning given in the preamble to this Agreement.
---
"SPE DIRECTORS" shall have the meaning given in Section 2.1.1.
-------------
"STATION PARTNERS" shall have the meaning given in the preamble to this
----------------
Agreement.
"STATION PARTNERS DIRECTORS" shall have the meaning given in Section 2.1.1.
--------------------------
"STATION PARTNERS LLC AGREEMENT" means that certain Operating Agreement
------------------------------
dated as of August 12, 1998, between Apollo and Bastion.
"STOCKHOLDER" shall have the meaning given in the Preamble to this
-----------
Agreement.
"SUBSIDIARY" means, in respect of any Person, any corporation, association,
----------
limited liability company, limited or general partnership or other business
entity of which more than 50.1% of the total voting power of shares of capital
stock or other interests (including partnership interests) entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by (i) such Person, (ii) such Person and one or more
Subsidiaries of such Person, or (iii) one or more Subsidiaries of such Person.
"TCI" means Tele-Communications, Inc., a Delaware corporation.
---
"TELEMUNDO" shall have the meaning given in Recital D to this Agreement.
---------
"TRANSFER" means, directly or indirectly (including, without limitation, by
--------
way of any Transfer of an interest in Station Partners), to sell, assign,
convey, transfer, pledge, subject to lien, or otherwise dispose or encumber, or
to enter into any contract, option or other arrangement or understanding with
respect to any assignment, conveyance, transfer, pledge, encumbrance or other
disposition. The terms "Transferor," "Transferee" and similar variations shall
have commensurate meaning.
"TRANSFER OF CONTROL APPLICATION" shall have the meaning given in Section
-------------------------------
3.3.1(b).
"TRANSFERRED ASSETS" shall have the meaning given in Section 3.3.2(c).
------------------
"TRANSFERRING STOCKHOLDER" shall have the meaning given in Section
------------------------
3.3.2(d)(2).
"ULTIMATE BENEFICIAL OWNER" means, with respect to SPE, SPE, Sony
-------------------------
Corporation of America or Sony Corporation and, with respect to Liberty, Liberty
or TCI, and with respect to either of them, any Transferee permitted pursuant to
the provisions of Section 3.3.2(c) hereof.
-8-
<PAGE>
ARTICLE 2
CORPORATE GOVERNANCE
2.1 Board of Directors.
------------------
2.1.1 Composition of Board. (a) The Board shall be comprised of
--------------------
nine directors, consisting of (i) six designated directors and (ii) three other
nominated directors subject to the approval of the holders of a majority of the
outstanding shares. Of the six designated directors, (x) four directors shall
be designees of Station Partners (the "STATION PARTNERS DIRECTORS") and (y) two
directors shall be designees of SPE (the "SPE DIRECTORS"). Of the three
nominated directors subject to the approval of the holders of a majority of the
outstanding shares of Common Stock, (A) one director shall be designated for
nomination by Liberty (the "LIBERTY NOMINATED DIRECTOR") and (B) the two
independent directors (the "INDEPENDENT DIRECTORS") shall be designated for
nomination in accordance with the provisions of the immediately succeeding
sentence. Of the two Independent Directors, one director shall be designated
for nomination by Station Partners, subject to the written approval of Liberty
and SPE, which approval shall not be unreasonably withheld, and one director
shall be designated for nomination by Liberty and SPE, acting jointly, subject
to the written approval of Station Partners, which approval shall not be
unreasonably withheld. The Parties agree that it shall not be unreasonable to
withhold approval of the election of an independent director who is also an
officer or employee of the Company.
(b) The Liberty Nominated Director shall not be a past or
present officer, director or employee of Liberty or its Affiliates (including,
but not limited to, its parent company), nor will the Liberty Nominated Director
have any familial relationship with Liberty or its Affiliates. The Liberty
Nominated Director shall be elected by action of a majority of the outstanding
shares of common stock of the Company held by Stockholders other than Liberty.
In the event that the Stockholders do not elect the specific nominee to the
Board proposed by Liberty, Liberty shall be entitled to submit alternative
nominee(s) until such time as the nominee submitted is elected to the Board by
the Stockholders, and the Stockholders shall promptly act to approve or
disapprove any such nominee upon submission by Liberty.
(c) With respect to the Independent Directors, in the event
that the Independent Director nominated by Station Partners is not approved by
Liberty and SPE or the Independent Director nominated by Liberty and SPE, acting
jointly, is not approved by Station Partners, then the party or parties whose
Independent Director is not approved shall be entitled to submit alternative
nominee(s) until such time as the nominee submitted is elected to the Board by
the Stockholders, and the Stockholders shall promptly act to approve or
disapprove any such nominee upon his submission.
(d) Each director designated or nominated by the
Stockholders as provided in this Section 2.1.1 must be a citizen of the United
States.
(e) The directors shall be elected in accordance with this
Section 2.1 at each annual meeting of the Stockholders and shall hold office
until the next annual meeting of Stockholders. Each director, including a
director elected to fill a vacancy in accordance with
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<PAGE>
Section 2.1.4, shall hold office until the expiration of the term for which
elected and until a successor has been elected and qualified.
(f) Subject to the last sentence of Section 3.1 hereof, if
any of SPE or Liberty Transfers any of its Common Stock to a Permitted
Transferee pursuant to Section 3.3 herein, then designations and nominations of
directors, voting on Major Decisions as set forth in Section 2.6 and the
approval or consent to any of the matters referred to in Sections 2.5, 2.7.2,
2.7.3, 2.8, 5.1.2, 6.1 or 6.15, shall be made, at the option of such Stockholder
and subject to applicable regulatory requirements, by either the Stockholder
party to this Agreement as of the date hereof or, as between such Stockholder
and its Permitted Transferees, the party owning the largest number of shares of
the Common Stock initially held by such Stockholder. Subject to the last
sentence of Section 3.1 hereof, if Station Partners Transfers its Common Stock
to a Permitted Transferee pursuant to Section 3.3 herein, then designations and
nominations of directors, voting on Major Decisions as set forth in Section 2.6
and the approval or consent to any of the matters referred to in Sections 2.5,
2.7.2, 2.7.3, 2.8, 5.1.2, 6.1 or 6.15, shall be made, at the option of Station
Partners and subject to applicable regulatory requirements, by either Station
Partners or its Permitted Transferees.
2.1.2 Agreement to Vote. Each Stockholder agrees to vote, or act
-----------------
by written consent (and to cause each of its Affiliates to vote, or act by
written consent, if applicable) with respect to, any shares of Common Stock
beneficially owned by it to cause the SPE Directors, the Liberty Nominated
Director, the Station Partners Directors and each of the Independent Directors
designated as provided in Section 2.1.1 above to be elected to the Board, and
the Company agrees to use its best efforts to cause the election of each such
designee to the Board, including nominating such individuals to be elected as
members of the Board as provided herein. Notwithstanding any other provision in
this Agreement to the contrary, no Stockholder shall be required to elect any
particular nominee for the Liberty Nominated Director position or either of the
Independent Director positions.
2.1.3 Removal. A director may be removed only by the party or
-------
parties which originally designated or nominated the director, or in the event
of any Independent Director, by agreement of Station Partners, SPE and Liberty.
Upon the written request of SPE, Liberty or Station Partners, each Stockholder
shall vote or act by written consent (and cause each of its Affiliates to vote
or act by written consent, if applicable), with respect to, all shares of Common
Stock beneficially owned by it and otherwise take or cause to be taken all
actions necessary to remove any director designated or nominated by such
requesting party.
2.1.4 Filling Vacancies. In the event that a vacancy is created
-----------------
at any time by the death, disability, retirement, resignation or removal (with
or without cause) of any SPE Director, Liberty Nominated Director, Station
Partners Director or Independent Director, the Party or Parties originally
designating or designating for nomination such director (as the case may be)
shall have the right to designate or designate for nomination a replacement
director to fill such vacancy in accordance with the procedures set forth in
Sections 2.1.1 and 2.1.2.
2.1.5 Additional Agreements. Each Stockholder agrees not to, and
---------------------
to cause each of its Affiliates not to, directly or indirectly, alone or in
concert with others:
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<PAGE>
(a) Seek election to, seek to place a representative on, or
seek the removal of any member of, the Board, except pursuant to Sections 2.1.1,
2.1.3 and 2.1.4; or
(b) Deposit any shares of Common Stock in a voting trust or
subject any shares of Common Stock to any arrangement or agreement with respect
to the voting of such shares (other than pursuant to the Liberty Proxy, the
Station Partners LLC Agreement, this Agreement (including, but not limited to,
pledges pursuant to Sections 3.3.1(c) and 3.3.2(e) hereof) or as may otherwise
be required by the FCC).
2.2 Cooperation. Each Stockholder shall vote (or act or not act by
-----------
written consent with respect to) all of its shares of Common Stock and shall
take all other necessary or desirable actions within its control (including
causing its respective designees or nominees to the Board to take all actions or
not take such actions required of the Stockholders pursuant to this Agreement,
attending all meetings in person or by proxy for purposes of obtaining a quorum,
executing all written consents in lieu of meetings and voting to remove members
of the Board, as applicable), and the Company shall take all necessary and
desirable actions within its control (including calling special Board and
Stockholder meetings, as applicable) to effectuate the provisions of this
Article 2.
2.3 Size of Board of Directors. The Company agrees not to take any action
--------------------------
that would cause the number of directors constituting the entire Board to be
other than nine and each Stockholder agrees to use its best efforts to cause the
number of directors constituting the entire Board to remain nine.
2.4 Board Procedures. The Company and the Stockholders shall each cause
----------------
the following procedures to be followed by the Board:
2.4.1 Meetings. The Board shall hold at least four (4) regularly
--------
scheduled meetings per year at such times as may from time to time be fixed by
resolution of the Board and no notice (other than the resolution) need be given
as to a regularly scheduled meeting. Special meetings of the Board may be held
at any time upon 48 hours notice by the chief executive officer of the Company
or at least two Directors. So long as Liberty owns at least 15% of the
outstanding shares of Common Stock, Liberty shall have the right to receive
notice of meetings of the Board. Written notice of the time and place of
special meetings shall be delivered personally to each director by reliable
overnight courier or communicated to each director by facsimile or other form of
recorded communication, charges prepaid, addressed to each director at that
director's address as it is shown on the records of the Company or, if it is not
so shown on such records or is not readily ascertainable, at that director's
residence or usual place of business. In case such notice is delivered by
reliable overnight courier, it shall be deemed received within two Business Days
following such delivery to the overnight courier. In case such notice is
delivered personally or by other form of written communication, it shall be
delivered at least 48 hours before the time of the holding of the meeting.
Reasonable efforts shall be made to insure that each Director actually receives
timely notice of any such special meeting. A notice must specify the purpose of
any special meeting. Notice of a meeting need not be given to any director who
signs a waiver of notice or a consent to holding the meeting (which waiver or
consent need not specify the purpose of the meeting) or an approval of the
minutes thereof, whether before or after the meeting, or who attends the meeting
without protesting, prior to its commencement, the lack of notice to such
director. All such waivers, consents and approvals
-11-
<PAGE>
shall be filed with the Company's records or made a part of the minutes of the
meeting. A majority of the directors present may adjourn any meeting to another
time and place. If the meeting is adjourned for more than twenty-four (24)
hours, notice of any adjournment shall be given prior to the time of the
adjourned meeting to the directors who are not present at the time of the
adjournment. Meetings of the Board may be held at any place which has been
designated in the notice of the meeting or at such place as may be approved by
the Board. Directors may participate in a meeting through use of conference
telephone or similar communications equipment, so long as all directors
participating in such meeting can hear one another. Participation in a meeting
in such manner constitutes presence in person at such meeting.
2.4.2 Agenda. A reasonably detailed agenda shall be supplied to
------
each Director reasonably in advance of each meeting of the Board, together with
other appropriate documentation with respect to agenda items calling for Board
action, to inform adequately the Directors regarding matters to come before the
Board. Any Director wishing to place a matter on the agenda for any meeting of
the Board may do so by communicating with the chief executive officer of the
Company sufficiently in advance of the meeting of the Board so as to permit
timely dissemination to all Directors of information with respect to the agenda
items.
2.4.3 Powers of the Board. Subject to the limitations included
-------------------
in this Agreement and the Bylaws of the Company, the Board shall have the power
to approve transactions and to act in a manner as is customary for Delaware
corporations. In no event shall the Board establish an executive committee, or
any other committee of the Board, without the prior written consent of each of
the Stockholders.
2.4.4 Voting. Subject to the provisions of Section 2.1.3 hereof,
------
all actions of the Board shall require a majority of the votes entitled to be
cast as if all directors were present.
2.4.5 Subsidiaries. The vote of a majority of the members of the
------------
Board of Directors of the Company shall be required to cause the Company to
elect the Board of Directors of each Subsidiary, which such majority shall
include at least one Station Partners Director, one SPE Director and one Liberty
Nominated Director. The procedures set forth in this Section 2.4 shall govern
the operations of the Boards of Directors of each Subsidiary.
2.5 Officers. Subject to the limitations included in this Agreement, the
--------
Bylaws and the Certificate of Incorporation, day-to-day management of the
operations of the Company shall be delegated to the officers of the Company who
will (except as otherwise specified herein) exercise such powers and perform
such duties as shall be determined from time to time by the Board, and who will
act in good faith to operate the Company's business in accordance with the
Budget and in a manner reasonably designed to achieve the goals of the Business
Plan. The Board shall not delegate to any officers of the Company the authority
to conduct business in any manner other than as set forth in the first sentence
of this Section 2.5. The officers of the Company shall consist of a chief
executive officer, a chief financial officer, and such other officers as the
Board determines from time to time to be appropriate ("MANAGEMENT"). The chief
executive officer shall report to the Board and all other officers shall report
to the chief executive officer or another officer designated by him or her.
Each Stockholder agrees that the appointment and remuneration or dismissal of
the chief executive officer and chief financial officer shall be made only on
the
-12-
<PAGE>
recommendation of Station Partners and the unanimous written approval of both
Station Partners and SPE.
2.6 Major Decisions. Except as set forth in the following sentence, the
---------------
Company shall not, and shall cause its Subsidiaries not to, directly or
indirectly, take any action constituting a Major Decision without the unanimous
written approval of the Stockholders. The Board shall not authorize and
Management shall not effect the Major Decision set forth in subparagraph (h) of
the definition of Major Decision without the unanimous written approval of both
Station Partners and SPE in their capacity as Stockholders. The Company's
Certificate of Incorporation and Bylaws provide that (x) the Board shall not
authorize, and Management shall not (A) effect any Major Decision (other than
the Major Decision set forth in subparagraph (h) of the definition of Major
Decision) without the unanimous approval of SPE, Liberty and Station Partners,
in their capacity as Stockholders or (B) effect the Major Decision set forth in
subparagraph (h) of the definition of Major Decision without the unanimous
written approval of both SPE and Station Partners, in their capacity as
Stockholders, and (y) any determination not specifically included in the
definition of "Major Decision" or otherwise identified in this Agreement as
requiring approval of a different percentage of the Stockholders shall, except
to the extent required by the DGCL, be made by the Board acting by majority vote
of the authorized number of Directors.
2.7 Conduct of Business; Approval of Business Plan and Budget.
---------------------------------------------------------
2.7.1 Conduct of Business. The Stockholders each agree and shall
-------------------
cause the Board and Management to act in good faith to operate the Company and
its Subsidiaries in accordance with the Budget and in a manner reasonably
designed to achieve the goals of the Business Plan.
2.7.2 Approval of Business Plan. The Stockholders hereby agree on
-------------------------
the initial business plan (the "BUSINESS PLAN") of the Company and its
Subsidiaries, covering the period from the date of this Agreement until December
31, 2003, a copy of which is attached hereto as Schedule 2.7A. The Stockholders
agree that the Business Plan shall not be amended or modified except with the
unanimous written approval of the Stockholders.
2.7.3 Approval of the Budget. On or prior to the date which is
----------------------
thirty (30) days before the end of each calendar year, commencing with the
calendar year ending December 31, 1998, the chief executive officer of the
Company shall present to the Board and Stockholders a budget for the following
calendar year. The budget as presented by the chief executive officer of the
Company shall become the budget (the "BUDGET") for such calendar year only when
approved by the Board and, if required by the provisions of this Section 2.7.3,
approved by the Stockholders and shall not be effective or be implemented until
such approval is obtained. If the Board and, if applicable, the Stockholders, do
not approve the Budget for any calendar year prior to February 1 of such year,
then the Budget for that calendar year shall be the Budget from the prior
calendar year (excluding the prior year's extraordinary and nonrecurring items,
but including any contractually obligated or legally required commitments or
expenditures for the prior year in the Business Plan), adjusted by a five
percent (5%) increase in all fixed expenses together with an adjustment of all
variable expenses, such as utilities and insurance, in accordance with the
projected variances in their bases and contractual commitments in accordance
with their terms (a "ROLLOVER BUDGET"). Each Budget shall be approved by the
Board and shall not require the approval of the Stockholders except if, during
the 12 month period immediately preceding the date
-13-
<PAGE>
of submission of such Budget for approval, the Company has been in non-
compliance (without giving effect to any waivers or modifications within such 12
month period) under one or more of the material financial covenants contained in
the Company's Senior Credit Facility (unless the Company shall have been in
compliance with such covenants (without giving effect to any waivers or
modifications to such covenants within such 12 month period) for the two fiscal
quarters immediately preceding the submission of such Budget for approval).
2.8 Affiliation Agreement. Notwithstanding anything to the contrary
---------------------
contained herein, so long as (x) Station Partners or any Permitted Transferee of
Station Partners owns any shares of Common Stock and (y) any of SPE, Liberty or
any Affiliate of SPE or Liberty, Beneficially Owns, directly or indirectly, both
shares of Common Stock and any membership interest in Network Group, all
determinations regarding the enforcement of the Company's and its Subsidiaries'
rights under the Affiliation Agreement and any amendment, modification, change
or waiver thereto shall be made on behalf of the Company and its Subsidiaries
solely by Station Partners (other than a decision to terminate or fail to renew
the Affiliation Agreement in a circumstance where there is no breach on the part
of Network Group).
ARTICLE 3
RESTRICTIONS ON TRANSFER
3.1 General Prohibition on Transfer of Common Stock. Except for Permitted
-----------------------------------------------
Transfers, no Stockholder nor any of its Permitted Transferees shall be entitled
to Transfer (including, without limitation, by way of any Transfer of an
interest in Station Partners) any of the shares of Common Stock held by it. Any
attempted Transfer of shares of Common Stock other than a Permitted Transfer
shall be void ab initio and the Company shall not register any such purported
Transfer on its share register and such a purported Transfer (including, without
limitation, by way of any Transfer of an interest in Station Partners) shall
constitute a breach of this Agreement. After the consummation of any Permitted
Transfer of any shares of Common Stock, the shares of Common Stock so
Transferred shall continue to be subject to the terms and provisions of this
Agreement and any further Transfers shall be required to comply with all the
terms and provisions of this Agreement. Notwithstanding any other provision of
this Agreement to the contrary, any Permitted Transferee, other than a
Stockholder, who acquires such Stockholder's shares of Common Stock pursuant to
the provisions of Section 3.3.2 (d) shall not be entitled to consent (nor shall
its consent be required) to any Major Decision or any of the matters referred to
in Sections 2.5, 2.7.2, 2.7.3 and 2.8.
3.2 Permitted Transferees. Subject to the terms of this Agreement,
---------------------
any Permitted Transferee of a Stockholder shall be subject to the terms and
conditions of this Agreement as if such Permitted Transferee were SPE (in the
case where SPE or a Permitted Transferee of SPE is the Transferor), Liberty (in
the case where Liberty or a Permitted Transferee of Liberty is the Transferor),
Station Partners (in the case where Station Partners or a Permitted Transferee
of Station Partners is the Transferor), Apollo (in the case where Apollo or a
Permitted Transferee of Apollo is the Transferor) or Bastion (in the case where
Bastion or a Permitted Transferee of Bastion is the Transferor). Prior to the
initial acquisition of beneficial ownership of any Common Stock by any Permitted
Transferee (including, without limitation, by way of any Transfer of an
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interest in Station Partners) and as a condition thereto, each Stockholder,
Apollo and Bastion, as the case may be, agrees to cause its respective Permitted
Transferees to agree in writing with the other Parties hereto to be bound by the
terms and conditions of this Agreement to the extent described in the preceding
sentence. A Permitted Transfer shall not release the Stockholder, Apollo or
Bastion from any liability that such Person may have to the other Parties to
this Agreement prior to the date of such Transfer, but shall release the
Transferor from all future obligations accruing under this Agreement after the
date of Transfer provided the Permitted Transferee assumed all such obligations
of the Transferor hereunder.
3.3 Permitted Transfers. The following Transfers of shares of Common
-------------------
Stock shall be permitted ("PERMITTED TRANSFERS"):
3.3.1 Station Partners. In the case of Station Partners and its
----------------
Permitted Transferees:
(a) Put/Call Agreement. A Transfer of all but not less
------------------
than all of the shares of Common Stock and Network Rights (as such term is
defined in the Put/Call Agreement) held by it effected pursuant to the express
provisions of that certain Put/Call Agreement, dated as of the Effective Date,
by and among the Stockholders, a form of which is attached hereto as Exhibit B
(the "PUT/CALL AGREEMENT");
(b) Transfers to an Apollo Entity. A Transfer (either
-----------------------------
directly or indirectly through a Transfer by an Apollo Entity of all or any
portion of its membership interests in Station Partners to another Apollo
Entity) of all but not less than all of the shares of Common Stock and Network
Rights held by it to an Apollo Entity, provided (i) such Transfer does not
require any filing with the FCC of a change of control or license transfer
application under the Communications Act, (ii) such Transfer does not, directly
or indirectly, result in any requirement that any Party be required to modify
any internal relationship or relationship with any of its Affiliates, divest or
limit its rights with respect to any assets, agree to any restriction of its
activities or modify any transaction with other Affiliates in order to continue
to hold its interest in the Company and (iii) such Transfer does not result, to
Apollo's knowledge, in any increase in alien ownership of the Common Stock of
the Company from the amount represented to the FCC as part of the application to
transfer control of the broadcast stations then existing at the date acquired by
the Company as a result of the Merger (the "TRANSFER OF CONTROL APPLICATION");
-------------------------------
and
(c) Bona Fide Pledges. A pledge of shares of Common Stock
-----------------
by Station Partners (or a pledge of the membership interests of Station Partners
by the members thereof) to a financial institution and, in connection with a
pledge by Station Partners, an assignment or transfer of the associated put
rights to such financial institution, in a bona fide transaction, provided, that
(i) no such pledgee shall be permitted to foreclose on such pledge before the
fifth anniversary of the Acquisition Date or to exercise any voting rights with
respect to the Common Stock or membership interests, as the case may be, and
(ii) any pledgee shall agree to provide ten days notice to each Stockholder and
the Company of its intent to foreclose on the Common Stock or membership
interests, as the case may be, and any such foreclosure shall be subject to the
rights of Liberty and SPE to give a call notice under the Put/Call Agreement and
purchase such stock pursuant to the Put/Call Agreement.
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<PAGE>
3.3.2 SPE or Liberty. In the case of SPE or Liberty,
--------------
individually, or their Permitted Transferees:
(a) Transfers to Controlled Affiliates. Transfers of all
----------------------------------
or any portion of the shares of Common Stock held by it, directly or indirectly
through a Transfer of equity ownership in such Stockholder, to a Controlled
Affiliate of such Stockholder, provided there is no Change in Control resulting
therefrom.
(b) Transfers after Five Years. Transfers of all or any
--------------------------
portion of the shares of Common Stock held by it effected at any time after the
fifth anniversary of the Acquisition Date, provided such Stockholder's Affiliate
which is a member of the Network Group first complies with all of its
obligations under the Network Group Operating Agreement. Neither SPE nor Liberty
may Transfer its shares of Common Stock pursuant to this Section 3.3.2(b) unless
it or its Affiliate which is a member of the Network Group Transfers the same
proportion of its membership interest in Network Group.
(c) Corporate Reorganizations, Sales of Assets, Spin-offs.
-----------------------------------------------------
Transfers of all but not less than all of the shares of Common Stock held by it
as part of a Transfer of a larger group of assets (the "TRANSFERRED ASSETS"),
which Transfer may be effected through a corporate reorganization, a sale of
assets, distribution of equity shares or otherwise, (1) if the Transferred
Assets constitute a business which is engaged principally in the media,
entertainment, cable or telecommunications business, and (2) the value of the
Transferred Assets (other than the shares of Common Stock Transferred by such
Stockholder) at the time of Transfer comprise at least 85% of the value of the
Transferred Assets (including the shares of Common Stock Transferred by such
Stockholder).
(d) Compliance with Regulatory Restrictions. (1) Transfers
---------------------------------------
of all or any portion of the shares of Common Stock held by it if such Transfer
is necessary in order to comply with restrictions imposed upon the ownership by
such Stockholder (or any of its Affiliates) of the Common Stock by any federal
or state law, rule or regulation or any final judicial decree or order issued by
any federal or state court of competent jurisdiction if (i) such compliance
cannot be achieved by a restructuring of such Stockholder's interest in the
Company, and (ii) such Stockholder first complies with the provisions set forth
in (2) below; provided, however, that nothing shall require Stockholder to
modify any internal relationship or relationship with Affiliates, divest or
limit its rights with respect to any assets, agree to any restriction of its
activities or modify any transaction with other affiliates in order to continue
to hold and vote its interest in the Company.
(2) Prior to effecting a Transfer pursuant to the provisions of this
Section 3.3.2 (d), the Stockholder intending to effect such Transfer (the
"TRANSFERRING STOCKHOLDER") shall deliver written notice thereof (a "FIRST
REFUSAL NOTICE") to each other Stockholder (each, an "OFFEREE STOCKHOLDER")
offering to Transfer the shares of Common Stock to the Offeree Stockholders for
a purchase price proposed by the Transferring Stockholder (the "PROPOSED PRICE")
or, alternatively, if none of the Offeree Stockholders elects to purchase such
shares of Common Stock at the Proposed Price, then for a purchase price equal to
the Appraised Price multiplied by a fraction, the numerator of which is the
number of shares of Common Stock to be Transferred by the Transferring
Stockholder (computed on a fully diluted basis after giving effect to the
exercise
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<PAGE>
of any and all outstanding conversion rights, exchange rights, warrants and
options) and the denominator of which is the total number of shares of Common
Stock outstanding (computed on a fully diluted basis after giving effect to the
exercise of any and all outstanding conversion rights, exchange rights, warrants
and options). For a period of sixty (60) days following receipt by each Offeree
Stockholder of a First Refusal Notice (the "FIRST REFUSAL PERIOD"), each Offeree
Stockholder may elect, by the delivery of written notice of such election to
each other Stockholder (the "FIRST REFUSAL ELECTION NOTICE") within such First
Refusal Period, to purchase such shares of Common Stock at a price equal to the
Proposed Price or the Appraised Price, as the case may be (payable either in
cash or Marketable Securities). If any Offeree Stockholder duly and timely
delivers a First Refusal Election Notice to each other Stockholder in respect of
any shares of Common Stock during the First Refusal Period, then the
Transferring Stockholder shall be obligated to sell such shares to the Offeree
Stockholder, and the Offeree Stockholder shall be obligated to purchase such
shares of Common Stock from the Transferring Stockholder, free and clear of all
liens (other than obligations assumed pursuant to this Agreement). Each other
Offeree Stockholder shall have an additional five (5) days from receipt of the
First Refusal Election Notice to also deliver a First Refusal Election Notice to
participate in such purchase. If more than one Offeree Stockholder delivers a
First Refusal Election Notice, each such Offeree Stockholder shall be entitled
to purchase its pro rata portion of the shares of Common Stock offered (based
upon the number of shares of Common Stock then held by the Offeree Stockholders
electing to participate in such sale). The purchase of any shares of Common
Stock by any Offeree Stockholder shall be consummated on or before the thirtieth
(30th) Business Day after the First Refusal Election Notice is received by the
Transferring Stockholder or on such other date as the affected Parties may
agree. If none of the Offeree Stockholders duly and timely delivers a First
Refusal Election Notice, or if the Offeree Stockholders electing to purchase
fail to close such purchase as required, then the Transferring Stockholder shall
have the right to sell such shares of Common Stock to a Permitted Transferee
within 180 days from the date a First Refusal Election Notice was due or from
the expected date of the closing, on the same terms as provided in the First
Refusal Notice and at not less than 95% of the Proposed Price or the Appraised
Price, as the case may be. Notwithstanding anything to the contrary contained in
this Section 3.3.2.(d), the Offeree Stockholder's ownership of the Common Stock
shall comply with restrictions imposed upon ownership by such Stockholder (or
any of its Affiliates or Ultimate Beneficial Owner) of the Common Stock by any
federal or state law, rule or regulation or any final judicial decree or order
issued by any federal or state court of competent jurisdiction.
(e) Bona Fide Pledges. A pledge of shares of Common Stock
-----------------
by it (or a pledge of shares of the common stock of SPE or Liberty, as the case
may be, by the stockholders thereof) to a financial institution and, in
connection with a pledge of the shares of Common Stock by SPE or Liberty, the
assignment or transfer of the associated call rights to such financial
institution, in a bona fide transaction, provided, that (i) no such pledgee
shall be permitted to foreclose on such pledge before the fifth anniversary of
the Acquisition Date or to exercise any voting rights with respect to the Common
Stock and (ii) any pledgee shall agree to provide ten days prior written notice
to each Stockholder and the Company of its intent to foreclose on the Common
Stock.
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<PAGE>
3.3.3 Bastion. In the case of Bastion and its Permitted
-------
Transferees:
(a) Transfers to a Bastion Controlled Affiliate. A
-------------------------------------------
Transfer of all or any portion of the membership interests of Station Partners
held by it to a Bastion Controlled Affiliate, provided (i) such Transfer does
not require any filing with the FCC of a change of control or license transfer
application under the Communications Act, (ii) such Transfer does not, directly
or indirectly, result in any requirement that any Party be required to modify
any internal relationship or relationship with any of its Affiliates, divest or
limit its rights with respect to any assets, agree to any restriction of its
activities or modify any transaction with other Affiliates in order to continue
to hold its interest in the Company and (iii) such Transfer does not result, to
Bastion's knowledge, in any increase in alien ownership of the Common Stock of
the Company from the amount represented in the Transfer of Control Application.
(b) Transfers after Seven Years. If the Put or Call under
---------------------------
the Put/Call Agreement has not been exercised on or prior to the seventh
anniversary of the Acquisition Date, Bastion may sell its membership interest in
Station Partners to a third party approved by each of Liberty and SPE. Further,
each of Apollo, Liberty and SPE agree to use its commercially reasonable efforts
to identify a mutually acceptable purchaser of Bastion's membership interests in
Station Partners and to cooperate with Bastion in its attempts to effect such
Transfer (which covenant shall not obligate any of Liberty or SPE to incur any
costs in furtherance hereof or provide any consent or approval hereunder).
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1 Mutual Representations and Warranties. Each Party hereby represents
-------------------------------------
and warrants to the other Parties as follows:
4.1.1 The Party has been duly formed and is validly existing and
in good standing under the laws of the jurisdiction of its organization.
4.1.2 The Party has the right, power, and legal capacity and
authority to enter into and perform its obligations under this Agreement. The
Party's execution and delivery of this Agreement and the consummation of these
transactions have been duly authorized by its board of directors or other
governing body, and no further authorization (corporate or other) is necessary
on the part of the Party for the execution and delivery of this Agreement or for
the performance of its obligations provided for herein.
4.1.3 The Agreement has been duly executed and delivered by the
Party, and, assuming this Agreement is a binding obligation of the other parties
to it, this Agreement constitutes a valid and binding obligation of the Party
enforceable against it in accordance with its terms.
4.1.4 The consummation of the transactions contemplated by this
Agreement will not violate, conflict with or result in a breach of the Party's
constitutive documents, or any
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<PAGE>
instrument or agreement to which the Party is a party or by which the Party is
bound, or any provision of laws and regulations applicable to the Party.
4.1.5 Each Stockholder owns the Common Stock held by it free and
clear of all liens, security interests, encumbrances, easements, judgments or
imperfections of title of any nature whatsoever. Except for this Agreement, the
Liberty Proxy and the Station Partners LLC Agreement, there are no voting
trusts, proxies, or any other agreements, restrictions or understandings with
respect to the voting of the capital stock of the Company binding on such
Stockholder.
4.1.6 Apollo represents and warrants that to its knowledge the
representations made by it to the FCC as part of the Transfer of Control
Application are true and correct in all material respects as of the date hereof.
Apollo agrees that, subsequent to the date hereof, if (i) Apollo becomes aware
that the aggregate alien ownership in the Company is at any time greater than
that represented to the FCC as part of the Transfer of Control Application as a
result of the investment by Apollo, through Station Partners, in the Company,
and (ii) as a result of such increase in alien ownership interest, the Company's
alien ownership would exceed the level that is permitted under the
Communications Act and the rules and regulations of the FCC promulgated
thereunder, taking into consideration the alien ownership or proposed alien
ownership of SPE and Liberty, it will restructure its investment in Station
Partners or take any other action necessary so that such alien interest will not
be attributable to the Company consistent with the requirements of the
Communications Act and the rules and regulations of the FCC thereunder and
Liberty and SPE agree to cooperate with all reasonable requests of Apollo in
connection therewith.
4.1.7 Bastion represents and warrants that to its knowledge the
representations made by it to the FCC as part of the Transfer of Control
Application are true and correct in all material respects as of the date hereof.
Bastion agrees that, subsequent to the date hereof, if (i) Bastion becomes aware
that the aggregate alien ownership in the Company is at any time greater than
that represented to the FCC as part of the Transfer of Control Application as a
result of the investment by Bastion, through Station Partners, in the Company,
and (ii) as a result of such increase in alien ownership interest, the Company's
alien ownership would exceed the level that is permitted under the
Communications Act and the rules and regulations of the FCC promulgated
thereunder, taking into consideration the alien ownership or proposed alien
ownership of SPE and Liberty, it will restructure its investment in Station
Partners or take any other action necessary so that such alien interest will not
be attributable to the Company consistent with the requirements of the
Communications Act and the rules and regulations of the FCC thereunder and
Liberty and SPE agree to cooperate with all reasonable requests of Bastion in
connection therewith.
4.1.8 Each of Liberty and SPE represents and warrants that to its
knowledge the representations made by it to the FCC as part of the Transfer of
Control Application to the Company are true and correct in all material respects
as of the date hereof. Liberty and SPE agree that, subsequent to the date
hereof, if (i) they become aware that the aggregate alien ownership in the
Company is at any time greater than that represented to the FCC as part of the
Transfer of Control Application as a result of the investment by SPE and Liberty
in the Company, and (ii) as a result of such increase in alien ownership
interest, the Company's alien ownership would exceed the level that is permitted
under the Communications Act and the rules and regulations of the FCC
promulgated thereunder, taking into consideration the alien ownership or
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<PAGE>
proposed alien ownership by either SPE or Liberty, it will restructure its
investment in Station Partners or take any other action necessary so that such
alien interest will not be attributable to the Company consistent with the
requirements of the Communications Act and the rules and regulations of the FCC
thereunder and Apollo and Bastion agree to cooperate with all reasonable
requests of SPE and Liberty in connection therewith.
ARTICLE 5
COVENANTS
5.1 Mutual Covenants. Each Party hereby covenants to the other Parties
----------------
as follows:
5.1.1 The Party agrees that it will not Transfer any of its shares
of Common Stock and, in the case of Station Partners, Network Rights, and, in
the case of Apollo and Bastion, any of its membership interest in Station
Partners, if such action would result in a Change in Control or Event of Default
(as defined in the Senior Credit Facility) or a Change of Control or Event of
Default (as defined in the Indenture), other than as consented to or waived by
the lenders party to the Credit Facility or the bondholders under the Indenture,
respectively; provided, however, that no such consents or waivers shall require
the Company to make any payment to such lenders or bondholders (unless the
Company is reimbursed by the Party requesting such waiver or consent) or make
any modifications to the Senior Credit Facility or Indenture (other than changes
to the definition of Change in Control necessitated by the Transfer) which the
Board determines, in good faith, may be adverse to the Company. The Company
agrees to cooperate with any Party requesting a consent or waiver under this
Section 5.1.1 and provide reasonable assistance (at the expense of the
requesting party) in obtaining such consent or waiver.
5.1.2 The Company shall not permit any Subsidiary of the Company
to issue any options, warrants or rights to purchase any of the securities of
such Subsidiary to any Person other than the Company or a wholly owned
Subsidiary of the Company.
5.2 Station Partners Covenants. Station Partners hereby covenants to the
--------------------------
other Parties as follows:
5.2.1 Station Partners has delivered to each of the other Parties
hereto a true and complete copy of the Station Partners LLC Agreement. Station
Partners, Apollo, Bastion and their respective Permitted Transferees shall not
effect any amendment, modification or termination of the Station Partners LLC
Agreement in a manner that would result in Apollo not having the sole power (i)
to direct the voting of all Common Stock held by Station Partners, (ii) to
designate all Station Partners Directors hereunder, other than one director
(which shall be designated by Bastion in accordance with the Station Partners
LLC Agreement), and (iii) to direct Station Partners' consent or the withholding
of such consent with respect to any Major Decision or any other action that
requires the unanimous approval of the Stockholders hereunder; provided,
however, that to the extent that the Station Partners LLC Agreement provides as
of the date hereof for any limitations on the powers of Apollo set forth in
clauses (i), (ii) and (iii), there shall be no
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<PAGE>
obligation on the part of Station Partners, Apollo, Bastion and their respective
Permitted Transferees to amend the Station Partners LLC Agreement to remove such
limitations.
5.3 SPE and Liberty Covenants. SPE and Liberty have delivered to
-------------------------
Station Partners a true and complete copy of the Network Group Operating
Agreement.
ARTICLE 6
MISCELLANEOUS
6.1 Term. This Agreement shall be effective as of the Effective Date
----
and shall continue in force until such time as it is terminated by the
Stockholders by unanimous written consent.
6.2 Remedies.
--------
(a) Each party hereto acknowledges that money damages would not be
an adequate remedy in the event that any of the covenants or agreements in this
Agreement are not performed in accordance with its terms and that the non-
breaching party(ies) would suffer irreparable injury in such event, and it is
therefore agreed that, in addition to and without limiting any other remedy or
right it may have, the non-breaching Party(ies) will have the right to an
injunction, temporary restraining order or other equitable relief in any court
of competent jurisdiction enjoining any such breach and enforcing specifically
the terms and provisions hereof.
(b) All rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity shall be cumulative
and not alternative, and the exercise or beginning of the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party.
(c) Notwithstanding any other provision of this Agreement, no Party
shall have the right to terminate this Agreement in the event of a breach of
another Party.
6.3 Legends.
-------
(a) Upon original issuance thereof, and until such time as the same
is no longer required hereunder or under the applicable requirements of the
Securities Act or applicable state securities or "blue sky" laws, any
certificate issued representing any shares of Common Stock held by a Stockholder
or any Permitted Transferee (including all certificates issued upon Transfer)
shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO VOTING
AGREEMENTS AND RESTRICTIONS ON TRANSFER SET FORTH IN A CERTAIN STOCKHOLDERS
AGREEMENT DATED AS OF AUGUST 12, 1998 AMONG SONY PICTURES ENTERTAINMENT
INC., LIBERTY MEDIA CORPORATION, APOLLO INVESTMENT FUND III, L.P., BASTION
CAPITAL FUND, L.P., STATION PARTNERS, LLC AND TELEMUNDO HOLDINGS, INC.,
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<PAGE>
A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF TELEMUNDO HOLDINGS,
INC."
(b) The certificates representing the shares of Common Stock
(including any certificate issued upon Transfer) shall also bear any legend
required under any applicable state securities or "blue sky" laws.
(c) The Company may make a notation on its records or give
instructions to any transfer agents or registrars for the Common Stock in order
to implement the restrictions on Transfer set forth in this Agreement.
(d) In connection with any Transfer of Common Stock, the transferor
shall provide the Company with such customary certificates, opinions and other
documents as the Company may reasonably request to assure that such Transfer
complies fully with applicable securities and other laws.
(e) The Company shall not incur any liability for any delay in
recognizing any Transfer of Common Stock if the Company in good faith reasonably
believes that such Transfer may have been or would be in violation in any
material respect of the provisions of the Securities Act, applicable state
securities or "blue sky" laws, or this Agreement.
6.4 Notices. Any notice to be given or to be served upon the Company or
-------
any Party hereto in connection with this Agreement must be in writing (which may
include facsimile) and will be deemed to have been given (i) if personally
delivered, on the date received or refused, when delivered to the address
specified by the party to receive the notice, (ii) if sent by facsimile, once
such notice or other communication is transmitted to the facsimile number
specified below, and the appropriate written facsimile confirmation is received,
provided that such notice or other communication is promptly thereafter mailed
by United States mail, postage prepaid, or (iii) if sent by a prepaid overnight
delivery service under circumstances by which such service guarantees next
Business Day delivery, the date received or refused. Such notices will be given
to a party and to its respective counsel at the addresses specified below. Any
party may, at any time by giving five days' prior written notice to the other
Parties, designate any other address in substitution of the below-specified
address to which such notice will be given.
(a) If to Liberty, to:
Liberty Media Corporation
8101 East Prentice Avenue
Suite 500
Englewood, Colorado 80111
Facsimile No.: (303) 721-5443
Attention: David Koff
with a copy (which shall not constitute notice) to:
Tele-Communications, Inc.
5619 DTC Parkway
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<PAGE>
Englewood, Colorado 80111
Facsimile No.: (303) 488-3245
Attention: Stephen Brett
with a copy (which shall not constitute notice) to:
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue
Suite 3400
Los Angeles, California 90071
Facsimile No.: (213) 687-5600
Attention: Thomas C. Janson, Jr.
(b) If to SPE, to:
Sony Pictures Entertainment Inc.
10202 West Washington Boulevard
Culver City, California 90232
Facsimile No.: (310) 244-1818
Attention: Andy Kaplan
with a copy (which shall not constitute notice) to:
Sony Pictures Entertainment Inc.
10202 West Washington Boulevard
Culver City, California 90232
Facsimile: (310) 244-1797
Attention: General Counsel
with a copy (which shall not constitute notice) to:
Troop Steuber Pasich Reddick & Tobey, LLP
2029 Century Park East, 24th Floor
Los Angeles, California 90067
Facsimile No.: (310) 728-2204
Attention: C.N. Franklin Reddick III
(c) If to Apollo or Station Partners, to:
Apollo Advisors, L.P.
1999 Avenue of the Stars, Suite 1900
Los Angeles, California 90067
Facsimile No.: (310) 201-4199
Attention: Bruce Spector
with a copy (which shall not constitute notice) to:
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<PAGE>
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Facsimile No.: (212) 872-1002
Attention: Patrick J. Dooley, Esq.
(d) If to Bastion, to:
Bastion Capital Fund, L.P.
1999 Avenue of the Stars, Suite 2960
Los Angeles, California 90067
Attention: Guillermo Bron
with a copy (which shall not constitute notice) to:
Irell & Manella LLP
333 South Hope Street, Suite 3300
Los Angeles, California 90071-3042
Facsimile: (213) 229-0515
Attention: Edmund M. Kaufman
(e) If to the Company, to:
Telemundo Holdings, Inc.
2290 West 8th Avenue
Hialeah, Florida 33010
Facsimile: (305) 889-7997
Attention: President
6.5 Complete Agreement. This Agreement constitutes the complete and
------------------
exclusive agreement among the Parties with respect to the subject matter herein
and replaces and supersedes all prior written and oral agreements or statements
by and among the Parties or any of them. No representation, statement,
condition or warranty not contained in this Agreement shall be binding on the
Parties or have any force or effect whatsoever. To the extent that any
provision of the Certificate conflicts with any provision of this Agreement, the
Certificate shall control.
6.6 Governing Law. THE PROVISIONS OF THIS AGREEMENT SHALL BE
-------------
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF DELAWARE APPLICABLE TO CONTRACTS MADE IN, AND TO BE PERFORMED WITHIN,
SAID STATE.
6.7 Binding Effect. Subject to the provisions of this Agreement
--------------
relating to transferability, this Agreement shall be binding upon and inure to
the benefit of the Parties, and their respective successors and assigns.
6.8 Pronouns; Statutory References. All pronouns and all variations
------------------------------
thereof shall be deemed to refer to the masculine, feminine, or neuter, singular
or plural, as the context in which
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<PAGE>
they are used may require, unless otherwise expressly provided herein. Any
reference to the Code, the Regulations, the Act or other statutes or laws
include all amendments, modifications, or replacements of the specific sections
and provisions concerned.
6.9 Headings. All headings herein are inserted only for convenience and
--------
ease of reference and are not to be considered in the construction or
interpretation of any provision of this Agreement.
6.10 Interpretation. In the event any claim is made by any Party relating
--------------
to any conflict, omission or ambiguity in this Agreement, no presumption or
burden of proof or persuasion shall be implied by virtue of the fact that this
Agreement was prepared by or at the request of a particular Party or its
counsel.
6.11 References to this Agreement. Numbered or lettered articles,
----------------------------
sections and subsections herein contained refer to articles, sections and
subsections of this Agreement unless otherwise expressly stated.
6.12 Jurisdiction. Each Party hereby consents exclusively to the
------------
jurisdiction of the state and federal courts sitting in Los Angeles County,
California, New York County, New York and Wilmington, Delaware in any action on
a claim arising out of, under or in connection with this Agreement or the
transactions contemplated by this Agreement. Each Party further agrees that
personal jurisdiction over it may be effected by service of process by
registered or certified mail addressed as provided in this Agreement, and that
when so made shall be as if served upon it personally within the States of
California, New York or Delaware.
6.13 Severability. If any provision of this Agreement or the application
------------
of any such provision to any Person or circumstance shall be held invalid, the
remainder of this Agreement or the application of such provision to Persons or
circumstances other than those to which it is held invalid shall not be affected
thereby.
6.14 Additional Documents and Acts. Each Party agrees to execute and
-----------------------------
deliver such additional documents and instruments and to perform such additional
acts as may be reasonably necessary or appropriate in accordance with the terms
of this Agreement to effectuate, carry out and perform all of the terms,
provisions, and conditions of this Agreement and the transactions contemplated
hereby.
6.15 Amendments. All amendments to this Agreement must be in writing and
----------
signed by all of the Parties.
6.16 Reliance on Authority of Person Signing Agreement. If a Party is not
-------------------------------------------------
a natural Person, neither the Company nor any Party shall be required to
determine the authority of the individual signing this Agreement to make any
commitment or undertaking on behalf of such entity or to determine any fact or
circumstance bearing upon the existence of the authority of such individual.
6.17 Multiple Counterparts. This Agreement may be executed in two or more
---------------------
counter parts, each of which shall be deemed an original, with the same effect
as if the signatures thereto
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<PAGE>
and hereto were upon the same instrument. This Agreement shall become effective
when each party shall have received a counterpart signed by the other party
hereto.
6.18 No Third Party Beneficiary. This Agreement is not intended and shall
--------------------------
not be construed to be for the benefit of any creditors or other Persons (other
than the Parties in their capacity as such) to whom any debts, liabilities or
obligations are owed by (or who otherwise has any claim against) the Company or
any of the Parties and no such creditor or other Person shall obtain any right
under any such provision, or shall by reason of any such provision make any
claim in respect of any debt, liability or obligation, or otherwise, against the
Company or the Parties.
-26-
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement to
be effective as of the Effective Date.
TELEMUNDO HOLDINGS, INC. APOLLO INVESTMENT FUND
III, L.P.
By: Apollo Advisors II, L.P.,
By: /s/ Aaron Stone Its General Partner
-----------
Name: Aaron Stone
Title: Assistant Secretary By: Apollo Capital Management
II, Inc.,
Its General Partner
By: /s/ Bruce Spector
-----------------
Name: Bruce Spector
Title: Vice President
BASTION CAPITAL FUND, L.P.
By: /s/ Guillermo Bron
------------------
Name: Guillermo Bron
Title:
LIBERTY MEDIA CORPORATION
By: /s/ David B. Koff
-----------------
Name: David B. Koff
Title: Senior Vice President
SONY PICTURES ENTERTAINMENT INC.
By: /s/ Leah Weil
-------------
Name: Leah Weil
Title: Assistant Secretary
-27-
<PAGE>
STATION PARTNERS, LLC
By: Apollo Investment Fund III, L.P., as
Managing Member
By: Apollo Advisors II, L.P.,
Its General Partner
By: Apollo Capital
Management II, Inc.,
Its General Partner
By: /s/ Bruce Spector
-----------------
Name: Bruce Spector
Title: Vice President
-28-
<PAGE>
EXHIBIT 10.5
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (the "Agreement") dated as of August 12, 1998
by and among Telemundo Group, Inc., a Delaware corporation ("TGI") and Telemundo
Network Inc., a Delaware corporation ("TNI" and, together with TGI, "Sellers")
and Telemundo Network Group LLC, a limited liability company organized under
the laws of Delaware ("Purchaser").
This Agreement sets forth the terms and conditions upon which Sellers
will sell to Purchaser, and Purchaser will purchase from Sellers, certain
property, assets, rights and obligations of Sellers as hereinafter set forth.
In consideration of the mutual agreements contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound hereby, agree as
follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
AND ASSUMPTION OF LIABILITIES
1.1 PURCHASE AND SALE OF ASSETS. Subject to the terms and conditions
---------------------------
of this Agreement, at the Closing (as defined in Section 1.7), Sellers shall
sell, convey, assign, transfer and deliver to Purchaser and Purchaser shall
purchase, acquire and accept from Sellers, as hereinafter provided, the Acquired
Assets (as defined in Section 1.2), and will assume the Assumed Liabilities (as
defined in Section 1.4).
1.2 ACQUIRED ASSETS. The term "Acquired Assets" shall mean all of
---------------
Sellers' right, title and interest in all of the properties, assets, rights and
entitlements of whatever kind, character, description and nature, whether real
or personal, tangible or intangible of Sellers primarily used in the operation
of the network programming, production and affiliate operations, network
advertising sales and network marketing operations (the "Network") of Sellers as
currently conducted by Sellers (other than the Excluded Assets (as such term is
defined below)) as the same shall exist at the Closing, including, without
limitation:
<PAGE>
(a) all books of account, general, financial, accounting and
personnel records, files and other records primarily used in connection with the
operation of the Network;
(b) all contracts, leases for real and personal property and
other agreements primarily used in connection with the operation of the Network,
including, without limitation, those set forth on Schedule 1.2(b), and certain
contracts, leases and agreements which are partially used by the Network and
expressly set forth on Schedule 1.2(b);
(c) all tangible assets and properties primarily used in
connection with the Network, of every kind and description, including, without
limitation, vehicles, machinery, equipment, tools, furniture, and fixtures owned
or leased by Sellers in connection with the operation of the Network and those
set forth on Schedule 1.2(c); provided, however, that the parties hereto
acknowledge and agree that Schedule 1.2(c) was prepared at the request of
Purchaser and that Sellers have not independently verified the accuracy or
completeness of Schedule 1.2(c) or the existence or non-existence of any items
reflected thereon and that such schedule is subject to further modification
pursuant to Section 4.10 hereof;
(d) the name "Telemundo" and all similar variants, and all trade
names, trademarks, copyrights, service marks, and logos, registered and
unregistered, used or held for use primarily in connection with the operation of
the Network, including, without limitation, those set forth on Schedule 1.2(d)
(the "Intellectual Property Assets");
(e) all network film rights, if any, that Sellers have with
respect to those items listed on Schedule 1.2(e) hereto;
(f) all of the outstanding shares of common stock of Telemundo
Studios Mexico, S.A. de C.V., a Mexico corporation ("TSM"), held by TNI and;
(g) all other personal property and intangible property or
technology of Sellers primarily used in the operation of the Network.
1.3 EXCLUDED ASSETS. The parties to this Agreement expressly
---------------
understand and agree that Sellers are not selling, conveying, assigning,
transferring or delivering to Purchaser the following assets, rights and
properties, which shall be
2
<PAGE>
specifically excluded from the transactions contemplated by this Agreement (the
"Excluded Assets"):
(a) cash and all accounts receivable recorded on either Seller's
books and records prior to Closing in accordance with generally accepted
accounting principles and in a manner consistent with Sellers' past practices
(the "Sellers' Accounts Receivable") (and Purchaser shall provide to Sellers as
soon as practicable after the Closing but in any event no later than 15 days
after the Closing a listing as of the date of Closing of the Sellers' Accounts
Receivable, which listing shall be subject to Sellers' reasonable approval);
(b) all minute books, stock ledgers, stock transfer books and
similar corporate records of Sellers (other than those related to TSM);
(c) all accounts receivable recorded on TSM's books and records
prior to Closing in accordance with generally accepted accounting principles and
in a manner consistent with Sellers' past practices (the "TSM Accounts
Receivable" and together with the Sellers' Accounts Receivable, the "Accounts
Receivable") (and Purchaser shall provide to Sellers as soon as practicable
after the Closing but in any event no later than 15 days after the Closing a
listing as of the date of Closing of the TSM Accounts Receivable, which listing
shall be subject to Sellers' reasonable approval); and
(d) all other assets of Sellers which are not primarily used in
connection with the operation of the Network, including, without limitation,
those assets listed on Schedule 1.3(d) and prepaid expenses which do not relate
to the Network.
1.4 ASSUMPTION OF LIABILITIES. Upon the terms and subject to the
-------------------------
conditions of this Agreement, in reliance on the representations, warranties and
agreements of Sellers contained herein, and in consideration of the sale of the
Acquired Assets referred to in Section 1.2 hereof, Purchaser shall on the date
of the Closing, without any further responsibility or liability of Sellers or
each of their past and present affiliates and their successors and assigns and
each of their officers, directors, employees and agents, shareholders, partners,
principals, directors and members (the "Seller Representatives"), absolutely and
irrevocably assume and be solely liable and responsible for only those specific
obligations and liabilities of Sellers arising from and in connection with the
Acquired Assets or the operation of the Network or of TSM from and after the
date of Closing, and the liabilities and obligations set forth on Schedule 1.4
hereto and no others, (the "Assumed Liabilities").
3
<PAGE>
It is not the intention of either Purchaser or Sellers that the
assumption by Purchaser of the Assumed Liabilities shall in any way enlarge the
rights of third persons under any agreements or arrangements with Purchaser or
Sellers. Nothing contained herein shall in any way prevent Purchaser from
contesting in good faith any of the Assumed Liabilities with any third person
obligee; provided that no contestation shall relieve Purchaser of its
obligations hereunder to Sellers with respect thereto.
Sellers acknowledge and agree that the only liabilities of Sellers
assumed by Purchaser are the Assumed Liabilities and that all other liabilities
of Sellers and TSM are not being assumed by Purchaser and are being retained as
a liability of Sellers, regardless of any limitation, qualifications or
disclosure that may be made in any representations or warranties herein with
respect to the subject matter of such liabilities and any liens, claims, charges
or encumbrances of any kind for taxes or other governmental claims existing at
the date of Closing (the "Retained Liabilities").
1.5 RIGHTS OF ENFORCEMENT AND SETTLEMENT. From and after the
------------------------------------
Closing, Purchaser shall have complete control over the payment, settlement or
other disposition of the Assumed Liabilities and the right to commence, conduct
and control all negotiations and proceedings with respect thereto, and Sellers
shall have complete control over the payment, settlement or other disposition of
the Retained Liabilities and the right to commence, conduct and control all
negotiations and proceedings with respect thereto. The parties hereto shall
each notify the other promptly of any claim made to Sellers with respect to any
such Assumed Liability or to Purchaser with respect to any such Retained
Liability, as the case may be, and the other shall not, except with the prior
written consent of the other party or parties, which may not unreasonably be
withheld by the other party or parties, voluntarily make any payment of, settle
or offer to settle, or consent to any compromise or admit liability with respect
to, any such Assumed Liability or Retained Liability, as the case may be.
Sellers shall cooperate, at Purchaser's expense, with Purchaser in any
reasonable manner requested by Purchaser in connection with any negotiations or
proceedings involving any Assumed Liabilities. Purchaser shall cooperate, at
Sellers' expense, with Sellers in any reasonable manner requested by Sellers in
connection with any negotiations or proceedings involving any Retained
Liabilities.
1.6 CONSIDERATION. In consideration of the sale of the Acquired
-------------
Assets, at the Closing Purchaser will assume the Assumed Liabilities and shall
deliver, upon the terms and subject to the conditions set forth below, the sum
of $73,964,898.24 (the "Consideration"). Payment of the Consideration shall be
made on the date of Closing by wire transfer of immediately available funds to
an account of Sellers at a bank or banks specified by Sellers.
4
<PAGE>
1.7 CLOSING. The closing of the transactions contemplated by this
-------
Agreement will take place at the offices of Akin, Gump, Strauss, Hauer & Feld,
L.L.P., 590 Madison Avenue, New York, New York 10022, as of the date hereof (the
"Closing").
(a) At the Closing, Sellers will deliver to Purchaser (i) a duly
executed counterpart of a Bill of Sale in the form annexed hereto as Exhibit A,
(ii) a duly executed counterpart of an Instrument of Assignment and Assumption
in the form annexed hereto as Exhibit B (the "Assumption Agreement"), (iii) a
duly executed counterpart of each Intellectual Property Assets Assignment, (iv)
copies of all consents received in connection with the assignment of the
Acquired Assets, (v) copies of all lien termination documents or documents
terminating other security interests with respect to the Acquired Assets, (vi) a
duly executed counterpart of the Sharing Agreement (as defined in Section 4.8)
and (vii) all other previously undelivered documents required hereunder to be
delivered by Sellers to Purchaser at or prior to the Closing in connection with
the transactions contemplated by this Agreement.
(b) At the Closing, Purchaser will deliver to Sellers (i) a duly
executed counterpart of a Bill of Sale in the form annexed hereto as Exhibit A,
(ii) a duly executed counterpart of the Assumption Agreement, (iii) a duly
executed counterpart of each Intellectual Property Assets Assignment, (iv) a
duly executed counterpart of the Sharing Agreement, and (v) all other previously
undelivered documents required hereunder to be delivered by Purchaser to Sellers
at or prior to the Closing in connection with the transactions contemplated by
this Agreement.
1.8 ADJUSTMENTS AND PRORATIONS.
--------------------------
(a) The following matters and items, in each case to the extent
related to the Network and to the extent such amounts are Assumed Liabilities
shall be apportioned between the parties hereto or, where applicable, credited
in total to a particular party, as of 11:59P.M. of the day immediately preceding
the date of the Closing (the "Cut-Off Time"):
(i) Rents, common area charges, fees and other amounts
payable under the leases listed on Schedule 1.2(b) and taxes and fees,
including, without limitation, real estate taxes to the extent not prepaid
and to the extent payable pursuant to or as required by such leases,
personal property, business, occupation, sales and gross revenue taxes, and
other similar taxes, if any (based on the most current available
information), and water and sewer charges shall be prorated as
5
<PAGE>
of the Cut-Off Time based on the benefit received or to be received by
Sellers and Purchaser, respectively.
(ii) Telephone contracts and contracts for the
supply of heat, steam, electricity, gas, lighting and any other service to
the extent not prepaid shall be prorated as of the Cut-Off Time on the
basis of the most recent utility bills.
(iii) Such other items as are provided for in this
Agreement or as are normally prorated and adjusted in the sale of a
business similar to the Network, including, without limitation, amounts
payable to the extent not pre paid under the contracts and other agreements
listed on Schedule 1.2(b) (other than those contracts and agreements which
are third party license agreements or internal production agreements as
contemplated by Section 1 of Schedule 1.4) shall be prorated as of the Cut-
Off Time.
(b) Purchaser and Sellers shall account and pay for the
foregoing, and any other applicable prorations and allocations as soon as
practicable after the Closing. The prorations, allocations, adjustments and
other accountings required under this Agreement shall be made by authorized
representatives of Sellers and Purchaser, with each party to bear its own costs
and expenses in connection therewith.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers, jointly and severally, represent and warrant to Purchaser as
follows:
2.1 CORPORATE ORGANIZATION. Each Seller is a corporation duly
----------------------
organized, validly existing and in good standing under the laws of Delaware and
each Seller has the corporate power and authority to own the Acquired Assets and
to carry on its business as currently conducted related thereto. Each Seller is
duly qualified to do business as a foreign corporation in good standing in all
jurisdictions in which the nature of its business makes such qualification
necessary, except where the failure to be
6
<PAGE>
so qualified would not have a material adverse effect on the financial
condition, results of operations or business of either Seller and its
subsidiaries taken as a whole.
2.2 AUTHORIZATION. Each Seller has the corporate power and authority
-------------
to enter into this Agreement, the Assumption Agreement and the Sharing Agreement
and to carry out the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and the Assumption Agreement and the consummation
of the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of each Seller. Each of this
Agreement and the Assumption Agreement has been duly executed and delivered by
each Seller and constitutes a valid and binding agreement of each of them
enforceable against each of them in accordance with its terms except to the
extent that its enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or other laws affecting the enforcement of creditors'
rights generally or by general equitable principles.
2.3 NO VIOLATION. Subject to Section 4.2 hereof and except as set
------------
forth in Schedule 2.3, neither the execution and delivery of this Agreement nor
the consumm ation of the transactions contemplated hereby will violate any
provision of the Certificate of Incorporation or Bylaws or similar governing
documents of either Seller, or violate, or be in conflict with, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or cause the acceleration of the maturity of any debt
or obligation pursuant to, or result in the creation or imposition of any
security interest, lien or other encumbrance upon the Acquired Assets, or
violate any statute or law or any judgment, decree, order, regulation or rule of
any court or governmental authority; except in each case where such result would
not have a material adverse effect on the transactions contemplated hereby.
2.4 TITLE TO PROPERTIES; ENCUMBRANCES. Except as set forth in
---------------------------------
Schedule 2.4 and except for real property or personal property of which either
Seller is a lessee, Sellers have good and valid title to all personal property
included in the Acquired Assets free and clear of all mortgages, liens,
encumbrances, charges, claims or security interests of any nature whatsoever,
other than (i) imperfections of title, if any, that do not materially detract
from the value of the property subject thereto, or materially interfere with the
manner in which it is currently being used by the Network, or materially impair
the operations of the Network taken as a whole, and (ii) liens relating to taxes
and general or special assessments which are not delinquent or which can be paid
without penalty or which are being contested in good faith by appropriate
proceedings and which if resolved adversely would not have a material adverse
effect
7
<PAGE>
on the Network taken as a whole (collectively, "Liens"). Immediately after the
Closing, Purchaser will have good and valid title to all the personal property
included in the Acquired Assets, other than leased real and personal property,
free and clear of all Liens.
2.5 ASSETS NECESSARY TO THE OPERATION OF THE NETWORK. The Acquired
------------------------------------------------
Assets and Shared Assets (as defined in Section 4.8) include all of the assets
reasonably necessary to carry on the operation of the Network as presently
conducted.
2.6 TRADEMARKS. Sellers own or possess the Intellectual Property
----------
Assets and Sellers are unaware of any assertion or claim challenging the
validity of any of the foregoing. To the best knowledge of Sellers, there are no
infringements of any proprietary rights owned by or licensed by or to Sellers.
There are, and immediately after the Closing will be, no contractual
restrictions or limitations on Purchaser's right to use the name and mark
"Telemundo" in the conduct of the operation of the Network as presently carried
on by Sellers other than as contemplated by that certain Affiliation Agreement
by and between Purchaser and TGI dated as of August 12, 1998 (the "Affiliation
Agreement"). Immediately after the Closing, Purchaser will own all of the
Intellectual Property Assets free from any Liens other than the Affiliation
Agreement, subject to any notices or transfer filings or registrations.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
PURCHASER
Purchaser represents and warrants to Sellers as follows:
3.1 CORPORATE ORGANIZATION. Purchaser is a limited liability company
----------------------
duly organized, validly existing and in good standing under the laws of the
State of Delaware.
3.2 AUTHORIZATION. Purchaser has the power and authority to enter
-------------
into this Agreement, the Assumption Agreement and the Sharing Agreement and to
carry out the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Assumption Agreement and the consummation of
the transactions contemplated hereby and thereby have been duly authorized by
all necessary limited liability company action of Purchaser. Each of this
Agreement and the Assumption Agreement has been duly executed and delivered by
Purchaser and is a valid and binding agreement of Purchaser, enforceable in
accordance with its terms
8
<PAGE>
except to the extent that its enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or other laws affecting the enforcement
of creditors' rights generally or by general equitable principles.
3.3 NO VIOLATION. Neither the execution and delivery of this
------------
Agreement nor the consummation of the transactions contemplated hereby will
violate any provision of the operating agreement and other governing limited
liability company documents of Purchaser or violate, or be in conflict with, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or cause the acceleration of the
maturity of any debt or obligation pursuant to, or result in the creation or
imposition of any security interest, lien or other encumbrance, any agreement or
commitment to which Purchaser is a party or by which Purchaser is bound, or to
which the property of Purchaser is subject, or violate any statute or law or
any judgment, decree, order, regulation or rule of any court or governmental
authority; except in each case where such result would not have a material
adverse effect on the transactions contemplated hereby.
ARTICLE IV
COVENANTS
---------
4.1 FURTHER ASSURANCES.
------------------
(a) After the Closing, Purchaser and Sellers shall each from
time to time, at the request of the other party, execute and deliver such other
instruments of conveyance and transfer and take such other actions as may be
reasonably necessary as mutually determined by the parties hereto, in order to
more effectively consummate the transactions contemplated hereby and to vest in
Purchaser good and valid title to the Acquired Assets free and clear of all
Liens and transfer of all of the assets which, together with the Shared Assets
under the Service Agreement, will be all of the assets reasonably necessary to
carry on the operation of the Network as presently conducted by Sellers.
(b) After the Closing, Purchaser and Sellers shall each from
time to time take such actions as may be reasonably necessary as mutually
determined by the parties hereto in order to more effectively consummate the
transactions contemplated hereby and to include in the Shared Assets those
assets necessary to the operation of the
9
<PAGE>
Network as presently conducted or to Sellers' respective businesses as presently
conducted.
(c) After the Closing, Purchaser shall make available to
Sellers, upon written request and at no charge to Sellers, access to any of
Purchaser's personnel previously in Sellers' employ whose assistance or
participation is reasonably required by Sellers in anticipation of, or
preparation for, existing or future litigation, the collection of Accounts
Receivable, for insurance matters, for the preparation of tax returns or audits
or the prosecution or defense of any claim, suit or proceeding relating to any
proposed tax adjustment or for other matters in which Sellers or any of their
affiliates are involved and which is related to the Network.
(d) After the Closing, Sellers shall make available to
Purchaser, upon written request and at no charge to Purchaser, access to any of
Sellers' personnel whose assistance or participation is reasonably required to
assist in the transfer of the operations of the Network to Purchaser; provided
that the access to such employees shall not interfere with such employees'
discharge of their duties and responsibilities to Sellers.
(e) After the Closing, Sellers shall promptly forward or cause
to be forwarded to Purchaser, in exactly the form received, any cash, checks,
documents or other materials received by Sellers in respect of the Acquired
Assets or the Assumed Liabilities, and Purchaser shall promptly forward or cause
to be forwarded to Sellers, in exactly the form received, any cash, checks,
documents or other materials received by Purchaser in respect of the Excluded
Assets or the Retained Liabilities, including, but not limited to, any payments
in whatever form received, which relate to Accounts Receivable.
4.2 PERFORMANCE OF CONTRACTS. In the event and to the extent that the
------------------------
consent to the assignment to Purchaser of any of the contracts, leases or
agreements listed on Schedule 1.2(b) has not been obtained as of the date of
Closing or a contract or agreement is not able to be assigned pursuant to this
Agreement, such contract, lease or agreement shall not be assigned hereunder at
the Closing and: (i) Sellers agree to continue to be, or to cause their
respective affiliates to continue to be, bound thereunder in accordance with its
terms and (ii) Purchaser agrees, at the request of Sellers, to perform and
discharge fully all of the obligations of Sellers and their respective
affiliates thereunder from and after the date of Closing, and shall indemnify
Sellers for any and all actions, suits, proceedings, claims, demands, losses,
costs, expenses, obligations, liabilities, judgments, damages, recoveries and
deficiencies, including, without
10
<PAGE>
limitation, interest, penalties and reasonable attorneys' fees (collectively
"Damages"), attributable to any failures on the part of Purchaser in connection
with such performance; provided, however, that Sellers shall not alter, modify
or extend the terms and conditions of such contracts or agreements or leases
without Purchaser's prior written consent and at the request of, the sole
expense of, and for the account of, Purchaser, Sellers shall take all reasonable
actions to protect their rights thereunder. Sellers shall, without further
consideration therefor, pay, assign and remit to Purchaser promptly all monies,
rights and other considerations received or obtained, or which may be received
or obtained by Sellers in respect of such performance so long as Purchaser
cooperates fully with Sellers in such arrangements and promptly reimburses
Sellers for all reasonable payments made by Sellers in connection therewith.
Sellers shall use their good faith efforts, and Purchaser shall cooperate fully
with Sellers, to obtain all necessary consents; provided, however, that Sellers
shall not be obligated to pay any consideration therefor to the third party from
whom such consent is requested. If and when any such consent shall be obtained
or such contract or agreement or lease shall otherwise become assignable,
without the payment of any further consideration therefor, Sellers shall
promptly assign all of their rights and obligations thereunder to Purchaser and
Purchaser shall assume such rights and obligations.
4.3 PUBLICITY. The parties hereto agree that no public release or
---------
announcement announcing or describing the material terms of the transactions
contemplated hereby shall be issued by any party without the prior consent
(which consent shall not be unreasonably withheld) of each of the other parties,
except as such release or announcement may be required by law or the rules or
regulations of any United States or foreign securities exchange, provided that
in connection therewith, prior written notice thereof is provided to the other
parties hereto.
4.4 CONFIDENTIALITY. The parties agree that any "Confidential
---------------
Information" (as defined below) shall be kept confidential and that no party
will, without the prior written consent of the other party, disclose any
Confidential Information to any third party in any manner whatsoever, in whole
or in part, except (i) that a party may disclose Confidential Information to its
directors, officers, employees and representatives who need to know such
information for the purposes of operating the business of such party (it being
understood that such directors, officers, employees and representatives shall be
informed by such party of the confidential nature of such information and shall
be requested by such party to treat such information confidentially), (ii) any
disclosure of such Confidential Information may be disclosed if all other
parties consent in advance in writing, and (iii) any of such Confidential
Information may be disclosed if a party is required to disclose it by legal or
administrative process or for other appropriate legal reasons (in which case,
such party shall provide the other parties with
11
<PAGE>
prompt written prior notice of any such requirement and shall cooperate with the
other parties in seeking a protective order or other remedy to avoid such
disclosure). The term "Confidential Information" means all information not
available to the general public or that is otherwise confidential or proprietary
in nature, except such information that (i) is or becomes publicly available
other than as a result of disclosure by a party or its directors, officers,
employees or representatives or (ii) is or becomes known or available to a non-
confidential source who is not, to the recipient's knowledge after reasonable
inquiry, prohibited from transmitting the information by a contractual, legal,
fiduciary or other obligation.
4.5 EMPLOYEE AND LABOR MATTERS.
--------------------------
(a) On the date of the Closing, Purchaser shall offer employment
to those employees of Sellers whose names are set forth on Schedule 4.5 hereto
(the "Employees") at the same level of base compensation and benefits provided
by Sellers in effect immediately prior to the Closing. Sellers shall be
responsible for and shall cause to be discharged and satisfied in full all
amounts owed to any Employee for wages, benefits and salaries arising for the
period prior to and including the Closing. Purchaser shall assume liability for
all wages, benefits and salaries of Employees for the period from and after the
Closing.
(b) Effective as of the Closing Purchaser shall establish, or
become a participating employer in, "employee welfare benefit plans" as defined
in Section 3(1) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") ("Welfare Plans"), which offer the same level of benefits
provided by Sellers to the Employees immediately prior to the Closing. Purchaser
shall cause all Employees to become participants effective as of the Closing in
the Welfare Plans sponsored by Purchaser or in which Purchaser is a
participating employer. With respect to each Welfare Plan in which Purchaser is
a participating employer, Purchaser will waive pre-existing condition exclusions
in compliance with applicable provisions of the Health Insurance Portability and
Accountability Act ("HIPAA") and ERISA. Purchaser will ensure that all Employees
of Sellers who participated in Sellers' Welfare Plans immediately prior to the
Closing will be covered by the Purchaser's Welfare Plans as of the Closing.
Purchaser will provide credit under its Welfare Plans and policies to Employees
for service with Sellers for all purposes for which such service was recognized
by Sellers, provided that such service credit shall not be required to the
extent that it would result in duplication of benefits in respect of the same
period of service. Employees' medical expenses incurred prior to Closing shall
be taken into account in satisfying deductible and out-of-pocket limitations for
the year in which the Closing occurs under the Purchaser's Welfare Plans.
Sellers will retain all liabilities
12
<PAGE>
accrued prior to the date of Closing under the Sellers' Welfare Plans. Purchaser
will assume all liabilities accrued from and after the date of the Closing under
the Purchaser's Welfare Plans.
(c) Effective as of the Closing, Purchaser shall establish, or
become a participating employer in, a qualified 401(k) savings plan (the
"Purchaser 401(k) Plan"), and Employees who participate in the Telemundo Group,
Inc. Retirement and Savings Plan (the "Telemundo 401(k) Plan") shall be
permitted to participate in the Purchaser 401(k) Plan and shall have recognized
by the Purchaser 401(k) Plan prior service with Sellers. Purchaser and Sellers
agree that, as soon as practicable after the Closing, Purchaser and Sellers
shall cause the trustees of their respective plans to effect a plan-to-plan
transfer of assets and liabilities with respect to the Employees' accounts
(including outstanding participant loans) from the Telemundo 401(k) Plan to the
Purchaser 401(k) Plan.
4.6 TAX ALLOCATION. The parties agree to work together as soon as
--------------
practicable after the Closing to allocate the Purchase Price among the Assets in
accordance with Section 1060 of the Code and the regulations promulgated
thereunder. Purchaser shall deliver to Sellers a copy of Purchaser's Form 8594
at least 30 days prior to the filing thereof.
4.7 ACCESS TO BOOKS AND RECORDS. Purchaser and Sellers shall grant
---------------------------
to each other access to the books, records, papers and documents relating to the
Network, (i) in the case of Purchaser, included in the Acquired Assets, and (ii)
in the cases of Sellers, not included in the Acquired Assets which relate to the
operation of the Network (the "Records"). Such access shall be given upon the
reasonable request of the requesting party during normal business hours and upon
five business days prior notice. Each party shall maintain in the Records in its
possession for a period of four years from and after the date of Closing, and
each shall first offer to the other such of the Records as it may hereafter
desire to dispose of or destroy at least 30 days prior to initiating any
disposition or destruction whether prior to or following the aforementioned
four-year period.
4.8 SHARING AGREEMENT. Concurrently with the Closing, the parties
-----------------
will enter into a mutually acceptable Services and Facilities Agreement (Short
Form) (the "Sharing Agreement") pursuant to which they will share certain
facilities, equipment, and administrative services (the "Shared Assets"), the
cost of which will be allocated between the parties.
13
<PAGE>
4.9 INTERCOMPANY ACCOUNTS CANCELLED. Effective as of the Closing,
-------------------------------
Purchaser and Sellers shall cancel, without any payment therefor, all of
Seller's intercompany accounts payable and receivable between Purchaser and
Sellers and Purchaser and Sellers hereby release one another from any and all
further obligations or liabilities with respect thereto. Any amounts payable or
receivable from Purchaser, its members and their respective affiliates or
Station Partners, LLC, or its members and their respective affiliates shall not
be deemed to be intercompany accounts, shall not be cancelled and shall remain
in full force and effect and shall be payable in accordance with the payment
terms specified therein.
4.10 FINALIZATION OF SCHEDULE 1.2(C). The parties acknowledge that
-------------------------------
Schedule 1.2(c) is only a preliminary listing and that it is expected that
certain adjustments will be made thereto. Accordingly, the parties agree to work
together in good faith to mutually agree as promptly as practicable after
Closing (but in any event no later than 90 days after Closing), as to what
assets would be properly included in a final Schedule 1.2(c). Purchaser, on the
one hand, and Sellers, on the other, will take all actions in accordance with
Section 4.1 to properly transfer the assets to reflect a final Schedule 1.2(c).
4.11 RELEASE OF SELLERS. Purchaser shall use its best efforts to
------------------
obtain, as soon as practicable after the Closing, the unconditional release of
Sellers' obligations with respect to each of the agreements and instruments set
forth on Schedule 4.11 hereto. To the extent Sellers are not relieved from their
obligations, Purchaser shall indemnify and hold harmless Sellers and their
respective Seller Representatives from and after the date of Closing against and
in respect of any and all Damages that Seller or their respective Seller
Representatives shall incur or suffer which arise out of, result from or relate
to or otherwise in respect of either Seller's obligations with respect to each
of the agreements and instruments set forth on Schedule 4.11 hereto.
ARTICLE V
INDEMNIFICATION
5.1 INDEMNITIES BY SELLERS. Sellers, jointly and severally, shall
----------------------
indemnify, defend and hold harmless Purchaser, its past and present affiliates
and their successors and assigns and each of their respective officers,
directors, employees and agents, shareholders, partners, principals, directors
and members (collectively, the "Purchaser Representatives") against and in
respect of any and all Damages that Purchaser or the Purchaser Representatives
shall incur or suffer which arise out of, result
14
<PAGE>
from or relate to or otherwise in respect of (i) the Retained Liabilities or
(ii) any breach of any covenant of Sellers' contained in this Agreement.
5.2 INDEMNITIES BY PURCHASER. Purchaser shall indemnify, defend and
------------------------
hold harmless Sellers and each of their Seller Representatives in respect of any
and all Damages that Sellers or their respective Seller Representatives shall
incur or suffer which arise out of, result from or relate to or otherwise in
respect of (i) the Assumed Liabilities or (ii) any breach of any covenant of
Purchaser contained in this Agreement.
5.3 NOTICE OF INDEMNIFYING PARTY. If any party (the "Indemnitee")
----------------------------
receives notice of any claim, assertion or other commencement of any action or
proceeding or becomes aware of any matter with respect to which the other party
is obligated to provide indemnification (the "Indemnifying Party") pursuant to
Section 5.1 or 5.2, the Indemnitee shall promptly give the Indemnifying Party
written notice thereof. Failure to give such notice shall not affect a party's
right to be indemnified hereunder; provided, however, that the Indemnifying
Party's liability hereunder shall be limited to that which would have existed
had prompt notice been given, and the Indemnitee shall be solely responsible
for, and shall indemnify the Indemnifying Party from, such increased liability,
if any, as shall have been occasioned by its failure to provide the Indemnifying
Party with prompt notice. The Indemnifying Party shall defend, at such
Indemnifying Party's own expense and by such Indemnifying Party's own counsel,
any such matter involving the asserted liability of the Indemnitee. In such
event, the Indemnitee, the Indemnifying Party and the Indemnifying Party's
counsel shall cooperate in the compromise of, or defense against, any such
asserted liability. The Indemnitee may participate in the defense of such
asserted liability at its own expense; provided, however, that if the Indemnitee
elects not to participate in such defense, the Indemnifying Party shall keep the
Indemnitee fully appraised at all times as to the status of the defense or any
settlement negotiations with respect thereto. If the Indemnifying Party does not
notify the Indemnitee within thirty (30) days, or within such shorter response
period as is required to avoid prejudice to the ability to defend against such
claim, assertion, action or proceeding, after receipt of Indemnitee's notice of
an action or proceeding that the Indemnifying Party intends to assume the
defense of such claim, action, assertion or proceeding, then the Indemnitee may
defend such claim, action, assertion or proceeding at the Indemnifying Party's
sole expense. The Indemnifying Party shall have the right to compromise any
action or suit provided that it shall not effect a settlement of any action or
claim without the prior written consent of the Indemnitee which consent shall
not be unreasonably withheld and shall include an unconditional release of the
Indemnitee for any claim, action, assertion or proceeding. If the Indemnifying
Party is defending any claim, the Indemnitee shall make available
15
<PAGE>
to the Indemnifying Party any books, records or other documents within its
control that are reasonably necessary or appropriate for such defense.
ARTICLE VI
----------
MISCELLANEOUS PROVISIONS
------------------------
6.1 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
----------------------------------------------
representations and warranties made herein shall terminate at the Closing.
6.2 AMENDMENT AND MODIFICATION. This Agreement may not be amended
--------------------------
except by an instrument in writing signed on behalf of all the parties.
6.3 WAIVER OF COMPLIANCE. At any time prior to the Closing, the
--------------------
parties may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document, certificate
or writing delivered pursuant hereto, or (c) waive compliance with any of the
agreements contained herein unless waiver is unlawful or specifically
prohibited. Any agreement on the part of any party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
6.4 EXPENSES; TRANSFER TAXES. The parties to this Agreement shall
------------------------
each pay their own expenses in connection with the preparation of this Agreement
and the consummation of the transactions contemplated hereby. To the extent any
cash taxes are payable as a result of the transactions contemplated by this
Agreement, the parties agree to work together to minimize the impact. Purchaser
shall pay and/or reimburse Sellers for all sales, use, value added, documentary
stamp, gross receipts, registration, transfer, conveyance, excise, recording,
license and other similar taxes and fees (collectively, "Transfer Taxes")
arising out of or in connection with the transactions contemplated hereby.
Sellers shall prepare and timely file all tax returns required to be filed in
respect of Transfer Taxes, provided, however, that Purchaser shall be permitted
to prepare any such tax returns that are the primary responsibility of Purchaser
under applicable law. Purchaser's preparation of any such tax returns shall be
subject to Sellers' approval, which approval shall not be unreasonably withheld.
6.5 BULK SALES LAWS. Purchaser and Sellers hereby waive compliance
---------------
with the provisions of any applicable statutes relating to bulk transfers or
bulk sales.
16
<PAGE>
6.6 NOTICES. All notices and other communications among the parties
-------
shall be in writing and shall be deemed to have been duly given when (i)
delivered in person, or (ii) one business day after delivery to a reputable
overnight courier service (i.e., Federal Express), postage pre-paid, or (iii)
delivered by facsimile and promptly confirmed by telephone and by deliver of a
copy in person or overnight as aforesaid, in each case with postage prepaid,
addressed as follows:
(a) If to Sellers to:
Telemundo Group, Inc.
2290 West 8th Avenue
Hialeah, Florida 33010
Facsimile: (305) 889-7980
Attention: General Counsel
with a courtesy copy to (which shall not constitute notice):
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Facsimile: (212) 872-1002
Attention: Patrick J. Dooley
or to such other person or address as Sellers shall furnish to Purchaser in
writing.
(b) If to Purchaser, to:
Telemundo Network Group LLC
2290 West 8th Avenue
Hialeah, Florida 33010
Facsimile: (305) 889-7980
Attention: General Counsel
with a courtesy copy to (which shall not constitute notice):
Troop, Steuber, Pasich, Reddick & Tobey LLP
2029 Century Park East
Twenty-Fourth Floor
Los Angeles, California 90067
Facsimile: (310) 728-2204
17
<PAGE>
Attention: C.N. Franklin Reddick, III
or to such other person or address as Purchaser shall furnish to Sellers in
writing.
6.7 ASSIGNMENT. This Agreement and all of the provisions hereof
----------
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. This Agreement and any of the
rights, interests or obligations hereunder may be assigned by any of the parties
hereto without the prior written consent of the other parties, provided that no
assignment permitted by this Agreement shall relieve the assigning party from
its obligations hereunder.
6.8 GOVERNING LAW. THIS AGREEMENT AND THE LEGAL RELATIONS AMONG
-------------
THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK, INCLUDING, WITHOUT LIMITATION, SECTION
5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
6.9 COUNTERPARTS. This Agreement may be executed simultaneously
------------
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
6.10 HEADINGS. The headings of the Sections and Articles of this
--------
Agreement are inserted for convenience only and shall not constitute a part
hereof or affect in any way the meaning or interpretation of this Agreement.
6.11 ENTIRE AGREEMENT. This Agreement, including the Exhibits hereto,
----------------
the Schedules and the other documents and certificates delivered pursuant to the
terms hereof, set forth the entire agreement and understanding of the parties
hereto in respect of the subject matter contained herein, and supersede all
prior agreements, promises, covenants, arrangements, communications,
representations or warranties, whether oral or written, by any officer, employee
or representative of any party hereto.
6.12 THIRD PARTIES. Nothing herein expressed or implied is intended
-------------
or shall be construed to confer upon or give to any person or corporation other
than the parties hereto and their successors or assigns, any rights or remedies
under or by reason of this Agreement.
6.13 VALIDITY. The invalidity or unenforceability of any provision
--------
of this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
TELEMUNDO GROUP, INC.
By: /s/ Osvaldo F. Torres
----------------------------------------------
Name: Osvaldo F. Torres
Title: Vice President, General Counsel and
Secretary
TELMUNDO NETWORK, INC.
By: /s/ Osvaldo F. Torres
---------------------------------------------
Name: Osvaldo F. Torres
Title:
TELEMUNDO NETWORK GROUP LLC
by SPE MUNDO INVESTMENT INC.
its Managing Member
By: /s/ Leah Weil
---------------------------------------------
Name: Leah Weil
Title: Assistant Secretary
19
<PAGE>
EXHIBIT 10.6
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
Dated as of August 4, 1998,
among
TLMD ACQUISITION CO.,
as Borrower,
TELEMUNDO HOLDINGS, INC.,
as Parent Guarantor,
THE LENDERS NAMED HEREIN,
CREDIT SUISSE FIRST BOSTON,
as Administrative Agent,
as Collateral Agent and
as Issuing Bank
CANADIAN IMPERIAL BANK OF COMMERCE,
as Documentation Agent
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
Definitions
SECTION 1.01. Defined Terms................................................ 1
SECTION 1.02. Terms Generally.............................................. 23
ARTICLE II
The Credits
SECTION 2.01. Commitments.................................................. 23
SECTION 2.02. Loans........................................................ 23
SECTION 2.03. Borrowing Procedure.......................................... 25
SECTION 2.04. Evidence of Debt; Repayment of Loans......................... 26
SECTION 2.05. Fees......................................................... 26
SECTION 2.06. Interest on Loans............................................ 26
SECTION 2.07. Default Interest............................................. 27
SECTION 2.08. Alternate Rate of Interest................................... 27
SECTION 2.09. Termination and Reduction of Commitments..................... 27
SECTION 2.10. Conversion and Continuation of Borrowings................... 28
SECTION 2.11. Repayment of Term Borrowings................................. 29
SECTION 2.12. Optional Prepayments......................................... 30
SECTION 2.13. Mandatory Prepayments........................................ 30
SECTION 2.14. Reserve Requirements; Change in Circumstances................ 32
SECTION 2.15. Change in Legality........................................... 33
SECTION 2.16. Indemnity.................................................... 33
SECTION 2.17. Pro Rata Treatment........................................... 34
SECTION 2.18. Sharing of Setoffs........................................... 34
SECTION 2.19. Payments..................................................... 35
SECTION 2.20. Taxes........................................................ 35
SECTION 2.21. Assignment of Commitments Under Certain Circumstances;
Duty to Mitigate........................................... 36
SECTION 2.22. Letters of Credit............................................ 37
ARTICLE III
Representations and Warranties
SECTION 3.01. Organization; Powers......................................... 40
SECTION 3.02. Authorization................................................ 40
SECTION 3.03. Enforceability............................................... 40
SECTION 3.04. Governmental Approvals....................................... 40
SECTION 3.05. Financial Statements......................................... 40
SECTION 3.06. No Material Adverse Change................................... 41
SECTION 3.07. Title to Properties; Possession Under Leases................. 41
SECTION 3.08. Subsidiaries................................................. 41
SECTION 3.09. Litigation; Compliance with Laws............................. 41
SECTION 3.10. Agreements................................................... 42
</TABLE>
<PAGE>
Contents, p. 2
<TABLE>
<S> <C>
SECTION 3.11. Federal Reserve Regulations.................................. 42
SECTION 3.12. Investment Company Act; Public Utility Holding Company
Act..................................................... 42
SECTION 3.13. Use of Proceeds.............................................. 42
SECTION 3.14. Tax Returns.................................................. 42
SECTION 3.15. No Material Misstatements.................................... 42
SECTION 3.16. Employee Benefit Plans....................................... 43
SECTION 3.17. Environmental Matters........................................ 43
SECTION 3.18. Insurance.................................................... 43
SECTION 3.19. Security Documents........................................... 44
SECTION 3.20. Intellectual Property........................................ 44
SECTION 3.21. Station Licenses............................................. 44
SECTION 3.22. Labor Matters................................................ 45
SECTION 3.23. Solvency..................................................... 45
SECTION 3.24. Merger Agreement............................................. 45
SECTION 3.25 Year 2000.................................................... 45
ARTICLE IV
Conditions of Lending
SECTION 4.01. All Credit Events............................................ 46
SECTION 4.02. First Credit Event........................................... 46
ARTICLE V
Affirmative Covenants
SECTION 5.01. Existence; Businesses and Properties, Insurance.............. 49
SECTION 5.02. Obligations and Taxes........................................ 49
SECTION 5.03. Financial Statements, Reports, etc........................... 50
SECTION 5.04. Litigation and Other Notices................................. 51
SECTION 5.05. Employee Benefits............................................ 51
SECTION 5.06. Maintaining Records; Access to Properties
and Inspections......................................... 51
SECTION 5.07. Use of Proceeds.............................................. 52
SECTION 5.08. Compliance with Environmental Laws........................... 52
SECTION 5.09. Further Assurances........................................... 52
SECTION 5.10. Hedging Arrangements......................................... 52
ARTICLE VI
Negative Covenants
SECTION 6.01. Indebtedness................................................. 52
SECTION 6.02. Liens........................................................ 54
SECTION 6.03. Sale and Lease-Back Transactions............................. 55
SECTION 6.04. Investments, Loans and Advances.............................. 55
SECTION 6.05. Mergers, Consolidations, Sales of Assets..................... 56
SECTION 6.06. Dividends and Distributions; Restrictions on Ability of
Subsidiaries to Pay Dividends........................... 56
SECTION 6.07. Transactions with Affiliates................................. 57
SECTION 6.08. Business of Parent and Subsidiaries.......................... 57
SECTION 6.09. Amendment of Material Documents.............................. 57
</TABLE>
<PAGE>
Contents, p. 3
<TABLE>
<S> <C>
SECTION 6.10. Prepayments, Redemptions and Repurchases of Debt........... 57
SECTION 6.11. Collateral and Guarantee Requirements....................... 57
SECTION 6.12. Fiscal Year................................................. 58
SECTION 6.13. Certain Changes in Ownership or Control..................... 58
SECTION 6.14. Consolidated Leverage Ratio................................. 58
SECTION 6.15. Consolidated Interest Expense Coverage Ratio................ 58
SECTION 6.16. Consolidated Fixed Charge Coverage Ratio.................... 59
ARTICLE VII
Events of Default...................................... 60
ARTICLE VIII
The Agents............................................. 62
ARTICLE IX
Guarantee.............................................. 64
ARTICLE X
Miscellaneous.......................................... 65
SECTION 10.01. Notices..................................................... 65
SECTION 10.02. Survival of Agreement....................................... 66
SECTION 10.03. Binding Effect.............................................. 66
SECTION 10.04. Successors and Assigns...................................... 66
SECTION 10.05. Expenses; Indemnity......................................... 68
SECTION 10.06. Right of Setoff............................................. 69
SECTION 10.07. Applicable Law.............................................. 70
SECTION 10.08. Waivers; Amendment.......................................... 70
SECTION 10.09. Interest Rate Limitation.................................... 71
SECTION 10.10. Entire Agreement............................................ 71
SECTION 10.11. WAIVER OF JURY TRIAL........................................ 71
SECTION 10.12. Severability................................................ 71
SECTION 10.13. Counterparts................................................ 71
SECTION 10.14. Headings.................................................... 72
SECTION 10.15. Jurisdiction; Consent to Service of Process................. 72
SECTION 10.16. Confidentiality............................................. 72
</TABLE>
Schedule 1.01 Subsidiary Guarantors
Schedule 2.01 Commitments
Schedule 3.01 Organization; Powers
Schedule 3.02 Authorization
Schedule 3.05 Pro Forma Financial Information
Schedule 3.06 Material Adverse Change
Schedule 3.07 Certain Encumbrances
Schedule 3.08 Subsidiaries
Schedule 3.09 Litigation
<PAGE>
Contents, p. 4
Schedule 3.14 Tax Returns
Schedule 3.17 Environmental Matters
Schedule 3.18 Insurance
Schedule 3.21 Station Licenses
Schedule 3.22 Labor Matters
Schedule 6.01 Existing Indebtedness
Schedule 6.02 Existing Liens
Schedule 6.04 Existing Investments
Exhibit A Form of Administrative Questionnaire
Exhibit B Form of Assignment and Acceptance
Exhibit C Form of Borrowing Request
Exhibit D Form of Subsidiary Guarantee Agreement
Exhibit E Form of Indemnity, Subrogation and
Contribution Agreement
Exhibit F Form of Pledge Agreement
Exhibit G-1 Form of Security Agreement
Exhibit G-2 Form of Puerto Rican Security Agreement
Exhibit H-1 Form of Opinion of Osvaldo F. Torres, Esq.,
General Counsel of the Borrower
Exhibit H-2 Form of Opinion of Akin, Gump, Strauss,
Hauer & Feld, special counsel for the
Parent and the Borrower
Exhibit H-3 Form of Opinion of McConnell Valdes, Puerto
Rican counsel for the Parent and the Borrower
Exhibit H-4 Form of Opinion of Latham & Watkins, special
counsel for the Borrower
Exhibit K Terms of Subordinated Indebtedness
<PAGE>
CREDIT AGREEMENT dated as of August 4, 1998, among TLMD
ACQUISITION CO., a Delaware corporation (the "Borrower");
TELEMUNDO HOLDINGS, INC., a Delaware corporation of which the
Borrower is a wholly owned subsidiary (the "Parent"); the Lenders
(as defined in Article I); CREDIT SUISSE FIRST BOSTON, a bank
organized under the laws of Switzerland, acting through its New
York Branch, as administrative agent (in such capacity, the
"Administrative Agent"), as collateral agent (in such capacity,
the "Collateral Agent") and as issuing bank (in such capacity,
the "Issuing Bank"); and CANADIAN IMPERIAL BANK OF COMMERCE, as
documentation agent (in such capacity, the "Documentation
Agent").
The Borrower, the Parent and Telemundo Group, Inc., a Delaware corporation
(the "Company") have entered into an Agreement and Plan of Merger dated as of
November 24, 1997 (the "Merger Agreement"), pursuant to which the Borrower will
be merged with and into the Company (which at the time of such merger will
become the "Borrower" hereunder), the Company will become a wholly owned
subsidiary of the Parent and each share of the Company's outstanding capital
stock, other than shares owned directly or indirectly by the Parent and
Dissenting Shares, as defined in the Merger Agreement, will be converted into
the right to receive cash equal to $44 plus the Additional Amount, as defined in
the Merger Agreement (the "Merger"). At the time of the Merger, the Company
will sell the Network Assets, as defined in the Network Sale Agreement, to the
Network Company for cash in an amount not less than $73,200,000 pursuant to the
Network Sale Agreement (the "Network Sale") and the Network Company and the
Borrower will enter into the Network Affiliation Agreement.
The Borrower has requested the Lenders to extend credit in the form of (a)
Tranche A Term Loans on the Closing Date in an aggregate principal amount not in
excess of $25,000,000 (subject to reduction as provided herein), (b) Tranche B
Term Loans on the Closing Date in an aggregate principal amount not in excess of
$175,000,000 (subject to reduction as provided herein), (c) Revolving Loans at
any time and from time to time prior to the Revolving Credit Maturity Date in an
aggregate principal amount at any time outstanding not in excess of $150,000,000
(subject to reduction as provided herein) minus the L/C Exposure at any time and
(d) Letters of Credit in an aggregate stated amount at any time outstanding not
in excess of $25,000,000. The proceeds of the Term Loans and of Revolving Loans
made on the Closing Date are to be used by the Borrower solely (i) to finance
the acquisition of the Company pursuant to the Merger, (ii) to refinance certain
existing indebtedness of the Company and (iii) to pay fees and expenses related
to the Closing Date Transactions and the transactions leading to the Merger.
The proceeds of the remaining Revolving Loans are to be used by the Borrower and
the Subsidiaries to provide working capital for use in the ordinary course of
their businesses and for other general corporate purposes. The Letters of
Credit are to be used to support obligations (other than trade payables)
incurred by the Borrower and the Subsidiaries in the ordinary course of their
businesses.
The Lenders are willing to extend such credit to the Borrower and the
Issuing Bank is willing to issue Letters of Credit for the account of the
Borrower on the terms and subject to the conditions set forth herein.
Accordingly, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Defined Terms. As used in this Agreement, including the
preamble hereto, the following terms shall have the meanings specified below:
"ABR Loan" shall mean any ABR Term Loan or ABR Revolving Loan.
<PAGE>
2
"ABR Revolving Loan" shall mean any Revolving Loan bearing interest at a
rate determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.
"ABR Term Loan" shall mean any Term Loan bearing interest at a rate
determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.
"Acquisition" shall mean the acquisition by the Borrower or any Subsidiary,
including through a merger or consolidation or a sale of capital stock, of any
other person or any division or business unit of any other person.
"Adjusted LIBO Rate" shall mean, with respect to any Eurodollar Borrowing
for any Interest Period, an interest rate per annum equal to the product of (a)
the LIBO Rate in effect for such Interest Period and (b) Statutory Reserves.
"Administrative Questionnaire" shall mean an Administrative Questionnaire
in the form of Exhibit A.
"Affiliate" shall mean, when used with respect to a specified person,
another person that directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with the person
specified.
"Aggregate Revolving Credit Exposure" shall mean the aggregate amount of
the Lenders' Revolving Credit Exposures.
"Alternate Base Rate" shall mean, for any day, a rate per annum equal to
the greater of (a) the Prime Rate in effect on such day and (b) the sum of (i)
the Federal Funds Effective Rate in effect on such day and (ii) 1/2 of 1%. If
for any reason the Administrative Agent shall have determined (which
determination shall be conclusive absent manifest error) that it is unable to
ascertain the Federal Funds Effective Rate for any reason, including the
inability of the Administrative Agent to obtain sufficient quotations in
accordance with the terms of the definition thereof, the Alternate Base Rate
shall be determined without regard to clause (b) of the preceding sentence until
the circumstances giving rise to such inability no longer exist. Any change in
the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds
Effective Rate shall be effective on the effective date of such change in the
Prime Rate or the Federal Funds Effective Rate, respectively.
"Apollo" shall mean Apollo Investment Fund III, Apollo Advisors II, L.P.,
Apollo Management, L.P., and their successors (the "Original Apollo Entities"),
and any other investment fund with respect to which the investment decisions,
decisions as to the exercise of voting or consensual rights and other material
decisions are ultimately controlled by substantially the same group of
individuals at the time controlling such decisions as to any of the Original
Apollo Entities.
"Applicable Percentage" shall mean, for any day, with respect to any
Eurodollar Loan or ABR Loan that is part of a Revolving Credit Borrowing or a
Tranche A Term Borrowing, or with respect to the Commitment Fees, as the case
may be, the applicable percentage set forth below under the caption "Eurodollar
Spread", "ABR Spread" or "Fee Percentage", as the case may be, based upon the
Consolidated Leverage Ratio as of the most recent Determination Date:
<PAGE>
3
<TABLE>
<CAPTION>
Eurodollar ABR Fee
Consolidated Leverage Ratio Spread Spread Percentage
--------------------------- ---------- ------ ----------
<S> <C> <C> <C>
Category 1 1.875% 0.875% 0.500%
----------
Greater than or equal to 6.00 to 1.00
Category 2 1.750% 0.750% 0.500%
----------
Less than 6.00 to 1.00 but greater than
or equal to 5.50 to 1.00
Category 3 1.500% 0.500% 0.375%
----------
Less than 5.50 to 1.00 but greater than
or equal to 5.00 to 1.00
Category 4 1.250% 0.250% 0.375%
----------
Less than 5.00 to 1.00 but greater than
or equal to 4.50 to 1.00
Category 5 1.000% 0.000% 0.250%
----------
Less than 4.50 to 1.00 but greater than
or equal to 4.00 to 1.00
Category 6 0.750% 0.000% 0.250%
----------
Less than 4.00 to 1.00
</TABLE>
; provided that until the Determination Date next following the first fiscal
quarter end after the Closing Date, the Applicable Percentage shall be
determined by reference to Category 1. At any time when the Borrower has failed
to deliver any financial statements and certificates required to have been
delivered under Section 5.03(a) or (b), the Applicable Percentage shall be
determined (a) for the first 30 days after the Delivery Date by which such
financial statements and certificates were to have been delivered, by reference
to the Category in effect immediately prior to such Delivery Date and (b)
thereafter, for so long as such financial statements and certificates shall not
have been delivered, by reference to the next lower Category (with Category 6
being the highest Category and Category 1 being the lowest Category); provided,
that if, following the delivery of such financial statements and certificates,
it shall appear that the Applicable Percentages employed pursuant to this
sentence to compute interest rates and the Commitment Fees shall have been lower
or higher than the Applicable Percentages that would have been employed had such
financial statements and certificates been timely delivered, the Borrower shall
make supplemental payments to the Lenders, or shall withhold amounts from
payments thereafter becoming due for the accounts of the Lenders, to the extent
necessary to eliminate the effect with respect to each Lender of the deficiency
or excess.
"Arranger and Agent Fees" shall have the meaning assigned to such term in
Section 2.05(b).
"Arrangers" shall mean Credit Suisse First Boston and Canadian Imperial
Bank of Commerce.
"Asset Sale" shall mean the sale or transfer (by way of merger or
otherwise, and including any casualty event or condemnation that results in the
receipt of any insurance or condemnation proceeds) by the Parent or any of the
Subsidiaries to any person (other than a sale or transfer to the Parent or any
Subsidiary) of (a) any capital stock of any of the Subsidiaries or (b) any other
assets, whether real or personal and whether tangible or intangible, of the
Parent or any of the Subsidiaries, including any assets of broadcast stations;
provided that the following shall not be deemed to be "Asset Sales" for purposes
of this Agreement: (i) the Network Sale, (ii) any disposition of obsolete or
worn out assets or Permitted
<PAGE>
4
Investments, in each case in the ordinary course of business, (iii) the
licensing by the Parent or any Subsidiary of any television programming
material, (iv) any asset sale or series of related asset sales described in
clause (b) above resulting in Net Cash Proceeds not in excess of $7,500,000 in
the aggregate during any fiscal year, and (v) sales of any assets permitted to
be sold under clause (d) of Section 6.05 if (w) the Borrower advises the
Administrative Agent in writing within five Business Days following the
completion of each such sale that the Borrower intends to use (or cause its
subsidiaries to use) the Net Cash Proceeds of such sale received by the Parent
or any of the Subsidiaries to purchase additional assets to be used in the
business of the Borrower and its subsidiaries, (x) after giving pro forma effect
to each such sale as if it had occurred at the beginning of the most recent
period of four fiscal quarters for which financial statements shall have been
delivered pursuant to Section 5.03(a) or (b), as applicable, the Borrower shall
be in compliance with the financial covenants set forth in Article VI, (y)
either (A) the Net Cash Proceeds of each such sale received by the Parent or any
of the Subsidiaries are promptly deposited in an escrow account with the
Administrative Agent, pursuant to an escrow agreement satisfactory to the
Borrower and the Administrative Agent, and held in such account pending any such
purchase or the application of such Net Cash Proceeds pursuant to Section
2.13(b) or (B) the Net Cash Proceeds of each such sale received by the Parent or
any of the Subsidiaries are promptly applied to prepay Revolving Credit
Borrowings, in which case an amount of the Revolving Credit Commitments equal to
the amount so prepaid will be held available and not borrowed pending, and will
be made available (subject to the conditions to borrowing set forth herein) to
provide funds for, any such purchase or the application of such Net Cash
Proceeds pursuant to Section 2.13(b), and (z) such Net Cash Proceeds are in fact
used to purchase additional assets to be used in the business of the Borrower
and its subsidiaries within nine months after the date of closing of such sale
(or the Borrower and its subsidiaries shall within nine months of the closing
date of such sale enter into a contract to purchase additional assets to be used
in the business of the Borrower and its subsidiaries using such proceeds and
shall close such purchase within 15 months after the date of closing of such
sale), failing which any portion of such Net Cash Proceeds that have not been
used to purchase additional assets to be used in the business of the Borrower
and its subsidiaries will immediately be deemed for purposes of Section 2.13(b)
to constitute Net Cash Proceeds of an Asset Sale.
"Assignment and Acceptance" shall mean an assignment and acceptance entered
into by a Lender and an assignee, and accepted by the Administrative Agent, in
the form of Exhibit B or such other form as shall be approved by the
Administrative Agent.
"Bastion" shall mean Bastion Capital Fund, L.P., Bastion Partners, L.P.,
Bastion Management Corp. and their successors (the "Original Bastion Entities")
and/or any other Affiliate of any of the foregoing with respect to which the
investment decisions, decisions as to the exercise of voting or consensual
rights and other material decisions are ultimately controlled by substantially
the same group of individuals at the time controlling such decisions as to any
of the Original Bastion Entities.
"Board" shall mean the Board of Governors of the Federal Reserve System of
the United States of America.
"Borrower Equity Contribution" shall mean the contribution by the Parent to
the common equity of the Borrower on the Closing Date of cash representing all
the proceeds of the Parent Equity Contribution and all the net proceeds of the
Senior Discount Note Sale.
"Borrowing" shall mean a group of Loans of a single Type made by the
Lenders on a single date and as to which a single Interest Period is in effect.
"Borrowing Request" shall mean a request by the Borrower in accordance with
the terms of Section 2.03 and substantially in the form of Exhibit C.
"Broadcast Station" shall mean all or substantially all the assets used and
useful for operating a full service commercial television broadcast station
pursuant to a Station License, including without limitation the rights to use
such Station License.
<PAGE>
5
"Business Day" shall mean any day other than a Saturday, Sunday or day on
which banks in New York, New York are authorized or required by law to close;
provided, however, that when used in connection with a Eurodollar Loan, the term
"Business Day" shall also exclude any day on which banks are not open for
dealings in dollar deposits in the London interbank market.
"Capital Expenditures" shall mean, for any period, additions to property,
plant and equipment and other capital expenditures of the Borrower and its
subsidiaries that are (or would be) set forth in a consolidated statement of
cash flows of the Borrower for such period prepared in accordance with GAAP,
except that Capital Expenditures for any period shall not include Capital Lease
Obligations incurred by the Borrower and its consolidated subsidiaries during
such period.
"Capital Lease Obligations" of any person shall mean the obligations of
such person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
A "Change in Control" shall be deemed to have occurred if at any time (a)
the Sponsors (and their respective Controlled Affiliates) taken together shall
not own, directly or indirectly, in the aggregate, shares representing at least
50.1% of the equity and aggregate ordinary voting power represented by the
outstanding capital stock of the Parent; (b) Liberty and SPE (and their
respective Controlled Affiliates) shall not each own, directly or indirectly,
shares representing at least 15% of the equity and aggregate ordinary voting
power (including for the purpose of calculating the aggregate ordinary voting
power represented by shares owned by Liberty and its Controlled Affiliates or
SPE and its Controlled Affiliates, as the case may be, any voting power
associated with such shares owned by Liberty and its Controlled Affiliates or
SPE and its Controlled Affiliates that shall be controlled by one or more other
Sponsors or Station Holdings) represented by the outstanding capital stock of
the Parent (provided, that if either Liberty or SPE and its Controlled
Affiliates shall be required by the FCC or any Federal court or other Federal
Governmental Authority with applicable jurisdiction to dispose of any of or all
its shares of the capital stock of the Parent and such disposition would, but
for this parenthetical, result in a Change in Control under this clause (b),
such Change in Control will not be deemed to have occurred so long as (i)
Liberty (if SPE or any of its Controlled Affiliates shall have been required by
the FCC or any Federal court or other Federal Governmental Authority to dispose
of any or all of its shares of the capital stock of the Parent) or SPE (if
Liberty or any of its Controlled Affiliates shall have been required by the FCC
or any Federal court or other Federal Governmental Authority to dispose of any
or all of its shares of the capital stock of the Parent) and its Controlled
Affiliates shall continue to own shares representing at least 20% of the equity
represented by the outstanding capital stock of the Parent, (ii) each of Liberty
and SPE (and its respective Controlled Affiliates) continues to own Equity
Interests of the Network Company representing 50% of the aggregate voting power
represented by all such outstanding Equity Interests of the Network Company and
(iii) Liberty and SPE (and their respective Controlled Affiliates) continue to
own Equity Interests of the Network Company that in the aggregate for Liberty
and SPE (and such Controlled Affiliates) represent 80% of the aggregate equity
represented by all such outstanding Equity Interests of the Network Company); or
(c) the Borrower shall not be a wholly owned subsidiary of the Parent.
Notwithstanding anything to the contrary in the foregoing definition, if,
pursuant to any requirement of the FCC or any Federal court or other Federal
Governmental Authority, any person shall receive in exchange for capital stock
of the Parent and shall hold (a) Rights entitling it to acquire capital stock of
the Parent for a nominal exercise price or (b) Rights entitling it to acquire
capital stock of the Parent together with Indebtedness of the Parent in an
amount substantially equal to the exercise price of such Rights, then compliance
with the requirement set forth in subclause (i) of the proviso to clause (b) of
the foregoing definition shall be determined on a pro forma basis giving effect
to the exercise of such Rights for such nominal exercise price (in the case of
Rights described in clause (a) above) or by offset of the exercise price thereof
against such Indebtedness (in the case of Rights described in clause (b) above).
"Chicago Subsidiary Partnership Agreement" shall mean the Amended and
Restated Partnership Agreement dated as of February 26, 1996, among Essaness
Theatres Corporation, a
<PAGE>
6
Delaware corporation, Video 44 Acquisition Corp., Inc. (formerly called
Harriscope of Chicago, Inc.), an Illinois corporation and a Wholly Owned
Subsidiary, and Telemundo of Chicago, Inc., a Delaware corporation and a Wholly
Owned Subsidiary.
"Chicago Subsidiary" shall mean Video 44, an Illinois general partnership
and an indirect subsidiary of the Borrower.
"Closing Date" shall mean the date of the initial Credit Event.
"Closing Date Transactions" shall mean the Parent Equity Contribution, the
Senior Discount Note Sale, the Borrower Equity Contribution, the Borrowings
hereunder on the Closing Date, the Merger, the Refinancing, the Network Sale and
the execution and delivery of the Network Affiliation Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Collateral" shall mean all the "Collateral" as defined in any Security
Document.
"Collateral Requirement" shall mean, at any time, that (a) the Pledge
Agreement (or a supplement referred to in Section 23 thereof) shall have been
duly executed by the Parent, the Borrower and each Subsidiary (other than the
Chicago Subsidiary and any Foreign Subsidiary) existing at such time and owning
any outstanding capital stock or Indebtedness of the Borrower or any other
Subsidiary (including the Puerto Rican Notes), shall have been delivered to the
Collateral Agent and shall be in full force and effect, and all the outstanding
Equity Interests and Rights (or, in the case of the Chicago Subsidiary, all the
Equity Interests and Rights in the Chicago Subsidiary owned by the Borrower or
any Subsidiary) of the Borrower (after giving effect to the Merger) and the
Subsidiaries (including each License Subsidiary) and all such Indebtedness shall
have been duly and validly pledged thereunder (or to the extent not evidenced by
any instrument, under the Security Agreement) to the Collateral Agent for the
ratable benefit of the Secured Parties and certificates or other instruments
representing such shares or Indebtedness (to the extent such Indebtedness is
evidenced by instruments), accompanied by stock powers or other instruments of
transfer endorsed in blank, shall be in the actual possession of the Collateral
Agent; provided that the Borrower and the Subsidiaries shall not be required to
pledge more than 65% of the voting capital stock (but shall be required to
pledge 100% of the non-voting capital stock) of the Puerto Rican Subsidiary or
any other Foreign Subsidiary; (b) except as expressly permitted under Section
6.11, each Station License owned or controlled directly or indirectly by the
Parent (other than the Station License of the Chicago Subsidiary) is owned by a
License Subsidiary all the capital stock of which is directly owned by the
Parent or the Borrower and pledged to the Collateral Agent under the Pledge
Agreement; (c) the Security Agreement (or a supplement referred to in Section
7.15 thereof) shall have been duly executed by the Parent, the Borrower and each
Subsidiary (other than the Chicago Subsidiary and any Foreign Subsidiary),
existing at such time, and shall have been delivered to the Collateral Agent and
shall be in full force and effect, and each document (including each Uniform
Commercial Code financing statement and each filing with respect to intellectual
property owned by the Parent, the Borrower or any Subsidiary, other than the
Chicago Subsidiary and any Foreign Subsidiary) required by law or reasonably
requested by the Administrative Agent to be filed, registered or recorded in
order to create in favor of the Collateral Agent for the benefit of the Secured
Parties a valid, legal and perfected first-priority security interest in and
lien on the Collateral subject to the Security Agreement (subject to any Lien
expressly permitted by Section 6.02) shall have been so filed, registered or
recorded and evidence thereof delivered to the Collateral Agent; (d) the Puerto
Rican Note Security Agreement shall have been duly executed by the Puerto Rican
Subsidiary and the Borrower and shall be in full force and effect, and the
original thereof shall have been delivered to the Collateral Agent; (e) each
person required under the terms of the Network Affiliation Agreement and any
other affiliation, programming or other agreement to consent to the assignment
pursuant to the Security Agreement of the rights of the Parent, the Borrower or
any Subsidiary under such agreement in order for such assignment to be effective
shall have executed and delivered a consent to such assignment satisfactory to
the Collateral Agent; and (f) the Indemnity, Subrogation and Contribution
Agreement (or a supplement referred to in Section 12 thereof) shall have been
executed by the Parent, the Borrower and each other Loan Party (other than the
<PAGE>
7
Chicago Subsidiary and any Foreign Subsidiary), shall have been delivered to the
Collateral Agent and shall be in full force and effect.
"Commitment" shall mean, with respect to any Lender, such Lender's
Revolving Credit Commitment and Term Loan Commitments.
"Commitment Fee" shall have the meaning assigned to such term in Section
2.05(a).
"Common Stock" shall mean the common stock, par value $0.001 per share, of
the Parent.
"Confidential Information Memorandum" shall mean the Confidential
Information Memorandum of the Borrower dated April 1998.
"Consolidated EBITDA" shall mean, for any period, Consolidated Net Income
for such period, plus, without duplication and to the extent deducted from
revenues in determining Consolidated Net Income, the sum of (a) the aggregate
amount of Consolidated Interest Expense for such period, (b) the aggregate
amount of income tax expense for such period, (c) all amounts attributable to
depreciation and amortization for such period, (d) permitted termination
payments owed by the Borrower or any Subsidiary during such period resulting
from the early termination of time brokerage agreements, local marketing
agreements or similar agreements, (e) all extraordinary charges during such
period, (f) payments under non-compete agreements during such period, (g)
merger-related and other non-recurring charges during such period, (h) any
amount deducted in determining Consolidated Net Income for such period as a
result of any minority interest in a Subsidiary and (i) all other non-cash
charges during such period, and minus, without duplication and to the extent
added to revenues in determining Consolidated Net Income for such period, (a)
all extraordinary gains during such period and (b) the aggregate amount of all
payments to holders of minority interests in Subsidiaries during such period,
all as determined on a consolidated basis with respect to the Borrower and its
subsidiaries in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" shall mean, for any period, the
ratio of (a) Consolidated EBITDA for such period to (b) the sum of (i)
Consolidated Interest Expense for such period, (ii) the aggregate amount of cash
taxes paid by the Borrower and its subsidiaries during such period (excluding
payments on account of accrued foreign withholding taxes in an aggregate amount
not exceeding the lesser of the accrued balance of such foreign withholding
taxes at the Closing Date and $25,000,000; provided, that not more than
$5,000,000 of any such amount paid during any fiscal year will be excluded
unless at the time of such payment the Consolidated Leverage Ratio is less than
5.00 to 1.00), (iii) interest payable in cash and mandatory principal payments
during such period in respect of the Senior Discount Notes or any other
Indebtedness of the Parent, (iv) cash dividends on capital stock declared by the
Borrower or any of its subsidiaries during such period (excluding dividends paid
by the Borrower to the Parent in amounts not greater than the interest and
principal payments referred to in the preceding clause (iii) and dividends
payable to the Borrower or any of its Wholly Owned Subsidiaries), (v) scheduled
principal payments of Indebtedness made by the Borrower or any of its
subsidiaries during such period (other than any such payment made to the
Borrower or any of its Wholly Owned Subsidiaries, but including Scheduled
Revolving Credit Principal Payments), (vi) the principal component of Capital
Lease Obligations paid during such period and (vii) Capital Expenditures during
such period (the items referred to in the foregoing clauses (i) through (vii)
being collectively called "Consolidated Fixed Charges"); provided further, that
for purposes of calculating the Consolidated Fixed Charge Coverage Ratio, the
Borrower's Consolidated EBITDA and Consolidated Fixed Charges for each of the
four-fiscal-quarter periods ending at the ends of the three fiscal quarters next
following the fiscal quarter during which the Closing Date occurs shall be
deemed to equal (A) the Borrower's Consolidated EBITDA and Consolidated Fixed
Charges, respectively, for the period commencing at the beginning of the fiscal
quarter next following the fiscal quarter during which the Closing Date occurs
and ending at the end of the applicable period plus (B) the Borrower's pro forma
Consolidated EBITDA and Consolidated Fixed Charges, respectively, for each
quarter in the applicable period that shall have ended prior to the beginning of
the fiscal quarter next following the fiscal quarter during which the Closing
Date occurs, prepared on a basis consistent with that used in preparing the pro
forma financial statements delivered pursuant to Section 4.02(q).
<PAGE>
8
"Consolidated Interest Expense" shall mean, for any period, the interest
expense, both expensed and capitalized (including the interest component in
respect of Capital Lease Obligations), accrued or paid by the Borrower and its
subsidiaries during such period net of interest income during such period that
the Borrower and its subsidiaries are entitled to receive in cash on a current
basis, determined on a consolidated basis in accordance with GAAP. For purposes
of the foregoing, interest expense shall be determined exclusive of deferred
financing costs and the amortization thereof and after giving effect to any net
payments made or received by the Borrower and its subsidiaries with respect to
Hedging Agreements.
"Consolidated Interest Expense Coverage Ratio" shall mean, for any period,
the ratio of (a) Consolidated EBITDA for such period to (b) Consolidated
Interest Expense for such period; provided that for purposes of calculating the
Consolidated Interest Expense Coverage Ratio, the Borrower's Consolidated EBITDA
and Consolidated Interest Expense for each of the four-fiscal-quarter periods
ending at the end of the three fiscal quarters next following the fiscal quarter
during which the Closing Date occurs shall be deemed to equal (i) the Borrower's
Consolidated EBITDA and Consolidated Interest Expense, respectively, for the
period commencing at the beginning of the fiscal quarter next following the
fiscal quarter during which the Closing Date occurs and ending at the end of the
applicable period plus (ii) the Borrower's pro forma Consolidated EBITDA and
Consolidated Interest Expense, respectively, for each quarter in the applicable
period that shall have ended prior to the beginning of the fiscal quarter next
following the fiscal quarter during which the Closing Date occurs, prepared on a
basis consistent with that used in preparing the pro forma financial statements
delivered pursuant to Section 4.02(q).
"Consolidated Leverage Ratio" shall mean, at any time, the ratio of (a)
Consolidated Total Debt at such time to (b) Consolidated EBITDA for the most
recently ended period of four fiscal quarters, all as determined on a
consolidated basis in accordance with GAAP; provided that for purposes of
calculating the Consolidated Leverage Ratio, the Borrower's Consolidated EBITDA
for each of the four-fiscal-quarter periods ending at the ends of the three
fiscal quarters next following the fiscal quarter during which the Closing Date
occurs shall be deemed to equal (i) the Borrower's Consolidated EBITDA for the
period commencing at the beginning of the fiscal quarter next following the
fiscal quarter during which the Closing Date occurs and ending at the end of the
applicable period plus (ii) the Borrower's pro forma Consolidated EBITDA for
each quarter in the applicable period that shall have ended prior to the
beginning of the fiscal quarter next following the fiscal quarter during which
the Closing Date occurs, prepared on a basis consistent with that used in
preparing the pro forma computations delivered pursuant to Section 4.02(q).
Solely for purposes of this definition, if, at any time the Consolidated
Leverage Ratio is being determined, the Borrower or any Subsidiary shall have
completed an Acquisition or Disposition since the beginning of the relevant four
fiscal quarter period, the Consolidated Leverage Ratio shall be determined on a
pro forma basis as if such Acquisition or Disposition, and any related
incurrence or repayment of Indebtedness, had occurred at the beginning of such
period.
"Consolidated Net Income" shall mean, for any period, net income or loss of
the Borrower and its subsidiaries for such period, as determined on a
consolidated basis in accordance with GAAP, provided that there shall in any
event be excluded the income (or loss) of any person accrued prior to the date
it becomes a subsidiary of the Borrower or is merged into or consolidated with
the Borrower or any of its subsidiaries or the date that person's assets are
acquired by the Borrower or any of its subsidiaries.
"Consolidated Total Debt" shall mean, as of any date of determination,
without duplication, the aggregate principal amount of Indebtedness of the
Borrower and its subsidiaries outstanding as of such date, determined on a
consolidated basis in accordance with GAAP (other than Indebtedness of the type
referred to in clause (j) of the definition of the term "Indebtedness", except
to the extent of any unreimbursed drawings thereunder).
"Control" shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a person,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "Controlling" and "Controlled" shall have meanings correlative
thereto.
<PAGE>
9
"Controlled Affiliate" shall mean (i) with respect to SPE, SCA and any
person which is Controlled and wholly owned by SPE, SCA or any wholly owned
Controlled Affiliate of either of them, any direct, majority-owned and
Controlled subsidiary of SPE, SCA or any such wholly owned Controlled Affiliate,
and any directly or indirectly wholly owned and Controlled subsidiary of any
such direct, majority-owned and Controlled subsidiary (ii) with respect to
Liberty, TCI and any person which is Controlled and wholly owned by Liberty, TCI
or any wholly owned Controlled Affiliate of either of them, any direct, majority
owned and Controlled subsidiary of Liberty, TCI or any such wholly owned
Controlled Affiliate, and any directly or indirectly wholly owned and Controlled
subsidiary of any such direct, majority-owned and Controlled subsidiary, (iii)
with respect to Apollo, any person which is controlled and wholly owned by
Apollo, and (iv) with respect to Bastion, any person which is Controlled and
wholly owned by Bastion.
"Credit Event" shall have the meaning assigned to such term in Section
4.01.
"Default" shall mean any event or condition which upon notice, lapse of
time or both would constitute an Event of Default.
"Determination Date" shall mean each day that is the second Business Day
after the delivery of financial statements pursuant to Section 5.03(a) or (b).
"Disposition" shall mean the sale or transfer by the Borrower or any
Subsidiary, including through a merger or consolidation or a sale of capital
stock, of any subsidiary, division or business unit of the Borrower or such
Subsidiary.
"dollars" or "$" shall mean lawful money of the United States of America.
"Domestic Subsidiary" shall mean a Subsidiary incorporated or organized
under the laws of the United States of America, any State thereof or the
District of Columbia.
"environment" shall mean ambient air, surface water and groundwater
(including potable water, navigable water and wetlands), the land surface or
subsurface strata, the workplace or as otherwise defined in any Environmental
Law.
"Environmental Claim" shall mean any written accusation, allegation, notice
of violation, claim, demand, order, directive, cost recovery action or other
cause of action by, or on behalf of, any Governmental Authority or any person
for damages, injunctive or equitable relief, personal injury (including
sickness, disease or death), Remedial Action costs, tangible or intangible
property damage, natural resource damages, nuisance, pollution, any adverse
effect on the environment caused by any Hazardous Material, or for fines,
penalties or restrictions, resulting from or based upon (a) the existence, or
the continuation of the existence, of a Release (including sudden or non-sudden,
accidental or non-accidental Releases), (b) exposure to any Hazardous Material,
(c) the presence, use, handling, transportation, storage, treatment or disposal
of any Hazardous Material or (d) the violation or alleged violation of any
Environmental Law or Environmental Permit.
"Environmental Law" shall mean any and all applicable present and future
treaties, laws, rules, regulations, codes, ordinances, orders, decrees,
judgments, injunctions, notices or binding agreements issued, promulgated or
entered into by any Governmental Authority, relating in any way to the
environment, preservation or reclamation of natural resources, the management,
Release or threatened Release of any Hazardous Material or to health and safety
matters, including, but not limited to, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986, 42 U.S.C. (S)(S) 9601 et seq.
(collectively "CERCLA"), the Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act of 1976 and the Hazardous and Solid Waste
Amendments of 1984, 42 U.S.C. (S)(S) 6901 et seq., the Federal Water Pollution
Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C. (S)(S) 1251 et
seq., the Clean Air Act of 1970, as amended 42 U.S.C. (S)(S) 7401 et seq., the
Toxic Substances Control
<PAGE>
10
Act of 1976, 15 U.S.C. (S)(S) 2601 et seq., the Occupational Safety and Health
Act of 1970, as amended, 29 U.S.C. (S)(S) 651 et seq., the Emergency Planning
and Community Right-to-Know Act of 1986, 42 U.S.C. (S)(S) 11001 et seq., the
Safe Drinking Water Act of 1974, as amended, 42 U.S.C. (S)(S) 300(f) et seq.,
the Hazardous Materials Transportation Act, 49 U.S.C. (S)(S) 5101 et seq., and
any similar or implementing state or local law, and all amendments or
regulations promulgated under any of the foregoing.
"Environmental Permit" shall mean any permit, approval, authorization,
certificate, license, variance, filing or permission required by or from any
Governmental Authority pursuant to any Environmental Law.
"Equity Interests" shall mean (a) with respect to a corporation, shares of
the capital stock of such corporation and (b) with respect to a partnership,
limited liability company or other person, partnership, limited liability or
other equity interests in such person.
"Equity Issuance" shall mean any issuance and sale by the Parent or by any
Subsidiary to a person other than the Parent, another Subsidiary, the Sponsors
or any Controlled Affiliate of any Equity Interests of the Parent or any
Subsidiary or any Rights in respect thereof; provided, that the following will
not be deemed to be "Equity Issuances" for purposes of this Agreement: (a) the
issuance of capital stock of the Parent upon the exercise of employee stock
options or Rights granted in the ordinary course of business or (b) the issuance
of capital stock or Rights of the Parent as an "equity kicker" or pursuant to
the exercise of Rights issued as an "equity kicker" in connection with the
issuance of Subordinated Indebtedness, in either case on terms consistent with
current practice in the market for subordinated indebtedness.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
the same may be amended from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code, or solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"ERISA Event" shall mean (a) any "reportable event", as defined in Section
4043 of ERISA or the regulations issued thereunder, with respect to a Plan; (b)
the adoption of any amendment to a Plan that would require the provision of
security pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (c)
the existence with respect to any Plan of an "accumulated funding deficiency"
(as defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (d) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (e) the incurrence of any liability under Title IV of ERISA
with respect to the termination of any Plan or the withdrawal or partial
withdrawal of the Borrower or any of its ERISA Affiliates from any Plan or
Multiemployer Plan; (f) the receipt by the Borrower or any ERISA Affiliate from
the PBGC or a plan administrator of any notice relating to the intention to
terminate any Plan or Plans or to appoint a trustee to administer any Plan; (g)
the receipt by the Borrower or any ERISA Affiliate of any notice concerning the
imposition of Withdrawal Liability or a determination that a Multiemployer Plan
is, or is expected to be, insolvent or in reorganization, within the meaning of
Title IV of ERISA; (h) the occurrence of a "prohibited transaction" with respect
to which the Borrower or any of the Subsidiaries is a "disqualified person"
(within the meaning of Section 4975 of the Code) or with respect to which the
Borrower or any such Subsidiary could otherwise be liable; and (i) any other
event or condition with respect to a Plan or Multiemployer Plan that could
reasonably be expected to result in material liability of the Borrower.
"Eurodollar Borrowing" shall mean a Borrowing comprised of Eurodollar
Loans.
"Eurodollar Loan" shall mean any Eurodollar Revolving Loan or Eurodollar
Term Loan.
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11
"Eurodollar Revolving Loan" shall mean any Revolving Loan bearing interest
at a rate determined by reference to the Adjusted LIBO Rate in accordance with
the provisions of Article II.
"Eurodollar Term Loan" shall mean any Term Loan bearing interest at a rate
determined by reference to the Adjusted LIBO Rate in accordance with the
provisions of Article II.
"Event of Default" shall have the meaning assigned to such term in Article
VII.
"Excess Cash Flow" shall mean, for any fiscal year, the sum (without
duplication) of:
(a) Consolidated Net Income, adjusted to exclude any gains or losses
attributable to any Asset Sale; plus
(b) depreciation, amortization and other non-cash charges or losses
deducted in determining Consolidated Net Income for such period; minus
(c) payments during such period on account of charges added to Excess
Cash Flow for an earlier period pursuant to clause (b) above as "non-cash
charges or losses" in such earlier period; plus
(d) any amount deducted in determining Consolidated Net Income as a
result of any minority interest in a Subsidiary; plus
(e) the sum of (i) the amount, if any, by which Net Working Capital
decreased during such period, plus (ii) the aggregate principal amount of
Indebtedness (other than Capital Lease Obligations) incurred by the
Borrower and its subsidiaries during such period to finance Capital
Expenditures; minus
(f) the sum of (i) any non-cash gains included in determining such
consolidated net income (or loss) for such period, plus (ii) the amount, if
any, by which Net Working Capital increased during such period; plus
(g) amounts received during such period on account of gains
subtracted from Excess Cash Flow for an earlier period pursuant to clause
(f)(i) above as "non-cash gains" in such earlier period; minus
(h) Capital Expenditures for such period; minus
(i) the aggregate amount of all payments to holders of minority
interests in Subsidiaries during such period; minus
(j) the sum of (i) scheduled amortization payments in respect of the
Term Loans during such period, (ii) Scheduled Revolving Credit Principal
Payments during such period, (iii) scheduled amortization or similar
payments during such period in respect of other Indebtedness of the
Borrower and its subsidiaries and (iv) mandatory prepayments during such
period in respect of other Indebtedness of the Borrower and its
subsidiaries (other than prepayments that would not be required if the
Borrower and the Subsidiaries made, or were required to make, prepayments
in respect of Loans outstanding hereunder); plus
(k) the net proceeds of Indebtedness incurred by the Borrower and its
subsidiaries during such period to the extent such proceeds were applied to
make payments or prepayments of Indebtedness referred to in clause (j)
above; minus
(l) dividends and other distributions paid by the Borrower pursuant
to Section 6.06(a) during such period.
<PAGE>
12
"Excluded Taxes" shall mean, with respect to the Administrative Agent, any
Lender, the Issuing Bank or any other recipient of any payment to be made by or
on account of any obligation of the Borrower hereunder, (a) income or franchise
taxes imposed on (or measured by) its net income by the United States of
America, or by any Governmental Authority as a result of a present or former
connection between the recipient and the jurisdiction of the Governmental
Authority imposing such tax or any political subdivision or taxing authority
thereof or therein (other than any such connection arising solely from the
recipient having received any payment under or taking any other action related
to any loan under this Agreement or any Loan Document, (b) any branch profits
taxes imposed by the United States of America or any similar tax imposed by any
other jurisdiction in which such recipient is located and (c) in the case of a
Foreign Lender (other than an assignee pursuant to a request by the Borrower
under Section 2.21(a)), any withholding tax that (i) is in effect and would
apply to amounts payable to such Foreign Lender at the time such Foreign Lender
becomes a party to this Agreement (or designates a new lending office), except
to the extent that the prior lending office or the assignor, as applicable, of
such Foreign Lender was entitled, at the time of designation of a new lending
office (or assignment), to receive additional amounts from the Borrower with
respect to any withholding tax pursuant to Section 2.20(a), or (ii) is
attributable to such Foreign Lender's failure to comply with Section 2.20(e).
"Existing Credit Facility" shall mean the Amended and Restated Loan and
Security Agreement dated December 31, 1996, by and between Telemundo Group,
Inc., certain of its subsidiaries and Foothill Capital Corporation.
"FCC" shall mean the United States Federal Communications Commission or any
Governmental Authority succeeding to the functions thereof.
"Federal Communications Act" shall mean the Communications Act of 1934, as
amended.
"Federal Funds Effective Rate" shall mean, for any day, the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published on the
next succeeding Business Day by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day that is a Business Day, the average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for
the day for such transactions received by the Administrative Agent from three
Federal funds brokers of recognized standing selected by it.
"Fee Payment Date" shall have the meaning assigned to such term in Section
2.05(a).
"Fees" shall mean the Commitment Fees, the Arranger and Agent Fees, the L/C
Participation Fees and the Issuing Bank Fees.
"Financial Officer" of any corporation shall mean the chief financial
officer, principal accounting officer, Treasurer or Controller of such
corporation.
"Foreign Lender" shall mean any Lender that is organized under the laws of
a jurisdiction other than that in which the Borrower is located. For purposes of
this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.
"Foreign Subsidiary" shall mean any Subsidiary that is not a Domestic
Subsidiary.
"GAAP" shall mean United States generally accepted accounting principles
applied on a consistent basis.
"Governmental Authority" shall mean any Federal, state, local or foreign
court or governmental agency, authority, instrumentality or regulatory body.
"Guarantee" of or by any person shall mean any obligation, contingent or
otherwise, of such person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other person
<PAGE>
13
(the "primary obligor") in any manner, whether directly or indirectly, and
including any obligation of such person, direct or indirect, (a) to purchase or
pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or to purchase (or to advance or supply funds for the purchase of)
any security for the payment of such Indebtedness, (b) to purchase or lease
property, securities or services for the purpose of assuring the owner of such
Indebtedness of the payment of such Indebtedness or (c) to maintain working
capital, equity capital or any other financial statement condition or liquidity
of the primary obligor so as to enable the primary obligor to pay such
Indebtedness; provided, however, that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business.
"Guarantee Requirement" shall mean, at any time, that the Subsidiary
Guarantee Agreement (or a supplement referred to in Section 20 thereof) shall
have been executed by each Subsidiary (other than the Chicago Subsidiary and any
Foreign Subsidiary) existing from time to time, shall have been delivered to the
Collateral Agent and shall be in full force and effect.
"Guarantors" shall mean the Parent and the Subsidiary Guarantors.
"Hazardous Materials" shall mean all explosive or radioactive substances or
wastes, hazardous or toxic substances or wastes, pollutants, solid, liquid or
gaseous wastes, including petroleum or petroleum distillates, asbestos or
asbestos containing materials, polychlorinated biphenyls ("PCBs") or PCB-
containing materials or equipment, radon gas, infectious or medical wastes and
all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
"Hedging Agreement" shall mean any interest rate protection agreement,
foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging arrangement.
"Indebtedness" of any person shall mean, without duplication, (a) all
obligations of such person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such person
upon which interest charges are customarily paid, (d) all obligations of such
person under conditional sale or other title retention agreements relating to
property or assets purchased by such person, (e) all obligations of such person
issued or assumed as the deferred purchase price of property or services
(excluding trade accounts payable and accrued obligations incurred in the
ordinary course of business), (f) all Indebtedness of others secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property owned or acquired by such
person, whether or not the obligations secured thereby have been assumed, (g)
all Guarantees by such person of Indebtedness of others, (h) all Capital Lease
Obligations of such person, (i) all obligations of such person in respect of
Hedging Agreements and (j) all obligations of such person as an account party in
respect of letters of credit and bankers' acceptances. The Indebtedness of any
person (i) shall include the Indebtedness of any partnership in which such
person is a general partner, (ii) shall exclude Program Obligations that would
otherwise constitute Indebtedness incurred in the ordinary course of business up
to an aggregate amount of $10,000,000 for the Borrower and its subsidiaries, and
(iii) shall exclude ordinary course payment obligations under Local Marketing
Agreements. For purposes of determining compliance with any covenant in this
Agreement, (i) the amount of any Indebtedness referred to in clause (f) above
that has not been assumed by the subject person shall be the lesser of (A) the
amount of such Indebtedness owed by the primary obligor in respect thereof and
(B) the fair market value of the property owned or acquired by the subject
person that is subject to any Lien securing such Indebtedness and (ii) the
amount of any Indebtedness referred to in clause (g) above shall be limited to
the maximum liability, contingent or otherwise, of the subject person under the
applicable Guarantee.
"Indemnified Taxes" shall mean Taxes other than Excluded Taxes.
"Indemnitee" shall have the meaning assigned to such term in Section
10.05(b).
<PAGE>
14
"Indemnity, Subrogation and Contribution Agreement" shall mean the
Indemnity, Subrogation and Contribution Agreement, substantially in the form of
Exhibit E, among the Borrower, the Guarantors and the Collateral Agent.
"Intellectual Property" shall have the meaning assigned to such term in
Section 3.20.
"Interest Payment Date" shall mean, with respect to any Loan, (i) each day
that is the last day of an Interest Period applicable to the Borrowing of which
such Loan is a part, (ii) in the case of a Loan with an Interest Period of
longer than three months, each day that would have been the last day of an
Interest Period had a series of three month Interest Periods been applicable to
such Loan and (iii) the date of any prepayment of such Loan or conversion of
such Loan to a Loan of a different Type.
"Interest Period" shall mean (a) as to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing or on the last day of the preceding
Interest Period applicable thereto and ending on the numerically corresponding
day (or, if there is no numerically corresponding day, on the last day) in the
calendar month that is 1, 3, or 6 months thereafter, as the Borrower may elect
and (b) as to any ABR Borrowing, the period commencing on the date of such
Borrowing or on the last day of the preceding Interest Period applicable thereto
and ending on the earliest of (i) the next succeeding March 31, June 30,
September 30 or December 31, (ii) the Revolving Credit Maturity Date, Tranche A
Maturity Date or Tranche B Maturity Date, as applicable, and (iii) the date such
Borrowing is converted to a Borrowing of a different Type in accordance with
Section 2.10 or repaid or prepaid in accordance with Section 2.11 or 2.12;
provided, however, that if any Interest Period would end on a day other than a
Business Day, such Interest Period shall be extended to the next succeeding
Business Day unless, in the case of a Eurodollar Borrowing only, such next
succeeding Business Day would fall in the next calendar month, in which case
such Interest Period shall end on the next preceding Business Day. Interest
shall accrue from and including the first day of an Interest Period to but
excluding the last day of such Interest Period.
"Issuing Bank Fees" shall have the meaning assigned to such term in Section
2.05(c).
"L/C Commitment" shall mean the commitment of the Issuing Bank to issue
Letters of Credit pursuant to Section 2.22.
"L/C Disbursement" shall mean a payment or disbursement made by the Issuing
Bank pursuant to a Letter of Credit.
"L/C Exposure" shall mean at any time the sum of (a) the aggregate undrawn
amount of all outstanding Letters of Credit at such time plus (b) the aggregate
principal amount of all L/C Disbursements that have not yet been reimbursed at
such time. The L/C Exposure of any Revolving Credit Lender at any time shall
mean its Pro Rata Percentage of the aggregate L/C Exposure at such time.
"L/C Participation Fee" shall have the meaning assigned to such term in
Section 2.05(c).
"Lenders" shall mean (a) the financial institutions listed on Schedule 2.01
and (b) any financial institution that has become a party hereto pursuant to an
Assignment and Acceptance (in either case other than any such financial
institution that has ceased to be a party hereto pursuant to an Assignment and
Acceptance).
"Letter of Credit" shall mean any letter of credit issued pursuant to
Section 2.22.
"Liberty" shall mean Liberty Media Corporation and its successors.
"LIBO Rate" shall mean, with respect to any Eurodollar Borrowing for any
Interest Period, the rate per annum determined by the Administrative Agent at
approximately 11:00 a.m., London time, on the date which is two Business Days
prior to the beginning of such Interest Period by reference to the
<PAGE>
15
British Bankers' Association Interest Settlement Rates for deposits in dollars
(as set forth by any service selected by the Administrative Agent which has been
nominated by the British Bankers' Association as an authorized information
vendor for the purpose of displaying rates) for a period equal to such Interest
Period, provided that, to the extent that an interest rate is not ascertainable
pursuant to the foregoing provisions of this definition, the "LIBO Rate" shall
be the interest rate per annum determined by the Administrative Agent equal to
the rate per annum at which deposits in dollars are offered for such Interest
Period by the Administrative Agent in the London interbank market in London,
England at approximately 11:00 a.m., London time, on the date which is two
Business Days prior to the beginning of such Interest Period.
"License Subsidiary" shall mean a Domestic Subsidiary (or, solely in the
case of any License Subsidiary holding Station Licenses used by the Borrower's
Puerto Rican Station, a Puerto Rican Subsidiary) that holds the Station Licenses
for a Station owned by the Borrower or a Subsidiary and that (a) has no
significant assets (other than such Station Licenses) or liabilities (other than
under the Subsidiary Guarantee Agreement) and (b) engages in no business other
than the ownership of such Station Licenses.
"Lien" shall mean, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, encumbrance, charge or security interest in or on such
asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement (or any financing lease
having substantially the same economic effect as any of the foregoing) relating
to such asset and (c) in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities.
"Loan Documents" shall mean this Agreement, the Letters of Credit, the
Subsidiary Guarantee Agreement, the Security Documents and the Indemnity,
Subrogation and Contribution Agreement.
"Loan Parties" shall mean the Borrower, the Parent and each Subsidiary that
is, or is required by this Agreement to be, a party to the Subsidiary Guarantee
Agreement or any Security Document.
"Loans" shall mean the Revolving Loans and the Term Loans.
"Local Marketing Agreement" shall mean a local marketing arrangement, sale
agreement, time brokerage agreement, management agreement or similar arrangement
pursuant to which a person: (a) obtains the right to sell at least a majority of
the advertising inventory of a television station on behalf of a third party,
(b) purchases at least a majority of the air time of a television station to
exhibit programming and sell advertising time, (c) manages the selling
operations of a television station with respect to at least a majority of the
advertising inventory of such station, (d) manages the acquisition of
programming for a television station, (e) acts as a program consultant for a
television station or (f) manages the operation of a television station
generally.
"Margin Stock" shall have the meaning assigned to such term in Regulation
U.
"Material Adverse Effect" shall mean a materially adverse effect on (a) the
business, assets, results of operations, financial condition or prospects of the
Parent and its subsidiaries, taken as a whole, or, prior to the Merger, the
Company and its subsidiaries, taken as a whole, or on their ability to perform
their obligations under the Loan Documents, or (b) the validity or
enforceability of any Loan Document or any other material document entered into
in connection with the Transactions or the other transactions contemplated
hereby or the rights, remedies or benefits available to the parties thereunder.
"Merger" shall have the meaning assigned to such term in the preamble to
this Agreement.
"Moody's" shall mean Moody's Investors Service, Inc.
"Multiemployer Plan" shall mean a multiemployer plan as defined in Section
4001(a)(3) of ERISA.
<PAGE>
16
"Net Cash Proceeds" shall mean (a) with respect to any Asset Sale, the cash
proceeds thereof, including any cash received in respect of any non-cash
proceeds, but only as and when received, and any insurance or condemnation
proceeds, net of (i) costs of sale (including payment of the outstanding
principal amount of, premium or penalty, if any, interest and other amounts on
any Indebtedness (other than Loans) required to be repaid under the terms
thereof as a result of such Asset Sale), (ii) taxes attributable to such Asset
Sale in the year in which such Asset Sale occurs as a direct result thereof and
(iii) amounts provided as a reserve, in accordance with GAAP, against any
liabilities under any indemnification obligations associated with such Asset
Sale (provided that, to the extent and at the time any such amounts are released
from such reserve, such amounts shall constitute Net Cash Proceeds), and (b)
with respect to any Equity Issuance or any issuance or other disposition of
Indebtedness for borrowed money, the cash proceeds thereof net of underwriting
commissions or placement fees and expenses directly incurred in connection
therewith. Notwithstanding the foregoing, Net Cash Proceeds will be deemed to
have been received by the Chicago Subsidiary or any of its subsidiaries from any
event only at the times and up to the aggregate amount of any distributions
received by the Borrower or any of its subsidiaries from the Chicago Subsidiary
after the date of such event.
"Net Working Capital" shall mean, at any date, (a) the consolidated current
assets of the Borrower and its subsidiaries as of such date (excluding cash and
Permitted Investments) minus (b) the consolidated current liabilities of the
Borrower and its subsidiaries as of such date (excluding current liabilities in
respect of Indebtedness). Net Working Capital at any date may be a positive
number or negative number. Net Working Capital increases when it becomes more
positive or less negative and decreases when it becomes less positive or more
negative.
"Network Affiliation Agreement" shall mean, collectively, (a) the seven,
Affiliation Agreements, each between one or more Subsidiaries and the Network
Company and (b) the two Memoranda of Agreement, in each case between the Company
and the Network Company, all substantially in the form of the Station
Affiliation Agreement and the Memoranda of Agreement, respectively, previously
provided to the Arrangers.
"Network Company" shall mean Telemundo Network Group L.L.C., a Delaware
limited liability company of which 50% of the membership interests are owned by
one or more Controlled Affiliates of Liberty and 50% are owned by one or more
Controlled Affiliates of SPE.
"Network Sale" shall have the meaning assigned to such term in the preamble
to this Agreement.
"Network Sale Agreement" shall mean the Network Sale Agreement dated as of
August 12, 1998, between the Borrower and the Network Company.
"Obligations" shall mean (a) the due and punctual payment by the Borrower
of (i) the principal of and premium, if any, and interest (including interest
accruing during the pendency of any bankruptcy, insolvency, receivership or
other similar proceeding, regardless of whether allowed or allowable in such
proceeding) on the Loans, when and as due, whether at maturity, by acceleration,
upon one or more dates set for prepayment or otherwise, (ii) each payment
required to be made by the Borrower under the Credit Agreement in respect of any
Letter of Credit, when and as due, including payments in respect of
reimbursement of disbursements, interest thereon and obligations to provide cash
collateral, and (iii) all other monetary obligations, including fees, costs,
expenses and indemnities, whether primary, secondary, direct, contingent, fixed
or otherwise (including monetary obligations incurred during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding), of the Loan Parties to the
Administrative Agent, the Collateral Agent, the Lenders, the Issuing Bank or any
other person under the Credit Agreement and the other Loan Documents, (b) the
due and punctual payment and performance of all covenants, agreements,
obligations and liabilities of the Loan Parties under or pursuant to the Loan
Documents and (c) the due and punctual payment and performance of all
obligations of the Borrower, monetary or otherwise, under each Hedging Agreement
entered into with a counterparty that was a Lender at the time such Hedging
Agreement was entered into.
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17
"Offer to Purchase" shall mean the Offer to Purchase and Consent
Solicitation Statement of TLMD Acquisition Co.dated July 13, 1998 (as amended on
July 20, 1998).
"Other Taxes" shall mean any and all present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement.
"Parent Equity Contribution" shall mean the contribution by the Sponsors to
the common equity of the Parent on or prior to the Closing Date of cash in an
amount not less than $273,200,000.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and
defined in ERISA.
"Perfection Certification" shall mean the Perfection Certificate
substantially in the form of Annex 1 to the Security Agreement.
"Permitted Investment" shall mean:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are backed
by the full faith and credit of the United States of America), in each case
maturing within one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 180 days from the
date of acquisition thereof and having, at such date of acquisition, a
credit rating of at least A-2 by S&P or P-2 by Moody's;
(c) investments in certificates of deposit, banker's acceptances and
time deposits maturing within 180 days of the date of acquisition thereof
issued or guaranteed by or placed with, and money market deposit accounts
issued or offered by, any Lender or domestic office of any commercial bank
organized under the laws of the United States of America or any State
thereof that has a combined capital and surplus and undivided profits or
not less than $500,000,000;
(d) repurchase obligations of any Lender or any commercial bank
satisfying the requirements of clause (c) of this definition, having a term
of not more than 30 days, with respect to obligations of the type described
in clause (a) of this definition;
(e) securities with maturities of one year or less from the date of
acquisition issued or fully guaranteed by any state, commonwealth or
territory of the United States, by any political subdivision or taxing
authority of any such state, commonwealth or territory or by any foreign
government, the securities of which state, commonwealth, territory,
political subdivision, taxing authority or foreign government (as the case
may be) are rated at least A by S&P or A by Moody's;
(f) securities with maturities of one year or less from the date of
acquisition backed by standby letters of credit issued by any Lender or any
commercial bank satisfying the requirements of clause (c) of this
definition.
(g) shares of money market mutual or similar funds which invest
exclusively in assets satisfying the requirements of clauses (a) through
(f) of this definition; and
(h) other investment instruments approved in writing by the Required
Lenders.
"person" shall mean any natural person, corporation, business trust, joint
venture, association, company, partnership or government, or any agency or
political subdivision thereof.
<PAGE>
18
"Plan" shall mean any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 307 of ERISA, and in respect of which the Borrower or
any ERISA Affiliate is (or, if such plan were terminated, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Pledge Agreement" shall mean the Pledge Agreement, substantially in the
form of Exhibit F, between the Parent, the Borrower, each Subsidiary owing
capital stock or Indebtedness of the Borrower or any other Subsidiary and the
Collateral Agent for the benefit of the Secured Parties.
"Prime Rate" shall mean the rate of interest per annum publicly announced
from time to time by the Administrative Agent as its prime rate in effect at its
principal office in New York City, New York; each change in the Prime Rate shall
be effective on the date such change is publicly announced as being effective.
"Pro Forma Financial Information" shall mean the pro forma financial
information heretofore delivered to the Lenders and set forth in Schedule 3.05
hereto.
"Pro Rate Percentage" of any Revolving Credit Lender at any time shall mean
the percentage of the Total Revolving Credit Commitment represented by such
Lender's Revolving Credit Commitment. In the event the Revolving Credit
Commitments shall have been terminated, the Pro Rata Percentages of the
Revolving Credit Lenders shall be determined by reference to the Revolving
Credit Commitments most recently in effect (giving effect to any assignments
pursuant to Section 10.04).
"Program Obligations" shall mean all obligations, whether fixed or
contingent, of the Borrower and its Subsidiaries in respect of the right to
broadcast programs and films produced or supplied by any person (other than a
Loan Party).
"Puerto Rican Note Security Agreement" shall mean the Security Agreement,
substantially in the form of Exhibit G-2, between the Borrower, the Puerto Rican
Subsidiary and the Collateral Agent.
"Puerto Rican Notes" shall mean that zero coupon note due 2002, dated March
23, 1998, for the aggregate amount of $187,666,000 and any note issued in
renewal or replacement thereof.
"Puerto Rican Subsidiary" shall mean Telemundo of Puerto Rico, Inc., a
Puerto Rican corporation.
"Refinancing" shall mean (a) the redemption by the Company, on or prior to
the Closing Date, of its Senior Notes due 2006 in an aggregate outstanding
amount of $192,000,000 and its Senior Notes due 2001 in an aggregate outstanding
amount of approximately $200,000, on the date hereof and (b) the repayment of
all amounts outstanding under the Existing Credit Facility and the termination
of any letters of credit outstanding thereunder and the commitments thereunder.
"Register" shall have the meaning assigned to such term in Section
10.04(d).
"Regulation U" shall mean Regulation U of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.
"Regulation X" shall mean Regulation X of the Board as from time to time in
effect and all official ruling and interpretations thereunder or thereof.
"Related Fund" shall mean, with respect to any Lender that is a fund that
invests in loans, any other fund that invest in loans and is managed by the same
investment advisor as such Lender or by an Affiliate of such investment advisor.
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19
"Release" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, disposing,
depositing, dispersing, emanating or migrating of any Hazardous Material in,
into, onto or through the environment.
"Remedial Action" shall mean (a) "remedial action" as such term is defined
in CERCLA, 42 U.S.C. Section 9601(24), and (b) all other actions required by any
Governmental Authority or voluntarily undertaken to; (i) clean up, remove,
treat, abate or in any other way address any Hazardous Material in the
environment; (ii) prevent the Release or threat of Release, or minimize the
further Release of any Hazardous Material in the environment; (ii) prevent the
Release or threat of Release, or minimize the further Release of any Hazardous
Material so it does not migrate or endanger or threaten to endanger public
health, welfare or the environment; or (iii) perform studies and investigations
in connection with, or as a precondition to, clause (i) or (ii) above.
"Required Lenders" shall mean, at any time, Lenders having Loans, L/C
Exposures and unused Revolving Credit and Term Loan Commitments representing
more than 50% of the sum of all Loans outstanding, L/C Exposures and unused
Revolving Credit and Term Loan Commitments at such time.
"Responsible Officer" of any corporation shall mean any executive officer
or Financial Officer of such corporation and any other officer or similar
official thereof responsible for the administration of the obligations of such
corporation in respect of this Agreement.
"Revolving Credit Borrowing" shall mean a Borrowing comprised of Revolving
Loans.
"Revolving Credit Commitment" shall mean, with respect to each Lender, the
commitment of such Lender to make Revolving Loans hereunder as set forth on
Schedule 2.01, or in the Assignment and Acceptance pursuant to which such
Lender assumed its Revolving Credit Commitment, as applicable, as the same may
be (a) reduced from time to time pursuant to Section 2.09 and (b) reduced or
increased from time to time pursuant to assignments by or to such Lender
pursuant to Section 10.04.
"Revolving Credit Exposure" shall mean, with respect to any Lender at any
time, the aggregate principal amount at such time of all outstanding Revolving
Loans of such Lender plus the aggregate amount at such time of such Lender's L/C
Exposure.
"Revolving Credit Lender" shall mean a Lender that has a Revolving Credit
Commitment (or that had such a Commitment at the time the Revolving Credit
Commitments were terminated).
"Revolving Credit Maturity Date" shall mean the seventh anniversary of the
last day of the calendar quarter in which the Closing Date occurs.
"Revolving Credit Reduction Date" shall mean the last day of each calendar
year beginning with December 31, 2001 (or, if any such day shall not be a
Business Day, the next preceding Business Day).
"Revolving Loans" shall mean the revolving loans made by the Lenders to the
Borrower pursuant to clause (a)(iii) of Section 2.01. Each Revolving Loan shall
be a Eurodollar Revolving Loan or an ABR Revolving Loan.
"Rights" shall mean, with respect to any person, warrants, options or other
rights to acquire Equity Interests in such person.
"S&P" shall mean Standard & Poor's.
"SCA" shall mean Sony Corporation of America and its successors.
"Scheduled Revolving Credit Principal Payments" shall mean, with respect to
any period, the excess of (a) the aggregate amount of the outstanding Revolving
Credit Borrowings at the beginning of such period over (b) the amount of the
Total Revolving Credit Commitment at the end of such period, giving effect to
any schedule reduction in the Total Revolving Credit Commitment under Section
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2.09(c) during such period, but excluding the effect of (i) any voluntary
reductions in the Total Revolving Credit Commitment during such period to the
extent they exceed such schedule reduction and (ii) any voluntary reductions in
the Total Revolving Credit Commitment during any prior period.
"Secured Parties" shall mean the Administrative Agent, the Collateral
Agent, each Lender, the Issuing Bank and each other person to which any of the
Obligations is owed.
"Security Agreement" shall mean the Security Agreement, substantially in
the form of Exhibit G-1, between the Borrower, the Subsidiaries (other than any
Foreign Subsidiary) and the Collateral Agent for the benefit of the Secured
Parties.
"Security Documents" shall mean the Security Agreement, the Pledge
Agreement, the Puerto Rican Note Security Agreement and each of the security
agreements and other instruments and documents executed and delivered pursuant
to any of the foregoing or pursuant to Section 5.09.
"Senior Discount Note Indenture" shall mean the Indenture dated as of
August 12, 1998 between the Parent, as issuer and Bank of Montreal Trust
Company, as trustee.
"Senior Discount Note Sale" shall mean the issuance and sale by the Parent
of the Senior Discount Notes for gross proceeds of not less than $100,000,000
and not more than $125,000,000.
"Senior Discount Notes" shall mean the Parent's Senior Discount Notes Due
2008 issued under the Senior Discount Note Indenture.
"SPE" shall mean Sony Pictures Entertainment Inc. and its successors.
"Sponsors" shall mean Apollo, Liberty, SPE and Bastion and any transferee
of the shares of capital stock of the Parent owned by Station Holdings on the
date hereof in accordance with the express provisions of the Stockholders'
Agreement (other than Section 3.3.1(b) of such Agreement) that shall have been
approved by each of Liberty and SPE (or any Controlled Affiliates to which their
shares of capital stock of the Parent shall have been transferred).
"Station Holdings" shall mean the entity formed by Apollo and Bastion to
acquire shares of the common stock of the Parent pursuant to the Stockholders'
Agreement.
"Station Licenses" shall mean, with respect to the Borrower or any of its
subsidiaries, all authorizations, licenses or permits issued by the FCC and
granted or assigned to the Borrower or any of its subsidiaries, or under which
the Borrower or any of its subsidiaries has the right to operate any Station,
together with any extensions or renewals thereof.
"Stations" shall mean, collectively, (a) Stations KVEA (Los Angeles), WNJU
(New York), WSCV (Miami), KSTS (San Francisco), WSNS (Chicago), KVDA (San
Antonio), KTMD (Houston), WKAQ (San Juan), K47DQ, K52CK and K61F1 (Sacramento),
W32AY (Boston), K15CU (Salinas-Monterey), K49CJ (Colorado Springs), K27E1 (Santa
Barbara/Santa Maria), K48EJ (Salt Lake City), K60EE and K49CD (Odessa/Midland),
K11SF (Austin), K36DV (Amarillo), K52FF (Reno) and K40DX (Abilene), and (b) any
additional television broadcast station owned or acquired by the Borrower or a
Subsidiary after the date hereof, other than any such broadcast station, whether
owned on the date hereof or hereafter acquired, disposed of by the Borrower or
any Subsidiary after the date hereof in accordance with the terms of this
Agreement.
"Statutory Reserves" shall mean a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board for Eurocurrency Liabilities (as defined in Regulation
D of the Board). Such reserve percentages shall include those imposed pursuant
to such Regulation D.
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21
Eurodollar Loans shall be deemed to constitute Eurocurrency Liabilities and to
be subject to such reserve requirements without benefit of or credit for
proration, exemptions or offsets that may be available from time to time to any
Lender under such Regulation D. Statutory Reserves shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.
"Stockholders' Agreement" shall mean the Agreement dated as of [ ],
1998, among the Parent, Apollo, Bastion, Station Holdings, Liberty and SPE, as
in effect on such date.
"Subordinated Indebtedness" shall mean Indebtedness of the Parent or the
Borrower that is not by its terms required to be repaid, prepaid, redeemed,
purchased or defeased prior to the Tranche B Maturity Date and that is
subordinated to the obligations of the Parent or the Borrower, as the case may
be, under the Loan Document on terms at least as favorable to the Lenders as
those set forth in Exhibit K hereto.
"subsidiary" shall mean, with respect to any person (herein referred to as
the "parent"), any corporation, partnership, association or other business
entity (a) of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or more
than 50% of the general partnership interests are, at the time any determination
is being made, owned, controlled or held, or (b) that is, at the time any
determination is made, otherwise Controlled, by the parent or one or more
subsidiaries of the parent or by the parent and one or more subsidiaries of the
parent.
"Subsidiary" shall mean subsidiary of the Parent.
"Subsidiary Guarantee Agreement" shall mean the Guarantee Agreement,
substantially in the form of Exhibit D, made by the Subsidiary Guarantors in
favor of the Collateral Agent for the benefit of the Secured Parties.
"Subsidiary Guarantors" shall mean each person listed on Schedule 1.01 and
each other person that becomes party to the Subsidiary Guarantee Agreement as a
Guarantor, and the permitted successors and assigns of each such person.
"Taxes" shall mean any and all present or future taxes, levies, imposts,
duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"TCI" shall mean Tele-Communications, Inc., a Delaware corporation, and its
successors.
"Term Borrowing" shall mean a Borrowing comprised of Tranche A Term Loans
or Tranche B Term Loans.
"Term Loan Commitments" shall mean the Tranche A Commitments and the
Tranche B Commitments.
"Term Loan Repayment Dates" shall mean the Tranche A Term Loan Repayment
Dates and the Tranche B Term Loan Repayment Dates as set forth in Section
2.11(a).
"Term Loans" shall mean the Tranche A Term Loans and the Tranche B Term
Loans.
"Total Revolving Credit Commitment" shall mean, at any time, the aggregate
amount of the Revolving Credit Commitments, as in effect at such time.
"Tranche A Commitment" shall mean, with respect to each Lender, the
commitment of such Lender to make Tranche A Term Loans as set forth on Schedule
2.01 or in the Assignment and Acceptance pursuant to which such Lender shall
have assumed its Tranche A Commitment, as applicable, as the same may be (a)
reduced on the Closing Date pursuant to Section 2.01(b), (b) reduced
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22
from time to time pursuant to Section 2.09 and (c) reduced or increased from
time to time pursuant to assignments by or to such Lender pursuant to Section
10.04.
"Tranche A Lender" shall mean a Lender with a Tranche A Commitment or with
outstanding Tranche A Term Loans.
"Tranche A Maturity Date" shall mean the seventh anniversary of the last
day of the calendar quarter in which the Closing Date occurs.
"Tranche A Term Borrowing" shall mean a Borrowing comprised of Tranche A
Term Loans.
"Tranche A Term Loan Repayment Date" shall mean (a) if the Closing Date
occurs on or before September 30, 1998, each of the 24 consecutive calendar
quarter end dates commencing with December 31, 1999 (or, if any such day shall
not be a Business Day, the next preceding Business Day) and (b) if the Closing
Date occurs after September 30, 1998, each of the 24 consecutive calendar
quarter end dates commencing with March 31, 2000 (or, if any such day shall not
be a Business Day, the next preceding Business Day).
"Tranche A Term Loans" shall mean the term loans made by the Lenders to the
Borrower pursuant to clause (a)(i) of Section 2.01. Each Tranche A Term Loan
shall be either a Eurodollar Term Loan or an ABR Term Loan.
"Tranche B Commitment" shall mean, with respect to each Lender, the
commitment of such Lender to make Tranche B Term Loans as set forth on Schedule
2.01 or in the Assignment and Acceptance pursuant to which such Lender shall
have assumed its Tranche B Commitment, as applicable, as the same may be (a)
reduced from time to time pursuant to Section 2.09 and (b) reduced or increased
from time to time pursuant to assignments by or to such Lender pursuant to
Section 10.04.
"Tranche B Lender" shall mean a Lender with a Tranche B Commitment or with
outstanding Tranche B Term Loans.
"Tranche B Maturity Date" shall mean the last day of the month that is six
months after the eighth anniversary of the last day of the calendar quarter in
which the Closing Date occurs.
"Tranche B Term Borrowing" shall mean a Borrowing comprised of Tranche B
Term Loans.
"Tranche B Term Loan Repayment Date" shall mean (a) if the Closing Date
occurs on or before September 30, 1998, each of the 30 consecutive calendar
quarter end dates commencing with December 31, 1999 (or, if any such day shall
not be a Business Day, the next preceding Business Day) and (b) if the Closing
Date occurs after September 30, 1998, each of the 30 consecutive calendar
quarter end dates commencing with March 31, 2000 (or, if any such day shall not
be a Business Day, the next preceding Business Day).
"Tranche B Term Loans" shall mean the term loans made by the Lenders to the
Borrower pursuant to clause (a)(ii) of Section 2.01. Each Tranche B Term Loan
shall be either a Eurodollar Term Loan or an ABR Term Loan.
"Transactions" shall mean the execution, delivery and performance by each
Loan Party of each of the Loan Documents, the Closing Date Transactions and the
Borrowings and issuances of Letters of Credit hereunder after the Closing Date.
"Type", when used in respect of any Loan or Borrowing, shall refer to the
Rate by reference to which interest on such Loan or on the Loans comprising such
Borrowing is determined. For purposes hereof, the term "Rate" shall include the
Adjusted LIBO Rate and the Alternate Base Rate.
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23
"Wholly Owned Subsidiary" shall mean a Subsidiary of which securities
(except for directors' qualifying shares) or other ownership interests
representing 100% of the equity or 100% of the ordinary voting power or 100% of
the general partnership interests are, at the time any determination is being
made, owned, controlled or held, directly or indirectly, by the Borrower or one
or more wholly owned subsidiaries of the Borrower.
"Withdrawal Liability" shall mean liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Terms Generally. The definitions in Section 1.01 shall apply
equally to both the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". All references
herein to Articles, Sections, Exhibits and Schedules shall be deemed references
to Articles and Sections of, and Exhibits and Schedules to, this Agreement
unless the context shall otherwise require. Except as otherwise expressly
provided herein, (a) any reference in this Agreement to any Loan Document shall
mean such document as amended, restated, supplemented or otherwise modified from
time to time and (b) all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time; provided,
however, that, if the Borrower notifies the Administrative Agent that the
Borrower requests an amendment to any provision hereof to eliminate the effect
of any change occurring after the date hereof in GAAP or in the application
thereof on the operation of such provision (or if the Administrative Agent
notifies the Borrower that the Required Lenders request an amendment to any
provision hereof for such purpose), regardless of whether any such notice is
given before or after such change in GAAP or in the application thereof, then
such provision shall be interpreted on the basis of GAAP as in effect and
applied immediately before such change shall have become effective until such
notice shall have been withdrawn or such provision amended in accordance
herewith.
ARTICLE II
The Credits
SECTION 2.01. Commitments. (a) Subject to the terms and conditions and
relying upon the representations and warranties herein set forth, each Lender
agrees, severally and not jointly, (i) to make a Tranche A Term Loan to the
Borrower on the Closing Date in a principal amount equal to its Tranche A
Commitment, (ii) to make a Tranche B Term Loan to the Borrower on the Closing
Date in a principal amount equal to its Tranche B Commitment and (iii) to make
Revolving Loans to the Borrower, at any time and from time to time on or after
the Closing Date and until the earlier of the Revolving Credit Maturity Date and
the termination of the Revolving Credit Commitment of such Lender in accordance
with the terms hereof, in an aggregate principal amount at any time outstanding
that will not result in (x) such Lender's Revolving Credit Exposure exceeding
(y) such Lender's Revolving Credit Commitment. Within the limits set forth in
clause (iii) of the preceding sentence and subject to the terms, conditions and
limitations set forth herein, the Borrower may borrow, pay or prepay and
reborrow Revolving Loans. Amounts paid or prepaid in respect of Term Loans may
not be reborrowed.
(b) In the event that the Parent issues the Senior Discount Notes on
or before the Closing Date for gross cash proceeds (before deduction of any
underwriting fees) in excess of $100,000,000, the aggregate amount of the
Tranche A Commitments shall be reduced (but not below zero) on the Closing Date,
or the amount of Revolving Loans funded on the Closing Date shall be reduced
(without reduction of the Revolving Credit Commitments ), in either case by such
amount in excess of $100,000,000, as the Borrower shall elect by written notice
to the Administrative Agent given not later than 12:00 (noon) New York City time
two Business Days prior to the Closing Date. Reductions in the Tranche A
Commitments of the Lenders pursuant to this Section 2.01(b) shall be allocated
among the Lenders in accordance with Section 2.09(e).
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SECTION 2.02. Loans. (a) Each Loan shall be made as part of a Borrowing
consisting of Loans made by the Lenders ratably in accordance with their
applicable Commitments; provided, that the failure of any Lender to make any
Loan shall not in itself relieve any other Lender of its obligation to lend
hereunder (it being understood, however, that no Lender shall be responsible for
the failure of any other Lender to make any Loan required to be made by such
other Lender). Except for Loans deemed made pursuant to paragraph (f) below, the
Loans comprising any Borrowing shall be in an aggregate principal amount that is
(i) an integral multiple of $1,000,000 and not less than $1,000,000 or (ii)
equal to the remaining available balance of the applicable Commitments.
(b) Subject to Sections 2.08 and 2.15, each Borrowing shall be comprised
entirely of ABR Loans or Eurodollar Loans as the Borrower may request pursuant
to Section 2.03. Each Lender may at its option make any Eurodollar Loan by
causing any domestic or foreign branch or Affiliate of such Lender to make such
Loan; provided that any exercise of such option shall not affect the obligation
of the Borrower to repay such Loan in accordance with the terms of this
Agreement. Borrowings of more than one Type may be outstanding at the same time;
provided, however, that the Borrower shall not be entitled to request any
Borrowing that, if made, would result in more than twelve Eurodollar Borrowings
outstanding hereunder at any time. For purposes of the foregoing, Borrowings
having different Interest Periods, regardless of whether they commence on the
same date, shall be considered separate Borrowings.
(c) Except with respect to Loans made pursuant to paragraph (f) below,
each Lender shall make each Loan to be made by it hereunder on the proposed date
thereof by wire transfer of immediately available funds to such account in New
York City as the Administrative Agent may designate not later than 12:00 (noon),
New York City time, and the Administrative Agent shall promptly transfer the
amounts so received to an account in the name of the Borrower designated by the
Borrower in the applicable Borrowing Request or, if a Borrowing shall not occur
on such date because any condition precedent herein specified shall not have
been met, return the amounts so received to the respective Lenders.
(d) Unless the Administrative Agent shall have received notice from a
Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender's portion of such Borrowing,
the Administrative Agent may assume that such Lender has made such portion
available to the Administrative Agent on the date of such Borrowing in
accordance with paragraph (c) above and the Administrative Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If the Administrative Agent shall have so made funds
available then, to the extent that such Lender shall not have made such portion
available to the Administrative Agent, such Lender and the Borrower severally
agree to repay to the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon for each day from the date
such amount is made available to the Borrower until the date such amount is
repaid to the Administrative Agent at (i) in the case of the Borrower, the
interest rate applicable at the time to the Loans comprising such Borrowing and
(ii) in the case of such Lender, a rate determined by the Administrative Agent
to represent its cost of overnight or short-term funds (which determination
shall be conclusive absent manifest error). Without limiting the rights of the
Borrower against such Lender, if such Lender shall repay to the Administrative
Agent such corresponding amount, such amount shall constitute such Lender's Loan
as part of such Borrowing for purposes of this Agreement and any amounts
theretofore repaid by the Borrower pursuant to this paragraph shall be promptly
returned to the Borrower.
(e) Notwithstanding any other provision of this Agreement, the Borrower
shall not be entitled to request any Borrowing if the Interest Period requested
with respect thereto would end after the Revolving Credit Maturity Date.
(f) If the Issuing Bank shall not have received from the Borrower the
payment required to be made by Section 2.22(e) in respect of any L/C
Disbursement within the time specified in such Section, the Issuing Bank will
promptly notify the Administrative Agent of the amount of such L/C Disbursement
and the Administrative Agent will promptly notify each Revolving Credit Lender
of such amount and
<PAGE>
25
its Pro Rata Percentage thereof. Each Revolving Credit Lender shall pay by wire
transfer of immediately available funds to the Administrative Agent not later
than 2:00 p.m., New York City time, on such date (or, if such Revolving Credit
Lender shall have received such notice later than 12:00 (noon), New York City
time, on any day, not later than 11:00 a.m., New York City time, on the
immediately following Business Day), an amount equal to such Lender's Pro Rata
Percentage of such L/C Disbursement (it being understood that such amount shall
be deemed to constitute an ABR Revolving Loan of such Lender and such payment
shall be deemed to have reduced the L/C Exposure), and the Administrative Agent
will promptly pay to the Issuing Bank amounts so received by it from the
Revolving Credit Lenders. The Administrative Agent will promptly pay to the
Issuing Bank any amounts received by it from the Borrower pursuant to Section
2.22(e) prior to the time that any Revolving Credit Lender makes any payment
pursuant to this paragraph (f); any such amounts received by the Administrative
Agent thereafter will be promptly remitted by the Administrative Agent to the
Revolving Credit Lenders that shall have made such payments and to the Issuing
Bank, as their interests may appear. If any Revolving Credit Lender shall not
have made its Pro Rata Percentage of such L/C Disbursement available to the
Administrative Agent as provided above, such Lender and the Borrower severally
agree to pay interest on such amount, for each day from and including the date
such amount is required to be paid in accordance with this paragraph to but
excluding the date such amount is paid, to the Administrative Agent for the
account of the Issuing Bank at (i) in the case of the Borrower, a rate per annum
equal to the interest rate applicable to ABR Revolving Loans pursuant to Section
2.06(a), and (ii) in the case of such Lender, for the first such day, the
Federal Funds Effective Rate, and for each day thereafter, the Alternate Base
Rate.
SECTION 2.03. Borrowing Procedure. In order to request a Borrowing (other
than a deemed Borrowing pursuant to Section 2.02(f), as to which this Section
2.03 shall not apply), the Borrower shall hand deliver or telecopy to the
Administrative Agent a duly completed Borrowing Request (a) in the case of a
Eurodollar Borrowing, not later than 12:00 (noon), New York City time, three
Business Days before a proposed Borrowing, and (b) in the case of an ABR
Borrowing, not later than 11:00 a.m., New York City time, on the Business Day of
a proposed Borrowing. Each Borrowing Request shall be irrevocable, shall be
signed by or on behalf of the Borrower and shall specify the following
information: (i) whether the Borrowing then being requested is to be a Tranche A
Term Borrowing, a Tranche B Term Borrowing or a Revolving Credit Borrowing, and,
subject to the third sentence of Section 2.02(b), whether such Borrowing is to
be a Eurodollar Borrowing or an ABR Borrowing; (ii) the date of such Borrowing
(which shall be a Business Day), (iii) the number and location of the account to
which funds are to be disbursed (which shall be an account that complies with
the requirements of Section 2.02(c)); (iv) the amount of such Borrowing; and (v)
if such Borrowing is to be a Eurodollar Borrowing, the Interest Period with
respect thereto; provided, however, that, notwithstanding any contrary
specification in any Borrowing Request, each requested Borrowing shall comply
with the requirements set forth in Section 2.02. If no election as to the Type
of Borrowing is specified in any such notice, then the requested Borrowing shall
be an ABR Borrowing. If no Interest Period with respect to any Eurodollar
Borrowing is specified in any such notice, then the Borrower shall be deemed to
have selected an Interest Period of one month's duration. The Administrative
Agent shall promptly advise the applicable Lenders of any notice given pursuant
to this Section 2.03 (and the contents thereof), and of each Lender's portion of
the requested Borrowing.
SECTION 2.04. Evidence of Debt; Repayment of Loans. (a) The Borrower
hereby unconditionally promises to pay to the Administrative Agent for the
account of each Lender (i) the then unpaid principal amount of each Revolving
Loan on the Revolving Credit Maturity Date and (ii) the principal amount of each
Term Loan of such Lender as provided in Section 2.11.
(b) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Borrower to such Lender
resulting from each Loan made by such Lender from time to time, including the
amounts of principal and interest payable and paid such Lender from time to time
under this Agreement.
(c) The Administrative Agent shall maintain accounts in which it will
record (i) the amount of each Loan made hereunder, the Type thereof and the
Interest Period applicable thereto, (ii) the amount
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26
of any principal or interest due and payable or to become due and payable from
the Borrower to each Lender hereunder and (iii) the amount of any sum received
by the Administrative Agent hereunder from the Borrower or any Guarantor and
each Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to paragraphs (b)
and (c) above shall be prima facie evidence of the existence and amounts of the
obligations therein recorded; provided, however, that the failure of any Lender
or the Administrative Agent to maintain such accounts or any error therein shall
not in any manner affect the obligation of the Borrower to repay the Loans in
accordance with their terms.
(e) Notwithstanding any other provision of this Agreement, in the event
any Lender shall request and receive a promissory note payable to such Lender
and its registered assigns, the interests represented by such note shall at all
times (including after any assignment of all or part of such interests pursuant
to Section 10.04) be represented by one or more promissory notes payable to the
payee named therein or its registered assigns.
SECTION 2.05. Fees. The Borrower agrees to pay to each Lender, through the
Administrative Agent, (a) on the Closing Date (i) a commitment fee (the "Ticking
Fee") equal to .50% of the amount of the Commitment of such Lender commencing to
accrue on July 1, 1998 and ceasing to accrue on the Closing Date. All Ticking
Fees shall be computed on the basis of the actual number of days elapsed in a
year of 360 days; provided, that no Ticking Fee shall be due or payable if the
Closing Date does not occur, and (b) on each calendar quarter end date
commencing with the first such date after the Closing Date (or, if any such day
shall not be a Business Day, the next preceding Business Day), and on the date
on which the Revolving Credit Commitment of such Lender shall expire or be
terminated as provided herein (each such day being called a "Fee Payment Date"),
a commitment fee (a "Commitment Fee") equal to the Applicable Percentage per
annum in effect from time to time on the average daily unused amount of the
Revolving Credit Commitment of such Lender during the preceding quarter (or
other period commencing with the Closing Date or ending with the date on which
the Revolving Credit Commitment of such Lender shall expire or be terminated).
All Commitment Fees shall be computed on the basis of the actual number of days
elapsed in a year of 360 days. The Commitment Fee due to each Lender shall
commence to accrue on the Closing Date and shall cease to accrue on the date on
which the Revolving Credit Commitment of such Lender shall expire or be
terminated as provided herein; provided, that no Commitment Fee shall be due or
payable if the Closing Date does not occur.
(b) The Borrower agrees to pay to the Arrangers and to the Administrative
Agent, for their own accounts, the fees separately agreed upon by the Borrower,
the Arrangers and the Administrative Agent (the "Arranger and Agent Fees").
(c) The Borrower agrees to pay (i) to each Revolving Credit Lender,
through the Administrative Agent, on each Fee Payment Date, a fee (an "L/C
Participation Fee") calculated on such Lender's Pro Rata Percentage of the
average daily aggregate L/C Exposure (excluding the portion thereof attributable
to unreimbursed L/C Disbursements) during the preceding quarter (or shorter
period commencing with the date hereof or ending with the Revolving Credit
Maturity Date or the date on which all Letters of Credit have been canceled or
have expired and the Revolving Credit Commitments of all Lenders shall have been
terminated) at a rate equal to the Applicable Percentage from time to time used
to determine the interest rate on Revolving Credit Borrowings comprised of
Eurodollar Loans pursuant to Section 2.06, and (ii) to the Issuing Bank, (A) on
each Fee Payment Date and on the date on which the Letter of Credit Commitment
shall be terminated as provided herein and no Letters of Credit shall be
outstanding, a fronting fee of .25% per annum on the undrawn face amount of each
outstanding Letter of Credit, and (B) issuance and drawing fees specified from
time to time by the Issuing Bank (collectively, the "Issuing Bank Fees"). All
L/C Participation Fees and Issuing Bank Fees shall be computed on the basis of
the actual number of days elapsed in a year of 360 days.
<PAGE>
27
All Fees shall be paid on the dates due, in immediately available funds, to
the Administrative Agent for distribution, if and as appropriate, among the
Lenders, except that the Issuing Bank Fees shall be paid directly to the Issuing
Bank. Once paid, none of the Fees shall be refundable.
SECTION 2.06. Interest on Loans. (a) Subject to the provisions of Section
2.07, the Loans comprising each ABR Borrowing shall bear interest (computed on
the basis of the actual number of days elapsed over a year of 365 or 366 days,
as the case may be, when the Alternate Base Rate is determined by reference to
the Prime Rate and over a year of 360 days at all other times) at a rate per
annum equal to the Alternate Base Rate plus (x) in the case of Revolving Loans
and Tranche A Term Loans, the Applicable Percentage in effect from time to time
and (y) in the case of Tranche B Term Loans, 1.125%.
(b) Subject to the provisions of Section 2.07, the Loans comprising each
Eurodollar Borrowing shall bear interest (computed on the basis of the actual
number of days elapsed over a year of 360 days) at a rate per annum equal to the
Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus (x)
in the case of Revolving Loans and Tranche A Term Loans, the Applicable
Percentage in effect from time to time and (y) in the case of Tranche B Term
Loans, 2.125%.
(c) Interest on each Loan shall be payable on the Interest Payment Dates
applicable to such Loan except as otherwise provided in this Agreement. The
applicable Alternate Base Rate or Adjusted LIBO Rate for each Interest Period or
day within an Interest Period, as the case may be, shall be determined by the
Administrative Agent, and such determination shall be conclusive absent manifest
error.
SECTION 2.07. Default Interest. If the Borrower shall default in the
payment of the principal of or interest on any Loan or any other amount becoming
due hereunder, by acceleration or otherwise, or under any other Loan Document,
the Borrower shall on demand from time to time pay interest, to the extent
permitted by law, on such defaulted amount to but excluding the date of actual
payment (after as well as before judgment) (a) in the case of overdue principal,
at the rate otherwise applicable to such Loan pursuant to Section 2.06 plus 2%
per annum and (b) in all other cases, at the rate per annum applicable at such
time to ABR Loans plus 2% per annum.
SECTION 2.08. Alternate Rate of Interest. In the event and on each occasion
that on the day two Business Days prior to the commencement of any Interest
Period for a Eurodollar Borrowing the Administrative Agent shall have determined
that dollar deposits in the principal amounts of the Loans comprising such
Borrowing are not generally available in the London interbank market, or that
the rates at which such dollar deposits are being offered will not adequately
reflect the cost to any Lender of making or maintaining its Eurodollar Loan
during such Interest Period, or that reasonable means do not exist for
ascertaining the Adjusted LIBO Rate, the Administrative Agent shall, as soon as
practicable thereafter, give written or telecopy notice of such determination to
the Borrower and the Lenders. In the event of any such determination, until the
Administrative Agent shall have advised the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, any request by the
Borrower for a Eurodollar Borrowing pursuant to Section 2.03 or 2.10 shall be
deemed to be a request for an ABR Borrowing. Each determination by the
Administrative Agent hereunder shall be conclusive absent manifest error.
SECTION 2.09. Termination and Reduction of Commitments. (a) The Term Loan
Commitments shall automatically terminate at 5:00 p.m., New York City time, on
the Closing Date. The Revolving Credit Commitments and the L/C Commitment shall
automatically terminate at 5:00 p.m., New York City time, on the Revolving
Credit Maturity Date. Notwithstanding the foregoing, all the Commitments shall
automatically terminate at 5:00 p.m., New York City time, on October 31, 1998,
if the initial Credit Event shall not have occurred by such time.
(b) Upon at least three Business Days' prior irrevocable written or
telecopy notice to the Administrative Agent, the Borrower may at any time in
whole permanently terminate, or from time to time in part permanently reduce,
the Tranche A
<PAGE>
28
Commitments, the Tranche B Commitments or the Revolving Credit Commitments;
provided, however, that (i) each partial reduction of the Tranche A Commitments,
the Tranche B Commitments or the Revolving Credit Commitments shall be in an
integral multiple of $1,000,000 and in a minimum amount of $1,000,000 and (ii)
the Total Revolving Credit Commitment shall not be reduced to an amount that is
less than the sum of (A) the Aggregate Revolving Credit Exposure at the time and
(B) any portion of the Total Revolving Credit Commitment at the time being held
available to fund the purchase of additional assets, as contemplated by the
definition of "Asset Sale" in Article I, or to pay the principal of and premium
and interest on the Company's Senior Notes due 2006, as contemplated by Section
4.02(j).
(c) On each Revolving Credit Reduction Date the Revolving Credit
Commitments shall be permanently reduced by such amount as shall be necessary in
order that the Total Revolving Credit Commitment will not exceed the amount set
forth below opposite such date:
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
December 31, 2001 $142,500,000
December 31, 2002 $127,500,000
December 31, 2003 $112,500,000
December 31, 2004 $ 90,000,000
</TABLE>
(d) The Revolving Credit Commitments shall be automatically and
permanently reduced by the amount of any prepayment of the Revolving Loans
pursuant to paragraph (b), (c) or (e) of Section 2.13.
(e) Each reduction in the Tranche A Commitments, the Tranche B Commitments
or the Revolving Credit Commitments hereunder shall be made ratably among the
Lenders in accordance with their respective applicable Commitments. The
Borrower shall pay to the Administrative Agent for the accounts of the Revolving
Credit Lenders, on the date of each termination or reduction, the Commitment
Fees due on the amount of the Revolving Credit Commitments so terminated or
reduced accrued to but excluding the date of such termination or reduction.
SECTION 2.10. Conversion and Continuation of Borrowings. The Borrower
shall have the right at any time upon prior irrevocable notice to the
Administrative Agent (a) not later than 12:00 (noon), New York City time, one
Business Day prior to conversion, to convert any Eurodollar Borrowing into an
ABR Borrowing, (b) not later than 12:00 (noon), New York City time, three
Business Days prior to conversion or continuation, to convert any ABR Borrowing
into a Eurodollar Borrowing or to continue any Eurodollar Borrowing as a
Eurodollar Borrowing for an additional Interest Period, and (c) not later than
12:00 (noon), New York City time, three Business Days prior to conversion, to
convert the Interest Period with respect to any Eurodollar Borrowing to another
permissible Interest Period, subject in each case to the following:
(i) each conversion or continuation shall be made pro rata among the
Lenders in accordance with the respective principal amounts of the Loans
comprising the converted or continued Borrowing;
(ii) if less than all the outstanding principal amount of any
Borrowing shall be converted or continued, then each resulting Borrowing
shall satisfy the limitations specified in Sections 2.02(a) and (b)
regarding the principal amount and maximum number of Borrowings of the
relevant Type;
(iii) each conversion shall be effected by each Lender and the
Administrative Agent by recording for the account of such Lender the new
Loan of such Lender resulting from such conversion and reducing the Loan
(or portion thereof) of such Lender being converted by an equivalent
principal amount; accrued interest on any Eurodollar Loan (or portion
thereof) being converted shall be paid by the Borrower at the time of
conversion;
(iv) if any Eurodollar Borrowing is converted at a time other than the
end of the Interest Period applicable thereto, the Borrower shall pay, upon
demand, any amounts due to the Lenders pursuant to Section 2.16;
<PAGE>
29
(v) any portion of a Borrowing maturing or required to be repaid in
less than one month may not be converted into or continued as a Eurodollar
Borrowing;
(vi) any portion of a Eurodollar Borrowing that cannot be converted
into or continued as a Eurodollar Borrowing by reason of the immediately
preceding clause shall be automatically converted at the end of the
Interest Period in effect for such Borrowing into an ABR Borrowing;
(vii) no Interest Period may be selected for any Tranche A Term
Borrowing or Tranche B Term Borrowing that is a Eurodollar Borrowing that
would end later than a Term Loan Repayment Date occurring on or after the
first day of such Interest Period if, after giving effect to such
selection, the aggregate outstanding amount of (A) the Tranche A Term
Borrowings or Tranche B Term Borrowings, as the case may be, that are
Eurodollar Borrowings with Interest Periods ending on or prior to such Term
Loan Repayment Date and (B) the Tranche A Term Borrowings or Tranche B Term
Borrowings, as the case may be, that are ABR Borrowings would not be at
least equal to the principal amount of Tranche A Term Borrowings or Tranche
B Term Borrowings to be paid on such Term Loan Repayment Date; and
(viii) upon notice to the Borrower from the Administrative Agent given
at the request of the Required Lenders, after the occurrence and during the
continuance of a Default or Event of Default, no outstanding Loan may be
converted into, or continued as, a Eurodollar Loan.
Each notice pursuant to this Section 2.10 shall be irrevocable and shall
refer to this Agreement and specify (i) the identity and amount of the Borrowing
that the Borrower requests be converted or continued, (ii) whether such
Borrowing is to be converted to or continued as a Eurodollar Borrowing or an ABR
Borrowing, (iii) if such notice requests a conversion, the date of such
conversion (which shall be a Business Day) and (iv) if such Borrowing is to be
converted to or continued as a Eurodollar Borrowing, the Interest Period with
respect thereto. If no Interest Period is specified in any such notice with
respect to any conversion to or continuation as a Eurodollar Borrowing, the
Borrower shall be deemed to have selected an Interest Period of one month's
duration. The Administrative Agent shall advise the Lenders of any notice given
pursuant to this Section 2.10 and of each Lender's portion of any converted or
continued Borrowing. If the Borrower shall not have given notice in accordance
with this Section 2.10 to continue any Borrowing into a subsequent Interest
Period (and shall not otherwise have given notice in accordance with this
Section 2.10 to convert such Borrowing), such Borrowing shall, at the end of the
Interest Period applicable thereto (unless repaid pursuant to the terms hereof),
automatically be continued into a new Interest Period as an ABR Borrowing.
SECTION 2.11. Repayment of Term Borrowings. (a) (i) The Borrower shall pay
to the Administrative Agent, for the accounts of the Lenders, on each Tranche A
Term Loan Repayment Date, a principal amount of the Tranche A Term Loans equal
to the percentage of the Tranche A Term Loans made on the Closing Date set forth
below opposite the number corresponding to such Tranche A Term Loan Repayment
Date (subject to adjustment from time to time pursuant to Sections 2.12 and
2.13(f)), together in each case with accrued and unpaid interest on the
principal amount to be paid to but excluding the date of such payment:
Tranche A Term Loan Percentage
------------------- ----------
Repayment Date
--------------
1-4 2.500
5-8 3.125
9-12 3.750
13-16 4.375
17-20 5.000
21-24 6.250
In the event that the Tranche A Term Loans made on the Closing Date shall be
less than the aggregate Tranche A Commitments, the installments payable on each
Tranche A Term Loan Repayment Date shall
<PAGE>
30
be reduced pro rata by an aggregate amount equal to the amount of such
reduction, expiration or termination.
(ii) The Borrower shall pay to the Administrative Agent, for the accounts
of the Lenders, on each Tranche B Term Loan Repayment Date, a principal amount
of the Tranche B Term Loans equal to the percentage of the Tranche B Term Loans
made on the Closing Date set forth below opposite the number corresponding to
such Tranche B Term Loan Repayment Date (subject to adjustment from time to time
pursuant to Sections 2.12 and 2.13(f)), together in each case with accrued and
unpaid interest on the principal amount to be paid to but excluding the date of
such payment:
Tranche B Term Loan Percentage
------------------- ----------
Repayment Date
--------------
1-29 0.25
30 92.75
(b) To the extent not previously paid, all Tranche A Term Loans and
Tranche B Term Loans shall be due and payable on the Tranche A Maturity Date and
Tranche B Maturity Date, respectively, together with accrued and unpaid interest
on the principal amount to be paid to but excluding the date of payment.
(c) All repayments pursuant to this Section 2.11 shall be subject to
Section 2.16, but shall otherwise be without premium or penalty.
SECTION 2.12. Optional Prepayments. (a) The Borrower shall have the right
at any time and from time to time to prepay any Borrowing, in whole or in part,
upon at least three Business Days' prior written or telecopy notice (or
telephone notice promptly confirmed by written or telecopy notice) to the
Administrative Agent before 12:00 noon, New York City time; provided, however,
that each partial prepayment shall be in an amount that is an integral multiple
of $1,000,000 and not less than $1,000,000.
(b) Optional prepayments of Term Borrowings shall be allocated pro rata
between the then-outstanding Tranche A Term Borrowings and Tranche B Term
Borrowings and applied against the remaining scheduled installments of principal
due in respect of the Tranche A Term Borrowings and Tranche B Term Borrowings
under Sections 2.11(a)(i) and (ii), respectively, in the inverse order of
maturity.
(c) Each notice of prepayment shall specify the prepayment date and the
principal amount of each Borrowing (or portion thereof) to be prepaid, shall be
irrevocable and shall commit the Borrower to prepay such Borrowing by the amount
stated therein on the date stated therein. All prepayments under this Section
2.12 shall be subject to Section 2.16 but otherwise without premium or penalty.
All prepayments under this Section 2.12 shall be accompanied by accrued interest
on the principal amount being prepaid to the date of payment.
SECTION 2.13. Mandatory Prepayments. (a) In the event of any termination
of all the Revolving Credit Commitments, the Borrower shall repay or prepay all
the outstanding Revolving Credit Borrowings on the date of such termination. In
the event of any partial reduction of the Revolving Credit Commitments, then (i)
at or prior to the effective date of such reduction, the Administrative Agent
shall notify the Borrower and the Revolving Credit Lenders of the Aggregate
Revolving Credit Exposure after giving effect thereto and (ii) if the Total
Revolving Credit Commitment after giving effect to such reduction or termination
would be less than the sum of (A) the Aggregate Revolving Credit Exposure at the
time and (B) any portion of the Total Revolving Credit Commitment at the time
being held available to fund the purchase of additional assets, as contemplated
by the definition of "Asset Sale" in Article I, or to pay the principal of and
premium and interest on the Company's Senior Notes due 2006, as contemplated by
Section 4.02(j), then the Borrower shall, on the date of such reduction or
termination, repay or prepay Revolving Credit Borrowings in an amount sufficient
to eliminate such deficiency.
<PAGE>
31
(b) As promptly as practicable and in any event not later than the fifth
Business Day following the completion of any Asset Sale with respect to which
the Borrower has not by 1:00 p.m., New York City time, on such fifth Business
Day given the Administrative Agent written advice that it intends to use the Net
Cash Proceeds of such Asset Sale to purchase additional assets to be used in the
business of the Borrower and its subsidiaries, the Borrower shall apply 100% of
the Net Cash Proceeds received with respect thereto to prepay outstanding Term
Loans and, if the Term Loans shall have been paid in full, to prepay Revolving
Credit Loans. As promptly as practicable and in any event not later than the
Business Day following the date on which any Net Cash Proceeds are deemed for
purposes of this paragraph to constitute Net Cash Proceeds of an Asset Sale
pursuant to clause (z) of the definition of "Asset Sale", the Borrower shall
apply such Net Cash Proceeds to prepay outstanding Term Loans and, if the Term
Loans shall have been repaid in full, to prepay Revolving Credit Loans.
(c) As promptly as practicable and in any event not later than the third
Business Day following the receipt of Net Cash Proceeds from any Equity
Issuance, the Borrower shall apply an amount equal to 100% of such Net Cash
Proceeds (or, if less, the amount by which the aggregate Net Cash Proceeds of
such Equity Issuance and all prior Equity Issuances after the date hereof
exceeds $50,000,000) to prepay outstanding Term Loans and, if the Term Loans
shall have been paid in full, to prepay Revolving Credit Loans.
(d) Not later than the earlier of (i) 90 days after the end of each fiscal
year of the Borrower, commencing with the fiscal year ending December 31, 1999,
and (ii) the date on which the financial statements with respect to such fiscal
year are delivered pursuant to Section 5.03(a), the Borrower shall prepay
outstanding Term Loans in an aggregate principal amount equal to (A) if the
Consolidated Leverage Ratio at the end of the applicable fiscal year shall have
been greater than or equal to 5.00 to 1.00, 75% of Excess Cash Flow for such
fiscal year and (B) if the Consolidated Leverage Ratio at the end of the
applicable fiscal year shall have been less than 5.00 to 1.00, 50% of Excess
Cash Flow for such fiscal year, in either case minus $5,000,000.
(e) In the event that the Borrower or any Subsidiary shall receive Net Cash
Proceeds from the incurrence or disposition of any Indebtedness permitted under
clause (h) of Section 6.01 (other than (i) Indebtedness permitted under such
clause (h) in an aggregate principal amount not to exceed $25,000,000, and (ii)
other Indebtedness permitted under such clause (h) the Net Cash Proceeds of
which are promptly applied to finance acquisitions permitted under Section
6.04(h); provided, that no Event of Default has occurred and is continuing at
the time the Net Cash Proceeds of any such Indebtedness referred to in this
parenthetical are received), the Borrower shall, as promptly as practicable and
in any event not later than the third Business Day following the receipt of such
Net Cash Proceeds, apply an amount equal to (A) if the Consolidated Leverage
Ratio at the most recent fiscal quarter end, adjusted to give effect to such
Indebtedness as if it had been outstanding at such fiscal quarter end, shall be
greater than or equal to 5.00 to 1.00, 100% of such Net Cash Proceeds, or (B)
if the Consolidated Leverage Ratio at the most recent fiscal quarter end, as so
adjusted, shall be less than 5.00 to 1.00, 50% of such Net Cash Proceeds, to
prepay outstanding Term Loans and, if the Term Loans shall have been paid in
full, to prepay Revolving Credit Loans.
(f) Mandatory prepayments of Term Loans shall, subject to paragraph (i)
below, be allocated pro rata between the then-outstanding Tranche A Term Loans
and Tranche B Term Loans and applied against the remaining scheduled
installments of principal due in respect of Tranche A Term Loans or Tranche B
Term Loans under Section 2.11(a)(i) and (ii), respectively, in the inverse order
of maturity.
(g) The Borrower shall deliver to the Administrative Agent, at the time of
each prepayment required under this Section 2.13, (i) a certificate signed by a
Financial Officer of the Borrower setting forth in reasonable detail the
calculation of the amount of such prepayment and (ii) to the extent practicable,
at least three days prior written notice of such prepayment. Each notice of
prepayment shall specify the prepayment date and the Type and principal amount
of each Loan (or portion thereof) to be prepaid. All prepayments under this
Section 2.13 shall be subject to Section 2.16, but shall otherwise be without
premium or penalty.
<PAGE>
32
(h) Amounts to be applied pursuant to this Section 2.13 to the prepayment
of Term Loans and Revolving Loans shall be applied first to reduce outstanding
ABR Term Loans or ABR Revolving Loans, as the case may be, and then to prepay
Eurodollar Term Loans or Eurodollar Revolving Loans, as the case may be. In the
event the amount of any prepayment required to be made pursuant to this Section
shall exceed the aggregate principal amount of the ABR Tranche A Term Loans, ABR
Tranche B Term Loans or ABR Revolving Loans, as the case may be, outstanding
(the amount of any such excess being called the "Excess Amount"), the Borrower
shall have the right, in lieu of making such prepayment in full, to prepay all
the outstanding applicable ABR Loans of the applicable class and to deposit an
amount equal to the Excess Amount with the Collateral Agent in a cash collateral
account maintained (pursuant to documentation reasonably satisfactory to the
Administrative Agent) by and in the sole dominion and control of the Collateral
Agent. Any amounts so deposited shall be held by the Collateral Agent as
collateral for the Obligations and applied to the prepayment of the applicable
Eurodollar Loans at the ends of the current Interest Periods applicable thereto.
At the request of the Borrower, amounts so deposited shall be invested by the
Collateral Agent in Permitted Investments maturing prior to the date or dates on
which it is anticipated that such amounts will be applied to prepay Eurodollar
Loans; any interest earned on such Permitted Investments will be for the account
of the Borrower, and the Borrower will deposit with the Administrative Agent the
amount of any loss on any such Permitted Investment to the extent necessary in
order that the amount of the prepayment to be made with the deposited amounts
may not be reduced.
(i) Any Tranche B Lender may elect, by notice to the Administrative Agent
in writing (or by telephone or telecopy promptly confirmed in writing) at least
one Business Day prior to any prepayment of Tranche B Term Loans required to be
made by the Borrower for the account of such Lender pursuant to this Section
2.13, to waive all or a portion of such prepayment. Any prepayment so waived
will be applied instead (i) to prepay Tranche A Term Loans to the extent Tranche
A Term Loans in a sufficient amount are outstanding, and (ii) otherwise, to
prepay Revolving Loans (without reducing the Revolving Credit Commitments).
SECTION 2.14. Reserve Requirements; Change in Circumstances. (a)
Notwithstanding any other provision of this Agreement, if after the date of this
Agreement any change in applicable law or regulation or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof (whether or not having the force of
law) shall change the basis of taxation of payments to any Lender or the Issuing
Bank of the principal of or interest on any Eurodollar Loan made by such Lender
or any Fees or other amounts payable hereunder (other than changes in respect of
taxes imposed on the overall net income of such Lender or the Issuing Bank by
the jurisdiction in which such Lender or the Issuing Bank has its principal
office or applicable lending office or by any political subdivision or taxing
authority therein), or shall impose, modify or deem applicable any reserve,
special deposit or similar requirement against assets of, deposits with or for
the account of or credit extended by any Lender or the Issuing Bank (except any
such reserve requirement which is reflected in the Adjusted LIBO Rate) or shall
impose on such Lender or the Issuing Bank or the London interbank market any
other condition affecting this Agreement or Eurodollar Loans made by such Lender
or any Letter of Credit or participation therein, and the result of any of the
foregoing shall be to increase the cost to such Lender or the Issuing Bank of
making or maintaining any Eurodollar Loan or increase the cost to any Lender of
issuing or maintaining any Letter of Credit or purchasing or maintaining a
participation therein or to reduce the amount of any sum received or receivable
by such Lender or the Issuing Bank hereunder (whether of principal, interest or
otherwise) by an amount deemed by such Lender or the Issuing Bank to be
material, then the Borrower will pay to such Lender or the Issuing Bank, as the
case may be, upon demand such additional amount or amounts as will compensate
such Lender or the Issuing Bank, as the case may be, for such additional costs
incurred or reduction suffered.
(b) If any Lender or the Issuing Bank shall have determined that the
adoption after the date hereof of any law, rule, regulation, agreement or
guideline regarding capital adequacy, or any change after the date hereof in any
such law, rule, regulation, agreement or guideline (whether such law, rule,
regulation, agreement or guideline has been adopted) or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof, or compliance by any Lender (or any
lending office of such Lender) or the Issuing Bank or any Lender's or the
Issuing
<PAGE>
33
Bank's holding company with any request or directive issued after the date
hereof regarding capital adequacy (whether or not having the force of law) of
any Governmental Authority has or would have the effect of reducing the rate of
return on such Lender's or the Issuing Bank's capital or on the capital of such
Lender's or the Issuing Bank's holding company, if any, as a consequence of this
Agreement or the Loans made or participations in Letters of Credit purchased by
such Lender pursuant hereto or the Letters of Credit issued by the Issuing Bank
pursuant hereto to a level below that which such Lender or the Issuing Bank or
such Lender's or the Issuing Bank's holding company could have achieved but for
such applicability, adoption, change or compliance (taking into consideration
such Lender's or the Issuing Bank's policies and the policies of such Lender's
or the Issuing Bank's holding company with respect to capital adequacy) by an
amount deemed by such Lender or the Issuing Bank to be material, then from time
to time the Borrower shall pay to such Lender or the Issuing Bank, as the case
may be, such additional amount or amounts as will compensate such Lender or the
Issuing Bank or such Lender's or the Issuing Bank's holding company for any such
reduction suffered.
(c) A certificate of a Lender or the Issuing Bank setting forth the amount
or amounts necessary to compensate such Lender or the Issuing Bank or its
holding company, as applicable, as specified in paragraph (a) or (b), together
with supporting documentation or computations, above shall be delivered to the
Borrower and shall be conclusive absent manifest error. The Borrower shall pay
such Lender or the Issuing Bank the amount shown as due on any such certificate
delivered by it within 10 days after its receipt of the same.
(d) Failure or delay on the part of any Lender or the Issuing Bank to
demand compensation for any increased costs or reduction in amounts received or
receivable or reduction in return on capital shall not constitute a waiver of
such Lender's or the Issuing Bank's right to demand such compensation. The
protection of this Section shall be available to each Lender and the Issuing
Bank regardless of any possible contention of the invalidity or inapplicability
of the law, rule, regulation, agreement, guideline or other change or condition
that shall have occurred or been imposed.
SECTION 2.15. Change in Legality. (a) Notwithstanding any other provision
of this Agreement, if, after the date hereof, any change in any law or
regulation or in the interpretation thereof by any Governmental Authority
charged with the administration or interpretation thereof shall make it unlawful
for any Lender to make or maintain any Eurodollar Loan or to give effect to its
obligations as contemplated hereby with respect to any Eurodollar Loan, then, by
written notice to the Borrower and to the Administrative Agent:
(i) such Lender may declare that Eurodollar Loans will not thereafter
(for the duration of such unlawfulness) be made by such Lender hereunder
(or, for such duration, be continued for additional Interest Periods and
ABR Loans will not thereafter (for such duration) be converted into
Eurodollar Loans), whereupon any request for a Eurodollar Borrowing (or to
convert an ABR Borrowing to a Eurodollar Borrowing or to continue a
Eurodollar Borrowing for an additional Interest Period) shall, as to such
Lender only, be deemed a request for an ABR Loan (or a request to continue
an ABR Loan as such for an additional Interest Period or to convert a
Eurodollar Loan into an ABR Loan, as the case may be), unless such
declaration shall be subsequently withdrawn; and
(ii) such Lender may require that all outstanding Eurodollar Loans made
by it be converted to ABR Loans, in which event all such Eurodollar Loans
shall be automatically converted to ABR Loans as of the effective date of
such notice as provided in paragraph (b) below.
In the event any Lender shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal that would otherwise have been applied to
repay the Eurodollar Loans that would have been made by such Lender or the
converted Eurodollar Loans of such Lender shall instead be applied to repay the
ABR Loans made by such Lender in lieu of, or resulting from the conversion of,
such Eurodollar Loans.
<PAGE>
34
(b) For purposes of this Section 2.15, a notice to the Borrower by any
Lender shall be effective as to each Eurodollar Loan made by such Lender, if
lawful, on the last day of the Interest Period currently applicable to such
Eurodollar Loan; in all other cases such notice shall be effective on the date
of receipt by the Borrower.
SECTION 2.16. Indemnity. The Borrower shall indemnify each Lender against
any loss or expense that such Lender may sustain or incur as a consequence of
(a) any event, other than a default by such Lender in the performance of its
obligations hereunder, which results in (i) such Lender receiving or being
deemed to receive any amount on account of the principal of any Eurodollar Loan
prior to the end of the Interest Period in effect therefor (including by reason
of any assignment pursuant to Section 2.21), (ii) the conversion of any
Eurodollar Loan to an ABR Loan, or the conversion of the Interest Period with
respect to any Eurodollar Loan, in each case other than on the last day of the
Interest Period in effect therefor, or (iii) any Eurodollar Loan to be made by
such Lender (including any Eurodollar Loan to be made pursuant to a conversion
or continuation under Section 2.10) not being made after notice of such Loan
shall have been given by the Borrower hereunder (any of the events referred to
in this clause (a) being called a "Breakage Event") or (b) any default in the
making of any payment or prepayment required to be made hereunder. In the case
of any Breakage Event, such loss shall include an amount equal to the excess, as
reasonably determined by such Lender, of (i) its cost of obtaining funds for the
Eurodollar Loan that is the subject of such Breakage Event for the period from
the date of such Breakage Event to the last day of the Interest Period in effect
(or that would have been in effect) for such Loan over (ii) the amount of
interest likely to be realized by such Lender in redeploying the funds released
or not utilized by reason of such Breakage Event for such period. A certificate
of any Lender setting forth any amount or amounts which such Lender is entitled
to receive pursuant to this Section 2.16, together with supporting documentation
or computations, shall be delivered to the Borrower and shall be conclusive
absent manifest error.
SECTION 2.17. Pro Rata Treatment. Except as required under Sections 2.13
and 2.15, each Borrowing, each payment or prepayment of principal of any
Borrowing, each payment of interest on the Loans, each payment of the Commitment
Fees, each reduction of the Term Loan Commitments or the Revolving Credit
Commitments and each conversion of any Borrowing to or continuation of any
Borrowing as a Borrowing of any Type shall be allocated pro rata among the
Lenders in accordance with their respective applicable Commitments (or, if such
Commitments shall have expired or been terminated, in accordance with the
respective principal amounts of their applicable outstanding Loans), and the
Borrower and each Lender agrees to take all such actions as shall be necessary
to give effect to such requirement. Each Lender agrees that in computing such
Lender's portion of any Borrowing to be made hereunder, the Administrative Agent
may, in its discretion, round each Lender's percentage of such Borrowing to the
next higher or lower whole dollar amount.
SECTION 2.18. Sharing of Setoffs. Each Lender agrees that if it shall,
through the exercise of a right of banker's lien, setoff or counterclaim against
the Borrower or any other Loan Party, or pursuant to a secured claim under
Section 506 of Title 11 of the United States Code or other security or interest
arising from, or in lieu of, such secured claim, received by such Lender under
any applicable bankruptcy, insolvency or other similar law, or by any other
means, obtain payment, voluntary or involuntary, in respect of any Loan or Loans
or L/C Disbursement as a result of which the unpaid principal portion of its
Tranche A Term Loans, Tranche B Term Loans and Revolving Loans and
participations in L/C Disbursements shall be proportionately less than the
unpaid principal portion of the Tranche A Term Loans, Tranche B Term Loans and
Revolving Loans and participations in L/C Disbursements of any other Lender, it
shall be deemed simultaneously to have purchased from such other Lender at face
value, and shall promptly pay to such other Lender the purchase price for, a
participation in the Tranche A Term Loans, Tranche B Term Loans, Revolving Loans
and L/C Exposure, as the case may be, of such other Lender, so that the benefit
of all such payments shall be shared by the Lenders ratably in accordance with
the aggregate unpaid principal amount of the Tranche A Term Loans, Tranche B
Term Loans and Revolving Loans and L/C Exposure and participations in Tranche A
Term Loans, Tranche B Term Loans, Revolving Loans and L/C Exposure held by all
the Lenders; provided, however, that (i) if any such participations are
purchased pursuant to this Section 2.18 and the payment giving rise thereto
shall thereafter be recovered, such participations shall be rescinded to the
extent of such recovery
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and the purchase price restored without interest, and (ii) the provisions of
this paragraph shall not be construed to apply to any payment made by the
Borrower pursuant to and in accordance with the express terms of this Agreement
or any payment obtained by a Lender as consideration for the assignment of or
sale of a participation in any of its Loans or participations in L/C
Disbursements to any assignee or participant, other than to the Borrower or any
of the Subsidiaries or any Affiliate thereof (as to which the provisions of this
paragraph shall apply). The Borrower expressly consents to the foregoing
arrangements and agrees that any Lender holding a participation in a Term Loan
or Revolving Loan or L/C Disbursement deemed to have been so purchased may
exercise any and all rights of banker's lien, setoff or counterclaim with
respect to any and all moneys owing by the Borrower to such Lender by reason of
such participation as fully as if such Lender had made a Loan directly to the
Borrower in the amount of such participation.
SECTION 2.19. Payments. (a) The Borrower shall make each payment
(including principal of or interest on any Borrowing or any L/C Disbursement or
any Fees or other amounts) hereunder and under any other Loan Document not later
than 1:00 p.m., New York City time, on the date when due in immediately
available dollars, without setoff, defense or counterclaim. Any amounts
received after such time on any date may, in the discretion of the
Administrative Agent, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon. Each such payment
(other than (i) Issuing Bank Fees, which shall be paid directly to the Issuing
Bank, and (ii) payments pursuant to Sections 2.14, 2.16, 2.20 and 10.05 or
pursuant to other Loan Documents, which shall be made directly to the persons
entitled thereto) shall be made to the Administrative Agent at its offices at
Eleven Madison Avenue, New York, New York 10010, or as otherwise directed.
(b) The Administrative Agent shall distribute any such payments received
by it for the account of any other person to the appropriate recipient promptly
following receipt thereof. Whenever any payment (including principal of or
interest on any Borrowing or any Fees or other amounts) hereunder or under any
other Loan Document shall become due, or otherwise would occur, on a day that is
not a Business Day, such payment may be made on the next succeeding Business
Day, and such extension of time shall in such case be included in the
computation of interest or Fees, if applicable.
SECTION 2.20. Taxes. (a) Any and all payments by or on account of any
obligation of the Borrower hereunder shall be made free and clear of and without
deduction for any Indemnified Taxes or Other Taxes; provided that if the
Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from
such payments, then (i) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section) the Administrative Agent, Lender or
Issuing Bank, as the case may be, receives an amount equal to the sum it would
have received had no such deductions been made, (ii) the Borrower shall make
such deductions and (iii) the Borrower shall pay the full amount deducted to the
relevant Governmental Authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Administrative Agent, each Lender and
the Issuing Bank, within 10 days after written demand therefor, for the full
amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent,
such Lender or the Issuing Bank, as the case may be, on or with respect to any
payment by or on account of any obligation of the Borrower hereunder (including
Indemnified Taxes or Other Taxes imposed or asserted on or attributable to
amounts payable under this Section) and any penalties, interest and reasonable
expenses arising therefrom or with respect thereto, whether or not such
Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted
by the relevant Governmental Authority. A certificate as to the amount of such
payment or liability delivered to the Borrower by a Lender or the Issuing Bank,
or by the Administrative Agent on its own behalf or on behalf of a Lender or the
Issuing Bank, shall be conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes or Other
Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to
the Administrative Agent the
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36
original or a certified copy of a receipt issued by such Governmental Authority
evidencing such payment, a copy of the return reporting such payment or other
evidence of such payment reasonably satisfactory to the Administrative Agent.
(e) Each Lender that is not a "United States person" within the meaning
of Section 7701(a)(30) of the Code (a "Non-U.S. Lender") shall deliver to the
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Borrower (with a copy to the Administrative Agent) two copies of either United
States Internal Revenue Service Form 1001 or Form 4224, or, in the case of a
Non-U.S. Lender claiming exemption from U.S. Federal withholding tax under
Section 871(h) or 881(c) of the Code with respect to payments of "portfolio
interest", a Form W-8, or any subsequent versions thereof or successors thereto
(and, if such Non-U.S. Lender delivers a Form W-8, a certificate representing
that such Non-U.S. Lender is not a bank for purposes of Section 881(c) of the
Code, is not a 10-percent shareholder of the Borrower (within the meaning of
Section 871(h)(3)(B) of the Code) and is not a controlled foreign corporation
related to the Borrower (within the meaning of Section 864(d)(4) of the Code)),
properly completed and duly executed by such Non-U.S. Lender claiming complete
exemption from, or reduced rate of, U.S. Federal withholding tax on payments by
the Borrower under this Agreement or any other Loan Document. Such forms shall
be delivered by each Non-U.S. Lender on or before the date it becomes a party to
this Agreement or designates a new lending office. In addition, each Non-U.S.
Lender shall deliver such forms promptly upon the obsolescence, expiration or
invalidity of any form previously delivered by such Non-U.S. Lender.
Notwithstanding any other provision of this Section 2.20, a Non-U.S. Lender
shall not be required to deliver any form pursuant to this Section 2.20(e) that
such Non-U.S. Lender is not legally able to deliver.
SECTION 2.21. Assignment of Commitments Under Certain Circumstances; Duty
to Mitigate. (a) In the event (i) any Lender or the Issuing Bank delivers a
certificate requesting compensation pursuant to Section 2.14, (ii) any Lender or
the Issuing Bank delivers a notice described in Section 2.15 or (iii) the
Borrower is required to pay any amount to any Lender or the Issuing Bank or any
Governmental Authority on account of any Lender or the Issuing Bank pursuant to
Section 2.20, the Borrower may, at its sole expense and effort (including with
respect to the processing and recordation fee referred to in Section 10.04(b)),
upon notice to such Lender or the Issuing Bank and the Administrative Agent,
require such Lender or the Issuing Bank to transfer and assign, without recourse
(in accordance with and subject to the restrictions contained in Section 10.04),
all of its interests, rights and obligations under this Agreement to an assignee
designated by the Borrower that shall assume such assigned obligations (which
assignee may be another Lender, if a Lender accepts such assignment); provided
that (w) such assignment will result in a reduction in the claim for
compensation under Section 2.14 or in the withdrawal of the notice under Section
2.15 or in the reduction of payments under Section 2.20, as the case may be, (x)
such assignment shall not conflict with any law, rule or regulation or order of
any court or other Governmental Authority having jurisdiction, (y) the Borrower
shall have received the prior written consent of the Administrative Agent (and,
if a Revolving Credit Commitment is being assigned, of the Issuing Bank), which
consent shall not unreasonably be withheld, and (z) the Borrower or such
assignee shall have paid to the affected Lender or the Issuing Bank in
immediately available funds an amount equal to the sum of the principal of and
interest accrued to the date of such payment on the outstanding Loans or L/C
Disbursements of such Lender or the Issuing Bank, respectively, plus all Fees
and other amounts accrued for the account of such Lender or the Issuing Bank
hereunder (including any amounts under Section 2.14 and Section 2.20); provided
further that, if prior to any such transfer and assignment the circumstances or
event that resulted in such Lender's or the Issuing Bank's claim for
compensation under Section 2.14 or notice under Section 2.15 or the amounts paid
pursuant to Section 2.20, as the case may be, cease to cause such Lender or the
Issuing Bank to suffer increased costs or reductions in amounts received or
receivable or reduction in return on capital, or cease to have the consequences
specified in Section 2.15, or cease to result in amounts being payable under
Section 2.20, as the case may be (including as a result of any action taken by
such Lender or the Issuing Bank pursuant to paragraph (b) below), or if such
Lender or the Issuing Bank shall waive its right to claim further compensation
under Section 2.14 in respect of such circumstances or event or shall withdraw
its notice under Section 2.15 or shall waive its right to further payments under
Section 2.20 in respect of such circumstances or event, as the case may be, then
such Lender or the Issuing Bank shall not thereafter be required to make any
such transfer and assignment hereunder.
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(b) If (i) any Lender or the Issuing Bank shall request compensation under
Section 2.14, (ii) any Lender or the Issuing Bank delivers a notice described in
Section 2.15 or (iii) the Borrower is required to pay any amount to any Lender,
the Issuing Bank or any Governmental Authority on account of any Lender or the
Issuing Bank, pursuant to Section 2.20, then such Lender or the Issuing Bank
shall use reasonable efforts (which shall not require such Lender or the Issuing
Bank to incur an unreimbursed loss or unreimbursed cost or expense or otherwise
take any action inconsistent with its internal policies or legal or regulatory
restrictions or suffer any disadvantage or burden deemed by it to be
significant) (x) to file any certificate or document reasonably requested in
writing by the Borrower or (y) to assign its rights and delegate and transfer
its obligations hereunder to another of its offices, branches or affiliates, if
such filing or assignment would reduce its claims for compensation under Section
2.14 or enable it to withdraw its notice pursuant to Section 2.15 or would
reduce amounts payable pursuant to Section 2.20, as the case may be, in the
future. The Borrower hereby agrees to pay all reasonable costs and expenses
incurred by any Lender or the Issuing Bank in connection with any such filing or
assignment, delegation and transfer.
SECTION 2.22. Letters of Credit. (a) General. The Borrower may request the
issuance of Letters of Credit for its own account, at any time and from time to
time while the Revolving Credit Commitments remain in effect, to support
obligations (other than trade payables) incurred by the Borrower and the
Subsidiaries in the ordinary course of their businesses. Each Letter of Credit
will be in a form reasonably acceptable to the Administrative Agent and the
Issuing Bank. This Section shall not be construed to impose an obligation upon
the Issuing Bank to issue any Letter of Credit that is inconsistent with the
terms and conditions of this Agreement.
(b) Notice of Issuance; Certain Conditions. In order to request the
issuance of a Letter of Credit, the Borrower shall hand deliver or telecopy to
the Issuing Bank and the Administrative Agent (reasonably in advance of the
requested date of issuance) a notice requesting the issuance of a Letter of
Credit and setting forth the date of issuance, the date on which such Letter of
Credit is to expire (which shall comply with paragraph (c) below), the amount of
such Letter of Credit, the name and address of the beneficiary thereof and such
other information as shall be necessary to prepare such Letter of Credit. A
Letter of Credit shall be issued only if, and upon issuance of each Letter of
Credit the Borrower shall be deemed to represent and warrant that, after giving
effect to such issuance (A) the L/C Exposure shall not exceed $25,000,000 and
(B) the Aggregate Revolving Credit Exposure shall not exceed the Total Revolving
Credit Commitment.
(c) Expiration Date. Each Letter of Credit shall expire at the close of
business on the earlier of the date one year after the date of the issuance of
such Letter of Credit and the date that is five Business Days prior to the
Revolving Credit Maturity Date, unless such Letter of Credit expires by its
terms on an earlier date.
(d) Participations. By the issuance of a Letter of Credit and without any
further action on the part of the Issuing Bank or the Lenders, the Issuing Bank
hereby grants to each Revolving Credit Lender, and each such Lender hereby
acquires from the Issuing Bank, a participation in such Letter of Credit equal
to such Lender's Pro Rata Percentage of the aggregate amount available to be
drawn under such Letter of Credit, effective upon the issuance of such Letter of
Credit. In consideration and in furtherance of the foregoing, each Revolving
Credit Lender hereby irrevocably, absolutely and unconditionally agrees to pay
to the Administrative Agent, for the account of the Issuing Bank, such Lender's
Pro Rata Percentage of each L/C Disbursement made by the Issuing Bank and not
reimbursed by the Borrower forthwith on the date due as provided in Section
2.02(f). Each Revolving Credit Lender acknowledges and agrees that its
obligation to acquire participations pursuant to this paragraph in respect of
Letters of Credit is irrevocable, absolute and unconditional and shall not be
affected by any circumstance whatsoever, including the occurrence and
continuance of a Default or an Event of Default or the termination of the
Revolving Credit Commitments, and that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever.
(e) Reimbursement. If the Issuing Bank shall make any L/C Disbursement in
respect of a Letter of Credit, the Borrower shall pay to the Administrative
Agent an amount equal to such L/C
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Disbursement not later than two hours after the Borrower shall have received
notice from the Issuing Bank that payment of such draft will be made, or, if the
Borrower shall have received such notice later than 10:00 a.m., New York City
time, on any Business Day, not later than 10:00 a.m., New York City time, on the
immediately following Business Day.
(f) Obligations Absolute. The Borrower's obligations to reimburse L/C
Disbursements as provided in paragraph (e) above shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement, under any and all circumstances whatsoever,
and irrespective of:
(i) any lack of validity or enforceability of any Letter of Credit
or any Loan Document, or any term or provision therein;
(ii) any amendment or waiver of or any consent to departure from all
or any of the provisions of any Letter of Credit or any Loan Document;
(iii) the existence of any claim, setoff, defense or other right that
the Borrower, any other party guaranteeing, or otherwise obligated with,
the Borrower, any Subsidiary or other Affiliate thereof or any other person
may at any time have against the beneficiary under any Letter of Credit,
the Issuing Bank, the Administrative Agent or any Lender or any other
person, whether in connection with this Agreement, any other Loan Document
or any other related or unrelated agreement or transaction;
(iv) any draft or other document presented under a Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in any respect or
any statement therein being untrue or inaccurate in any respect;
(v) payment by the Issuing Bank under a Letter of Credit against
presentation of a draft or other document that does not comply with the
terms of such Letter of Credit; and
(vi) any other act, or omission to act, or delay of any kind of the
Issuing Bank, the Lenders, the Administrative Agent or any other person or
any other event or circumstance whatsoever, whether or not similar to any
of the foregoing, that might, but for the provisions of this Section,
constitute a legal or equitable discharge of the Borrower's obligations
hereunder.
Without limiting the generality of the foregoing, it is expressly
understood and agreed that the absolute and unconditional obligation of the
Borrower hereunder to reimburse L/C Disbursements will not be excused by the
gross negligence or wilful misconduct of the Issuing Bank. However, the
foregoing shall not be construed to excuse the Issuing Bank from liability to
the Borrower to the extent of any direct damages (as opposed to consequential
damages, claims in respect of which are hereby waived by the Borrower to the
extent permitted by applicable law) suffered by the Borrower that are caused by
the Issuing Bank's gross negligence or wilful misconduct in determining whether
drafts and other documents presented under a Letter of Credit comply with the
terms thereof; it is understood that the Issuing Bank may accept documents that
appear on their face to be in substantial compliance with the terms of a Letter
of Credit, without responsibility for further investigation, and make payment
under such Letter of Credit, unless, in the Issuing Bank's judgment, it has
received information that proves any such documents to be forged or fraudulent;
provided that the Issuing Bank shall not be liable in any respect for any error
made as a result of, or damages resulting from, the exercise of its judgment
with regard to any such documents if such judgment is made in good faith. The
parties hereto expressly agree that (i) the Issuing Bank's exclusive reliance on
the documents presented to it under such Letter of Credit as to any and all
matters set forth therein, including reliance on the amount of any draft
presented under such Letter of Credit, whether or not the amount due to the
beneficiary thereunder equals the amount of such draft and whether or not any
document presented pursuant to such Letter of Credit proves to be insufficient
in any respect, if such document on its face appears to be in substantial
compliance with the terms of a Letter of Credit, and whether or not any other
statement or any other document presented pursuant to such Letter of Credit
proves to be forged, fraudulent or invalid or any statement therein
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39
proves to be inaccurate or untrue in any respect whatsoever and (ii) any
noncompliance in any immaterial respect of the documents presented under such
Letter of Credit with the terms thereof shall, in each case, be deemed not to
constitute wilful misconduct or gross negligence of the Issuing Bank.
(g) Disbursement Procedures. The Issuing Bank shall, promptly following
its receipt thereof, examine all documents purporting to represent a demand for
payment under a Letter of Credit. The Issuing Bank shall as promptly as
possible give telephonic notification, confirmed by telecopy, to the
Administrative Agent and the Borrower of such demand for payment and whether the
Issuing Bank has made or will make an L/C Disbursement thereunder; provided that
any failure to give or delay in giving such notice shall not relieve the
Borrower of its obligation to reimburse the Issuing Bank and the Revolving
Credit Lenders with respect to any such L/C Disbursement. The Administrative
Agent shall promptly give each Revolving Credit Lender notice thereof.
(h) Interim Interest. If the Issuing Bank shall make any L/C Disbursement
in respect of a Letter of Credit, then, unless the Borrower shall reimburse such
L/C Disbursement in full on such date, the unpaid amount thereof shall bear
interest for the account of the Issuing Bank, for each day from and including
the date of such L/C Disbursement, to but excluding the earlier of the date of
payment by the Borrower or the date on which interest shall commence to accrue
thereon as provided in Section 2.02(f), at the rate per annum that would apply
to such amount if such amount were an ABR Loan.
(i) Resignation or Removal of the Issuing Bank. The Issuing Bank may
resign at any time by giving 180 days' prior written notice to the
Administrative Agent, the Lenders and the Borrower, and may be removed at any
time by the Borrower by notice to the Issuing Bank, the Administrative Agent and
the Lenders. Subject to the next succeeding paragraph, upon the acceptance of
any appointment as the Issuing Bank hereunder by a Lender that shall agree to
serve as a successor Issuing Bank, such successor shall succeed to and become
vested with all the interests, rights and obligations of the retiring Issuing
Bank and the retiring Issuing Bank shall be discharged from its obligations to
issue additional Letters of Credit hereunder. At the time such removal or
resignation shall become effective, the Borrower shall pay all accrued and
unpaid fees pursuant to Section 2.05(c)(ii). The acceptance of any appointment
as the Issuing Bank hereunder by a successor Lender shall be evidenced by an
agreement entered into by such successor, in a form satisfactory to the Borrower
and the Administrative Agent, and, from and after the effective date of such
agreement, (i) such successor Lender shall have all the rights and obligations
of the previous Issuing Bank under this Agreement and the other Loan Documents
and (ii) references herein and in the other Loan Documents to the term "Issuing
Bank" shall be deemed to refer to such successor or to any previous Issuing
Bank, or to such successor and all previous Issuing Banks, as the context shall
require. After the resignation or removal of the Issuing Bank hereunder, the
retiring Issuing Bank shall remain a party hereto and shall continue to have all
the rights and obligations of an Issuing Bank under this Agreement and the other
Loan Documents with respect to Letters of Credit issued by it prior to such
resignation or removal, but shall not be required to issue additional Letters of
Credit.
(j) Cash Collateralization. If any Event of Default shall occur and be
continuing, the Borrower shall, on the Business Day it receives notice from the
Administrative Agent or the Required Lenders (or, if the maturity of the Loans
has been accelerated, Revolving Credit Lenders holding participations in
outstanding Letters of Credit representing greater than 50% of the aggregate
undrawn amount of all outstanding Letters of Credit) thereof and of the amount
to be deposited, deposit in an account with the Collateral Agent, for the
benefit of the Revolving Credit Lenders, an amount in cash equal to the L/C
Exposure as of such date. Such deposit shall be held by the Collateral Agent as
collateral for the payment and performance of the Obligations. The Collateral
Agent shall have exclusive dominion and control, including the exclusive right
of withdrawal, over such account. Other than any interest earned on the
investment of such deposits in Permitted Investments, which investments shall be
made at the option and sole discretion of the Collateral Agent, such deposits
shall not bear interest. Interest or profits, if any, on such investments shall
accumulate in such account. Moneys in such account shall (i) automatically be
applied by the Administrative Agent to reimburse the Issuing Bank for L/C
Disbursements for which it has not been reimbursed, (ii) be held for the
satisfaction of the reimbursement obligations of the Borrower for the L/C
Exposure at such time and (iii) if the maturity
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of the Loans has been accelerated (but subject to the consent of Revolving
Credit Lenders holding participations in outstanding Letters of Credit
representing greater than 50% of the aggregate undrawn amount of all outstanding
Letters of Credit), be applied to satisfy the Obligations. If the Borrower is
required to provide an amount of cash collateral hereunder as a result of the
occurrence of an Event of Default, such amount (to the extent not applied as
aforesaid) shall be returned to the Borrower within three Business Days after
all Events of Default have been cured or waived.
ARTICLE III
Representations and Warranties
Each of the Parent and the Borrower represents and warrants to the
Administrative Agent, the Issuing Bank and each of the Lenders that:
SECTION 3.01. Organization; Powers. The Parent, the Borrower and each of
the Subsidiaries (a) is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization, (b) has
all requisite power and authority, and all requisite licenses and permits from
the FCC and other Governmental Authorities, to own its property and assets and
to carry on its business as now conducted and as proposed to be conducted, (c)
is qualified to do business, and is in good standing, in every jurisdiction
where such qualification is required, except, as set forth on Schedule 3.01,
where the failure so to qualify could not reasonably be expected to result in a
Material Adverse Effect, and (d) has the corporate power and authority to
execute, deliver and perform its obligations under each of the Loan Documents
and each other agreement or instrument contemplated hereby to which it is or
will be a party and, in the case of the Borrower, to borrow hereunder.
SECTION 3.02. Authorization. The Transactions (a) have been duly
authorized by all requisite corporate and, if required, stockholder action and
(b) will not (i) violate (A) any material provision of law, statute, rule or
regulation, or of the certificate or articles of incorporation or other
constitutive documents or by-laws of the Parent, the Borrower or any of the
Subsidiaries, (B) any order of any Governmental Authority or (C) any provision
of any indenture, or any material agreement or other instrument, to which the
Parent, the Borrower or any of the Subsidiaries is a party or by which any of
them or any of their property is or may be bound, (ii) be in conflict with,
result in a breach of or constitute (alone or with notice or lapse of time or
both) a default under, or give rise to any right to accelerate or to require the
prepayment, repurchase or redemption of any obligation under any such indenture,
agreement or other instrument or (iii) result in the creation or imposition of
any Lien upon or with respect to any property or assets now owned or hereafter
acquired by the Parent, the Borrower or any of the Subsidiaries (other than any
Lien created hereunder or under the Security Documents). Schedule 3.02
discloses certain agreements which, if not for the consummation of the
Transactions, would be violated.
SECTION 3.03. Enforceability. This Agreement has been duly executed and
delivered by the Parent and the Borrower and constitutes, and each other Loan
Document when executed and delivered by each Loan Party thereto will constitute,
a legal, valid and binding obligation of the Parent or the Borrower or such Loan
Party enforceable against the Parent or the Borrower or such Loan Party in
accordance with its terms subject to the limitations set forth on Schedule 3.03.
SECTION 3.04. Governmental Approvals. No action, consent or approval of,
registration or filing with or any other action by any Governmental Authority is
or will be required in connection with the Transactions, except for (a) the
filing of Uniform Commercial Code financing statements (including filings under
the Uniform Commercial Code as adopted in the Commonwealth of Puerto
Rico) and filings with the United States Patent and Trademark Office and the
United States Copyright Office, (b) such as have been or will at the Closing
Date have been made or obtained and are or will at the Closing Date be in full
force and effect, (c) such as may be required pursuant to any bank regulatory or
other requirement applicable to the Administrative Agent, the Collateral Agent,
any Lender or any of their
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41
respective Affiliates and (d) such as by their nature are to be made on or after
the Closing Date and the failure to make or complete which prior to the Closing
Date will not have a material adverse impact on the Closing Date Transactions or
on the rights or interests of the Lenders.
SECTION 3.05. Financial Statements. (a) The Borrower has heretofore
furnished to the Lenders (i) consolidated and consolidating balance sheets and
statements of operations and consolidated statements of cash flow and
stockholders' equity of the Company (A) as of the end of and for each fiscal
year in the three-fiscal year period ended December 31, 1997, audited, in the
case of such consolidated financial statements, by Deloitte & Touche LLP,
independent public accountants and (B) as of the end of and for the fiscal
quarter ended March 31, 1998 and the corresponding quarter of the immediately
preceding fiscal year, certified by a Financial Officer of the Company. Such
financial statements present fairly the financial condition and results of
operations and cash flows of the Company and its consolidated Subsidiaries as of
such dates and for such periods. Such balance sheets and the notes thereto
disclose all material liabilities, direct or contingent, of the Company and its
consolidated Subsidiaries as of the dates thereof. Such financial statements
were prepared in accordance with GAAP applied on a consistent basis.
(b) The Borrower has heretofore delivered to the Lenders its unaudited pro
forma consolidated balance sheets and statements of operations as of the end of
and for the fiscal year ended December 31, 1997, and as of the fiscal quarter
ended and for the twelve months ended March 31, 1998, prepared giving effect to
the Closing Date Transactions as if they had occurred on each such date and at
the beginning of each such period. Both the financial statements referred to in
the first sentence of this Section 3.05(b) and the Pro Forma Financial
Information have been prepared in good faith by the Borrower, based on the best
information available to the Borrower as of the date of delivery thereof . The
Pro Forma Financial Information , subject to the assumptions set forth therein
(which assumptions are believed by the Borrower to be reasonable), accurately
reflects all adjustments required to be made to give effect to the Closing Date
Transactions and presents fairly on a pro forma basis the estimated consolidated
financial condition and results of operations of the Borrower and its
consolidated Subsidiaries as of the dates and for the periods set forth therein,
assuming that the Closing Date Transactions had actually occurred at such dates
and at the beginnings of such periods.
SECTION 3.06. No Material Adverse Change. Since the date of the most recent
financial statements referred to in Section 3.05, except as set forth on
Schedule 3.06, there has occurred or become known no event, condition or change
in or affecting the Parent and the Subsidiaries or the Company and its
subsidiaries that, individually or in the aggregate with other such events,
conditions or changes, has had or could reasonably be expected to have a
Material Adverse Effect.
SECTION 3.07. Title to Properties; Possession Under Leases. (a) Except as
set forth on Schedule 3.07, the Parent, the Borrower and each of the
Subsidiaries has good and marketable title to, or valid leasehold interests in,
all its material properties and assets (including the Collateral), except for
minor defects in title that do not interfere with its ability to conduct its
business as currently conducted or to utilize such properties and assets for
their intended purposes. All such material properties and assets are free and
clear of Liens, other than Liens expressly permitted by Section 6.02.
(b) Except as set forth in Schedule 3.07, (i) each of the Parent, the
Borrower and each Subsidiary has complied with all material obligations under
all material leases to which it is a party and all such leases are in full force
and effect and (ii) each of the Parent, the Borrower and each Subsidiary enjoys
peaceful and undisturbed possession under all such material leases to which it
is a party.
SECTION 3.08. Subsidiaries. Schedule 3.08 sets forth as of the Closing
Date, after giving effect to the Merger, a list of all Subsidiaries and the
ownership interest of the Parent, the Borrower and each other Subsidiary
therein. The shares of capital stock or other ownership interests so indicated
on Schedule 3.08 are fully paid and non-assessable and are owned by the persons
indicated on such Schedule, free and clear of all Liens.
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42
SECTION 3.09. Litigation; Compliance with Laws. (a) Except as set forth on
Schedule 3.09, there are not any actions, suits or proceedings at law or in
equity or by or before any Governmental Authority now pending or, to the
knowledge of the Parent or the Borrower, threatened against the Parent, the
Borrower or any of the Subsidiaries or any business, property or rights of any
such person (i) that involve any Loan Document or the Closing Date Transactions,
(ii) as to which there is a reasonable possibility of an adverse determination
and that, if adversely determined, could reasonably be expected, individually or
in the aggregate, to result in a Material Adverse Effect, (iii) that could
materially and adversely effect the ability of the Loan Parties to fully and
timely perform their respective obligations under the Loan Documents or the
other documents executed in connection with the Transactions or the ability of
the parties to consummate the Transactions or (iv) that have or would have,
individually or in the aggregate, a reasonable likelihood of restraining,
preventing or imposing burdensome conditions on the Transactions.
(b) The Parent, the Borrower and each Subsidiary is in compliance with all
laws, regulations, consent decrees and orders of any Governmental Authority
applicable to it (including, without limitation, the Federal Communications Act
and the regulations thereunder, employee health and safety laws and
Environmental Laws) or its property and all indentures, agreements and other
instruments binding upon it or its property, except where the failure to comply,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect. No Default has occurred and is continuing.
SECTION 3.10. Agreements. None of the Parent, the Borrower or any of the
Subsidiaries is in default in any manner under any provision of any indenture or
other material agreement or instrument evidencing Indebtedness, or any other
material agreement or instrument to which it is a party or by which it or any of
its properties or assets are or may be bound, where such default could
reasonably be expected to result in a Material Adverse Effect.
SECTION 3.11. Federal Reserve Regulations. (a) None of the Parent, the
Borrower or any of the Subsidiaries is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
buying or carrying Margin Stock.
(b) No part of the proceeds of any Loan or any Letter of Credit will be
used, whether directly or indirectly, and whether immediately, incidentally or
ultimately, for any purpose that entails a violation of, or that is inconsistent
with, the provisions of the Regulations of the Board, including Regulation U or
X.
SECTION 3.12. Investment Company Act; Public Utility Holding Company Act.
None of the Parent, the Borrower or any of the Subsidiaries is (a) an
"investment company" as defined in, or subject to regulation under, the
Investment Company Act of 1940 or (b) a "holding company" as defined in, or
subject to regulation under, the Public Utility Holding Company Act of 1935.
SECTION 3.13. Use of Proceeds. The Borrower will use the proceeds of the
Loans and will request the issuance of Letters of Credit only for the purposes
specified in the preamble to this Agreement.
SECTION 3.14. Tax Returns. Each of the Parent, the Borrower and the
Subsidiaries has filed or caused to be filed all Federal, state, local and
foreign income tax returns and all other material Federal, state, local and
foreign tax returns required to have been filed by it and has paid or caused to
be paid all taxes due and payable by it and all assessments received by it,
except taxes that are being contested in good faith by appropriate proceedings
and for which the Parent, the Borrower or such Subsidiary, as applicable, shall
have set aside on its books adequate reserves. Schedule 3.14 discloses an audit
of the Company's tax returns currently being conducted by the Internal Revenue
Service.
SECTION 3.15. No Material Misstatements. None of (a) the Confidential
Information Memorandum or (b) any other written or formally presented
information, report, financial statement, exhibit, schedule or document
furnished by or on behalf of the Parent, the Borrower or the Sponsors to
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43
the Administrative Agent or any Lender in connection with the negotiation of any
Loan Document or included therein or delivered pursuant thereto, in each case as
updated from time to time, contained, contains or will contain at the time it
was or is so furnished any material misstatement of fact or omitted, omits or
will omit at such time to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were, are
or will be made, not misleading; provided that to the extent any such
information, report, financial statement, exhibit, schedule or document was
based upon or constituted a forecast or projection, the Parent and the Borrower
represent only that they and the Sponsors acted in good faith and utilized what
such persons believed to be reasonable assumptions at the time it was prepared
and due care in the preparation of such information, report, financial
statement, exhibit or schedule.
SECTION 3.16. Employee Benefit Plans. Each of the Parent, the Borrower and
their ERISA Affiliates is in compliance in all material respects with the
applicable provisions of ERISA and the Code and the regulations and published
interpretations thereunder. No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other such ERISA Events,
could reasonably be expected to result in material liability of the Parent, the
Borrower or any of their ERISA Affiliates. The present value of all benefit
liabilities under each Plan (based on those assumptions used to fund such Plan)
did not, as of the last annual valuation date applicable thereto, exceed the
fair market value of the assets of such Plan, and the present value of all
benefit liabilities of all underfunded Plans (based on those assumptions used to
fund each such Plan) did not, as of the last annual valuation dates applicable
thereto, exceed the fair market value of the assets of all such underfunded
Plans.
SECTION 3.17. Environmental Matters. Except as set forth in Schedule 3.17,
to the knowledge of the Borrower, the Parent and the Subsidiaries:
(a) The properties owned, leased or operated by the Parent, the Borrower
and the Subsidiaries (the "Properties") do not contain any Hazardous Materials
in amounts or concentrations which (i) constitute, or constituted a violation
of, (ii) require Remedial Action under, or (iii) could reasonably be expected to
give rise to liability under, Environmental Laws, which violations, Remedial
Actions and liabilities, in the aggregate, could result in a Material Adverse
Effect;
(b) The Properties and all operations of the Parent, the Borrower and the
Subsidiaries are in compliance, and in the last five years have been in
compliance, with all Environmental Laws and all necessary Environmental Permits
have been obtained and are in effect, except to the extent that such non-
compliance or failure to obtain any necessary permits, in the aggregate, could
not result in a Material Adverse Effect;
(c) There have been no Releases or threatened Releases at, from, under or
proximate to the Properties or otherwise in connection with the operations of
the Parent, the Borrower or the Subsidiaries, which Releases or threatened
Releases, in the aggregate, could result in a Material Adverse Effect;
(d) None of the Parent, the Borrower or any of the Subsidiaries has
received any notice of an Environmental Claim in connection with the Properties
or the operations of the Parent, the Borrower or the Subsidiaries or with regard
to any person whose liabilities for environmental matters the Parent, the
Borrower or the Subsidiaries has retained or assumed, in whole or in part,
contractually, by operation of law or otherwise, which, in the aggregate, could
result in a Material Adverse Effect, nor do the Parent, the Borrower or the
Subsidiaries have reason to believe that any such Environmental Claim is being
threatened; and
(e) Hazardous Materials have not been transported from the Properties, and
have not been generated, treated, stored or disposed of at, on or under any of
the Properties, in any case in a manner that could give rise to liability under
any Environmental Law, nor have the Parent, the Borrower or the Subsidiaries
retained or assumed any liability, contractually, by operation of law or
otherwise, with respect to the generation, treatment, storage or disposal of
Hazardous Materials, which transportation, generation, treatment, storage or
disposal, or retained or assumed liabilities, in the aggregate, could result in
a Material Adverse Effect.
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44
SECTION 3.18. Insurance. Schedule 3.18 sets forth a true, complete and
correct description of all insurance maintained by the Parent, the Borrower or
the Subsidiaries as of the date hereof and, as updated to the Closing Date, as
of the Closing Date. As of each such date, such insurance is in full force and
effect and all premiums have been duly paid. The Parent, the Borrower and the
Subsidiaries have insurance in such amounts and covering such risks and
liabilities as are in accordance with normal industry practice.
SECTION 3.19. Security Documents. (a) The Pledge Agreement is effective to
create in favor of the Collateral Agent, for the ratable benefit of the Secured
Parties, a legal, valid and enforceable security interest in the Collateral (as
defined in the Pledge Agreement), and when the Collateral is delivered to the
Collateral Agent the Pledge Agreement will constitute a fully perfected first
priority Lien on and security interest in all right, title and interest of each
pledgor thereunder in such Collateral, in each case prior and superior in right
to any other person.
(b) The Security Agreement is effective to create in favor of the
Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid
and enforceable security interest in the Collateral (as defined in the Security
Agreement), and when financing statements in appropriate form are filed in the
offices specified on Schedule 6 to the Perfection Certificate, the Security
Agreement will constitute a fully perfected (to the extent perfection may be
achieved by filings of financing statements or similar filings in public
offices) Lien on and security interest in all right, title and interest of the
grantors thereunder in such Collateral (other than the Intellectual Property, as
defined in the Security Agreement), in each case prior and superior in right to
any other person, other than with respect to Liens expressly permitted by
Section 6.02.
(c) When the Security Agreement is filed in the United States Patent and
Trademark Office and the United States Copyright Office, the Security Agreement
will constitute a fully perfected (to the extent perfection may be achieved by
filing in such offices) Lien on, and security interest in, all right, title and
interest of the grantors thereunder in the Intellectual Property (as defined in
the Security Agreement), in each case prior and superior in right to any other
person (it being understood that subsequent recordings in the United States
Patent and Trademark Office and the United States Copyright Office may be
necessary to perfect a lien on registered trademarks, trademark applications and
copyrights acquired by the grantors after the date hereof).
(d) On the Closing Date, after giving effect to the Closing Date
Transactions, and at all times thereafter, the Collateral Requirement and the
Guarantee Requirement will have been satisfied.
(e) The foregoing provisions of this Section 3.19 are qualified in their
entirety by this Section 3.19(e). An amendment to the certificate of
incorporation (the "Charter Amendment") of the Puerto Rican Subsidiary was filed
with the State Department of the Commonwealth of Puerto Rico on July 9, 1998
(the "Filing Date"). Once the Charter Amendment has been processed by the State
Department of the Commonwealth of Puerto Rico it will be effective as of the
Filing Date. The Puerto Rican Subsidiary has issued, and the Borrower has
pledged to the Collateral Agent pursuant to the Pledge Agreement, sixty-five
percent (65%) of the voting shares of the Puerto Rican Subsidiary and one
hundred percent (100%) of the non-voting shares of the Puerto Rican Subsidiary
under the Charter Amendment. Upon the processing of the Charter Amendment by the
State Department of the Commonwealth of Puerto Rico this Section 3.19(e) shall
be of no effect and the representations and warranties of the Parent and the
Borrower with respect to shares in the Puerto Rican Subsidiary shall be as set
forth in the remainder of Section 3.19.
SECTION 3.20. Intellectual Property. The Borrower and each Subsidiary
owns, or is licensed to use, all trademarks, tradenames, service marks,
copyrights, technology, know-how and processes ("Intellectual Property")
---------------------
necessary for the conduct of its business as currently conducted, except for
those the failure to own or be licensed to use which could not reasonably be
expected to result in a Material Adverse Effect. The use of Intellectual
Property by the Borrower and its Subsidiaries does not infringe on the rights
of, and no Intellectual Property of the Borrower or any of its Subsidiaries is
being infringed upon by, any Person, and no claim is pending or threatened
challenging the use or the validity of any
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45
Intellectual Property of the Borrower or any Subsidiary, except for
infringements and claims that, in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
SECTION 3.21. Station Licenses. Schedule 3.21 accurately and completely
lists as of the date hereof (after giving effect to the Closing Date
Transactions), for each Station, all Station Licenses held by the Borrower or
any of its subsidiaries, or under which the Borrower or any of its subsidiaries
has the right to operate such Station. As of the Closing Date, the Station
Licenses listed on Schedule 3.21 with respect to any Station include all
material authorizations, licenses and permits issued by the FCC that are
required or necessary for the operation of such Station, and the conduct of the
business of the Borrower and its subsidiaries with respect to such Station, as
currently conducted or proposed to be conducted. The Station Licenses listed on
Schedule 3.21(except the Station License owned by the Chicago Subsidiary) (a) in
the case of Station Licenses marked with an asterisk on Schedule 3.21, as of the
Closing Date and (b) in the case of Station Licenses not so marked on Schedule
3.21, as of the 90th day after the Closing Date will be issued in the name of,
or validly assigned to the License Subsidiary for the Station being operated
under authority of such Station Licenses and validly issued and in full force
and effect, and the Borrower and its subsidiaries will have fulfilled and
performed in all material respects their obligations with respect thereto and
have full power and authority to operate thereunder, and, except as described in
Schedule 3.21 hereto, all consents to the transfer of control of the principal
broadcasting licenses and any other material Station Licenses in connection with
the Closing Date Transactions shall have been granted by the FCC; provided that
such consents will not be required to have become final orders.
SECTION 3.22. Labor Matters Except as set forth on Schedule 3.22, as of
the date hereof and the Closing Date, there are no strikes, lockouts or
slowdowns against the Parent, the Borrower or any of the Subsidiaries pending
or, to the knowledge of the Parent or the Borrower, threatened. Except for
violations that could not in the aggregate reasonably be expected to result in a
Material Adverse Effect, the hours worked by and payments made to employees of
the Parent, the Borrower and the Subsidiaries have not been in material
violation of the Fair Labor Standards Act or any other applicable Federal,
state, local or foreign law dealing with such matters. All material payments
due from the Parent, the Borrower or any of the Subsidiaries, or for which any
claim may be made against the Parent, the Borrower or any of the Subsidiaries,
on account of wages and employee health and welfare insurance and other
benefits, have been paid or accrued as a liability on the books of the Parent,
the Borrower or the applicable Subsidiary. The consummation of the Transactions
will not give rise to any right of termination or right of renegotiation on the
part of any union under any collective bargaining agreement to which the Parent,
the Borrower or any of the Subsidiaries is bound.
SECTION 3.23. Solvency. Immediately after the consummation of the Closing
Date Transactions, (i) the fair value of the assets of each Loan Party, at a
fair valuation, will exceed its debts and liabilities, subordinated, contingent
or otherwise; (ii) the present fair saleable value of the property of each Loan
Party will be greater than the amount that will be required to pay its probable
liability on its debts and other liabilities, subordinated, contingent or
otherwise, as such debts and other liabilities become absolute and matured;
(iii) each Loan Party will be able to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured; and (iv) each Loan Party will not have unreasonably small
capital with which to conduct the business in which it is engaged as such
business is now conducted and is proposed to be conducted following the Closing
Date.
SECTION 3.24. Merger Agreement. To the best knowledge of the Parent and
the Borrower, the representations and warranties of the Parent, the Borrower and
the Company set forth in the Merger Agreement are true and correct in all
material respects.
SECTION 3.25. Year 2000. The Parent, the Borrower and the Subsidiaries
have (i) developed plans, utilizing internal resources, to ensure that their
information systems are capable of properly utilizing dates beyond December 31,
1999 (the "Year 2000" issue), (ii) upgraded or replaced many of their accounting
and traffic systems, including the conversion to new software which is Year 2000
compliant and (iii) evaluated their other principal computer systems and
determined that they are
<PAGE>
46
substantially Year 2000 compliant. The Parent, the Borrower and the Subsidiaries
are also seeking to work with their relevant customers, suppliers and other
service providers to ensure that their systems are Year 2000 compliant. Based
upon the information available to it, the Borrower does not believe that the
consequences to it and its subsidiaries of the Year 2000 issue will result in a
Default or a Material Adverse Effect.
ARTICLE IV
Conditions of Lending
The obligations of the Lenders to make Loans and of the Issuing Bank to
issue Letters of Credit hereunder are subject to the satisfaction of the
following conditions:
SECTION 4.01. All Credit Events. On the date of each Borrowing and on the
date of each issuance of a Letter of Credit (each such event being called a
"Credit Event"):
(a) The Administrative Agent shall have received a notice of such
Borrowing as required by Section 2.03 (or such notice shall have been deemed
given in accordance with Section 2.03) or, in the case of the issuance of a
Letter of Credit, the Issuing Bank and the Administrative Agent shall have
received a notice requesting the issuance of such Letter of Credit as required
by Section 2.22(b).
(b) The representations and warranties set forth in Article III shall be
true and correct in all material respects on and as of the date of such Credit
Event with the same effect as though made on and as of such date, except to the
extent such representations and warranties expressly relate to an earlier date.
(c) The Borrower and each other Loan Party shall be in compliance with all
the terms and provisions set forth herein and in each other Loan Document on its
part to be observed or performed, and at the time of and immediately after such
Credit Event, no Event of Default or Default shall have occurred and be
continuing.
Each Credit Event shall be deemed to constitute a representation and
warranty by the Borrower on the date of such Credit Event as to the satisfaction
of the conditions set forth in paragraphs (b) and (c) of this Section 4.01. In
the case of the Credit Events occurring on the Closing Date, the conditions set
forth in paragraphs (b) and (c) of this Section 4.01 shall be construed as
giving effect to the Merger and the other Closing Date Transactions.
SECTION 4.02. Initial Credit Event. On the Closing Date:
(a) The Arrangers and the Administrative Agent shall have received,
on behalf of itself, the Lenders and the Issuing Bank, favorable written
opinions of (i) Osvaldo F. Torres, Esq., General Counsel of the Borrower,
substantially to the effect set forth in Exhibit H-1, (ii) Akin, Gump,
Strauss, Hauer & Feld, L.L.P., special counsel for the Parent and the
Borrower, substantially to the effect set forth in Exhibit H-2, (iii)
McConnell Valdes, Puerto Rican counsel for the Parent and the Borrower,
substantially to the effect set forth in Exhibit H-3 and (iv) Latham &
Watkins, special counsel for the Borrower, substantially to the effect set
forth in Exhibit H-4, in each case dated the Closing Date, addressed to the
Administrative Agent, the Lenders and the Issuing Bank, and covering such
other matters relating to the Loan Documents and the Transactions as the
Arrangers and the Administrative Agent shall reasonably request, and the
Parent and the Borrower hereby request such counsel to deliver such
opinion.
(b) The Arrangers and the Administrative Agent shall have received (i)
a copy of the certificate or articles of incorporation, including all
amendments thereto, of each Loan Party, certified as of a recent date by
the Secretary of State or comparable official of the state or other
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47
jurisdiction of its organization, and, except with respect to jurisdictions
that do not issue such certificates for persons organized in the manner of
such Loan Party, a certificate as to the good standing of each Loan Party
as of a recent date, from such Secretary of State or other official; (ii) a
certificate of the Secretary or Assistant Secretary of each Loan Party
dated the Closing Date and certifying (A) that attached thereto is a true
and complete copy of the by-laws of such Loan Party as in effect on the
Closing Date and at all times since a date prior to the date of the
resolutions described in clause (B) below, (B) that attached thereto is a
true and complete copy of resolutions duly adopted by the Board of
Directors of such Loan Party authorizing the execution, delivery and
performance of the Loan Documents to which such person is a party and, in
the case of the Borrower, the Borrowings hereunder, and that such
resolutions have not been modified, rescinded or amended and are in full
force and effect, (C) that the certificate or articles of incorporation of
such Loan Party have not been amended since the date of the last amendment
thereto shown on the certified copy thereof furnished pursuant to clause
(i) above, and (D) as to the incumbency and specimen signature of each
officer executing any Loan Document or any other document delivered in
connection herewith on behalf of such Loan Party; (iii) a certificate of
another officer as to the incumbency and specimen signature of the
Secretary or Assistant Secretary executing the certificate pursuant to (ii)
above; and (iv) such other documents as the Lenders, the Issuing Bank or
the Arrangers or the Administrative Agent, may reasonably request.
(c) The Arrangers and the Administrative Agent shall have received a
certificate, dated the Closing Date and signed by a Financial Officer of
the Borrower, confirming compliance with the conditions precedent set forth
in paragraphs (b) and (c) of Section 4.01.
(d) The Arrangers and the Administrative Agent shall have received
all Fees and other amounts due and payable on or prior to the Closing Date,
including, to the extent invoiced, reimbursement or payment of all out-of-
pocket expenses required to be reimbursed or paid by the Borrower hereunder
or under any other Loan Document.
(e) The Parent Equity Contribution shall have been or shall
simultaneously be completed; the issued and outstanding Equity Interests of
the Parent shall consist only of common stock of a single class and, if the
Sponsors shall so determine, Rights with respect thereto; Apollo and
Bastion taken together shall own, directly or indirectly, 50.1% of such
common stock (taking into account all Rights on a fully diluted basis), and
Liberty and SPE taken together shall own, directly or indirectly, 49.9% of
such common stock (taking into account all Rights on a fully diluted
basis); and no other person shall own any of such common stock or any
Rights with respect thereto.
(f) The Senior Discount Note Sale shall have been or shall
substantially simultaneously be completed.
(g) The Borrower Equity Contribution shall have been or shall
substantially simultaneously be completed.
(h) The Merger shall have been, or substantially simultaneously with
the initial Credit Event shall be, consummated in accordance with the
Merger Agreement and applicable law, without any amendment to or waiver of
any material terms or conditions of the Merger Agreement not approved by
the Lenders. The Lenders and the Issuing Bank shall have received executed
copies of the Merger Agreement and all certificates, opinions and other
documents delivered in connection therewith, all certified by a Financial
Officer as complete and correct.
(i) The Network Sale shall have been or shall substantially
simultaneously be completed and the Borrower and the Network Company shall
have entered into the Network Affiliation Agreement.
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(j) The Refinancing shall have been or shall substantially
simultaneously be completed; provided that an aggregate principal amount of
the Company's Senior Notes due 2006 acceptable to the Required Lenders may
remain outstanding if (i) the Company or the Borrower shall have made a
tender offer for the purchase of such Notes but such Notes shall not have
been tendered by the holders thereof for purchase by the Company or the
Borrower, (ii) the indenture under which such Notes are outstanding shall
have been amended as contemplated in the Offer to Purchase, and (iii)
either (A) sufficient cash (which may represent the proceeds of Revolving
Loans made hereunder) shall have been or shall simultaneously with the
initial borrowings hereunder be deposited with the trustee for such Notes,
in accordance with the terms of such indenture, to defease all obligations
of the Company to pay the principal thereof and premium and interest
thereon when and as due or (B) the Borrower shall have given irrevocable
instructions to the Administrative Agent that an amount of the Total
Revolving Credit Commitment sufficient to pay the principal of and premium
and interest on such Notes when and as due shall be restricted and made
available to the Borrower (subject to the conditions set forth in this
Article IV) solely for the purpose of discharging such principal, premium
and interest (and the Borrower shall be deemed to have given such
instructions if, at the time of the initial borrowings hereunder, such
Notes shall not be defeased as contemplated in the preceding clause (A)).
(k) Subject only to the processing by the State Department of the
Commonwealth of Puerto Rico of the Charter Amendment (as defined in Section
3.19(e)) of the Puerto Rican Subsidiary, the Collateral Requirement shall
be satisfied, and the capitalization of the Puerto Rican Subsidiary shall
have been restructured so that substantially all the economic interest
therein is represented by the non-voting capital stock thereof. The
Collateral Agent shall have received a Federal Reserve Form U-1 duly
completed and executed by the Borrower demonstrating compliance with
Regulation U of the Board.
(l) The Collateral Agent shall have received the results of a search
of the Uniform Commercial Code (or equivalent) filings made with respect to
the Loan Parties in the states (or other jurisdictions) in which the chief
executive office of each such person is located, any offices of such
persons in which records have been kept relating to accounts receivable and
the other jurisdictions in which Uniform Commercial Code filings (or
equivalent filings) are to be made pursuant to clause (b) of the definition
of "Collateral Requirement", together with copies of the financing
statements (or similar documents) disclosed by such search, and accompanied
by evidence satisfactory to the Collateral Agent that the Liens indicated
in any such financing statement (or similar document) would be permitted
under Section 6.02 or have been released.
(m) The Collateral Agent shall have received a Perfection Certificate
dated the Closing Date and duly executed by a Responsible Officer of the
Borrower.
(n) The Guarantee Requirement shall be satisfied.
(o) All requisite Governmental Authorities (including the FCC and any
antitrust or banking authorities) and third parties shall have approved or
consented to the Transactions to the extent required, in each case to the
extent failure to obtain such approvals or consents could, individually or
in the aggregate, reasonably be expected to result in a Material Adverse
Effect, and there shall be no action by any Governmental Authority, actual
or threatened, that has a reasonable likelihood of materially restraining,
preventing or imposing burdensome conditions on the Transactions or the
other transactions contemplated hereby (it being understood that FCC
approval shall be deemed to have been obtained upon receipt of an initial
favorable ruling from the FCC unless the Arrangers in good faith believe
that it is reasonably uncertain that such initial ruling will become final
and nonappealable).
(p) The Arrangers and the Administrative Agent shall have received an
opinion (and related going-concern valuation) reasonably satisfactory in
all respects to the Arrangers from
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49
Houlihan Lokey Howard & Zukin Inc. as to the solvency of the Parent and the
Subsidiaries on a consolidated basis after giving effect to the Closing
Date Transactions.
(q) The Arrangers and the Administrative Agent shall have received
pro forma computations satisfactory to them indicating that the
Consolidated Leverage Ratio at the end of the most recently ended period of
four fiscal quarters prior to the Closing Date for which financial
statements are available, giving pro forma effect to the Closing Date
Transactions as if they had occurred at the beginning of such period (and
reflecting such adjustments resulting from the Network Sale and the Network
Affiliation Agreement as shall have been reflected in the Pro Forma
Financial Information), shall have been not greater than 7.0 to 1.0.
(r) The Arrangers shall be satisfied that, after giving effect to the
Closing Date Transactions, the Borrower will have not less than $25,000,000
(subject to reduction by the amount of any outstanding principal balance
under the Existing Credit Facility on the Closing Date) of available
Revolving Credit Commitments to provide for its working capital needs.
(s) The terms on which the Closing Date Transactions shall have been
completed and the capitalization (including Indebtedness) of the Parent and
the Borrower after giving effect to the Closing Date Transactions shall be
consistent in all material respects with the pro forma financial statements
and projections provided to the Lenders prior to the date hereof
(including all updates of such projections provided to the Lenders prior to
the date hereof), giving effect to the assumptions on which such
projections are based.
ARTICLE V
Affirmative Covenants
Each of the Borrower and the Parent covenants and agrees with each Lender
that so long as this Agreement shall remain in effect and until the Commitments
have been terminated and the principal of and interest on each Loan, all Fees
and all other expenses or amounts payable under any Loan Document shall have
been paid in full and all Letters of Credit have been canceled or have expired
and all amounts drawn thereunder have been reimbursed in full, unless the
Required Lenders shall otherwise consent in writing, it will, and will cause
each of the Subsidiaries to:
SECTION 5.01. Existence; Businesses and Properties, Insurance. (a) Do or
cause to be done all things necessary to preserve, renew and keep in full force
and effect its legal existence, except as otherwise expressly permitted under
Section 6.05.
(b) Do or cause to be done all things necessary to obtain, preserve,
renew, extend and keep in full force and effect the rights, licenses (including
FCC licenses), permits, franchises, authorizations, patents, copyrights,
trademarks and trade names material to the conduct of its business; maintain and
operate such business in substantially the manner in which it is presently
conducted and operated; comply in all material respects with all applicable
laws, rules, regulations (including any zoning, building, Environmental Law,
ordinance, code or approval) and decrees and orders of any Governmental
Authority, whether now in effect or hereafter enacted; at all times maintain and
preserve all property material to the conduct of such business and keep such
property in good repair, working order and condition and from time to time make,
or cause to be made, all needful and proper repairs, renewals, additions,
improvements and replacements thereto necessary in order that the business
carried on in connection therewith may be properly conducted at all times; and
maintain, with financially sound and reputable insurance companies, insurance in
such amounts and against such risks as are customarily maintained by companies
engaged in the same or similar businesses operating in the same or similar
locations.
SECTION 5.02. Obligations and Taxes. Pay its material Indebtedness and
other material obligations promptly and in accordance with their terms and pay
and discharge promptly when due all
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50
taxes, assessments and governmental charges or levies imposed upon it or upon
its income or profits or in respect of its property, before the same shall
become delinquent or in default, as well as all lawful claims for labor,
materials and supplies or otherwise that, if unpaid, might give rise to a Lien
upon such properties or any part thereof; provided, however, that (a) such
payment and discharge shall not be required with respect to any such tax,
assessment, charge, levy or claim so long as the validity or amount thereof
shall be contested in good faith by appropriate proceedings and the Borrower
shall have set aside on its books adequate reserves with respect thereto in
accordance with GAAP and such contest operates to suspend collection of the
contested obligation, tax, assessment or charge and enforcement of a Lien and
(b) in the event the Borrower shall fail to make any payment required to be made
by it under this Section solely as a result of the blockage by the Collateral
Agent pursuant to Section 5(b) of the Pledge Agreement of dividends that would
otherwise have been paid by Subsidiaries, no further Event of Default shall
result from such failure.
SECTION 5.03. Financial Statements, Reports, etc. In the case of the Parent
and the Borrower, furnish to the Administrative Agent and each Lender:
(a) within 90 days after the end of each fiscal year, consolidated
balance sheets and related statements of operations, cash flows and
stockholders' equity showing the financial condition of the Parent and the
Borrower and their consolidated subsidiaries as of the close of such fiscal
year and the results of their operations and the operations of such
subsidiaries during such year and (with the exception of fiscal years prior
to 1999) the immediately preceding year, all audited by Deloitte & Touche
LLP or other independent public accountants of recognized national standing
acceptable to the Required Lenders and accompanied by an opinion of such
accountants (which shall not be qualified in any material respect) to the
effect that such consolidated financial statements fairly present in all
material respects the financial condition and results of operations of the
Parent and the Borrower and their consolidated subsidiaries on a
consolidated basis in accordance with GAAP;
(b) within 60 days after the end of each of the first three fiscal
quarters of each fiscal year, consolidated balance sheets and related
statements of operations, cash flows and stockholders' equity showing the
financial condition of the Parent and the Borrower and their consolidated
subsidiaries as of the close of such fiscal quarter and the results of
their operations and the operations of such subsidiaries during such fiscal
quarter and the then elapsed portion of the fiscal year and during the
corresponding periods in the immediately preceding fiscal year (with the
exception of fiscal years prior to 1999), all certified by a Financial
Officer of the Borrower as fairly presenting in all material respects the
financial condition and results of operations of the Parent and the
Borrower and their consolidated subsidiaries on a consolidated basis in
accordance with GAAP, subject to normal year-end audit adjustments;
(c) within 60 days after the end of each fiscal quarter of each fiscal
year, a management report in form satisfactory to the Administrative Agent
setting forth the consolidating revenues of the Parent and the Borrower and
their consolidated subsidiaries for such quarter, the operating income
before depreciation and amortization for each Station during such quarter
and a summary report of the most recent Nielsen ratings available for such
Stations;
(d) concurrently with any delivery of financial statements under
paragraph (a) or (b) above, a certificate of the accounting firm or
Financial Officer opining on or certifying such statements (which
certificate, when furnished by an accounting firm, may be limited to
accounting matters and disclaim responsibility for legal interpretations
and, when furnished by a Financial Officer, may be qualified as being to
the knowledge of such Financial Officer) (i) certifying that no Event of
Default or Default has occurred or, if such an Event of Default or Default
has occurred, specifying the nature and extent thereof and any corrective
action taken or proposed to be taken with respect thereto and (ii) setting
forth computations in reasonable detail satisfactory to the Administrative
Agent demonstrating compliance with the financial covenants contained in
Article VI;
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51
(e) concurrently with each delivery of financial statements under
paragraph (a) above, beginning with the financial statements for the fiscal
year ending December 31, 1999, a certificate of a Financial Officer in form
and detail satisfactory to the Administrative Agent setting forth a
calculation of Excess Cash Flow for the fiscal year to which such
statements relate;
(f) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by
the Parent, the Borrower or any of the Subsidiaries with the Securities and
Exchange Commission, or any Governmental Authority succeeding to any or all
of the functions of said Commission, or with any national securities
exchange;
(g) promptly following their submission with the FCC or any other
Federal, state or local Governmental Authority, copies of any and all
periodic or special reports filed by the Parent or any of the Subsidiaries,
if such reports indicate any material adverse change in the business,
operations or financial condition of the Parent or any of the Subsidiaries
or if copies thereof are requested by any Lender or the Administrative
Agent, and copies of any and all material notices and other material
communications from the FCC or from any other Federal, state or local
Governmental Authority with respect to the Parent or any of the
Subsidiaries or any Station; and
(h) promptly, from time to time, such other information regarding the
operations, business affairs and financial condition of the Parent, the
Borrower or any of the Subsidiaries, or compliance with the terms of any
Loan Document, as the Administrative Agent or any Lender may reasonably
request.
SECTION 5.04. Litigation and Other Notices. Furnish to the Administrative
Agent prompt written notice of the following:
(a) any Event of Default or Default, specifying the nature and extent
thereof and the corrective action (if any) taken or proposed to be taken
with respect thereto;
(b) the filing or commencement of, or any threat or notice of
intention of any person to file or commence, any action, suit or
proceeding, whether at law or in equity or by or before any Governmental
Authority, against the Parent, the Borrower or any Affiliate thereof that
could reasonably be expected to result in a Material Adverse Effect;
(c) the loss, suspension or material impairment of any FCC license
that is a full power station license or low power station license, or any
other material license, approval, certification or authorization granted by
any Governmental Authority; and
(d) any other development that in the judgment of the Borrower is
materially likely to result in a Material Adverse Effect.
SECTION 5.05. Employee Benefits. (a) Comply in all material respects with
the applicable provisions of ERISA and the Code and (b) furnish to the
Administrative Agent as soon as possible after, and in any event within 10 days
after any Responsible Officer of the Borrower or any ERISA Affiliate knows or
has reason to know that, any ERISA Event has occurred that, alone or together
with any other ERISA Events that have occurred could reasonably be expected to
result in liability of the Parent, the Borrower and/or the Subsidiaries in an
aggregate amount exceeding $5,000,000 or requiring payments exceeding
$1,000,000 in any year, a statement of a Financial Officer of the Borrower
setting forth details as to such ERISA Event and the action, if any, that the
Borrower proposes to take with respect thereto.
SECTION 5.06. Maintaining Records; Access to Properties and Inspections.
Keep proper books of record and account in which full, true and correct entries
in conformity with GAAP and all requirements of law are made of all dealings and
transactions in relation to its business and activities.
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52
Subject to the provisions of Section 10.16, each Loan Party will, and will cause
each of the Subsidiaries to, permit any representatives designated by the
Administrative Agent or any Lender to visit and inspect the financial records
and the properties of the Parent, the Borrower or any of the Subsidiaries at
reasonable times and as often as reasonably requested and to make extracts from
and copies of such financial records, and permit any representatives designated
by the Administrative Agent or any Lender to discuss the affairs, finances and
condition of the Parent, the Borrower or any of the Subsidiaries with the
officers thereof and independent accountants therefor.
SECTION 5.07. Use of Proceeds. Use the proceeds of the Loans and request
the issuance of Letters of Credit only for the purposes set forth in the
preamble to this Agreement.
SECTION 5.08. Compliance with Environmental Laws. Comply, and cause all
lessees and other persons occupying its properties to comply, in all material
respects with all Environmental Laws and Environmental Permits applicable to its
operations and properties; obtain and renew all Environmental Permits necessary
for its operations and properties; and conduct any Remedial Action in accordance
with Environmental Laws; provided, however, that none of the Parent, the
Borrower or any of the Subsidiaries shall be required to undertake any
compliance or Remedial Action, nor shall the failure to undertake any such
compliance or Remedial Action constitute a Default, to the extent that its
obligation to do so is being contested in good faith and by proper proceedings
and appropriate reserves are being maintained with respect to such
circumstances.
SECTION 5.09. Further Assurances. (a) Execute any and all further
documents, financing statements, agreements and instruments, and take all
further action (including filing Uniform Commercial Code and other financing
statements) that may be required under applicable law, or that the Required
Lenders, the Administrative Agent or the Collateral Agent may reasonably
request, in order to cause the Guarantee Requirement and the Collateral
Requirement to be satisfied at all times.
(b) From time to time, at the request of the Administrative Agent or the
Required Lenders, take all such actions as the Collateral Agent shall reasonably
specify (taking into account all relevant factors, including the potential tax
consequences of any proposed action) to create and perfect Liens on any
properties or assets of the Parent, the Borrower or the Subsidiaries (other than
the Chicago Subsidiary and the Puerto Rican Subsidiary) that have substantial
value and are not subject to the Liens created by the Security Documents to
secure the Obligations.
SECTION 5.10. Hedging Arrangements. The Borrower will enter into, not
later than the 45th day following the Closing Date, and will thereafter maintain
in effect for a period of not less than two years, one or more Hedging
Agreements on customary terms the effect of which is to limit the weighted
average effective interest rate applicable to 50% of the initial principal
amount of the Term Loans to a rate not greater than 10% per annum.
ARTICLE VI
Negative Covenants
Each of the Borrower and the Parent covenants and agrees with each Lender
that, so long as this Agreement shall remain in effect and until the Commitments
have been terminated and the principal of and interest on each Loan, all Fees
and all other expenses or amounts payable under any Loan Document have been paid
in full and all Letters of Credit have been canceled or have expired and all
amounts drawn
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53
thereunder have been reimbursed in full, unless the Required Lenders shall
otherwise consent in writing, it will not, and will not cause or permit any of
the Subsidiaries to:
SECTION 6.01. Indebtedness. Incur, create, assume or permit to exist any
Indebtedness, except:
(a) Indebtedness for borrowed money existing on the date hereof and
set forth in Schedule 6.01;
(b) Indebtedness created hereunder and under the other Loan Documents;
(c) the Senior Discount Notes;
(d) Indebtedness of the Borrower to any Wholly Owned Subsidiary and of
any Wholly Owned Subsidiary (other than a License Subsidiary) to the
Borrower or any other Wholly Owned Subsidiary;
(e) Guarantees by the Borrower of the Indebtedness of any Wholly Owned
Subsidiary;
(f) Indebtedness consisting of obligations of Telemundo of Chicago,
Inc. and Video 44 Acquisition Corp., Inc., each a Wholly Owned Subsidiary,
existing on the date hereof under the Chicago Subsidiary Partnership
Agreement;
(g) Indebtedness of the Borrower or any of its subsidiaries (other
than a License Subsidiary) consisting of (i) Capital Lease Obligations and
(ii) purchase money obligations in respect of real property or equipment,
in either case incurred in the ordinary course of business after the
Closing Date, and extensions, renewals and replacements of such Capital
Lease Obligations or purchase money obligations; provided that the
aggregate principal amount of the Capital Lease Obligations, purchase money
obligations and extensions, renewals and replacements thereof incurred
pursuant to this clause (g) and outstanding at any time shall not exceed
$15,000,000;
(h) Subordinated Indebtedness of the Borrower or the Parent not
prohibited by any other provision of this Agreement;
(i) Indebtedness of the Borrower created under Hedging Agreements
required under Section 5.10 or entered into in the ordinary course of
business to hedge or mitigate risks to which the Borrower or any Subsidiary
is exposed in the conduct of its business or the management of its
liabilities;
(j) obligations that constitute Indebtedness incurred, assumed or
guaranteed in the ordinary course of business under any Local Marketing
Agreement; provided, that the outstanding principal amount of any
Indebtedness incurred, assumed or guaranteed by the Parent, the Borrower or
any Subsidiary pursuant to any Local Marketing Agreement, together with the
aggregate amount of investments referred to in Section 6.04(g), shall not
exceed $10,000,000 at any time;
(k) Indebtedness of any subsidiary of the Borrower that existed at the
time such person became a subsidiary of the Borrower and that were not
incurred in contemplation of the acquisition by the Borrower or a
Subsidiary of such person;
(l) Indebtedness in respect of bid, performance and surety bonds
furnished by the Borrower and its subsidiaries in the ordinary course of
business;
(m) Extensions, renewals and replacements of Indebtedness permitted
under clauses (a), (c), (f) and (k) above to the extent the principal
amount of such Indebtedness is not increased, the weighted average life to
maturity of such Indebtedness is not decreased, such Indebtedness,
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54
if subordinated to the Obligations, remains so subordinated on terms not
less favorable to the Lenders and the original obligors in respect of such
Indebtedness remain the only obligors thereon; and
(n) other unsecured Indebtedness of the Borrower in an aggregate
principal amount not exceeding $20,000,000.
SECTION 6.02. Liens. Create, incur, assume or permit to exist any Lien on
any property or assets (including stock or other securities of any person,
including any Subsidiary) now owned or hereafter acquired by it or on any income
or revenues or rights in respect thereof, or assign or transfer any such income
or revenues or rights in respect thereof except:
(a) Liens on property or assets existing on the date hereof and set
forth in Schedule 6.02, and renewals, extensions and replacements of such
Liens; provided that such Liens and such extensions, renewals and
replacements shall extend only to those assets to which they extend on the
date hereof and shall secure only those obligations which they secure on
the date hereof;
(b) any Lien created under the Loan Documents;
(c) any Lien existing on any property or asset prior to the
acquisition thereof by the Borrower or any of the Subsidiaries; provided
that (i) such Lien is not created in contemplation of or in connection with
such acquisition and (ii) such Lien does not apply to any other property or
assets of the Parent, the Borrower or any of the Subsidiaries;
(d) Liens for taxes not yet due or which are being contested in
compliance with Section 5.02;
(e) carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business and securing
obligations that are not due and payable or that are being contested in
compliance with Section 5.02;
(f) pledges and deposits made in the ordinary course of business in
compliance with workmen's compensation, unemployment insurance and other
social security laws or regulations;
(g) deposits to secure the performance of bids, trade contracts (other
than for Indebtedness), leases (other than Capital Lease Obligations),
statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(h) zoning restrictions, easements, rights-of-way, restrictions on use
of real property and other similar encumbrances incurred in the ordinary
course of business which, in the aggregate, are not substantial in amount
and do not materially detract from the value of the property subject
thereto or interfere with the ordinary conduct of the business of the
Borrower and the Subsidiaries;
(i) purchase money security interests in real property, improvements
thereto or equipment hereafter acquired (or, in the case of improvements,
constructed) by the Borrower or any of the Subsidiaries securing
Indebtedness permitted under Section 6.01(g); provided that (i) such
security interests secure Indebtedness permitted by Section 6.01, (ii) such
security interests are incurred, and the Indebtedness secured thereby is
created, within 90 days after such acquisition (or construction), (iii) the
Indebtedness secured thereby does not exceed 90% of the lesser of the cost
or the fair market value of such real property, improvements or equipment
at
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55
the time of such acquisition (or construction) and (iv) such security
interests do not apply to any other property or assets of the Parent, the
Borrower or any of the Subsidiaries;
(j) Liens deemed to exist by virtue of the buyout provisions contained
in Sections 6 and 7 of the Chicago Subsidiary Partnership Agreement;
(k) the interests of lessors under Capital Leases permitted under
Section 6.01; and
(l) Liens inadvertently created by the Borrower or any Subsidiary
attaching to assets, and securing obligations, that in the aggregate for
all such assets and obligations are insignificant; provided that any such
Lien is discharged with reasonable promptness after any Responsible Officer
of the Borrower becomes aware of the same.
SECTION 6.03. Sale and Lease-Back Transactions. Enter into any arrangement
(other than facility and service sharing agreements entered into in connection
with the Network Sale), directly or indirectly, with any person whereby it shall
sell or transfer any property, real or personal, used or useful in its business,
whether now owned or hereafter acquired, and thereafter rent or lease such
property or other property which it intends to use for substantially the same
purpose or purposes as the property being sold or transferred.
SECTION 6.04. Investments, Loans and Advances. Purchase, hold or acquire
any capital stock, evidences of Indebtedness or other securities of, make or
permit to exist any loans or advances to, or make or permit to exist any
investment or any other interest in, any other person, except:
(a) investments by the Parent and the Borrower existing on the date
hereof and set forth on Schedule 6.04 or resulting from the Merger;
(b) investments by the Borrower or any Subsidiary in, and loans and
advances by the Borrower or any Subsidiary to, the Borrower or any
Subsidiary;
(c) investments in joint ventures formed by the Borrower or a
Subsidiary and one or more other persons, including joint ventures formed
to develop, own and operate towers, antennae and similar structures to be
used in the businesses of the Borrower or a Subsidiary and such other
persons; provided that the aggregate amount of all such investments
existing at any time shall not exceed $20,000,000;
(d) loans and advances to employees in an aggregate amount outstanding
at any time not to exceed $1,000,000;
(e) investments received in settlement of obligations owed to the
Borrower or any Subsidiary in the ordinary course of business;
(f) deferred purchase price receivables arising out of transactions
entered into in the ordinary course of business by the Borrower or any
Subsidiary;
(g) investments in and loans to (i) persons with which the Borrower or
one or more Subsidiaries have entered into, or have entered into an
agreement giving them the right to enter into, Local Marketing Agreements
and (ii) persons organized pursuant to any such Local Marketing Agreement;
provided, that the aggregate amount of investments, loans and advances
permitted to be made or to exist at any time under this clause (g),
together with the aggregate amount of Indebtedness referred to in Section
6.01(j), shall not exceed $10,000,000;
(h) investments by the Borrower and its subsidiaries in Equity
Interests of persons that, upon the making of such investments, become
Wholly Owned Subsidiaries; provided that (i) if the Consolidated Leverage
Ratio at the most recent fiscal quarter end shall have been greater than or
equal to 3.50 to 1.00, the Borrower and its subsidiaries will not make any
such
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56
investment that would result in the aggregate amount of such investments
exceeding $50,000,000, (ii) the ownership by the Borrower of such persons
is consistent with the requirements of Section 6.08, (iii) no Default
results from the making of any such investment and (iv) prior to the making
of any such investment the Borrower shall have delivered to the
Administrative Agent calculations demonstrating pro forma compliance with
the covenants contained in Sections 6.14, 6.15 and 6.16 as of the end of
and for the most recent period of four fiscal quarters for which financial
statements shall have been delivered pursuant to Section 5.03(a) or (b),
giving effect to such investment and the incurrence of any related
Indebtedness as if they had occurred at the beginning of such period;
(i) in the case of the Borrower or any Subsidiary, Permitted
Investments; and
(j) investments, loans or advances inadvertently made or agreed
to be made by the Borrower or any Subsidiary that in the aggregate for all
such investments, loans and advances are insignificant; provided that any
such investment, loan or advance is eliminated with reasonable promptness
after any Responsible Officer of the Borrower becomes aware of the same.
SECTION 6.05. Mergers, Consolidation and Sales of Assets. Merge into or
consolidate with any other person, or permit any other person to merge into or
consolidate with it, or sell, transfer, lease or otherwise dispose of (in one
transaction or in a series of transactions) all or any substantial part of its
assets (whether now owned or hereafter acquired), or any full power Station or
related broadcast license, or any capital stock of any Subsidiary (other than
any Subsidiary the assets of which are limited to a lower-power Station, the
Station License therefor and assets directly related thereto), or permit any
Subsidiary to issue any shares of its capital stock to any person other than the
Borrower or another Subsidiary, or, except as expressly permitted under Section
6.04, purchase, lease or otherwise acquire (in one transaction or a series of
transactions) all or any substantial part of the assets of any other person,
except that (a) the Borrower and any Subsidiary may complete the Network Sale,
including any adjustments to the assets transferred as part of the Network Sale
in accordance with the Network Sale Agreement, (b) the Borrower and any of the
Subsidiaries may purchase and sell inventory in the ordinary course of business,
(c) if at the time thereof and immediately after giving effect thereto no Event
of Default or Default shall have occurred and be continuing (i) any Subsidiary
(other than a License Subsidiary) may merge into the Borrower in a transaction
in which the Borrower is the surviving corporation, (ii) any Subsidiary (other
than a License Subsidiary that holds a license to broadcast in the continental
United States) may merge into or consolidate with any other Subsidiary in a
transaction in which the surviving entity is a Subsidiary and no person other
than the Borrower or a Subsidiary receives any consideration and (iii) any
License Subsidiary may merge into a newly formed corporation with no assets or
liabilities if (A) the surviving corporation is a License Subsidiary, (B) prior
to such merger the surviving corporation enters into such agreements as the
Administrative Agent reasonably requires assuming the obligations of the
original License Subsidiary under the Loan Documents and (C) immediately after
such merger the Collateral Requirement continues to be satisfied, and (d) the
Borrower or any Subsidiary may sell, transfer or otherwise dispose of assets
constituting all or a substantial part of its assets (including any full power
Station or related broadcast license, or any capital stock of any Subsidiary)
for cash in one or more arm's length transactions so long as (i) the proceeds of
any such sale are held and applied in accordance with the terms of this
Agreement and (ii) after giving effect to such sale, the aggregate amount of the
asset sales made by the Borrower and the Subsidiaries pursuant to this clause
(d) does not exceed $50,000,000 (or, if the Consolidated Leverage Ratio at the
end of the fiscal quarter most recently ended as of the time of such sale shall
be below 5.0 to 1.0, $150,000,000).
SECTION 6.06. Dividends and Distributions; Restrictions on Ability of
Subsidiaries to Pay Dividends. (a) Declare or pay, directly or indirectly, any
dividend or make any other distribution (by reduction of capital or otherwise),
whether in cash, property, securities or a combination thereof, with respect to
any shares of its capital stock or directly or indirectly redeem, purchase,
retire or otherwise acquire for value (or permit any Subsidiary to purchase or
acquire) any shares of any class of its capital stock or set aside any amount
for any such purpose; provided, however, that (i) any Subsidiary may declare and
pay dividends or make other distributions ratably on its Equity Interests, (ii)
the Chicago
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57
Subsidiary may make distributions required to be made under the terms of the
Chicago Subsidiary Partnership Agreement as in effect on the date hereof, (iii)
so long as no Default or Event of Default shall have occurred and be continuing
or would result therefrom, the Parent may purchase employee stock options (or
shares of its capital stock issued or to be issued pursuant to employee stock
options) to the extent such options were granted in the ordinary course of
business and (iv) so long as no Default or Event of Default shall have occurred
and be continuing or would result therefrom, the Borrower will be permitted to
pay cash dividends to the Parent in the amounts and at the times required in
order that the Parent may (x) perform its obligations in respect of interest
payable on the Senior Discount Notes (y) pay taxes in respect of the
consolidated group consisting of the Parent and the Subsidiaries and (z) pay
operating expenses in an amount not to exceed $1,000,000 during any period of
four fiscal quarters.
(b) Permit any Subsidiary, directly or indirectly, to create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any such Subsidiary to (i) pay any dividends or make any other
distributions on its capital stock or any other equity interest or (ii) make or
repay any loans or advances to the Borrower or to any other Subsidiary.
SECTION 6.07. Transactions with Affiliates. Sell or transfer any property
or assets to, or purchase or acquire any property or assets from, or otherwise
engage in any other transactions with, any of its Affiliates (other than the
Borrower or any Subsidiary), except that the Parent, the Borrower or any
Subsidiary may engage in any of the foregoing transactions at prices and on
terms and conditions not less favorable to the Parent, the Borrower or such
Subsidiary than could be obtained on an arm's-length basis from unrelated third
parties. Notwithstanding anything in the foregoing sentence to the contrary,
the Borrower and the Subsidiaries may perform the terms of the Network
Affiliation Agreement.
SECTION 6.08. Business of Parent and Subsidiaries. (a) In the case of the
Parent, own any capital stock or other equity interest in any person other than
the Borrower, or engage at any time in any business or business activity other
than the ownership of the capital stock of the Borrower and activities
reasonably related thereto.
(b) In the case of the Borrower and its subsidiaries, engage at any time
in any business or business activity other than the ownership and operation of
Spanish language television stations and business activities reasonably related
thereto; provided, that the Borrower and its subsidiaries may engage in the
ownership and operation of other Spanish language media and business activities
reasonably related thereto so long as the assets employed in or related to all
activities referred to in this proviso account for less than 10% of the
consolidated assets of the Borrower; provided further that the Borrower and its
subsidiaries may continue to own their interest in Conus Communications, L.P., a
Minnesota Limited Partnership.
SECTION 6.09. Amendment of Material Documents. (a) Amend, modify or waive
in any material respect the Stockholders' Agreement, the Network Affiliation
Agreement, the Senior Discount Note Indenture or any instrument or document
governing Indebtedness with an outstanding principal balance in excess of
$25,000,000 if any such amendment, modification or waiver, taken together with
any related amendments, modifications or waivers, could reasonably be expected
to be materially adverse to the Parent or the Borrower or to the rights or
interests of the Lenders.
(b) Cause or permit the termination of any Affiliation Agreement between
the Network Company and any full power Station entered into pursuant to the
Network Affiliation Agreement, which termination could reasonably be expected to
result in a Material Adverse Effect (excluding from clause (b) of the definition
of Material Adverse Effect, however, the validity or enforceability of such
terminated Affiliation Agreement), which determination shall be made by the
Required Lenders.
SECTION 6.10. Prepayments, Redemptions and Repurchases of Debt. (a) Make
any payment, whether in cash, property, securities or a combination thereof in
respect of, or pay, or offer or commit to pay, or otherwise directly or
indirectly redeem, repurchase, retire or otherwise acquire for consideration or
defease, any Indebtedness for borrowed money or Capital Lease Obligation (other
than Indebtedness under the Loan Documents, any of the Company's Senior Notes
due 2006 not acquired by
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the Company in connection with the Refinancing and intercompany Indebtedness) of
the Parent, the Borrower or any of the Subsidiaries, or set apart any sum for
the aforesaid purposes, except that the Borrower and the Subsidiaries may make
scheduled or mandatory payments of principal, interest or Capital Lease
Obligations as and when due (to the extent not prohibited by applicable
subordination provisions).
(b) Prepay, redeem, repurchase, retire or otherwise acquire for
consideration or defease the Puerto Rican Notes or any principal amount thereof;
provided that the Puerto Rican Notes may be prepaid if the Borrower in good
faith determines such prepayment to be advisable in the conduct of its business.
SECTION 6.11. Collateral and Guarantee Requirements. Take any action that
would result in the Collateral Requirement or the Guarantee Requirement not
being satisfied; provided, that the Borrower may transfer assets used by its
Puerto Rican Station from the Domestic Subsidiary in which they are held at the
Closing Date if (a) such assets shall be transferred to either (i) the Puerto
Rican Subsidiary or (ii) a newly formed Puerto Rican subsidiary of the Borrower,
(b) 65% of the voting capital stock and 100% of the non-voting capital stock of
any such newly formed Puerto Rican subsidiary shall have been pledged to the
Collateral Agent pursuant to the Pledge Agreement and substantially all the
equity interest in such Puerto Rican subsidiary shall be represented by the
shares of its non-voting capital stock and (c) such assets shall be held in a
corporate structure reasonably satisfactory to the Collateral Agent.
SECTION 6.12. Fiscal Year. Change the end of its fiscal year from December
31 to any other date.
SECTION 6.13. Certain Changes in Ownership or Control. Permit any change
to occur in the ownership or control of the Parent that (a) would violate the
foreign ownership provisions of the Federal Communications Act, the FCC's cross-
interest regulations or any other provisions of the Federal Communications Act
or FCC regulations and (b) could reasonably be expected, in the judgment of the
Arrangers or the Required Lenders, to result in (i) the required divestiture of
any Station or any other material assets of the Borrower and its subsidiaries,
(ii) material restrictions on the operation of the business of the Borrower, any
material subsidiary of the Borrower or any full-power Station, (iii) a material
adverse effect on any full-power Station License or (iv) any other consequence
that would materially and adversely affect the Borrower or the rights or
interests of the Lenders.
SECTION 6.14. Consolidated Leverage Ratio. Permit the Consolidated
Leverage Ratio at any time during any period beginning on a date set forth below
and ending on the day immediately preceding the next such date to be in excess
of the ratio set forth below opposite such initial date:
Date Ratio
---- -----
September 30, 1998 7.00
December 31, 1998 7.00
March 31, 1999 7.00
June 30, 1999 7.00
September 30, 1999 7.00
December 31, 1999 7.00
March 31, 2000 6.75
June 30, 2000 6.50
September 30, 2000 6.25
December 31, 2000 6.00
March 31, 2001 5.50
June 30, 2001 5.00
September 30, 2001 5.00
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59
December 31, 2001 4.50
March 31, 2002 4.50
June 30, 2002 4.50
September 30, 2002 4.50
December 31, 2002 4.50
Each quarter end thereafter 4.50
SECTION 6.15. Consolidated Interest Expense Coverage Ratio. Permit the
Consolidated Interest Expense Coverage Ratio for any four-fiscal-quarter period
ending on any date set forth below to be less than the ratio set forth below
opposite such date.
Date Ratio
---- -----
December 31, 1998 1.60
March 31, 1999 1.60
June 30, 1999 1.60
September 30, 1999 1.60
December 31, 1999 1.60
March 31, 2000 1.70
June 30, 2000 1.80
September 30, 2000 1.80
December 31, 2000 1.80
March 31, 2001 2.00
June 30, 2001 2.00
September 30, 2001 2.25
December 31, 2001 2.25
March 31, 2002 2.25
June 30, 2002 2.25
September 30, 2002 2.25
December 31, 2002 2.25
Each quarter end thereafter 2.25
SECTION 6.16. Consolidated Fixed Charge Coverage Ratio. Permit the
Consolidated Fixed Charge Coverage Ratio for any four-fiscal-quarter period
ending on any date set forth below to be less than the ratio set forth below
opposite such date.
Date Ratio
---- -----
December 31, 1998 1.00
March 31, 1999 1.00
June 30, 1999 1.00
September 30, 1999 1.00
December 31, 1999 1.00
March 31, 2000 1.05
June 30, 2000 1.05
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60
September 30, 2000 1.05
December 31, 2000 1.05
March 31, 2001 1.10
June 30, 2001 1.10
September 30, 2001 1.15
December 31, 2001 1.15
March 31, 2002 1.15
June 30, 2002 1.15
September 30, 2002 1.15
December 31, 2002 1.15
Each quarter end thereafter 1.15
ARTICLE VII
Events of Default
In case of the happening of any of the following events ("Events of
Default"):
(a) any representation or warranty made or deemed made in or in
connection with any Loan Document or the Borrowings or issuances of Letters
of Credit hereunder, or any representation, warranty, statement or
information made, deemed made or furnished in connection with or pursuant
to any Loan Document shall prove to have been false or misleading in any
material respect when so made, deemed made or furnished;
(b) default shall be made in the payment of any principal of any Loan
or any reimbursement with respect to any L/C Disbursement when and as the
same shall become due and payable, whether at the due date thereof or at a
date fixed for prepayment thereof or by acceleration thereof or otherwise;
(c) default shall be made in the payment of any interest on any Loan
or L/C Disbursement or of any Fee or any other amount (other than an amount
referred to in (b) above) due under any Loan Document, when and as the same
shall become due and payable, and such default shall continue unremedied
for a period of three Business Days;
(d) default shall be made in the due observance or performance by the
Parent, the Borrower or any of the Subsidiaries of any covenant, condition
or agreement contained in Section 5.01(a) (insofar as such default relates
to the Parent or the Borrower), 5.04 or 5.07 or in Article VI (and, in the
case of any default under Section 6.02 that results from the imposition of
a non-consensual Lien and does not involve significant assets of the
Parent, the Borrower or any Subsidiary, such default shall continue
unremedied for a period of 30 days after the Parent, the Borrower or any
Subsidiary obtains knowledge thereof);
(e) default shall be made in the due observance or performance by the
Parent, the Borrower or any of the Subsidiaries of any covenant, condition
or agreement contained in any Loan Document (other than those specified in
(b), (c) or (d) above) and such default shall continue unremedied for a
period of 30 days after notice thereof from the Administrative Agent or any
Lender to the Borrower;
(f) (i) the Parent, the Borrower or any of the Subsidiaries shall
fail to pay any principal or interest due in respect of any Indebtedness in
a principal amount in excess of $5,000,000, when and as the same shall
become due and payable, or (ii) the Parent, the Borrower or any of the
Subsidiaries shall fail to observe or perform any other term, covenant,
condition or agreement
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61
contained in any agreement or instrument evidencing or governing any such
Indebtedness, or any other event or condition shall occur, if the effect of
any failure or other event or condition referred to in this clause (ii) is
to cause, or to permit the holder or holders of such Indebtedness or a
trustee on its or their behalf to cause, such Indebtedness to become due or
to be required to be repurchased or redeemed prior to its stated maturity;
(g) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i)
relief in respect of the Parent, the Borrower or any of the Subsidiaries,
or of a substantial part of the property or assets of the Parent, the
Borrower or a Subsidiary, under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other Federal, state or foreign
bankruptcy, insolvency, receivership or similar law, (ii) the appointment
of a receiver, trustee, custodian, sequestrator, conservator or similar
official for the Parent, the Borrower or any of the Subsidiaries or for a
substantial part of the property or assets of the Parent, the Borrower or a
Subsidiary or (iii) the winding-up or liquidation of the Parent, the
Borrower or any of the Subsidiaries; and such proceeding or petition shall
continue undismissed for 60 days or an order or decree approving or
ordering any of the foregoing shall be entered;
(h) the Parent, the Borrower or any of the Subsidiaries shall (i)
voluntarily commence any proceeding or file any petition seeking relief
under Title 11 of the United States Code, as now constituted or hereafter
amended, or any other Federal, state or foreign bankruptcy, insolvency,
receivership or similar law, (ii) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or the filing of
any petition described in (g) above, (iii) apply for or consent to the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Parent, the Borrower or any of the Subsidiaries or
for a substantial part of the property or assets of the Parent, the
Borrower or any of the Subsidiaries, (iv) file an answer admitting the
material allegations of a petition filed against it in any such proceeding,
(v) make a general assignment for the benefit of creditors, (vi) become
unable, admit in writing its inability or fail generally to pay its debts
as they become due or (vii) take any action for the purpose of effecting
any of the foregoing;
(i) one or more judgments for the payment of money in an aggregate
amount in excess of $5,000,000 in the aggregate shall be rendered against
the Parent, the Borrower, any of the Subsidiaries or any combination
thereof and the same shall remain undischarged for a period of 30
consecutive days during which execution shall not be effectively stayed, or
any action shall be legally taken by a judgment creditor to levy upon
assets or properties of the Parent, the Borrower or any of the Subsidiaries
to enforce any such judgment;
(j) an ERISA Event shall have occurred that, in the opinion of the
Required Lenders, when taken together with all other such ERISA Events,
could reasonably be expected to result in liability of the Parent, the
Borrower and its ERISA Affiliates in an aggregate amount exceeding
$5,000,000 or to require payments exceeding $3,000,000 in any year;
(k) any Guarantee purported to be created hereunder or under the
Subsidiary Guarantee Agreement shall cease to be, or shall be asserted by
any Loan Party not to be, a valid and enforceable Guarantee of the
Obligations, or any security interest purported to be created by any
Security Document shall cease to be, or shall be asserted by any Loan Party
not to be, a valid, perfected, first priority (except as otherwise
expressly provided in this Agreement or such Security Document) security
interest in the securities, assets or properties covered thereby, except to
the extent that any such loss of perfection or priority results from the
failure of the Collateral Agent to maintain possession of certificates
representing securities pledged under the Pledge Agreement;
(l) any Station License held by the Borrower or any Subsidiary with
respect to any full power Station shall have been terminated, shall not
have been renewed prior to the expiration thereof or shall have been
renewed on terms materially adverse to the holder thereof, or any full
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62
power Station shall fail to maintain a substantially continuous broadcast
signal for a period of more than five days (or 10 days if such failure
relates to the conversion of such Station to digital television);
(m) there shall have occurred a Change in Control; or
(n) The group consisting of (i) Liberty and SPE and their respective
Controlled Affiliates taken together, (ii) any person all of the Equity
Interests in which are owned by Liberty and SPE and their respective
Controlled Affiliates taken together, and (iii) any person a majority of
the Equity Interests in which are owned by Liberty and SPE and their
respective wholly owned Controlled Affiliates taken together shall not own,
directly or indirectly, Equity Interests representing at least 50% of the
equity and aggregate ordinary voting power represented by the outstanding
Equity Interests of the Network Company;
then, and in every such event (other than an event with respect to the Parent or
the Borrower described in paragraph (g) or (h) above), and at any time
thereafter during the continuance of such event, the Administrative Agent may,
and at the request of the Required Lenders shall, by notice to the Borrower,
take either or both of the following actions, at the same or different times:
(i) terminate forthwith the Commitments and (ii) declare the Loans then
outstanding to be forthwith due and payable in whole or in part, whereupon the
principal of the Loans so declared to be due and payable, together with accrued
interest thereon and any unpaid accrued Fees and all other liabilities of the
Borrower accrued hereunder and under any other Loan Document, shall become
forthwith due and payable, without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived by the Borrower,
anything contained herein or in any other Loan Document to the contrary
notwithstanding; and in any event with respect to the Parent or the Borrower
described in paragraph (g) or (h) above, the Commitments shall automatically
terminate and the principal of the Loans then outstanding, together with accrued
interest thereon and any unpaid accrued Fees and all other liabilities of the
Borrower accrued hereunder and under any other Loan Document, shall
automatically become due and payable, without presentment, demand, protest or
any other notice of any kind, all of which are hereby expressly waived by the
Borrower, anything contained herein or in any other Loan Document to the
contrary notwithstanding.
ARTICLE VIII. THE AGENTS
In order to expedite the transactions contemplated by this Agreement,
Credit Suisse First Boston is hereby appointed to act as Administrative Agent
and Collateral Agent on behalf of the Lenders and the Issuing Bank (for purposes
of this Article VIII, the Administrative Agent and the Collateral Agent are
referred to collectively as the "Agents"). Each of the Lenders and each
assignee of any such Lender hereby irrevocably authorizes the Agents to take
such actions on behalf of such Lender or assignee or the Issuing Bank and to
exercise such powers as are specifically delegated to the Agents by the terms
and provisions hereof and of the other Loan Documents, together with such
actions and powers as are reasonably incidental thereto. The Administrative
Agent is hereby expressly authorized by the Lenders and the Issuing Bank,
without hereby limiting any implied authority, (a) to receive on behalf of the
Lenders and the Issuing Bank all payments of principal of and interest on the
Loans, all payments in respect of L/C Disbursements and all other amounts due to
the Lenders hereunder, and promptly to distribute to each Lender or the Issuing
Bank its proper share of each payment so received; (b) to give notice on behalf
of each of the Lenders to the Borrower of any Event of Default specified in this
Agreement of which the Administrative Agent has actual knowledge acquired in
connection with its agency hereunder; and (c) to distribute to each Lender
copies of all notices, financial statements and other materials delivered by the
Parent, the Borrower or any other Loan Party pursuant to this Agreement or the
other Loan Documents as received by the Administrative Agent. Without limiting
the generality of the foregoing, the Agents are hereby expressly authorized to
execute any and all documents (including
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63
releases) with respect to the Collateral and the rights of the Secured Parties
with respect thereto, as contemplated by and in accordance with the provisions
of this Agreement and the Security Documents.
Neither the Agents nor any of their respective directors, officers,
employees or agents shall be liable as such for any action taken or omitted by
any of them except for its or his own gross negligence or wilful misconduct, or
be responsible for any statement, warranty or representation herein or the
contents of any document delivered in connection herewith, or be required to
ascertain or to make any inquiry concerning the performance or observance by the
Borrower or any other Loan Party of any of the terms, conditions, covenants or
agreements contained in any Loan Document. The Agents shall not be responsible
to the Lenders for the due execution, genuineness, validity, enforceability or
effectiveness of this Agreement or any other Loan Documents, instruments or
agreements. The Agents shall in all cases be fully protected in acting, or
refraining from acting, in accordance with written instructions signed by the
Required Lenders and, except as otherwise specifically provided herein, such
instructions and any action or inaction pursuant thereto shall be binding on all
the Lenders. Each Agent shall, in the absence of knowledge to the contrary, be
entitled to rely on any instrument or document believed by it in good faith to
be genuine and correct and to have been signed or sent by the proper person or
persons. Neither the Agents nor any of their respective directors, officers,
employees or agents shall have any responsibility to the Parent, the Borrower or
any other Loan Party on account of the failure of or delay in performance or
breach by any Lender or the Issuing Bank of any of its obligations hereunder or
to any Lender or the Issuing Bank on account of the failure of or delay in
performance or breach by any other Lender or the Issuing Bank or the Parent, the
Borrower or any other Loan Party of any of their respective obligations
hereunder or under any other Loan Document or in connection herewith or
therewith. Each of the Agents may execute any and all duties hereunder by or
through agents or employees and shall be entitled to rely upon the advice of
legal counsel selected by it with respect to all matters arising hereunder and
shall not be liable for any action taken or suffered in good faith by it in
accordance with the advice of such counsel.
The Lenders hereby acknowledge that neither Agent shall be under any duty
to take any discretionary action permitted to be taken by it pursuant to the
provisions of this Agreement unless it shall be requested in writing to do so by
the Required Lenders.
Subject to the appointment and acceptance of a successor Agent as provided
below, either Agent may resign at any time by notifying the Lenders and the
Borrower. Upon any such resignation, the Required Lenders shall have the right
to appoint a successor. If no successor shall have been so appointed by the
Required Lenders and shall have accepted such appointment within 30 days after
the retiring Agent gives notice of its resignation, then the retiring Agent may,
on behalf of the Lenders, appoint a successor Agent which shall be a bank with
an office in New York, New York, having a combined capital and surplus of at
least $500,000,000 or an Affiliate of any such bank. Upon the acceptance of any
appointment as Agent hereunder by a successor bank, such successor shall succeed
to and become vested with all the rights, powers, privileges and duties of the
retiring Agent and the retiring Agent shall be discharged from its duties and
obligations hereunder. After the Agent's resignation hereunder, the provisions
of this Article and Section 10.05 shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting as
Agent.
With respect to the Loans made by it hereunder, each Agent in its
individual capacity and not as Agent shall have the same rights and powers as
any other Lender and may exercise the same as though it were not an Agent, and
the Agents and their Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with the Borrower or any of the
Subsidiaries or other Affiliate thereof as if it were not an Agent.
Each Lender agrees (a) to reimburse the Agents, on demand, in the amount of
its pro rata share (based on the amount of its Loans and available commitments
hereunder) of any expenses incurred for the benefit of the Lenders by the
Agents, including reasonable counsel fees and compensation of agents and
employees paid for services rendered on behalf of the Lenders, that shall not
have been reimbursed by the Borrower and (b) to indemnify and hold harmless each
Agent and any of its directors, officers, employees or agents, on demand, in the
amount of such pro rata share, from and against any and all
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64
liabilities, taxes, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever that
may be imposed on, incurred by or asserted against it in its capacity as Agent
or any of them relating to or arising out of this Agreement or any other Loan
Document or action taken or omitted by it or any of them under this Agreement or
any other Loan Document, to the extent the same shall not have been reimbursed
by the Borrower or any other Loan Party; provided that no Lender shall be liable
to an Agent or any such other indemnified person for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements that are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or wilful misconduct of such Agent or any of its directors, officers,
employees or agents. Each Revolving Credit Lender agrees to reimburse each of
the Issuing Bank and its directors, officers, employees and agents, in each
case, to the same extent and subject to the same limitations as provided above
for the Agents.
Each Lender acknowledges that it has, independently and without reliance
upon the Agents or any other Lender and based on such documents and information
as it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement. Each Lender also acknowledges that it will, independently
and without reliance upon the Agents or any other Lender and based on such
documents and information as it shall from time to time deem appropriate,
continue to make its own decisions in taking or not taking action under or based
upon this Agreement or any other Loan Document, any related agreement or any
document furnished hereunder or thereunder.
Each Lender acknowledges and agrees that the Documentation Agent will have
no duties or responsibilities hereunder or under the other Loan Documents.
ARTICLE IX. GUARANTEE
To induce the Lenders to make the Loans and the Issuing Bank to issue
Letters of Credit, the Parent hereby unconditionally and irrevocably guarantees,
as a primary obligor and not merely as a surety, the due and punctual payment
and performance of all the Obligations. Each and every default in payment of the
principal of and premium, if any, or interest on any Obligation shall give rise
to a separate cause of action hereunder, and separate suits may be brought
hereunder as each cause of action arises.
The Parent waives presentation to, demand of payment from and protest
to the Borrower of any of the Obligations, and also waives notice of acceptance
of this Guarantee and notice of protest for nonpayment and all other
formalities. The obligations of the Parent hereunder shall not be discharged or
impaired or otherwise affected by (a) the failure or delay of any Secured Party
to assert any claim or demand or to enforce any right or remedy against any Loan
Party under the provisions of any Loan Document or otherwise; (b) any extension
or renewal of any of the Obligations; (c) any rescission, waiver, amendment or
modification of, or any release from, any of the terms or provisions of any Loan
Document, any guarantee or any other agreement or instrument; (d) the release of
(or the failure to perfect a security interest in) any security held by any
Secured Party for the performance of the Obligations or any of them; (e) the
failure or delay of any Secured Party to exercise any right or remedy against
any other guarantor of the Obligations; (f) the failure of any Secured Party to
assert any claim or demand or to enforce any remedy under any Loan Document, any
guarantee or any other agreement or instrument; (g) any default, failure or
delay, wilful or otherwise, in the performance of the Obligations; or (h) any
other act, omission or delay to do any other act which may or might in any
manner or to any extent vary the risk of the Parent or otherwise operate as a
discharge of the Parent as a matter of law or equity or which would impair or
eliminate any right of the Parent to subrogation.
The Parent further agrees that this Guarantee constitutes a guarantee
of payment when due and not of collection, and waives any right to require that
any resort be had by any Secured Party to any security held for payment of the
Obligations or to any balance of any deposit account or credit on the books of
any Secured Party in favor of the Borrower or any other person.
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65
The obligations of the Parent hereunder shall not be subject to any
reduction, limitation, impairment or termination for any reason, including any
claim of waiver, release, surrender, alteration or compromise, and shall not be
subject to any defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality or unenforceability of the
Obligations or otherwise.
The Parent further agrees that this Guarantee shall continue to be
effective or be reinstated, as the case may be, if at any time any payment, or
any part thereof, on any Obligation is rescinded or must otherwise be restored
by any Secured Party upon the bankruptcy or reorganization of the Borrower or
otherwise.
In furtherance of the foregoing and not in limitation of any other
right which any Secured Party may have at law or in equity against the Parent by
virtue hereof, upon the failure of the Borrower to pay any Obligation when and
as the same shall become due, whether at maturity, by acceleration, after notice
of prepayment or otherwise, the Parent hereby promises to and will, upon receipt
of written demand by any Lender, forthwith pay, or cause to be paid, to the
Administrative Agent for distribution to the Secured Parties in cash an amount
equal to the sum of (i) the unpaid principal amount of such Obligations then
due, (ii) accrued and unpaid interest and fees on such Obligations and (iii) all
other monetary Obligations then due.
Upon payment by the Parent of any sums to the Secured Parties
hereunder, all rights of the Parent against the Borrower arising as a result
thereof shall in all respects be subordinate and junior in right of payment to
the prior indefeasible payment in full of all the Obligations and, if any
payment shall be made to the Parent on account of such rights prior to the
indefeasible payment in full of all the Obligations, such payment shall
forthwith be paid to the Administrative Agent to be credited and applied against
the Obligations to the extent necessary to discharge such Obligations. Upon
payment by the Parent of the sums to the Administrative Agent hereunder, subject
to the indefeasible payment in full of all the Obligations, the Parent shall be
subrogated to the rights of the Secured Parties to receive payments of the
Obligations.
The Parent waives notice of and hereby consents to any agreements or
arrangements whatsoever by the Secured Parties with any other person pertaining
to the Obligations, including agreements and arrangements for payment,
extension, subordination, composition, arrangement, discharge or release of the
whole or any part of the Obligations, or for the discharge or surrender of any
or all security, or for compromise, whether by way of acceptance of part payment
or otherwise, and the same shall in no way impair the Parent's liability
hereunder. Nothing shall discharge or satisfy the liability of the Parent
hereunder except the full performance and payment of the Obligations.
Each reference herein to any Secured Party shall be deemed to include
their or its successors and assigns, in whose favor the provisions of this
Guarantee shall also inure.
ARTICLE X
Miscellaneous
SECTION 10.01. Notices. Notices and other communications provided for
herein and in the other Loan Documents shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(a) if to the Borrower, to it at Telemundo Group, Inc., 2290 West
8th Avenue, Hialeah, FL 33010, Attention: Peter J. Housman II, CFO and
Treasurer (Fax No. (305)-889-7997), with a copy to Telemundo Group,
Inc., 2290 West 8th Avenue, Hialeah, FL 33010, Attention: Osvaldo F.
Torres, Vice President, General Counsel and Secretary (Fax No. (305)
889-7980);
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(b) if to the Administrative Agent, to Credit Suisse First Boston,
Eleven Madison Avenue, New York, NY 10010, Attention of Jonathan Satran
(Fax No. (212) 325-8304); and
(c) if to a Lender, to it at its address (or telecopy number) set
forth on Schedule 2.01 or in the Assignment and Acceptance pursuant to
which such Lender shall have become a party hereto.
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if delivered by hand or overnight courier service or sent by
telecopy or on the date five Business Days after dispatch by certified or
registered mail if mailed, in each case delivered, sent or mailed (properly
addressed) to such party as provided in this Section 10.01 or in accordance with
the latest unrevoked direction from such party given in accordance with this
Section 10.01; provided, that each notice under Article II will be delivered by
hand or overnight courier service or sent by telecopy.
SECTION 10.02. Survival of Agreement. All covenants, agreements,
representations and warranties made by the Parent, the Borrower and the
Subsidiaries herein and in the certificates or other instruments prepared or
delivered in connection with or pursuant to this Agreement or any other Loan
Document shall be considered to have been relied upon by the Lenders and the
Issuing Bank and shall survive the making by the Lenders of the Loans and the
issuance of Letters of Credit by the Issuing Bank, regardless of any
investigation made by the Lenders or the Issuing Bank or on their behalf, and
shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or any Fee or any other amount payable under this
Agreement or any other Loan Document is outstanding and unpaid or any Letter of
Credit is outstanding and so long as the Commitments have not been terminated.
The provisions of Sections 2.14, 2.16, 2.20, 10.05 and 10.16 shall remain
operative and in full force and effect regardless of the expiration of the term
of this Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the expiration of the Commitments, the
expiration of any Letter of Credit, the invalidity or unenforceability of any
term or provision of this Agreement or any other Loan Document, or any
investigation made by or on behalf of the Administrative Agent, the Collateral
Agent, any Lender or the Issuing Bank.
SECTION 10.03. Binding Effect. This Agreement shall become effective when
it shall have been executed by the Borrower and the Administrative Agent and
when the Administrative Agent shall have received counterparts hereof which,
when taken together, bear the signatures of each of the other parties hereto,
and thereafter shall be binding upon and inure to the benefit of the parties
hereto and their respective permitted successors and assigns.
SECTION 10.04. Successors and Assigns. (a) Whenever in this Agreement any
of the parties hereto is referred to, such reference shall be deemed to include
the permitted successors and assigns of such party; and all covenants, promises
and agreements by or on behalf of the Parent, the Borrower, the Administrative
Agent, the Issuing Bank or the Lenders that are contained in this Agreement
shall bind and inure to the benefit of their respective successors and assigns.
(b) Each Lender may assign to one or more assignees all or a portion of
its interests, rights and obligations under this Agreement (including all or a
portion of any or all of its Commitments and the Loans at the time owing to it);
provided, however, that (i) except in the case of an assignment to another
Lender or an Affiliate or Related Fund of the assigning Lender or another
Lender, (x) the Borrower, unless an Event of Default shall have occurred and be
continuing, and the Administrative Agent (and, in the case of any assignment of
a Revolving Credit Commitment, the Issuing Bank) must give their prior written
consent to such assignment (which consent shall not be unreasonably withheld)
and (y) the amount of the Revolving Credit Commitment and the Term Loan
Commitment or outstanding Term Loans of the assigning Lender subject to each
such assignment (determined as of the date the Assignment and Acceptance with
respect to such assignment is delivered to the Administrative Agent) shall not
be less than $5,000,000 in the aggregate (or, if less, the entire remaining
amount of such Lender's Revolving Credit Commitment or outstanding Term Loans)
and (ii) the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire. Upon accep-
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tance and recording pursuant to paragraph (e) of this Section 10.04 and payment,
from and after the effective date specified in each Assignment and Acceptance,
which effective date shall be at least five Business Days after the execution
thereof, (A) the assignee thereunder shall be a party hereto and, to the extent
of the interest assigned by such Assignment and Acceptance, have the rights and
obligations of a Lender under this Agreement and (B) the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Acceptance, be released from its obligations under this Agreement (and, in the
case of an Assignment and Acceptance covering all or the remaining portion of an
assigning Lender's rights and obligations under this Agreement, such Lender
shall cease to be a party hereto but shall continue to be entitled to the
benefits of Sections 2.14, 2.16, 2.20 and 10.05, as well as to any Fees accrued
for its account and not yet paid, and to be bound by the provisions of Section
10.16).
(c) By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the assignee thereunder shall be deemed to
confirm to and agree with each other and the other parties hereto as follows:
(i) such assigning Lender warrants that it is the legal and beneficial owner of
the interest being assigned thereby free and clear of any adverse claim and that
its Term Loan Commitments and Revolving Credit Commitment, and the outstanding
balances of its Term Loans and Revolving Loans, in each case without giving
effect to assignments thereof which have not become effective, are as set forth
in such Assignment and Acceptance, (ii) except as set forth in (i) above, such
assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement, or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement,
any other Loan Document or any other instrument or document furnished pursuant
hereto, or the financial condition of the Parent, the Borrower or any of the
Subsidiaries or the performance or observance by the Parent, the Borrower or any
of the Subsidiaries of any of its obligations under this Agreement, any other
Loan Document or any other instrument or document furnished pursuant hereto;
(iii) such assignee represents and warrants that it is legally authorized to
enter into such Assignment and Acceptance; (iv) such assignee confirms that it
has received a copy of this Agreement, together with copies of the most recent
financial statements referred to in Section 3.05(a) or delivered pursuant to
Section 5.03 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (v) such assignee will independently and without
reliance upon the Administrative Agent, the Collateral Agent, such assigning
Lender or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (vi) such assignee appoints
and authorizes the Administrative Agent and the Collateral Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement
as are delegated to the Administrative Agent and the Collateral Agent,
respectively, by the terms hereof, together with such powers as are reasonably
incidental thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all the obligations which by the terms of this
Agreement are required to be performed by it as a Lender.
(d) The Administrative Agent shall maintain at one of its offices in The
City of New York a copy of each Assignment and Acceptance delivered to it and a
register for the recordation of the names and addresses of the Lenders, and the
Commitments of, and principal amount of the Loans owing to, each Lender pursuant
to the terms hereof from time to time (the "Register"). The entries in the
Register shall be conclusive and the Parent, the Borrower, the Administrative
Agent, the Issuing Bank, the Collateral Agent and the Lenders may treat each
person whose name is recorded in the Register pursuant to the terms hereof as a
Lender hereunder for all purposes of this Agreement, notwithstanding notice to
the contrary. The Register and any Assignments and Acceptances delivered to the
Administrative Agent pursuant to this Section 10.04(d) shall be available for
inspection by the Borrower, the Issuing Bank, the Collateral Agent and any
Lender, at any reasonable time and from time to time upon reasonable prior
notice.
(e) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, an Administrative Questionnaire
completed in respect of the assignee (unless the assignee shall already be a
Lender hereunder), a processing and recordation fee of $3,500 (which shall be
paid by the assigning Lender and such assignee as they may agree) and, if
required, the written consent of the Borrower, the Issuing Bank and the
Administrative Agent to such assignment, the
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Administrative Agent shall (i) accept such Assignment and Acceptance, (ii)
record the information contained therein in the Register and (iii) give prompt
notice thereof to the Borrower, Lenders and the Issuing Bank. No assignment
shall be effective unless it has been recorded in the Register as provided in
this paragraph (e).
(f) Each Lender may without the consent of the Borrower, the Issuing Bank
or the Administrative Agent sell participations to one or more banks or other
entities in all or a portion of its rights and obligations under this Agreement
(including all or a portion of its Commitment and the Loans owing to it);
provided, however, that (i) such Lender's obligations under this Agreement shall
remain unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii) the participating
banks or other entities shall be entitled to the benefit of the cost protection
provisions contained in Sections 2.14, 2.16 and 2.20, and shall be bound by the
confidentiality provisions contained in Section 10.16, to the same extent as is
such Lender and (iv) the Borrower, the Administrative Agent, the Issuing Bank
and the Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement, and
such Lender shall retain the sole right to enforce the obligations of the
Borrower relating to the Loans or L/C Disbursements and to approve any
amendment, modification or waiver of any provision of this Agreement (other than
amendments, modifications or waivers decreasing any fees payable hereunder or
the amount of principal of or the rate at which interest is payable on the
Loans, extending any scheduled principal payment date or date fixed for the
payment of interest on the Loans, increasing or extending the Commitments or
releasing all or substantially all the Guarantors or the Collateral). All
amounts payable by the Borrower to any Lender hereunder in respect of any Loan
and the applicability of the cost protection provisions contained in Sections
2.14, 2.16 and 2.20 shall be determined as if such Lender had not sold or agreed
to sell any participation in such Loan, and as if such Lender were funding the
participated portion of such Loan in the same way that it is funding the portion
of such Loan in which no participation has been sold.
(g) Any Lender or participant may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
10.04, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Borrower furnished to such Lender by
or on behalf of the Parent, Borrower or the Sponsors; provided that, prior to
any such disclosure of information designated by the Borrower as confidential,
each such assignee or participant or proposed assignee or participant shall
execute an agreement whereby such assignee or participant shall agree (subject
to customary exceptions) to preserve the confidentiality of such confidential
information on terms no less restrictive than those applicable to the Lenders
pursuant to Section 10.16.
(h) Any Lender may at any time assign all or any portion of its rights
under this Agreement to a Federal Reserve Bank to secure extensions of credit by
such Federal Reserve Bank to such Lender; provided that no such assignment shall
release a Lender from any of its obligations hereunder or substitute any such
Bank for such Lender as a party hereto. In order to facilitate such an
assignment to a Federal Reserve Bank, the Borrower shall, at the request of the
assigning Lender, duly execute and deliver to the assigning Lender a promissory
note or notes evidencing the Loans made to the Borrower by the assigning Lender
hereunder.
(i) The Borrower shall not assign or delegate any of its rights or duties
hereunder without the prior written consent of the Administrative Agent, the
Issuing Bank and each Lender, and any attempted assignment without such consent
shall be null and void.
(j) In the event that S&P, Moody's and Thompson's BankWatch (or
InsuranceWatch Ratings Service, in the case of Lenders that are insurance
companies (or Best's Insurance Reports, if such insurance company is not rated
by Insurance Watch Ratings Service)) shall, after the date that any Lender
becomes a Revolving Credit Lender, downgrade the long-term certificate deposit
ratings of such Lender, and the resulting ratings shall be below BBB-, Baa3 and
C (or BB, in the case of a Lender that is an insurance company (or B, in the
case of an insurance company not rated by InsuranceWatch Ratings Service)), then
the Issuing Bank shall have the right, but not the obligation, at its own
expense, upon notice to such Lender and the Administrative Agent, to replace (or
to request the Borrower to use its
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reasonable efforts to replace) such Lender with an assignee (in accordance with
and subject to the restrictions contained in paragraph (b) above), and such
Lender hereby agrees to transfer and assign without recourse (in accordance with
and subject to the restrictions contained in paragraph (b) above) all its
interests, rights and obligations in respect of its Revolving Credit Commitment
to such assignee; provided, however, that (i) no such assignment shall conflict
with any law, rule and regulation or order of any Governmental Authority and
(ii) the Issuing Bank or such assignee, as the case may be, shall pay to such
Lender in immediately available funds on the date of such assignment the
principal of and interest accrued to the date of payment on the Loans made by
such Lender hereunder and all other amounts accrued for such Lender's account or
owed to it hereunder.
SECTION 10.05. Expenses; Indemnity. (a) The Borrower agrees to pay upon
request all out-of-pocket expenses incurred by the Administrative Agent, the
Collateral Agent and the Issuing Bank in connection with the syndication of the
credit facilities provided for herein and the preparation and administration of
this Agreement and the other Loan Documents or in connection with any
amendments, modifications or waivers of the provisions hereof or thereof
(whether or not the transactions hereby or thereby contemplated shall be
consummated) or incurred by the Administrative Agent, the Collateral Agent or
any Lender in connection with the enforcement (including in connection with the
negotiation of any restructuring or "work out" (whether or not consummated) of
the Obligations) or protection of its rights in connection with this Agreement
and the other Loan Documents or in connection with the Loans made or Letters of
Credit issued hereunder, including the fees, charges and disbursements of
Cravath, Swaine & Moore, counsel for the Administrative Agent and the Collateral
Agent and, in connection with any such enforcement or protection, the fees,
charges and disbursements of any other counsel for the Administrative Agent, the
Collateral Agent or any Lender.
(b) The Borrower agrees to indemnify the Administrative Agent, the
Collateral Agent, each Lender and the Issuing Bank, each Affiliate of any of the
foregoing persons and each of their respective directors, officers, employees,
agents and controlling persons (each such person being called an "Indemnitee")
against, and to hold each Indemnitee harmless from, any and all losses, claims,
damages, liabilities and related expenses, including reasonable counsel fees,
charges and disbursements, incurred by or asserted against any Indemnitee
arising out of, in any way connected with, or as a result of (i) the execution
or delivery of this Agreement or any other Loan Document or any agreement or
instrument contemplated thereby, the performance by the parties thereto of their
respective obligations thereunder or the consummation of the Transactions and
the other transactions contemplated thereby, (ii) the use of the proceeds of the
Loans or issuance of Letters of Credit, (iii) any claim, litigation,
investigation or proceeding relating to any of the foregoing, whether or not any
Indemnitee is a party thereto, or (iv) any actual or alleged presence or Release
of Hazardous Materials on any property owned, leased or operated by the Borrower
or any of the Subsidiaries, or any Environmental Claim related in any way to the
Borrower or the Subsidiaries; provided that such indemnity shall not, as to any
Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or wilful misconduct of such Indemnitee. In connection with any
claim, litigation, investigation or proceeding referred to in the preceding
sentence, the Indemnitees will endeavor to avoid duplication of effort and
expense by employing common counsel (including special or local counsel, where
required), which shall be nominated by the Administrative Agent (or, if the
Administrative Agent shall not be a party or prospective party to such claim,
litigation, investigation or proceeding, by the Lender party thereto with the
largest credit exposure or potential credit exposure hereunder), it being
understood that an Indemnitee will in any event be entitled to separate counsel
(i) if such Indemnitee may have defenses available to it that are different from
or potentially inconsistent with defenses that may be asserted by other
Indemnitees, (ii) if the representation by a single counsel of such Indemnitee
and other Indemnitees would otherwise be inappropriate due to actual or
potential differences in the interests of the Indemnitees or (iii) if the
Borrower shall agree to the retention of separate counsel.
(c) The provisions of this Section 10.05 shall remain operative and in
full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the expiration of the Commitments, the expiration
of any Letter of Credit, the invalidity or unenforceability of any term or
provision of this
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Agreement or any other Loan Document, or any investigation made by or on behalf
of the Administrative Agent, the Collateral Agent, any Lender or the Issuing
Bank. All amounts due under this Section 10.05 shall be payable on written
demand therefor.
SECTION 10.06. Right of Setoff. If an Event of Default shall have occurred
and be continuing, each Lender is hereby authorized at any time and from time to
time, except to the extent prohibited by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such Lender to or for the
credit or the account of the Parent or the Borrower against any of and all the
obligations of the Parent and the Borrower now or hereafter existing under this
Agreement and other Loan Documents held by such Lender, irrespective of whether
or not such Lender shall have made any demand under this Agreement or such other
Loan Document and although such obligations may be unmatured. The rights of
each Lender under this Section 10.06 are in addition to other rights and
remedies (including other rights of setoff) which such Lender may have.
SECTION 10.07. Applicable Law. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(OTHER THAN LETTERS OF CREDIT AND AS EXPRESSLY SET FORTH IN OTHER LOAN
DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK. EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF
CREDIT, OR IF NO SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND
PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF
COMMERCE, PUBLICATION NO. 500 (THE "UNIFORM CUSTOMS") AND, AS TO MATTERS NOT
GOVERNED BY THE UNIFORM CUSTOMS, THE LAWS OF THE STATE OF NEW YORK.
SECTION 10.08. Waivers; Amendment. (a) No failure or delay of the Parent,
the Borrower, the Administrative Agent, the Collateral Agent, any Lender or the
Issuing Bank in exercising any power or right hereunder or under any other Loan
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. The rights and remedies of
the Parent, the Borrower, the Administrative Agent, the Collateral Agent, the
Issuing Bank and the Lenders hereunder and under the other Loan Documents are
cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provision of this Agreement or any other Loan
Document or consent to any departure by the Parent, the Borrower or any other
Loan Party therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice or demand on the Parent or the Borrower in any case shall entitle the
Parent or the Borrower to any other or further notice or demand in similar or
other circumstances.
(b) None of this Agreement or any other Loan Document or any provision
hereof or thereof may be waived, amended or modified except pursuant to an
agreement or agreements in writing entered into by the Parent, the Borrower and
the Required Lenders (and, in the case of any other Loan Document, any other
person whose consent is required thereunder); provided, however, that no such
agreement shall (i) decrease the principal amount of, or extend the maturity of
or any scheduled principal payment date or date for the payment of any interest
on any Loan or any fees or any date for reimbursement of an L/C Disbursement, or
waive or excuse any such payment or any part thereof, amend or modify the
provisions of Section 2.09(c) or 2.13 (a), amend or modify the definition of the
term "Revolving Credit Reduction Date" or the term "Revolving Credit Maturity
Date",or decrease the rate of interest on any Loan or L/C Disbursement or any
fees, without the prior written consent of each Lender affected thereby, (ii)
change or extend the Commitment or decrease or extend the date for payment of
the Commitment Fees of any Lender without the prior written consent of such
Lender, (iii) amend or modify the provisions of Section 2.17, 2.18 or 10.04(i),
the provisions of this Section or the definition of the term "Required Lenders"
or release any Guarantors (other than pursuant to a permitted sale or
liquidation of such Guarantor) or all or any substantial part of the Collateral
without the prior written
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consent of each Lender, (iv) except as provided in Section 2.13(i), waive or
change the allocation between Tranche A Term Loans and Tranche B Term Loans of
any prepayment pursuant to Section 2.12 or 2.13 without the prior written
consent of Lenders holding more than 50% of the aggregate outstanding principal
amount of the Tranche A Term Loans and more than 50% of the aggregate
outstanding principal amount of the Tranche B Term Loans or (v) amend Section
2.13(i) without the prior written consent of the Lenders holding a majority of
the aggregate outstanding principal amount of the Tranche B Term Loans; provided
further that (i) no such agreement that by its terms adversely affects the
rights of the Revolving Credit Lenders, the Tranche A Lenders or the Tranche B
Lenders in a manner different from its effect on the other classes of Lenders
shall become effective unless approved by a majority in interest of each class
of Lenders so adversely affected and (ii) no such agreement shall amend, modify
or otherwise affect the rights or duties of the Administrative Agent, the
Collateral Agent or the Issuing Bank hereunder or under any other Loan Document
without the prior written consent of the Administrative Agent, the Collateral
Agent or the Issuing Bank. Notwithstanding the foregoing, if the Borrower shall
request the release of any Collateral (i) to be sold as part of any Asset Sale
and shall deliver to the Collateral Agent a certificate to the effect that such
Asset Sale and the disposition of the proceeds thereof will comply with the
terms of this Agreement, (ii) for transfer to the Network Company by reason of
an adjustment to the assets transferred as part of the Network Sale in
accordance with the Network Sale Agreement and shall deliver to the Collateral
Agent a certificate to the effect that such transfer will comply with the terms
of this Agreement and the Network Sale Agreement or (iii) in connection with the
transfer of assets to or the merger of any Subsidiary into a Foreign Subsidiary
in accordance with this Agreement and shall deliver to the Collateral Agent a
certificate to the effect that such transfer or merger will comply with the
terms of this Agreement, the Collateral Agent, if satisfied that the applicable
certificate is correct, shall, without the consent of any Lender, execute and
deliver all such instruments as may be required to effect the release of such
Collateral.
SECTION 10.09. Interest Rate Limitation. Notwithstanding anything herein to
the contrary, if at any time the interest rate applicable to any Loan or
participation in any L/C Disbursement, together with all fees, charges and other
amounts which are treated as interest on such Loan or participation in such L/C
Disbursement under applicable law (collectively the "Charges"), shall exceed the
maximum lawful rate (the "Maximum Rate") which may be contracted for, charged,
taken, received or reserved by the Lender holding such Loan or participation in
accordance with applicable law, the rate of interest payable in respect of such
Loan or participation hereunder, together with all Charges payable in respect
thereof, shall be limited to the Maximum Rate and, to the extent lawful, the
interest and Charges that would have been payable in respect of such Loan or
participation but were not payable as a result of the operation of this Section
10.09 shall be cumulated and the interest and Charges payable to such Lender in
respect of other Loans or participations or periods shall be increased (but not
above the Maximum Rate therefor) until such cumulated amount, together with
interest thereon at the Federal Funds Effective Rate to the date of repayment,
shall have been received by such Lender.
SECTION 10.10. Entire Agreement. This Agreement and the other Loan
Documents constitute the entire contract between the parties relative to the
subject matter hereof. Any other previous agreement among the parties with
respect to the subject matter hereof is superseded by this Agreement and the
other Loan Documents. Nothing in this Agreement or in the other Loan Documents,
expressed or implied, is intended to confer upon any party other than the
parties hereto and thereto any rights, remedies, obligations or liabilities
under or by reason of this Agreement or the other Loan Documents.
SECTION 10.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS
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AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.11.
SECTION 10.12. Severability. In the event any one or more of the provisions
contained in this Agreement or in any other Loan Document should be held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby (it being understood that the
invalidity of a particular provision in a particular jurisdiction shall not in
and of itself affect the validity of such provision in any other jurisdiction).
The parties shall endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 10.13. Counterparts. This Agreement may be executed in counterparts
(and by different parties hereto on different counterparts), each of which shall
constitute an original but all of which when taken together shall constitute a
single contract, and shall become effective as provided in Section 10.03.
Delivery of an executed signature page to this Agreement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Agreement.
SECTION 10.14. Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.
SECTION 10.15. Jurisdiction; Consent to Service of Process. (a) Each of
the Parent and the Borrower hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any New York State
court or Federal court of the United States of America sitting in New York City,
and any appellate court from any thereof, in any action or proceeding arising
out of or relating to this Agreement or the other Loan Documents, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State or,
to the extent permitted by law, in such Federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that the Administrative Agent, the Collateral Agent, the Issuing Bank or
any Lender may otherwise have to bring any action or proceeding relating to this
Agreement or the other Loan Documents against the Parent, the Borrower or their
properties in the courts of any jurisdiction.
(b) Each of the Parent and the Borrower hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement or
the other Loan Documents in any New York State or Federal court. Each of the
parties hereto hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 10.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 10.16. Confidentiality. The Administrative Agent, the Collateral
Agent, the Issuing Bank and each of the Lenders agrees to keep confidential (and
to use its best efforts to cause its respective agents and representatives to
keep confidential) the Information (as defined below) and all copies thereof,
extracts therefrom and analyses or other materials based thereon, except that
the Administrative Agent, the Collateral Agent, the Issuing Bank or any Lender
shall be permitted to disclose Information (a) to such of its respective
officers, directors, employees, agents, affiliates and representatives as need
to know such Information in connection with the performance of their duties
related to the Loan Documents and the transactions contemplated thereby or the
legal and regulatory compliance requirements of the Administrative Agent, the
Collateral Agent, the Issuing Bank or such
<PAGE>
73
Lender, as the case may be, (b) to the extent requested by any regulatory
authority, including the National Association of Insurance Commissioners or any
successor entity thereto, (c) to the extent otherwise required by applicable
laws and regulations or by any subpoena or similar legal process, (d) in
connection with any suit, action or proceeding (i) relating to the enforcement
of its rights hereunder or under the other Loan Documents or (ii) for purposes
of establishing a "due diligence" defense, (e) to any direct or indirect
contractual counterparty in swap agreements or such contractual counterparty's
professional advisor (so long as such contractual counterparty or professional
advisor to such contractual counterparty agrees to be bound by the provisions of
this Section 10.16) or (f) to the extent such Information (i) becomes publicly
available other than as a result of a breach of this Section 10.16 or (ii)
becomes available to the Administrative Agent, the Issuing Bank, any Lender or
the Collateral Agent on a nonconfidential basis from a source other than the
Borrower; provided, however, that the Administrative Agent, the Collateral
Agent, the Issuing Bank and/or any Lender, as the case may be, shall (to the
extent it may lawfully do so) provide the Borrower, to the extent practicable,
with advance notice of any disclosure of information referred to in clauses (c)
and (d) above. For the purposes of this Section, "Information" shall mean all
financial statements, certificates, reports, agreements and information
(including all analyses, compilations and studies prepared by the Administrative
Agent, the Collateral Agent, the Issuing Bank or any Lender based on any of the
foregoing and including any budget, programming and program scheduling
information) that are received from the Parent, the Borrower, any Subsidiary or
the Network Company and related to the Parent, the Borrower, any Subsidiary or
the Network Company, other than any of the foregoing that were available to the
Administrative Agent, the Collateral Agent, the Issuing Bank or any Lender on a
nonconfidential basis prior to its disclosure thereto by the Parent, the
Borrower or any Subsidiary, and that are in the case of Information provided
after the date hereof, clearly identified at the time of delivery as
confidential or of such a nature that a prudent person would expect such
Information to be confidential. The provisions of this Section 10.16 shall
remain operative and in full force and effect regardless of the expiration and
term of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
TLMD ACQUISITION CO.,
by
/s/ Aaron J. Stone
-------------------------------------------------
Name: Aaron J. Stone
Title: Assistant Secretary
TELEMUNDO HOLDINGS, INC.,
by
/s/ Aaron J. Stone
-------------------------------------------------
Name: Aaron J. Stone
Title: Assistant Secretary
<PAGE>
74
CREDIT SUISSE FIRST BOSTON, individually and as
Administrative Agent, Collateral Agent and Issuing Bank,
by
/s/ Judith E. Smith
-----------------------------------------------------
Name:Judith E. Smith
Title:Director
by
/s/ Chris T. Horgan
--------------------------------------------------
Name:Chris T. Horgan
Title:Vice President
CANADIAN IMPERIAL BANK OF COMMERCE,
individually and as Documentation Agent,
by
/s/ Matthew Jones
-----------------------------------------------------
Name: Matthew Jones
Title: CIBC Oppenheimer Corp., AS AGENT
CREDIT LYONNAIS NEW YORK BRANCH,
by
/s/ John P. Judge
-----------------------------------------------------
Name: John P. Judge
Title: Vice President
CREDIT AGRICOLE INDOSUEZ,
by
/s/ Craig Welch
-----------------------------------------------------
Name: Craig Welch
Title: First Vice President
by
/s/ John McCloskey
--------------------------------------------------
Name: John McCloskey
Title: Vice President, Team Leader
BANKBOSTON, N.A.,
by
/s/ Robert F. Milordi
-----------------------------------------------------
Name: Robert F. Milordi
Title: Managing Director
<PAGE>
SOCIETE GENERALE,
by
/s/ Elaine Khalil
---------------------------------------------------
Name: Elaine Khalil
Title: Vice President
THE BANK OF NOVA SCOTIA,
by
/s/ Perry Fryett
---------------------------------------------------
Name: Perry Fryett
Title: Authorized Signatorie
COMPAGNIE FINANCIERE DE CIC ET DE L'UNION
EUROPEENNE,
by
/s/ Brian O'Leary
---------------------------------------------------
Name: Brian O'Leary
Title: Vice President
by
/s/ Anthony Rock
------------------------------------------------
Name: Anthony Rock
Title: Vice President
THE FUJI BANK LIMITED, LOS ANGELES AGENCY,
by
/s/ Hirotoshi Naito
---------------------------------------------------
Name :Hirotoshi Naito
Title: Joint General Manager
THE LONG-TERM CREDIT BANK OF JAPAN, LTD. LOS
ANGELES AGENCY,
by
/s/ Koh Takemoto
---------------------------------------------------
Name: Koh Takemoto
Title: General Manager
<PAGE>
76
NATEXIS BANQUE, BFCE
by
/s/ Cynthia E. Sachs
---------------------------------------------------
Name: Cynthia E. Sachs
Title: Vice President
by
/s/ William C. Maier
---------------------------------------------------
Name: William C. Maier
Title: VP-Group Manager
VAN KAMPEN AMERICAN CAPITAL PRIME RATE
INCOME TRUST,
by
/s/ Jeffrey W. Maillet
---------------------------------------------------
Name: Jeffrey W. Maillet
Title: Sr. Vice Pres. & Director
KZH-ING-2 CORPORATION,
by
/s/ Virginia Conway
---------------------------------------------------
Name: Virginia Conway
Title: Authorized Agent
KZH-SOLEIL CORPORATION,
by
/s/ Dennis Kildea
---------------------------------------------------
Name: Dennis Kildea
Title: Authorized Agent
PILGRIM AMERICA PRIME RATE TRUST,
by Pilgrim America Investments, Inc. as its Investment
Manager
by
/s/ Robert Wilson
---------------------------------------------------
Name: Robert Wilson
Title: Vice President
KZH HOLDING CORPORATION III,
by
/s/ Virginia Conway
-------------------------------------------------
Name: Virginia Conway
Title: Authorized Agent
<PAGE>
77
GCB INVESTMENT PORTFOLIO,
by Citibank, N.A.
by
/s/ Steven Kaufman
--------------------------------------------------
Name: Steven Kaufman
Title: Vice President
ORIX USA CORPORATION,
by
/s/ Hiroyuki Miyauchi
---------------------------------------------------
Name: Hiroyuki Miyauchi
Title: Executive Vice President
KZH-CYPRESSTREE-1 CORPORATION,
by
/s/ Virginia Conway
----------------------------------------------------
Name: Virginia Conway
Title: Authorized Agent
CYPRESSTREE INVESTMENT FUND, LLC,
by CypressTree Investment Management Company, Inc., its
Managing Member
by
/s/ Timothy M. Barns
---------------------------------------------------
Name: Timothy M. Barns
Title: Managing Director
CYPRESSTREE INVESTMENT MANAGEMENT
COMPANY, INC.,
as Attorney-in-Fact and on behalf of First Allmerica
Financial Life Insurance Company as Portforlio Manager
by
/s/ Timothy M. Barns
---------------------------------------------------
Name: Timothy M. Barns
Title: Managing Director
<PAGE>
EXHIBIT 10.7
PLEDGE AGREEMENT (together with instruments executed and
delivered pursuant to Section 24, this "Agreement") dated as of
August 12, 1998, among TELEMUNDO GROUP, INC., a Delaware
corporation (the "Borrower"), TELEMUNDO HOLDINGS, INC., a
Delaware corporation of which the Borrower is a wholly owned
subsidiary (the "Parent"), each Subsidiary listed on Schedule I
hereto (such Subsidiaries being called individually a "Subsidiary
Pledgor" and collectively the "Subsidiary Pledgors"; the
Borrower, the Parent and the Subsidiary Pledgors are referred to
collectively as the "Pledgors") and CREDIT SUISSE FIRST BOSTON, a
bank organized under the laws of Switzerland, acting through its
New York Branch ("CSFB"), as collateral agent (in such capacity,
the "Collateral Agent") for the Secured Parties (as defined in
the Credit Agreement referred to below).
Reference is made to (a) the Credit Agreement dated as of August 4, 1998
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Borrower, the Parent, the lenders from time to time party
thereto (the "Lenders"), CSFB, as administrative agent (in such capacity, the
"Administrative Agent"), Collateral Agent, and issuing bank (in such capacity,
the "Issuing Bank"), and Canadian Imperial Bank of Commerce, as documentation
agent (in such capacity, the "Documentation Agent"), and (b) the Subsidiary
Guarantee Agreement referred to therein. Capitalized terms used and not
defined herein (including, without limitation, the term "Obligations", as used
in the next paragraph and elsewhere herein) are used with the meanings assigned
to such terms in the Credit Agreement.
The Lenders have agreed to make Loans to the Borrower and the Issuing Bank
has agreed to issue Letters of Credit for the account of the Borrower, pursuant
to, and upon the terms and subject to the conditions specified in, the Credit
Agreement. The Guarantors have agreed to guarantee, among other things, all the
obligations of the Borrower under the Credit Agreement. The obligations of the
Lenders to make Loans and of the Issuing Bank to issue Letters of Credit are
conditioned upon, among other things, the execution and delivery by the Pledgors
of a Pledge Agreement in the form hereof to secure the Obligations.
Accordingly, the Pledgors and the Collateral Agent, on behalf of itself and
each Secured Party (and each of their respective successors or assigns), hereby
agree as follows:
SECTION 1. Pledge. As security for the payment and performance, as the
case may be, in full of the Obligations, each Pledgor hereby hypothecates,
pledges, assigns as security and delivers unto the Collateral Agent, its
successors and assigns, and hereby grants to the Collateral Agent, its
successors and assigns, for the ratable benefit of the Secured Parties, a
security interest in all of such Pledgor's right, title and interest in, to and
under (a) the shares of capital stock owned by it and listed on Schedule II
hereto and any shares of capital stock of any Subsidiary obtained in the future
by such Pledgor and the certificates representing all such shares (collectively,
the "Pledged Stock"); provided that the Pledged Stock shall not include (i) more
than 65% of the issued and outstanding shares of voting capital stock of any
Foreign Subsidiary or (ii) to the extent that applicable law requires that a
Subsidiary of the Pledgor issue directors' qualifying shares, such qualifying
shares; (b)(i) the debt securities listed opposite the name of such Pledgor on
Schedule II hereto (including the Puerto Rican Notes), (ii) any debt securities
of any other Pledgor or any Foreign Subsidiary in the future issued to or held
by such Pledgor and (iii) the promissory notes and any other instruments
evidencing such debt securities (the "Pledged Debt Securities"); (c) all other
property that may be delivered to and held by the Collateral Agent pursuant to
the terms hereof; (d) subject to Section 5, all payments of principal or
interest, dividends, cash, instruments and other property from time to time
received, receivable or otherwise distributed, in respect of, in exchange for or
upon the conversion of the securities referred to in clauses (a) and (b) above;
(e) subject to Section 5, all rights and privileges of such Pledgor with respect
to the securities, interests and other property referred to in clauses (a), (b),
(c)and (d) above; and (f) all proceeds of any of the foregoing (the items
referred to in clauses (a) through (f) above being
<PAGE>
2
collectively referred to as the "Collateral"). Upon delivery to the Collateral
Agent, (a) any stock certificates, notes or other securities (including the
Pledged Debt Securities) now or hereafter included in the Collateral (the
"Pledged Securities") shall be accompanied by stock or bond powers duly executed
in blank or other indorsement or other instruments of transfer reasonably
satisfactory to the Collateral Agent with, if the Collateral Agent so requests,
signature guaranteed, and by such other indorsement, instruments and documents
as the Collateral Agent may reasonably request and (b) all other property
comprising part of the Collateral shall be accompanied by proper instruments of
assignment duly executed by each Pledgor and such other indorsement, instruments
or documents as the Collateral Agent may reasonably request. Each delivery of
Pledged Securities shall be accompanied by a schedule describing the securities
theretofore and then being pledged hereunder, which schedule shall be attached
hereto as Schedule II and made a part hereof. Each schedule so delivered shall
supersede any prior schedules so delivered.
TO HAVE AND TO HOLD the Collateral, together with all right, title,
interest, powers, privileges and preferences pertaining or incidental thereto,
unto the Collateral Agent, its successors and assigns, for the ratable benefit
of the Secured Parties, subject to the terms, covenants and conditions
hereinafter set forth.
SECTION 2. Delivery of the Collateral. (a) Each Pledgor agrees promptly
to deliver or cause to be delivered to the Collateral Agent any and all Pledged
Securities, and any and all certificates or other indorsement, instruments or
documents representing the Collateral.
(b) Each Pledgor will cause any Indebtedness for borrowed money owed to
such Pledgor by any other Pledgor or any Foreign Subsidiary to be evidenced by a
duly executed promissory note that is pledged and delivered to the Collateral
Agent pursuant to the terms hereof.
SECTION 3. Representations, Warranties and Covenants. Each Pledgor hereby
represents, warrants and covenants, as to itself and the Collateral pledged by
it hereunder, to and with the Collateral Agent that:
(a) the Pledged Stock represents that percentage as set forth on
Schedule II of the issued and outstanding shares of each class of the
capital stock or other Equity Interest of the issuer with respect thereto;
(b) except for the security interest granted hereunder, such Pledgor
(i) is and will at all times continue to be the direct owner, beneficially
and of record, of the Pledged Securities indicated on Schedule II, (ii)
holds the same free and clear of all Liens, (iii) will make no assignment,
pledge, hypothecation or transfer of, or create or permit to exist any
security interest in or other Lien on, the Collateral, other than pursuant
hereto, and (iv) subject to Section 5, will cause any and all Collateral,
whether for value paid by the Pledgor or otherwise, to be forthwith
deposited with the Collateral Agent and pledged or assigned hereunder;
(c) such Pledgor (i) has the power and authority to pledge the
Collateral in the manner hereby done or contemplated and (ii) will defend
its title or interest thereto or therein against any and all Liens (other
than the Lien created by this Agreement), however arising, of all persons
whomsoever;
(d) no consent of any other person (including stockholders or
creditors of such Pledgor) and no consent or approval of any Governmental
Authority or any securities exchange was or is necessary to the validity of
the pledge effected hereby;
(e) by virtue of the execution and delivery by the Pledgors of this
Agreement, when the Pledged Securities, certificates or other documents
representing or evidencing the Collateral are delivered to the Collateral
Agent in accordance with this Agreement or, if a security interest in any
of such Collateral may not under applicable law be perfected by possession,
then upon the filing of appropriate financing statements, the Collateral
Agent will
<PAGE>
3
obtain a valid and perfected first lien upon and security interest in such
Pledged Securities as security for the payment and performance of the
Obligations;
(f) the pledge effected hereby is effective to vest in the Collateral
Agent, on behalf of the Secured Parties, the rights of the Collateral Agent
in the Collateral as set forth herein;
(g) all of the Pledged Stock has been duly authorized and validly
issued, is fully paid and nonassessable and is in certificated form;
(h) all information set forth herein relating to the Pledged Stock is
accurate and complete in all material respects as of the date hereof;
(i) the pledge of the Pledged Stock pursuant to this Agreement does
not violate Regulation U or X of the Federal Reserve Board or any
successor thereto as of the date hereof;
(j) the Collateral shall not be represented by any certificates,
notes, securities, documents or other instruments other than those
delivered hereunder; and
(k) the terms of the governing documentation for the capital stock of
each partnership or limited liability company (other than the Chicago
Subsidiary) whose capital stock is pledged under Section 1 above will at
all times expressly provide that the capital stock of such partnership or
limited liability company is a security governed by Article VIII of the
Uniform Commercial Code as in effect in the jurisdiction of organization of
the issuer and that such capital stock will at all times be represented by
a certificate duly delivered to the Collateral Agent under Section 1 above.
SECTION 4. Registration in Nominee Name; Denominations. The Collateral
Agent, on behalf of the Secured Parties, shall have the right (in its sole and
absolute discretion) to hold the Pledged Securities in its own name as pledgee,
the name of its nominee (as pledgee or as sub-agent) or the name of the
Pledgors, endorsed or assigned in blank or in favor of the Collateral Agent.
Each Pledgor will promptly give to the Collateral Agent copies of any notices or
other communications received by it with respect to Pledged Securities
registered in the name of such Pledgor. The Collateral Agent shall at all times
have the right to exchange the certificates representing Pledged Securities for
certificates of smaller or larger denominations for any purpose consistent with
this Agreement.
SECTION 5. Voting Rights; Dividends and Interest, etc. (a) Unless and
until an Event of Default shall have occurred and be continuing:
(i) Each Pledgor shall be entitled to exercise any and all voting
and/or other consensual rights and powers inuring to an owner of Pledged
Securities or any part thereof for any purpose consistent with the terms of
this Agreement, the Credit Agreement and the other Loan Documents;
provided, however, that such Pledgor will not be entitled to exercise any
such right if the purpose thereof is to interfere with the exercise of the
rights and remedies of the Secured Parties under this Agreement or any
other Loan Document.
(ii) The Collateral Agent shall execute and deliver to each Pledgor,
or cause to be executed and delivered to each Pledgor, all such proxies,
powers of attorney and other indorsements or instruments as such Pledgor
may reasonably request for the purpose of enabling such Pledgor to exercise
the voting and/or consensual rights and powers it is entitled to exercise
pursuant to subparagraph (i) above and to receive the cash dividends it is
entitled to receive pursuant to subparagraph (iii) below.
(iii) Each Pledgor shall be entitled to receive and retain any and all
cash dividends, distributions, interest and principal paid on the Pledged
Securities to the extent and only to the extent that such cash dividends,
distributions, interest and principal are permitted by, and
<PAGE>
4
otherwise paid in accordance with, the terms and conditions of the Credit
Agreement, the other Loan Documents and applicable laws. All noncash
dividends, distributions, interest and principal, and all dividends,
distributions, interest and principal paid or payable in cash or otherwise
in connection with a partial or total liquidation or dissolution, return of
capital, capital surplus or paid-in surplus, and all other distributions
(other than distributions referred to in the preceding sentence) made on or
in respect of the Pledged Securities, whether paid or payable in cash or
otherwise, whether resulting from a subdivision, combination or
reclassification of the outstanding capital stock of the issuer of any
Pledged Securities or received in exchange for Pledged Securities or any
part thereof, or in redemption thereof, or as a result of any merger,
consolidation, acquisition or other exchange of assets to which such issuer
may be a party or otherwise, shall be and become part of the Collateral,
and, if received by any Pledgor, shall not be commingled by such Pledgor
with any of its other funds or property but shall be held separate and
apart therefrom, shall be held in trust for the benefit of the Collateral
Agent and shall be forthwith delivered to the Collateral Agent in the same
form as so received (with any necessary endorsement).
(b) Upon the occurrence and during the continuance of an Event of Default,
all rights of any Pledgor to dividends, distributions, interest or principal
that such Pledgor is authorized to receive pursuant to paragraph (a)(iii) above
shall cease, and all such rights shall thereupon become vested in the Collateral
Agent, which shall have the sole and exclusive right and authority to receive
and retain such dividends, distributions, interest or principal. All dividends,
distributions, interest or principal received by any Pledgor contrary to the
provisions of this Section 5 shall be held in trust for the benefit of the
Collateral Agent, shall be segregated from other property or funds of such
Pledgor and shall be forthwith delivered to the Collateral Agent upon demand in
the same form as so received (with any necessary endorsement). Any and all money
and other property paid over to or received by the Collateral Agent pursuant to
the provisions of this paragraph (b) shall be retained by the Collateral Agent
in an account to be established by the Collateral Agent upon receipt of such
money or other property and shall be applied in accordance with the provisions
of Section 7. After all Events of Default have been cured or waived, the
Collateral Agent shall, within five Business Days after all such Events of
Default have been cured or waived, repay to each Pledgor all cash dividends,
distributions, interest or principal (without interest) that such Pledgor would
otherwise be permitted to retain pursuant to the terms of paragraph (a)(iii)
above and which remain in such account.
(c) Upon the occurrence and during the continuance of an Event of Default,
all rights of any Pledgor to exercise the voting and consensual rights and
powers it is entitled to exercise pursuant to paragraph (a)(i) of this Section
5, and the obligations of the Collateral Agent under paragraph (a)(ii) of this
Section 5, shall cease, and all such rights shall thereupon become vested in the
Collateral Agent, which shall have the sole and exclusive right and authority to
exercise such voting and con sensual rights and powers, provided that, unless
otherwise directed by the Required Lenders, the Collateral Agent shall have the
right from time to time following and during the continuance of an Event of
Default to permit such Pledgor to exercise such rights; provided further that,
notwithstanding the foregoing, all voting and consensual rights and powers shall
remain with the Pledgor pending receipt of any necessary approval of the FCC of
any assignment or transfer of control of the FCC licenses held by the Borrower
or any Subsidiary. After all Events of Default have been cured or waived, such
Pledgor will have the right to exercise the voting and consensual rights and
powers that it would otherwise be entitled to exercise pursuant to the terms of
paragraph (a)(i) above.
SECTION 6. Remedies upon Default. Upon the occurrence and during the
continuance of an Event of Default, subject to applicable regulatory and legal
requirements, the Collateral Agent may sell the Collateral, or any part thereof,
at public or private sale or at any broker's board or on any securities
exchange, for cash, upon credit or for future delivery as the Collateral Agent
shall deem appropriate. The Collateral Agent shall be authorized at any such
sale (if it deems it advisable to do so) to restrict the prospective bidders or
purchasers to persons who will represent and agree that they are purchasing the
Collateral for their own account for investment and not with a view to the
distribution or sale thereof or to impose other restrictions necessary in its
judgment to ensure compliance with applicable securities laws, as more fully set
forth in Section 11, and upon consummation of any such sale the Collateral Agent
shall have the right to assign, transfer and deliver
<PAGE>
5
to the purchaser or purchasers thereof the Collateral so sold. Each such
purchaser at any such sale shall hold the property sold absolutely free from any
claim or right on the part of any Pledgor, and, to the extent permitted by
applicable law, each Pledgor hereby waives all rights of redemption, stay,
valuation and appraisal such Pledgor now has or may at any time in the future
have under any rule of law or statute now existing or hereafter enacted.
The Collateral Agent shall give a Pledgor 10 days' prior written notice
(which each Pledgor agrees is reasonable notice within the meaning of Section 9-
504(3) of the Uniform Commercial Code as in effect in the State of New York or
its equivalent in other jurisdictions) of the Collateral Agent's intention to
make any sale of such Pledgor's Collateral. Such notice, in the case of a
public sale, shall state the time and place for such sale and, in the case of a
sale at a broker's board or on a securities exchange, shall state the board or
exchange at which such sale is to be made and the day on which the Collateral,
or portion thereof, will first be offered for sale at such board or exchange.
Any such public sale shall be held at such time or times within ordinary
business hours and at such place or places as the Collateral Agent may fix and
state in the notice of such sale. At any such sale, the Collateral, or portion
thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Collateral Agent may (in its sole and absolute discretion)
determine. The Collateral Agent shall not be obligated to make any sale of any
Collateral if it shall determine not to do so, regardless of the fact that
notice of sale of such Collateral shall have been given. The Collateral Agent
may, without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and place
fixed for sale, and such sale may, without further notice, be made at the time
and place to which the same was so adjourned. In case any sale of all or any
part of the Collateral is made on credit or for future delivery, the Collateral
so sold may be retained by the Collateral Agent until the sale price is paid in
full by the purchaser or purchasers thereof, but the Collateral Agent shall not
incur any liability in case any such purchaser or purchasers shall fail to take
up and pay for the Collateral so sold and, in case of any such failure, such
Collateral may be sold again upon like notice. At any public (or, to the extent
permitted by applicable law, private) sale made pursuant to this Section 6, any
Secured Party may bid for or purchase, free from any right of redemption, stay
or appraisal on the part of any Pledgor (all said rights being also hereby
waived and released), the Collateral or any part thereof offered for sale and
may make payment on account thereof by using any claim then due and payable to
it from such Pledgor as a credit against the purchase price, and it may, upon
compliance with the terms of sale, hold, retain and dispose of such property
without further accountability to such Pledgor therefor. For purposes hereof,
(a) a written agreement to purchase the Collateral or any portion thereof shall
be treated as a sale thereof, (b) the Collateral Agent shall be free to carry
out such sale pursuant to such agreement and (c) such Pledgor shall not be
entitled to the return of the Collateral or any portion thereof subject thereto,
notwithstanding the fact that after the Collateral Agent shall have entered into
such an agreement all Events of Default shall have been remedied and the
Obligations paid in full. As an alternative to exercising the power of sale
herein conferred upon it, the Collateral Agent may proceed by a suit or suits at
law or in equity to foreclose upon the Collateral and to sell the Collateral or
any portion thereof pursuant to a judgment or decree of a court or courts having
competent jurisdiction or pursuant to a proceeding by a court-appointed
receiver. Any sale pursuant to the provisions of this Section 6 shall be deemed
to conform to the commercially reasonable standards as provided in Section 9-
504(3) of the Uniform Commercial Code as in effect in the State of New York or
its equivalent in other jurisdictions.
SECTION 7. Application of Proceeds of Sale. The proceeds of any sale of
Collateral pursuant to Section 6, as well as any Collateral consisting of cash,
shall be applied by the Collateral Agent as follows:
FIRST, to the payment of all costs and expenses incurred by the
Collateral Agent in connection with such sale or otherwise in connection
with this Agreement, any other Loan Document or any of the Obligations,
including all court costs and the reasonable fees and expenses of its
agents and legal counsel, the repayment of all advances made by the
Collateral Agent hereunder or under any other Loan Document on behalf of
any Pledgor and any other costs or expenses incurred in connection with the
exercise of any right or remedy hereunder or under any other Loan Document;
<PAGE>
6
SECOND, to the payment in full of the Obligations (the amounts so
applied to be distributed among the Secured Parties pro rata in accordance
with the amounts of the Obligations owed to them on the date of any such
distribution); and
THIRD, to the Pledgor, its successors or assigns, or as a court of
competent jurisdiction may otherwise direct.
The Collateral Agent may suspend application of any cash or proceeds to the
extent such application would be inconsistent with the Loan Documents or to the
extent such suspension is advisable in the Collateral Agent's good faith
judgment in order to protect the rights or interests of the Secured Parties.
Upon any sale of the Collateral by the Collateral Agent (including pursuant to a
power of sale granted by statute or under a judicial proceeding), the receipt of
the purchase money by the Collateral Agent or of the officer making the sale
shall be a sufficient discharge to the purchaser or purchasers of the Collateral
so sold and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Collateral Agent
or such officer or be answerable in any way for the misapplication thereof.
SECTION 8. Reimbursement of Collateral Agent. (a) Each Pledgor agrees to
pay upon demand to the Collateral Agent the amount of any and all reasonable
expenses, including the reasonable fees, other charges and disbursements of its
counsel and of any experts or agents, that the Collateral Agent may incur in
connection with (i) the administration of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from, or other realization upon, any
of the Collateral or (iii) the exercise or enforcement of any of the rights of
the Collateral Agent hereunder.
(b) Without limitation of its indemnification obligations under the other
Loan Documents, each Pledgor agrees to indemnify the Collateral Agent and the
Indemnitees against, and hold each Indemnitee harmless from, any and all losses,
claims, damages, liabilities and related expenses, including reasonable counsel
fees, other charges and disbursements, incurred by or asserted against any
Indemnitee arising out of, in any way connected with, or as a result of (i) the
execution or delivery of this Agreement or any other Loan Document or any
agreement or instrument contemplated hereby or thereby, the performance by the
parties hereto of their respective obligations thereunder or the consummation of
the Transactions and the other transactions contemplated thereby or (ii) any
claim, litigation, investigation or proceeding relating to any of the foregoing,
whether or not any Indemnitee is a party thereto, provided that such indemnity
shall not, as to any Indemnitee, be available to the extent that such losses,
claims, damages, liabilities or related expenses are determined by a court of
competent jurisdiction by final and nonappealable judgment to have resulted from
the gross negligence or wilful misconduct of such Indemnitee. In connection
with any claim, litigation, investigation or proceeding referred to in the
preceding sentence, the Indemnitees will endeavor to avoid duplication of effort
and expense by employing common counsel (including special or local counsel,
where required), which shall be nominated by the Collateral Agent (or, if the
Collateral Agent shall not be a party or prospective party to such claim,
litigation, investigation or proceeding, by the Lender party thereto with the
largest credit exposure or potential credit exposure hereunder), it being
understood that an Indemnitee will in any event be entitled to separate counsel
(i) if such Indemnitee may have defenses available to it that are different from
or potentially inconsistent with defenses that may be asserted by other
Indemnitees, (ii) if the representation by a single counsel of such Indemnitee
and other Indemnitees would otherwise be inappropriate due to actual or
potential differences in the interests of the Indemnitees or (iii) if the
Borrower shall agree to the retention of separate counsel.
(c) Any amounts payable as provided hereunder shall be additional
Obligations secured hereby. The provisions of this Section 8 shall remain
operative and in full force and effect regardless of the termination of this
Agreement or any other Loan Document, the consummation of the transactions
contemplated hereby, the repayment of any of the Obligations, the invalidity or
unenforceability of any term or provision of this Agreement or any other Loan
Document or any investigation made by or on behalf of the Collateral Agent or
any other Secured Party. All amounts due under this Section 8 shall be payable
on written demand therefor and shall bear interest at the rate specified in
Section 2.07 of the Credit Agreement.
<PAGE>
7
SECTION 9. Collateral Agent Appointed Attorney-in-Fact; Appointment of
Collateral Agent under Puerto Rican Note Security Agreement. (a) Each Pledgor
hereby appoints the Collateral Agent the attorney-in-fact of such Pledgor for
the purpose of carrying out the provisions of this Agreement and taking any
action and executing any instrument that the Collateral Agent may deem necessary
or advisable to accomplish the purposes hereof, which appointment is irrevocable
and coupled with an interest. Without limiting the generality of the foregoing,
the Collateral Agent shall have the right, upon the occurrence and during the
continuance of an Event of Default, with full power of substitution either in
the Collateral Agent's name or in the name of such Pledgor, to ask for, demand,
sue for, collect, receive and give acquittance for any and all moneys due or to
become due under and by virtue of any Collateral, to endorse checks, drafts,
orders and other instruments for the payment of money payable to such Pledgor
representing any interest or dividend or other distribution payable in respect
of the Collateral or any part thereof or on account thereof and to give full
discharge for the same, to settle, compromise, prosecute or defend any action,
claim or proceeding with respect thereto, and to sell, assign, endorse, pledge,
transfer and to make any agreement respecting, or otherwise deal with, the same;
provided that (i) if no Event of Default has occurred and is continuing, the
Collateral Agent shall only exercise its rights under this Section 9 to take
actions that the Pledgors are required to perform under this Agreement and have
not performed within three Business Days after receipt by the Borrower of notice
from the Collateral Agent requesting that any such actions be taken and (ii)
nothing herein contained shall be construed as requiring or obligating the
Collateral Agent to make any commitment or to make any inquiry as to the nature
or sufficiency of any payment received by the Collateral Agent, or to present or
file any claim or notice, or to take any action with respect to the Collateral
or any part thereof or the moneys due or to become due in respect thereof or any
property covered thereby. The Collateral Agent and the other Secured Parties
shall be accountable only for amounts actually received as a result of the
exercise of the powers granted to them herein, and neither they nor their
officers, directors, employees or agents shall be responsible to any Pledgor for
any act or failure to act hereunder, except for their own gross negligence or
wilful misconduct.
(b) The Borrower hereby appoints the Collateral Agent as collateral agent
under the Puerto Rican Note Security Agreement which appointment is irrevocable
and coupled with an interest. The Borrower acknowledges and agrees that neither
the Collateral Agent nor its officers, directors, employees, agents or
controlling persons will have any liability whatsoever to the Borrower for any
failure to perform its duties as collateral agent under the Puerto Rican Note
Security Agreement or for any other act or omission to act thereunder.
SECTION 10. Waivers; Amendment. (a) No failure or delay of the
Collateral Agent or any of the Pledgors in exercising any power or right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. The rights and remedies of
the Collateral Agent and the Pledgors hereunder and of the other Secured Parties
under the other Loan Documents are cumulative and are not exclusive of any
rights or remedies that they would otherwise have. No waiver of any provisions
of this Agreement or consent to any departure by any Pledgor therefrom shall in
any event be effective unless the same shall be permitted by paragraph (b)
below, and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No notice or demand on any
Pledgor in any case shall entitle such Pledgor to any other or further notice or
demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to a written agreement entered into between the
Collateral Agent and the Pledgor or Pledgors with respect to which such waiver,
amendment or modification is to apply, subject to any consent required in
accordance with Section 10.08 of the Credit Agreement.
SECTION 11. Securities Act, etc. In view of the position of the Pledgors
in relation to the Pledged Securities, or because of other current or future
circumstances, a question may arise under the Securities Act of 1933, as now or
hereafter in effect, or any similar statute hereafter enacted analogous in
purpose or effect (such Act and any such similar statute as from time to time in
effect being called the "Federal Securities Laws") with respect to any
disposition of the Pledged Securities
<PAGE>
8
permitted hereunder. Each Pledgor understands that compliance with the Federal
Securities Laws might very strictly limit the course of conduct of the
Collateral Agent if the Collateral Agent were to attempt to dispose of all or
any part of the Pledged Securities, and might also limit the extent to which or
the manner in which any subsequent transferee of any Pledged Securities could
dispose of the same. Similarly, there may be other legal restrictions or
limitations affecting the Collateral Agent in any attempt to dispose of all or
part of the Pledged Securities under applicable "Blue Sky" or other state
securities laws or similar laws analogous in purpose or effect. Each Pledgor
recognizes that in light of such restrictions and limitations the Collateral
Agent may, with respect to any sale of the Pledged Securities, limit the
purchasers to those who will agree, among other things, to acquire such Pledged
Securities for their own account, for investment, and not with a view to the
distribution or resale thereof. Each Pledgor acknowledges and agrees that in
light of such restrictions and limitations, the Collateral Agent, in its sole
and absolute discretion, (a) may proceed to make such a sale whether or not a
registration statement for the purpose of registering such Pledged Securities or
part thereof shall have been filed under the Federal Securities Laws and (b) may
approach and negotiate with a single potential purchaser to effect such sale.
Each Pledgor acknowledges and agrees that any such sale might result in prices
and other terms less favorable to the seller than if such sale were a public
sale without such restrictions. In the event of any such sale, the Collateral
Agent shall incur no responsibility or liability for selling all or any part of
the Pledged Securities at a price that the Collateral Agent, in its sole and
absolute discretion, may in good faith deem reasonable under the circumstances,
notwithstanding the possibility that a substantially higher price might have
been realized if the sale were deferred until after registration as aforesaid or
if more than a single purchaser were approached. The provisions of this Section
11 will apply notwithstanding the existence of a public or private market upon
which the quotations or sales prices may exceed substantially the price at which
the Collateral Agent sells.
SECTION 12. FCC Compliance. (a) Notwithstanding anything to the contrary
contained herein or in any other agreement, instrument, or document executed in
connection herewith, (i) no party hereto shall take or be required to take any
actions hereunder that would constitute or result in a transfer or assignment of
any Station License, permit or authorization or a change of control over such
Station License, permit or authorization requiring the prior approval of the FCC
without first obtaining such prior approval of the FCC and (ii) no failure on
the part of any party hereto to take any such actions prior to the obtaining of
such approval shall constitute an Event of Default. In addition, the parties
acknowledge that the voting rights of the Pledged Stock shall remain with the
relevant Pledgor thereof even upon the occurrence and during the continuance of
an Event of Default until the FCC shall have given its prior consent to the
exercise of stockholder rights by a purchaser at a public or private sale of
such Pledged Stock or the exercise of such rights by the Collateral Agent or by
a receiver, trustee, conservator or other agent duly appointed pursuant to
applicable law.
(b) If an Event of Default shall have occurred and be continuing, each
Pledgor shall take any action which the Collateral Agent may reasonably request
in the exercise of its rights and remedies under this Agreement in order to
transfer or assign the Collateral to the Collateral Agent or to such one or more
third parties as the Collateral Agent may designate, or to a combination of the
foregoing. To enforce the provisions of this Section 12, the Collateral Agent
and the other Secured Parties are empowered to seek from the FCC and any other
Governmental Authority, to the extent required, consent to or approval of any
involuntary transfer of control of any entity whose Collateral is subject to
this Agreement for the purpose of seeking a bona fide purchaser to whom control
ultimately will be transferred. Each Pledgor agrees to cooperate with any such
purchaser and with the Collateral Agent and the other Secured Parties in the
preparation, execution and filing of any forms and providing any information
that may be necessary or helpful in obtaining the FCC's consent to the
assignment to such purchaser of the Collateral. Each Pledgor hereby agrees to
consent to any such voluntary or involuntary transfer after and during the
continuation of an Event of Default and, without limiting any rights of the
Collateral Agent under this Agreement, to authorize the Collateral Agent to
nominate a trustee or receiver to assume control of the Collateral, subject only
to required judicial, FCC or other consents required by Governmental Authorities
or applicable law, in order to effectuate the transactions contemplated by this
Section 12. Such trustee or receiver shall have all the rights and powers as
provided to it by law or court order, or to the Collateral Agent under this
Agreement. Each
<PAGE>
9
Pledgor shall cooperate fully in obtaining the consent of the FCC and the
approval or consent of each other Governmental Authority required to effectuate
the foregoing.
(c) Without limiting the obligations of any Pledgor hereunder in any
respect, each Pledgor further agrees that if such Pledgor, upon the occurrence
and during the continuance of an Event of Default, should fail or refuse to take
any action required under paragraph (b) above for any reason whatsoever, without
limitation, including any refusal to execute any application necessary or
appropriate to obtain any governmental consent necessary or appropriate for the
exercise of any right of the Collateral Agent or any other Secured Party
hereunder, such Pledgor agrees that such application may be executed on such
Pledgor's behalf by the clerk of any court of competent jurisdiction without
notice to such Pledgor pursuant to court order.
(d) In connection with this Section 12, the Collateral Agent shall be
entitled to rely in good faith upon an opinion of outside FCC counsel of the
Collateral Agent's choice with respect to any such assignment or transfer,
whether or not the advice rendered is ultimately determined to have been
accurate.
SECTION 13. Security Interest Absolute. All rights of the Collateral
Agent hereunder, the grant of a security interest in the Collateral and all
obligations of each Pledgor hereunder, shall be absolute and unconditional
irrespective of (a) any lack of validity or enforceability of the Credit
Agreement, any other Loan Document, any agreement with respect to any of the
Obligations or any other agreement or instrument relating to any of the
foregoing, (b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or waiver
of or any consent to any departure from the Credit Agreement, any other Loan
Document or any other agreement or instrument relating to any of the foregoing,
(c) any exchange, release or nonperfection of any other collateral, or any
release or amendment or waiver of or consent to or departure from any guaranty,
for all or any of the Obligations or (d) any other circumstance that might
otherwise constitute a defense available to, or a discharge of, any Pledgor in
respect of the Obligations or in respect of this Agreement (other than the
indefeasible payment in full of all the Obligations).
SECTION 14. Termination or Release. (a) This Agreement and the security
interests granted hereby shall terminate when all the Obligations have been
indefeasibly paid in full and the Lenders have no further commitment to lend
under the Credit Agreement, the L/C Exposure has been reduced to zero and the
Issuing Bank has no further obligation to issue Letters of Credit under the
Credit Agreement.
(b) Upon any sale or other transfer by any Pledgor of any Collateral that
is permitted under the Credit Agreement to any person that is not a Pledgor, or
upon the effectiveness of any written consent to the release of the security
interest granted hereby in any Collateral pursuant to Section 10.08(b) of the
Credit Agreement, the security interest in such Collateral shall be
automatically released.
(c) In connection with any termination or release pursuant to paragraph
(a) or (b) above, the Collateral Agent shall execute and deliver to any Pledgor,
at such Pledgor's expense, all documents that such Pledgor shall reasonably
request to evidence such termination or release. Any execution and delivery of
documents pursuant to this Section 14 shall be without recourse to or warranty
by the Collateral Agent other than that the Collateral (other than any
Collateral that shall have been sold in accordance with Section 6) is not
subject to any interest granted by the Collateral Agent in favor of any other
person.
SECTION 15. Notices. All communications and notices hereunder shall be in
writing and given as provided in Section 10.01 of the Credit Agreement. All
communications and notices hereunder to any Subsidiary Pledgor shall be given to
it at the address for notices set forth in Schedule I.
SECTION 16. Further Assurances. Each Pledgor agrees to do such further
acts and things, and to execute and deliver such additional conveyances,
assignments, agreements, indorsements and
<PAGE>
10
instruments, as the Collateral Agent may at any time reasonably request in
connection with the administration and enforcement of this Agreement or with
respect to the Collateral or any part thereof or in order better to assure and
confirm unto the Collateral Agent its rights and remedies hereunder.
SECTION 17. Binding Effect; Several Agreement; Assignments. Whenever in
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of any Pledgor that are contained in
this Agreement shall bind and inure to the benefit of its successors and
assigns. This Agreement shall become effective as to any Pledgor when a
counterpart hereof (or a Supplement referred to in Section 24) executed on
behalf of such Pledgor shall have been delivered to the Collateral Agent and a
counterpart hereof (or a Supplement referred to in Section 24) shall have been
executed on behalf of the Collateral Agent, and thereafter shall be binding upon
such Pledgor and the Collateral Agent, and their respective successors and
assigns, enforceable by such Pledgor against the Collateral Agent and by the
Collateral Agent against such Pledgor, and their respective successors and
assigns, and shall inure to the benefit of such Pledgor, the Collateral Agent
and the other Secured Parties, and their respective successors and assigns,
except that no Pledgor shall have the right to assign its rights hereunder or
any interest herein or in the Collateral (and any such attempted assignment
shall be void), except as expressly contemplated by this Agreement or the other
Loan Documents. This Agreement shall be construed as a separate agreement with
respect to each Pledgor and may be amended, modified, supplemented, waived or
released with respect to any Pledgor without the approval of any other Pledgor
and without affecting the obligations of any other Pledgor hereunder.
SECTION 18. Survival of Agreement; Severability. (a) All covenants,
agreements, representations and warranties made by each Pledgor herein and in
the certificates or other instruments prepared or delivered in connection with
or pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Collateral Agent and the other Secured Parties,
shall survive the making by the Lenders of the Loans and the issuance of the
Letters of Credit by the Issuing Bank, regardless of any investigation made by
the Secured Parties or on their behalf, and shall continue in full force and
effect until terminated in accordance with Section 14.
(b) In the event any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby (it being understood
that the invalidity of a particular provision in a particular jurisdiction shall
not in and of itself affect the validity of such provision in any other
jurisdiction). The parties shall endeavor in good-faith negotiations to replace
the invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 19. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 20. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute a single contract, and shall become effective
as provided in Section 17. Delivery of an executed counterpart of a signature
page to this Agreement by facsimile transmission shall be as effective as
delivery of a manually executed counterpart of this Agreement.
SECTION 21. Rules of Interpretation. The rules of interpretation
specified in Section 1.02 of the Credit Agreement shall be applicable to this
Agreement. Section headings used herein are for convenience of reference only,
are not part of this Agreement and are not to affect the construction of, or to
be taken into consideration in interpreting this Agreement.
SECTION 22. Jurisdiction; Consent to Service of Process. (a) Each
Pledgor hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York
<PAGE>
City, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement or the other Loan Documents, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that, to the extent permitted by
applicable law, all claims in respect of any such action or proceeding may be
heard and determined in such New York State or, to the extent permitted by law,
in such Federal court. Each of the parties hereto agrees that a final judgment
in any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law. Nothing in this Agreement shall affect any right that the Collateral Agent
or any other Secured Party may otherwise have to bring any action or proceeding
relating to this Agreement or the other Loan Documents against the Pledgor or
its properties in the courts of any jurisdiction.
(b) Each Pledgor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection that it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Loan Documents in any
New York State or Federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 15. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 23. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 24. Additional Pledgors. Pursuant to Section 5.09 of the Credit
Agreement, each Subsidiary(other than any Foreign Subsidiary) that was not in
existence or not a Subsidiary on the date of the Credit Agreement is required to
enter into this Agreement as a Subsidiary Pledgor upon becoming a Subsidiary if
such Subsidiary owns or possesses property of a type that would be considered
Collateral hereunder. Upon execution and delivery by the Collateral Agent and a
Subsidiary of a Supplement in the form of Annex 1, such Subsidiary shall become
a Subsidiary Pledgor hereunder with the same force and effect as if originally
named as a Subsidiary Pledgor herein. The execution and delivery of such
Supplement shall not require the consent of any Pledgor hereunder. The rights
and obligations of each Pledgor hereunder shall remain in full force and effect
notwithstanding the addition of any new Subsidiary Pledgor as a party to this
Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
TELEMUNDO GROUP, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
<PAGE>
TELEMUNDO HOLDINGS, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
ESTRELLA COMMUNICATIONS, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
ESTRELLA LICENSE CORPORATION,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
NEW JERSEY TELEVISION BROADCASTING CORP. (N.Y.),
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
SACC ACQUISITION CORP.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
SAT CORP.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
<PAGE>
SPANISH AMERICAN COMMUNICATIONS CORPORATION,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO NETWORK, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO NEWS NETWORK, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO OF AUSTIN, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO OF CHICAGO, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
<PAGE>
TELEMUNDO OF COLORADO SPRINGS, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO OF FLORIDA, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO OF FLORIDA LICENSE CORPORATION,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO OF GALVESTON-HOUSTON, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO OF GALVESTON-HOUSTON LICENSE CORPORATION,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
<PAGE>
TELEMUNDO OF MEXICO, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO OF NORTHERN CALIFORNIA, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO OF NORTHERN CALIFORNIA LICENSE CORPORATION,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO OF PUERTO RICO LICENSE CORPORATION,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO OF SAN ANTONIO, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
<PAGE>
TELEMUNDO OF SAN ANTONIO LICENSE CORPORATION,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
<PAGE>
TELEMUNDO OF SANTA FE, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELENOTICIAS DEL MUNDO, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELENOTICIAS DEL MUNDO, L.P.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TU MUNDO MUSIC, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
<PAGE>
VIDEO 44 ACQUISITION CORP., INC. (formerly Harriscope
of Chicago, Inc.),
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
WNJU LICENSE CORPORATION,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
WNJU-TV BROADCASTING CORPORATION,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
CREDIT SUISSE FIRST BOSTON,
as Collateral Agent,
by
/s/ Judith E. Smith
--------------------------------
Name: Judith E. Smith
Title: Director
by
/s/ Todd C. Morgan
--------------------------------
Name: Todd C. Morgan
Title: Director
<PAGE>
EXHIBIT 10.8
SECURITY AGREEMENT (together with any instruments executed
and delivered pursuant to Section 7.15, the "Agreement") dated as
of August 12, 1998, among TELEMUNDO GROUP, INC., a Delaware
corporation (the "Borrower"), TELEMUNDO HOLDINGS, INC., a
Delaware corporation of which the Borrower is a wholly owned
subsidiary (the "Parent"), each Subsidiary listed on Schedule I
(the "Subsidiary Guarantors" and, together with the Parent, the
"Guarantors"; the Guarantors and the Borrower are referred to
collectively herein as the "Grantors") and CREDIT SUISSE FIRST
BOSTON, a bank organized under the laws of Switzerland, acting
through its New York Branch ("CSFB"), as collateral agent (in
such capacity, the "Collateral Agent") for the Secured Parties
(as defined herein).
Reference is made to (a) the Credit Agreement dated as of August 4, 1998
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Borrower, the Parent, the lenders from time to time party
thereto (the "Lenders"), CSFB, as administrative agent (in such capacity, the
"Administrative Agent"), Collateral Agent, and issuing bank (in such capacity,
the "Issuing Bank"), and Canadian Imperial Bank of Commerce, as documentation
agent (in such capacity, the "Documentation Agent"), and (b) the Subsidiary
Guarantee Agreement dated as of August 12, 1998 (as amended, supplemented or
otherwise modified from time to time, the "Subsidiary Guarantee Agreement"),
among the Subsidiary Guarantors and the Collateral Agent.
The Lenders have agreed to make Loans to the Borrower, and the Issuing Bank
has agreed to issue Letters of Credit for the account of the Borrower pursuant
to, and upon the terms and subject to the conditions specified in, the Credit
Agreement. Each of the Guarantors has agreed to guarantee, among other things,
all the obligations of the Borrower under the Credit Agreement. The obligations
of the Lenders to make such Loans and of the Issuing Bank to issue such Letters
of Credit are conditioned upon, among other things, the execution and delivery
by the Grantors of an agreement in the form hereof to secure the Obligations.
Accordingly, the Grantors and the Collateral Agent, on behalf of itself and
each Secured Party (and each of their respective successors or assigns), hereby
agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definition of Terms Used Herein. (a) Unless the context
otherwise requires, all capitalized terms used herein but not defined herein
shall have the meanings set forth in the Credit Agreement and all references to
the Uniform Commercial Code shall mean the Uniform Commercial Code in effect in
the State of New York as of the date hereof.
(b) As used herein, the following terms shall have the following meanings:
"Account Debtor" shall mean any person who is or who may become obligated
to any Grantor under, with respect to or on account of an Account.
"Accounts" shall mean any and all right, title and interest of any Grantor
to payment for goods and services sold or leased, including any such right
evidenced by chattel paper, whether due or to become due, whether or not it has
been earned by performance, and whether now or hereafter acquired or arising in
the future, including payments due from Affiliates of the Grantors.
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2
"Account Rights" shall mean all Accounts and all right, title and interest
in any returned goods, together with all rights, titles, securities and
guarantees with respect thereto, including any rights to stoppage in transit,
replevin, reclamation and resales, and all related security interests, liens and
pledges, whether voluntary or involuntary, in each case whether now existing or
owned or hereafter arising or acquired.
"Collateral" shall mean all (a) Account Rights, (b) Documents, (c)
Equipment, (d) General Intangibles, (e) Inventory, (f) cash and cash accounts,
(g) Intellectual Property (h) Investment Property and (i) Proceeds.
"Commodity Account" shall mean an account maintained by a Commodity
Intermediary in which a Commodity Contract is carried for a Commodity Customer.
"Commodity Contract" shall mean a commodity futures contract, an option on
a commodity futures contract, a commodity option or any other contract that, in
each case, is (a) traded on or subject to the rules of a board of trade that has
been designated as a contract market for such a contract pursuant to the federal
commodities laws or (b) traded on a foreign commodity board of trade, exchange
or market, and is carried on the books of a Commodity Intermediary for a
Commodity Customer.
"Commodity Customer" shall mean a person for whom a Commodity Intermediary
carries a Commodity Contract on its books.
"Commodity Intermediary" shall mean (a) a person who is registered as a
futures commission merchant under the federal commodities laws or (b) a person
who in the ordinary course of its business provides clearance or settlement
services for a board of trade that has been designated as a contract market
pursuant to federal commodities laws.
"Copyright License" shall mean any written agreement, now or hereafter in
effect, granting any right to any Grantor under any Copyright now or hereafter
owned by any third party, and all rights of such Grantor under any such
agreement.
"Copyrights" shall mean all of the following now owned or hereafter
acquired by any Grantor: (a) all copyright rights in any work subject to the
copyright laws of the United States or any other country, whether as author,
assignee, transferee or otherwise, and (b) all registrations and applications
for registration of any such copyright in the United States or any other
country, including registrations, recordings, supplemental registrations and
pending applications for registration in the United States Copyright Office,
including those listed on Schedule II.
"Credit Agreement" shall have the meaning assigned to such term in the
preliminary statement of this Agreement.
"Documents" shall mean all instruments, certificates representing shares of
capital securities, files, records, ledger sheets and documents covering or
relating to any of the Collateral.
"Entitlement Holder" shall mean a person identified in the records of a
Securities Intermediary as the person having a Security Entitlement against the
Securities Intermediary. If a person acquires a Security Entitlement by virtue
of Section 8-501(b)(2) or (3) of the Uniform Commercial Code, such person is the
Entitlement Holder.
"Equipment" shall mean all equipment, furniture and furnishings and all
tangible personal property similar to any of the foregoing, including tools,
parts and supplies of every kind and description, and all improvements,
accessions or appurtenances thereto, that are now or hereafter owned by any
Grantor. The term Equipment shall include Fixtures.
"Financial Asset" shall mean (a) a Security, (b) an obligation of a person
or a share, participation or other interest in a person or in property or an
enterprise of a person, which is, or is
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3
of a type, dealt with in or traded on financial markets, or which is recognized
in any area in which it is issued or dealt in as a medium for investment or (c)
any property that is held by a Securities Intermediary for another person in a
Securities Account if the Securities Intermediary has expressly agreed with the
other person that the property is to be treated as a Financial Asset under
Article 8 of the Uniform Commercial Code. As the context requires, the term
Financial Asset shall mean either the interest itself or the means by which a
person's claim to it is evidenced, including a certificated or uncertificated
Security, a certificate representing a Security or a Security Entitlement.
"Fixtures" shall mean all items of Equipment, whether now owned or
hereafter acquired, of any Grantor that become so related to particular real
estate that an interest in them arises under any real estate law applicable
thereto.
"General Intangibles" shall mean all choses in action and causes of action
and all other assignable intangible personal property of any Grantor of every
kind and nature (other than Account Rights) now owned or hereafter acquired by
any Grantor, including all rights and interests in partnerships, limited
partnerships, limited liability companies and other unincorporated entities,
corporate or other business records, indemnification claims, contract rights
(including (a) rights under leases, whether entered into as lessor or lessee,
(b) rights under the Network Affiliation Agreement, (c) rights under Hedging
Agreements, (d) any intercompany payment obligations not evidenced by any
instrument, (e) any written agreement, now or hereafter in effect, granting any
right to any third party under any Copyright now or hereafter owned by any
Grantor or which such Grantor otherwise has the right to license, and all rights
of such Grantor under any such agreement, (f) any written agreement, now or
hereafter in effect, granting to any third party any right to make, use or sell
any invention on which a Patent, now or hereafter owned by any Grantor or which
any Grantor otherwise has the right to license, is in existence, and all rights
of any Grantor under any such agreement, (g) the Puerto Rican Note Security
Agreement, as amended and in effect from time to time, and all rights of the
Borrower thereunder, and (h) other agreements, but excluding programming and
production agreements to the extent that the creation hereunder of a security
interest in the Grantors' rights under such agreements would constitute a breach
thereof), goodwill, registrations, franchises, tax refund claims and any letter
of credit, guarantee, claim, security interest or other security held by or
granted to any Grantor to secure payment by an Account Debtor of any of the
Account Rights.
"Intellectual Property" shall mean all intangible, intellectual and similar
property of any Grantor of every kind and nature now owned or hereafter acquired
by any Grantor, including inventions, designs, Patents, Copyrights, Licenses,
Trademarks, trade secrets, confidential or proprietary technical and business
information, know-how, show-how or other data or information, software and
databases and all embodiments or fixations thereof and related documentation,
registrations and franchises, and all additions, improvements and accessions to,
and books and records describing or used in connection with, any of the
foregoing.
"Inventory" shall mean all goods of any Grantor, whether now owned or
hereafter acquired, held for sale or lease, or furnished or to be furnished by
any Grantor under contracts of service or consumed in any Grantor's business,
including raw materials, intermediates, work in process, packaging materials,
finished goods, semi-finished inventory, scrap inventory, manufacturing supplies
and spare parts, and all such goods that have been returned to or repossessed by
or on behalf of any Grantor.
"Investment Property" shall mean all Securities (whether certificated or
uncertificated), Security Entitlements, Securities Accounts, Commodity Contracts
and Commodity Accounts of any Grantor, whether now owned or hereafter acquired
by any Grantor.
"License" shall mean any Patent License, Trademark License, Copyright
License or other license or sublicense to which any Grantor is a party,
including those listed on Schedule III (other than those licenses or license
agreements in existence on the date hereof and listed on Schedule III and those
licenses or license agreements entered into after the date hereof, in either
case which by their terms prohibit (or as to which applicable law prohibits)
assignment or a grant of a security interest by such Grantor).
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4
"Obligations" shall have the meaning assigned to such term in the Credit
Agreement.
"Patent License" shall mean any written agreement, now or hereafter in
effect, granting to any Grantor any right to make, use or sell any invention on
which a Patent, now or hereafter owned by any third party, is in existence, and
all rights of any Grantor under any such agreement.
"Patents" shall mean all of the following now owned or hereafter acquired
by any Grantor: (a) all letters patent of the United States or any other
country, all registrations and recordings thereof and all applications for
letters patent of the United States or any other country, including
registrations, recordings and pending applications in the United States Patent
and Trademark Office or any similar offices in any other country, including
those listed on Schedule IV, and (b) all reissues, continuations, divisions,
continuations-in-part, renewals or extensions thereof and the inventions
disclosed or claimed therein, including the right to make, use and/or sell the
inventions disclosed or claimed therein.
"Perfection Certificate" shall mean a certificate substantially in the form
of Annex 1 hereto, completed and supplemented with the schedules and attachments
contemplated thereby, and duly executed by a Financial Officer and the chief
legal officer of the Borrower.
"Proceeds" shall mean any consideration received from the sale, exchange,
license, lease or other disposition of any asset or property that constitutes
Collateral, any value received as a consequence of the possession of any
Collateral and any payment received from any insurer or other person or entity
as a result of the destruction, loss, theft, damage or other involuntary
conversion of whatever nature of any asset or property which constitutes
Collateral and shall include (a) any claim of any Grantor against any third
party for (and the right to sue and recover for and the rights to damages or
profits due or accrued arising out of or in connection with) (i) past, present
or future infringement of any Patent now or hereafter owned by any Grantor or
licensed to any Grantor under a Patent License, (ii) past, present or future
infringement or dilution of any Trademark now or hereafter owned by any Grantor
or licensed to a Grantor under a Trademark License or injury to the goodwill
associated with or symbolized by any Trademark now or hereafter owned by any
Grantor, (iii) past, present or future breach of any License and (iv) past,
present or future infringement of any Copyright now or hereafter owned by any
Grantor or licensed to a Grantor under a Copyright License and (b) any and all
other amounts from time to time paid or payable under or in connection with any
of the Collateral.
"Secured Parties" shall mean (a) the Lenders, (b) the Administrative Agent,
(c) the Collateral Agent, (d) the Issuing Bank, (e) each counterparty to an
Hedging Agreement entered into with the Borrower if such counterparty was a
Lender at the time the Hedging Agreement was entered into, (f) the beneficiaries
of each indemnification obligation undertaken by any Grantor under any Loan
Document and (g) the successors and assigns of each of the foregoing.
"Securities" shall mean any obligations of an issuer or any shares,
participations or other interests in an issuer or in property or an enterprise
of an issuer which (a) are represented by a certificate representing a security
in bearer or registered form, or the transfer of which may be registered upon
books maintained for that purpose by or on behalf of the issuer, (b) are one of
a class or series or by its terms is divisible into a class or series of shares,
participations, interests or obligations and (c)(i) are, or are of a type, dealt
with or traded on securities exchanges or securities markets or (ii) are a
medium for investment and by their terms expressly provide that they are a
security governed by Article 8 of the Uniform Commercial Code.
"Securities Account" shall mean an account to which a Financial Asset is
or may be credited in accordance with an agreement under which the person
maintaining the account undertakes to treat the person for whom the account is
maintained as entitled to exercise rights that comprise the Financial Asset.
"Security Entitlements" shall mean the rights and property interests of an
Entitlement Holder with respect to a Financial Asset.
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"Security Interest" shall have the meaning assigned to such term in Section
2.01.
"Securities Intermediary" shall mean (a) a clearing corporation or (b) a
person, including a bank or broker, that in the ordinary course of its business
maintains securities accounts for others and is acting in that capacity.
"Trademark License" shall mean any written agreement, now or hereafter in
effect, granting to any Grantor any right to use any Trademark now or hereafter
owned by any third party, and all rights of any Grantor under any such
agreement.
"Trademarks" shall mean all of the following now owned or hereafter
acquired by any Grantor: (a) all trademarks, service marks, trade names,
corporate names, company names, business names, fictitious business names, trade
styles, trade dress, logos, other source or business identifiers, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all registration and
recording applications filed in connection therewith, including registrations
and registration applications in the United States Patent and Trademark Office,
any State of the United States or any similar offices in any other country or
any political subdivision thereof, and all extensions or renewals thereof,
including those listed on Schedule V, (b) all goodwill associated therewith or
symbolized thereby and (c) all other assets, rights and interests that uniquely
reflect or embody such goodwill.
SECTION 1.02. Rules of Interpretation. The rules of interpretation
specified in Section 1.02 of the Credit Agreement shall be applicable to this
Agreement.
ARTICLE II
Security Interest
SECTION 2.01. Security Interest. As security for the payment or
performance, as the case may be, in full of the Obligations, each Grantor hereby
grants to the Collateral Agent, its successors and assigns, for the ratable
benefit of the Secured Parties, a security interest in all of such Grantor's
right, title and interest in, to and under the Collateral (the "Security
Interest"). Without limiting the foregoing, the Collateral Agent is hereby
authorized to file one or more financing statements (including fixture
filings), continuation statements, filings with the United States Patent and
Trademark Office or United States Copyright Office (or any successor office or
any similar office in any other country) or other documents for the purpose of
perfecting, confirming, continuing, enforcing or protecting the Security
Interest granted by each Grantor, without the signature of any Grantor, and
naming any Grantor or the Grantors as debtors and the Collateral Agent as
secured party.
SECTION 2.02. No Assumption of Liability. The Security Interest is
granted as security only and shall not subject the Collateral Agent or any other
Secured Party to, or in any way alter or modify, any obligation or liability of
any Grantor with respect to or arising out of the Collateral.
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6
ARTICLE III
Representations and Warranties
The Grantors jointly and severally represent and warrant to the Collateral
Agent and the Secured Parties that:
SECTION 3.01. Title and Authority. Each Grantor has good and valid rights
in and title to the Collateral with respect to which it has purported to grant a
Security Interest hereunder and has full power and authority to grant to the
Collateral Agent the Security Interest in such Collateral pursuant hereto and to
execute, deliver and perform its obligations in accordance with the terms of
this Agreement, without the consent or approval of any other person other than
any consent or approval which has been obtained.
SECTION 3.02. Filings. (a) The Perfection Certificate has been duly
prepared, completed and executed and the information set forth therein is
correct and complete in all material respects. Fully executed Uniform Commercial
Code financing statements (including fixture filings, as applicable) or other
appropriate filings, recordings or registrations containing a description of the
Collateral have been delivered to the Collateral Agent for filing in each
governmental, municipal or other office specified in Schedule 6 to the
Perfection Certificate, which are all the filings, recordings and registrations
(other than filings required to be made in the United States Patent and
Trademark Office and the United States Copyright Office in order to perfect the
Security Interest in Collateral consisting of United States Patents, Trademarks
and Copyrights or rights in any thereof) that are necessary to publish notice of
and protect the validity of and to establish a legal, valid and perfected
security interest in favor of the Collateral Agent (for the ratable benefit of
the Secured Parties) in respect of all Collateral in which the Security Interest
may be perfected by filing, recording or registration in the United States (or
any political subdivision thereof) and its territories and possessions, and no
further or subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary in any such jurisdiction, except as provided under
applicable law with respect to the filing of continuation statements or, upon
the change of any Grantor's name, location, identity or corporate structure,
with respect to the filing of financing statements or amendments to filed
financing statements.
(b) Each Grantor represents and warrants that fully executed security
agreements in the form hereof and containing a description of all Collateral
consisting of Intellectual Property shall have been received and recorded within
three months after the execution of this Agreement with respect to United States
Patents and United States registered Trademarks (and Trademarks for which United
States registration applications are pending) and within one month after the
execution of this Agreement with respect to United States registered Copyrights
by the United States Patent and Trademark Office and the United States Copyright
Office pursuant to 35 U.S.C. (S) 261, 15 U.S.C. (S) 1060 or 17 U.S.C. (S) 205
and the regulations thereunder, as applicable, to the extent necessary to
protect the validity of and to establish a legal, valid and perfected security
interest (to the extent perfectible by filing in the United States Patent and
Trademark Office or the United States Copyright Office) in favor of the
Collateral Agent (for the ratable benefit of the Secured Parties) in respect of
all Collateral consisting of Patents, Trademarks and Copyrights in which a
security interest may be perfected by filing, recording or registration in such
offices, and no further or subsequent filing, refiling, recording, rerecording,
registration or reregistration is necessary (other than such actions as are
necessary to perfect the Security Interest with respect to any Collateral
consisting of Patents, Trademarks and Copyrights (or registration or application
for registration thereof) acquired or registered after the date hereof) for that
purpose.
SECTION 3.03. Validity of Security Interest. The Security Interest
constitutes (a) a legal and valid security interest in all the Collateral
securing the payment and performance of the Obligations, (b) subject to the
filings described in Section 3.02 above, a perfected security interest in all
Collateral in which a security interest may be perfected by filing, recording or
registering a financing statement or analogous document in the United States (or
any political subdivision thereof) and its territories and possessions pursuant
to the Uniform Commercial Code or other applicable law in such
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7
jurisdictions and (c) a security interest that shall be perfected in all
Collateral in which a security interest may be perfected upon the receipt and
recording of this Agreement with the United States Patent and Trademark Office
and the United States Copyright Office, as applicable, within the three month
period (commencing as of the date hereof) pursuant to 35 U.S.C. Section 261 or
15 U.S.C. Section 1060 or the one month period (commencing as of the date
hereof) pursuant to 17 U.S.C. Section 205. The Security Interest is and shall be
prior to any other Lien on any of the Collateral, other than Liens expressly
permitted to be prior to the Security Interest pursuant to Section 6.02 of the
Credit Agreement.
SECTION 3.04. Absence of Other Liens. The Collateral is owned by the
Grantors free and clear of any Lien, except for Liens expressly permitted
pursuant to Section 6.02 of the Credit Agreement. No Grantor has filed or
consented to the filing of (a) any financing statement or analogous document
under the Uniform Commercial Code or any other applicable laws covering any
Collateral, (b) any assignment in which any Grantor assigns any Collateral or
any security agreement or similar instrument covering any Collateral with the
United States Patent and Trademark Office or the United States Copyright Office
or (c) any assignment in which any Grantor assigns any Collateral or any
security agreement or similar instrument covering any Collateral with any
foreign governmental, municipal or other office, which financing statement or
analogous document, assignment, security agreement or similar instrument is
still in effect, except, in each case, for Liens expressly permitted pursuant to
Section 6.02 of the Credit Agreement and Liens which secure Indebtedness to be
repaid on the Closing Date.
ARTICLE IV
Covenants
SECTION 4.01. Change of Name; Location of Collateral; Records; Place of
Business. (a) Each Grantor agrees promptly to notify the Collateral Agent in
writing of any change (i) in its corporate name or in any trade name used to
identify it in the conduct of its business or in the ownership of its
properties, (ii) in the location of its chief executive office, its principal
place of business, any office in which it maintains books or records relating to
Collateral owned by it or any office or facility at which Collateral owned by it
is located (including the establishment of any such new office or facility),
(iii) in its identity or corporate structure or (iv) in its Federal Taxpayer
Identification Number. Each Grantor agrees not to effect or permit any change
referred to in the preceding sentence unless all filings have been made under
the Uniform Commercial Code or otherwise that are required in order for the
Collateral Agent to continue at all times following such change to have a valid,
legal and perfected first priority security interest in all the Collateral to
the extent provided in Section 3.02. Each Grantor agrees promptly to notify the
Collateral Agent if any material portion of the Collateral owned or held by such
Grantor is damaged or destroyed.
(b) Each Grantor agrees to maintain, at its own cost and expense, such
complete and accurate records with respect to the Collateral owned by it as is
consistent with its current practices and in accordance with prudent and
standard practices used in industries in which such Grantor is engaged, but in
any event to include complete accounting records indicating all payments and
proceeds received with respect to any part of the Collateral, and, at such time
or times as the Collateral Agent may reasonably request, promptly to prepare and
deliver to the Collateral Agent a duly certified schedule or schedules in form
and detail reasonably satisfactory to the Collateral Agent showing the identity,
amount and location of any material Collateral.
SECTION 4.02. Periodic Certification. Each year, at the time of delivery
of annual financial statements with respect to the preceding fiscal year
pursuant to Section 5.03 of the Credit Agreement, the Borrower shall deliver to
the Collateral Agent a certificate executed by a Financial Officer and the chief
legal officer of the Borrower (a) setting forth the information required
pursuant to Section 2 of the Perfection Certificate or confirming that there has
been no change in such information since the date of such certificate or the
date of the most recent certificate delivered pursuant to this Section 4.02 and
(b) certifying that all Uniform Commercial Code financing statements (including
fixture filings,
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8
as applicable) or other appropriate filings, recordings or registrations,
including all refilings, rerecordings and reregistrations, containing a
description of the Collateral have been filed of record in each governmental,
municipal or other appropriate office in each jurisdiction identified pursuant
to clause (a) above to the extent necessary to protect and perfect the Security
Interest for a period of not less than 18 months after the date of such
certificate (except as noted therein with respect to any continuation statements
to be filed within such period). Each certificate delivered pursuant to this
Section 4.02 shall identify in the format of Schedule II, III, IV or V, as
applicable, all Copyrights, Licenses, Patents and Trademarks of any Grantor in
existence on the date thereof and not then listed on such Schedules or
previously so identified to the Collateral Agent.
SECTION 4.03. Protection of Security. Each Grantor shall, at its own cost
and expense, take any and all actions necessary to defend title to the
Collateral against all persons and to defend the Security Interest of the
Collateral Agent in the Collateral and the priority thereof against any Lien not
expressly permitted pursuant to Section 6.02 of the Credit Agreement unless the
amount of Collateral to be so defended individually or in the aggregate does not
constitute a material part of the Collateral hereunder and the applicable
Grantor shall in good faith determine that the cost of such defense to such
Grantor would be excessive in relation to the value of such Collateral (in which
case the applicable Grantor shall so notify the Collateral Agent).
SECTION 4.04. Further Assurances. Each Grantor agrees, at its own expense,
to execute, acknowledge, deliver and cause to be duly filed all such further
instruments and documents and take all such actions as the Collateral Agent may
from time to time reasonably request to better assure, preserve, protect and
perfect the Security Interest and the rights and remedies created hereby,
including the payment of any fees and taxes required in connection with the
execution and delivery of this Agreement, the granting of the Security Interest
and the filing of any financing statements (including fixture filings) or other
documents in connection herewith or therewith. If any amount payable to the
Grantors under or in connection with any of the Collateral shall be or become
evidenced by any promissory note or other instrument, such note or instrument
shall be immediately pledged and delivered to the Collateral Agent, duly
endorsed "without recourse or warranty" to the Collateral Agent.
Without limiting the generality of the foregoing, each Grantor hereby
authorizes the Collateral Agent, with prompt notice thereof to the Grantors, to
supplement this Agreement by supplementing Schedule II, III, IV or V hereto or
adding additional schedules hereto to specifically identify any asset or item
that may constitute Copyrights, Licenses, Patents or Trademarks; provided,
however, that any Grantor shall have the right, exercisable within 10 days after
it has been notified by the Collateral Agent of the specific identification of
such Collateral, to advise the Collateral Agent in writing of any inaccuracy of
the representations and warranties made by such Grantor hereunder with respect
to such Collateral. Each Grantor agrees that it will use its best efforts to
take such action as shall be necessary in order that all representations and
warranties hereunder shall be true and correct with respect to such Collateral
within 30 days after the date it has been notified by the Collateral Agent of
the specific identification of such Collateral.
SECTION 4.05. Inspection and Verification. The Collateral Agent and such
persons as the Collateral Agent may reasonably designate shall have the right,
at the Grantors' own cost and expense, to inspect the Collateral, all records
related thereto (and to make extracts and copies from such records) and the
premises upon which any of the Collateral is located, to discuss the Grantors'
affairs with the officers of the Grantors and their independent accountants and
to verify under reasonable procedures (which shall include prior notice to and
cooperation with the Grantors), in accordance with Section 5.06 of the Credit
Agreement, the validity, amount, quality, quantity, value, condition and status
of, or any other matter relating to, the Collateral, including, in the case of
Accounts or Collateral in the possession of any third person, by contacting
Account Debtors or the third person possessing such Collateral for the purpose
of making such a verification; provided that the Collateral Agent shall only
contact or cause to be contacted such Account Debtors if an Event of Default has
occurred and is continuing. The Collateral Agent shall have the absolute right
to share any information it gains from such inspection or verification with any
Secured Party (it being understood
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that any such information shall be deemed to be "Information" subject to the
provisions of Section 10.16 of the Credit Agreement).
SECTION 4.06. Taxes; Encumbrances. At its option, the Collateral Agent may
discharge past due taxes, assessments, charges, fees, Liens, security interests
or other encumbrances at any time levied or placed on the Collateral and not
permitted pursuant to Section 6.02 of the Credit Agreement, and may pay for the
maintenance and preservation of the Collateral to the extent any Grantor fails
to do so as required by the Credit Agreement or this Agreement, and each Grantor
jointly and severally agrees to reimburse the Collateral Agent on demand for any
payment made or any expense incurred by the Collateral Agent pursuant to the
foregoing authorization; provided, however, that nothing in this Section 4.06
shall be interpreted as excusing any Grantor from the performance of, or
imposing any obligation on the Collateral Agent or any Secured Party to cure or
perform, any covenants or other promises of any Grantor with respect to taxes,
assessments, charges, fees, liens, security interests or other encumbrances and
maintenance as set forth herein or in the other Loan Documents.
SECTION 4.07. Assignment of Security Interest. If at any time any Grantor
shall take a secu rity interest in any property of an Account Debtor or any
other person to secure payment and performance of an Account, such Grantor shall
promptly assign such security interest to the Collateral Agent. Such assignment
need not be filed of public record unless necessary to continue the perfected
status of the security interest against creditors of and transferees from the
Account Debtor or other person granting the security interest.
SECTION 4.08. Continuing Obligations of the Grantors. Each Grantor shall
remain liable to observe and perform all the conditions and obligations to be
observed and performed by it under each contract, agreement or instrument
relating to the Collateral, all in accordance with the terms and conditions
thereof, and each Grantor jointly and severally agrees to indemnify and hold
harmless the Collateral Agent and the Secured Parties from and against any and
all liability for such performance.
SECTION 4.09. Use and Disposition of Collateral. None of the Grantors
shall make or permit to be made an assignment, pledge or hypothecation of the
Collateral or shall grant any other Lien in respect of the Collateral, except as
expressly permitted by Section 6.02 of the Credit Agreement. None of the
Grantors shall make or permit to be made any transfer of the Collateral and each
Grantor shall remain at all times in possession of the Collateral owned by it,
except that (a) Inventory may be sold in the ordinary course of business and (b)
unless and until the Collateral Agent shall notify the Grantors that an Event of
Default shall have occurred and be continuing and that during the continuance
thereof the Grantors shall not sell, convey, lease, assign, transfer or
otherwise dispose of any Collateral (which notice may be given by telephone if
promptly confirmed in writing), the Grantors may use and dispose of the
Collateral in any lawful manner not inconsistent with the provisions of this
Agreement, the Credit Agreement or any other Loan Document. Without limiting the
generality of the foregoing, each Grantor agrees that it shall not permit any
Inventory to be in the possession or control of any warehouseman, bailee, agent
or processor at any time unless such warehouseman, bailee, agent or processor
shall have been notified of the Security Interest and shall have agreed in
writing to hold the Inventory subject to the Security Interest and the
instructions of the Collateral Agent and to waive and release any Lien held by
it with respect to such Inventory, whether arising by operation of law or
otherwise.
SECTION 4.10. Limitation on Modification of Accounts. None of the Grantors
will, without the Collateral Agent's prior written consent, grant any extension
of the time of payment of any of the Account Rights, compromise, compound or
settle the same for less than the full amount thereof, release, wholly or
partly, any person liable for the payment thereof or allow any credit or
discount whatsoever thereon, other than extensions, credits, discounts,
compromises or settlements granted or made in the ordinary course of business
and consistent with its current practices and in accordance with prudent and
standard practices used in the industries in which such Grantor is engaged;
provided that nothing in this covenant shall restrict the compromise or
settlement of any Accounts or Account Rights in an amount that is less than or
equal to the amount of such Account or Account Rights which the applicable
Grantor has reserved against in good faith.
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SECTION 4.11. Insurance. The Grantors, at their own expense, shall keep or
cause to be kept the Inventory and Equipment adequately insured at all times by
financially sound and reputable insurers; maintain such other insurance, to such
extent and against such risks, including fire and other risks insured against by
extended coverage, as is customary with companies in the same or similar
businesses operating in the same or similar locations, including public
liability insurance against claims for personal injury or death or property
damage occurring upon, in, about or in connection with the use of any properties
owned, occupied or controlled by it; and maintain such other insurance as may be
required by law.
(b) The Grantors shall: (i) cause all such policies to be endorsed or
otherwise amended to include a "standard" or "New York" lender's loss payable
endorsement which endorsement shall provide that, from and after the Closing
Date, if the insurance carrier shall have received written notice from the
Administrative Agent or the Collateral Agent of the occurrence of an Event of
Default, the insurance carrier shall pay all proceeds otherwise payable to the
Borrower or the Loan Parties under such policies directly to the Collateral
Agent; (ii) deliver original or certified copies of all such policies to the
Collateral Agent; (iii) cause each such policy to provide that it shall not be
canceled, modified or not renewed except (x) by reason of nonpayment of premium
upon not less than 10 days' prior written notice thereof by the insurer to the
Administrative Agent and the Collateral Agent (giving the Administrative Agent
and the Collateral Agent the right to cure defaults in the payment of premiums)
or (y) for any other reason upon not less than 30 days' prior written notice
thereof by the insurer to the Administrative Agent and the Collateral Agent; and
(iv) deliver to the Administrative Agent and the Collateral Agent, prior to the
cancelation, modification or nonrenewal of any such policy of insurance, a copy
of a renewal or replacement policy (or other evidence of renewal of a policy
previously delivered to the Administrative Agent and the Collateral Agent)
together with evidence satisfactory to the Administrative Agent and the
Collateral Agent of payment of the premium therefor.
(c) The Grantors shall notify the Administrative Agent and the Collateral
Agent immediately whenever any separate insurance concurrent in form or
contributing in the event of loss with that required to be maintained under this
Section 4.11 is taken out by the Borrower; and promptly deliver to the
Administrative Agent and the Collateral Agent a duplicate original copy of such
policy or policies.
(d) Each Grantor irrevocably makes, constitutes and appoints the
Collateral Agent (and all officers, employees or agents designated by the
Collateral Agent) as such Grantor's true and lawful agent (and attorney-in-fact)
for the purpose, during the continuance of an Event of Default, of making,
settling and adjusting claims in respect of Collateral under policies of
insurance, endorsing the name of such Grantor on any check, draft, instrument or
other item of payment for the proceeds of such policies of insurance and for
making all determinations and decisions with respect thereto. In the event that
any Grantor at any time or times shall fail to obtain or maintain any of the
policies of insurance required hereby or to pay any premium in whole or part
relating thereto, the Collateral Agent may, without waiving or releasing any
obligation or liability of the Grantors hereunder or any Event of Default, in
its sole discretion, obtain and maintain such policies of insurance and pay such
premium and take any other actions with respect thereto as the Collateral Agent
deems advisable. All sums disbursed by the Collateral Agent in connection with
this Section 4.11, including reasonable attorneys' fees, court costs, expenses
and other charges relating thereto, shall be payable, upon demand, by the
Grantors to the Collateral Agent and shall be additional Obligations secured
hereby.
SECTION 4.12. Legend. Each Grantor shall legend, in form and manner
satisfactory to the Collateral Agent, its books, records and documents
evidencing or pertaining to Account Rights with an appropriate reference to the
fact that its Account Rights have been assigned to the Collateral Agent for the
benefit of the Secured Parties and that the Collateral Agent has a security
interest therein.
SECTION 4.13. Covenants Regarding Patent, Trademark and Copyright
Collateral. (a) Each Grantor agrees that it will not, nor will it permit any of
its licensees to, do any act, or omit to do any act, which would cause any
Patent which is material to the conduct of such Grantor's business to become
invalidated or dedicated to the public, and agrees that it shall continue to
mark any products
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11
covered by a Patent with the relevant patent number as necessary and sufficient
to establish and preserve its maximum rights under applicable patent laws.
(b) Each Grantor (either itself or through its licensees or its
sublicensees) will, for each Trademark material to the conduct of such Grantor's
business, (i) maintain such Trademark in full force free from any claim of
abandonment or invalidity for non-use, (ii) display such Trademark with notice
of Federal or foreign registration to the extent necessary and sufficient to
establish and preserve its maximum rights under applicable law and (iii) not
knowingly use or knowingly permit the use of such Trademark in violation of any
third party rights.
(c) Each Grantor (either itself or through licensees) will, for each work
covered by a material Copyright, continue to publish, reproduce, display, adopt
and distribute the work with appropriate copyright notice as necessary and
sufficient to establish and preserve its maximum rights under applicable
copyright laws.
(d) Each Grantor shall notify the Collateral Agent immediately if it knows
or has reason to know that any Patent, Trademark or Copyright material to the
conduct of its business may become abandoned, lost or dedicated to the public,
or of any material adverse determination or development (including the
institution of, or any such determination or development in, any proceeding in
the United States Patent and Trademark Office, United States Copyright Office or
any court or similar office of any country) regarding such Grantor's ownership
of any Patent, Trademark or Copyright material to the conduct of its business,
its right to register the same, or to keep and maintain the same.
(e) In no event shall any Grantor, either itself or through any agent,
employee, licensee or designee, file an application for any Patent, Trademark or
Copyright (or for the registration of any Trademark or Copyright) with the
United States Patent and Trademark Office, United States Copyright Office or any
office or agency in any political subdivision of the United States or in any
other country or any political subdivision thereof, unless it promptly informs
the Collateral Agent, and, upon request of the Collateral Agent, executes and
delivers any and all agreements, instruments, documents and papers as the
Collateral Agent may request to evidence the Collateral Agent's security
interest in such Patent, Trademark or Copyright, and each Grantor hereby
appoints the Collateral Agent as its attorney-in-fact to execute and file such
writings for the foregoing purposes, all acts of such attorney being hereby
ratified and confirmed; such power, being coupled with an interest, is
irrevocable.
(f) Each Grantor will take all necessary steps that are consistent with
the practice in any proceeding before the United States Patent and Trademark
Office, United States Copyright Office or any office or agency in any political
subdivision of the United States or in any other country or any political
subdivision thereof, to maintain and pursue each material application relating
to the Patents, Trademarks and/or Copyrights (and to obtain the relevant grant
or registration) and to maintain each issued Patent and each registration of the
Trademarks and Copyrights that is material to the conduct of any Grantor's
business, including timely filings of applications for renewal, affidavits of
use, affidavits of incontestability and payment of maintenance fees, and, if
consistent with good business judgment, to initiate opposition, interference and
cancelation proceedings against third parties.
(g) In the event that any Grantor has reason to believe that any
Collateral consisting of a Patent, Trademark or Copyright material to the
conduct of any Grantor's business has been or is about to be infringed,
misappropriated or diluted by a third party, such Grantor promptly shall notify
the Collateral Agent and shall, if consistent with good business judgment,
promptly sue for infringement, misappropriation or dilution and to recover any
and all damages for such infringement, misappropriation or dilution, and take
such other actions as are appropriate under the circumstances to protect such
Collateral.
(h) Upon and during the continuance of an Event of Default, each Grantor
shall use its best efforts to obtain all requisite consents or approvals by the
licensor of each Copyright License, Patent License or Trademark License to
effect the assignment of all of such Grantor's right, title and interest
thereunder to the Collateral Agent or its designee.
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ARTICLE V
Power of Attorney
Each Grantor irrevocably makes, constitutes and appoints the Collateral
Agent (and all officers, employees or agents designated by the Collateral Agent)
as such Grantor's true and lawful agent and attorney-in-fact, and in such
capacity the Collateral Agent shall have the right, with power of substitution
for each Grantor and in each Grantor's name or otherwise, for the use and
benefit of the Collateral Agent and the Secured Parties, upon the occurrence and
during the continuance of an Event of Default (a) to receive, endorse, assign
and/or deliver any and all notes, acceptances, checks, drafts, money orders or
other evidences of payment relating to the Collateral or any part thereof; (b)
to demand, collect, receive payment of, give receipt for and give discharges and
releases of all or any of the Collateral; (c) to sign the name of any Grantor on
any invoice or bill of lading relating to any of the Collateral; (d) to send
verifications of Account Rights to any Account Debtor; (e) to commence and
prosecute any and all suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect or otherwise realize on all or any of
the Collateral or to enforce any rights in respect of any Collateral; (f) to
settle, compromise, compound, adjust or defend any actions, suits or proceedings
relating to all or any of the Collateral; (g) to notify, or to require any
Grantor to notify, Account Debtors to make payment directly to the Collateral
Agent; and (h) to use, sell, assign, transfer, pledge, make any agreement with
respect to or otherwise deal with all or any of the Collateral, and to do all
other acts and things necessary to carry out the purposes of this Agreement, as
fully and completely as though the Collateral Agent were the absolute owner of
the Collateral for all purposes; provided, however, that nothing herein
contained shall be construed as requiring or obligating the Collateral Agent or
any Secured Party to make any commitment or to make any inquiry as to the nature
or sufficiency of any payment received by the Collateral Agent or any Secured
Party, or to present or file any claim or notice, or to take any action with
respect to the Collateral or any part thereof or the moneys due or to become due
in respect thereof or any property covered thereby, and no action taken or
omitted to be taken by the Collateral Agent or any Secured Party with respect to
the Collateral or any part thereof shall give rise to any defense, counterclaim
or offset in favor of any Grantor or, other than for losses sustained through
the Collateral Agent's or any such Secured Party's gross negligence or wilful
misconduct, to any claim or action against the Collateral Agent or any Secured
Party. It is understood and agreed that the appointment of the Collateral Agent
as the agent and attorney-in-fact of the Grantors for the purposes set forth
above is coupled with an interest and is irrevocable. The provisions of this
Section shall in no event relieve any Grantor of any of its obligations
hereunder or under any other Loan Document with respect to the Collateral or any
part thereof or impose any obligation on the Collateral Agent or any Secured
Party to proceed in any particular manner with respect to the Collateral or any
part thereof, or in any way limit the exercise by the Collateral Agent or any
Secured Party of any other or further right which it may have on the date of
this Agreement or hereafter, whether hereunder, under any other Loan Document,
by law or otherwise.
ARTICLE VI
Remedies
SECTION 6.01. Remedies upon Default. Upon the occurrence and during the
continuance of an Event of Default, each Grantor agrees to deliver each item of
Collateral to the Collateral Agent on demand, and it is agreed that the
Collateral Agent shall have the right to take any of or all the following
actions at the same or different times: (a) with respect to any Collateral
consisting of Intellectual Property, on demand, to cause the Security Interest
to become an assignment, transfer and conveyance of any of or all such
Collateral by the applicable Grantors to the Collateral Agent or to license or
sublicense, whether general, special or otherwise, and whether on an exclusive
or non-exclusive basis, any such Collateral throughout the world on such terms
and conditions and in such manner as the Collateral Agent shall determine (other
than in violation of any then-existing licensing arrangements to the extent that
waivers are not obtained notwithstanding compliance with Section
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4.13(h)) and (b) with or without legal process and with or without prior notice
or demand for performance, to take possession of the Collateral and without
liability for trespass to enter any premises where the Collateral may be located
for the purpose of taking possession of or removing the Collateral and,
generally, to exercise any and all rights afforded to a secured party under the
Uniform Commercial Code or other applicable law. Without limiting the
generality of the foregoing, each Grantor agrees that the Collateral Agent shall
have the right, subject to the mandatory requirements of applicable law, to sell
or otherwise dispose of all or any part of the Collateral, at public or private
sale or at any broker's board or on any securities exchange, for cash, upon
credit or for future delivery as the Collateral Agent shall deem appropriate.
The Collateral Agent shall be authorized at any such sale (if it deems it
advisable to do so) to restrict the prospective bidders or purchasers to persons
who will represent and agree that they are purchasing any Collateral which
constitutes a "security" under applicable securities law for their own account
for investment and not with a view to the distribution or sale thereof, and upon
consummation of any such sale the Collateral Agent shall have the right to
assign, transfer and deliver to the purchaser or purchasers thereof the
Collateral so sold. Each such purchaser at any such sale shall hold the
property sold absolutely, free from any claim or right on the part of any
Grantor, and each Grantor hereby waives (to the extent permitted by law) all
rights of redemption, stay and appraisal which such Grantor now has or may at
any time in the future have under any rule of law or statute now existing or
hereafter enacted.
The Collateral Agent shall give the Grantors 10 days' written notice (which
each Grantor agrees is reasonable notice within the meaning of Section 9-504(3)
of the Uniform Commercial Code as in effect in the State of New York or its
equivalent in other jurisdictions) of the Collateral Agent's intention to make
any sale of Collateral. Such notice, in the case of a public sale, shall state
the time and place for such sale and, in the case of a sale at a broker's board
or on a securities exchange, shall state the board or exchange at which such
sale is to be made and the day on which the Collateral, or portion thereof, will
first be offered for sale at such board or exchange. Any such public sale shall
be held at such time or times within ordinary business hours and at such place
or places as the Collateral Agent may fix and state in the notice (if any) of
such sale. At any such sale, the Collateral, or portion thereof, to be sold may
be sold in one lot as an entirety or in separate parcels, as the Collateral
Agent may (in its sole and absolute discretion) determine. The Collateral Agent
shall not be obligated to make any sale of any Collateral if it shall determine
not to do so, regardless of the fact that notice of sale of such Collateral
shall have been given. The Collateral Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which the same was so
adjourned. In case any sale of all or any part of the Collateral is made on
credit or for future delivery, the Collateral so sold may be retained by the
Collateral Agent until the sale price is paid by the purchaser or purchasers
thereof, but the Collateral Agent shall not incur any liability in case any such
purchaser or purchasers shall fail to take up and pay for the Collateral so sold
and, in case of any such failure, such Collateral may be sold again upon like
notice. At any public (or, to the extent permitted by law, private) sale made
pursuant to this Section, any Secured Party may bid for or purchase, free (to
the extent permitted by law) from any right of redemption, stay, valuation or
appraisal on the part of any Grantor (all said rights being also hereby waived
and released to the extent permitted by law), the Collateral or any part thereof
offered for sale and may make payment on account thereof by using any claim then
due and payable to such Secured Party from any Grantor as a credit against the
purchase price, and such Secured Party may, upon compliance with the terms of
sale, hold, retain and dispose of such property without further accountability
to any Grantor therefor. For purposes hereof, a written agreement to purchase
the Collateral or any portion thereof shall be treated as a sale thereof; the
Collateral Agent shall be free to carry out such sale pursuant to such agreement
and no Grantor shall be entitled to the return of the Collateral or any portion
thereof subject thereto, notwithstanding the fact that after the Collateral
Agent shall have entered into such an agreement all Events of Default shall have
been remedied and the Obligations paid in full. As an alternative to exercising
the power of sale herein conferred upon it, the Collateral Agent may proceed by
a suit or suits at law or in equity to foreclose this Agreement and to sell the
Collateral or any portion thereof pursuant to a judgment or decree of a court or
courts having competent jurisdiction or pursuant to a proceeding by a court-
appointed receiver. Without limiting the foregoing, remedies available to the
Collateral Agent include the exercise, on its own
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14
initiative and without any approval from the Grantors, of any and all remedies
available to the Collateral Agent and Secured Party under the Puerto Rican Note
Security Agreement.
SECTION 6.02. Application of Proceeds. The Collateral Agent shall apply the
proceeds of any collection or sale of the Collateral, as well as any Collateral
consisting of cash, as follows:
FIRST, to the payment of all costs and expenses incurred by the
Administrative Agent or the Collateral Agent (in its capacity as such
hereunder or under any other Loan Document) in connection with such
collection or sale or otherwise in connection with this Agreement or any of
the Obligations, including all court costs and the fees and expenses of its
agents and legal counsel, the repayment of all advances made by the
Collateral Agent hereunder or under any other Loan Document on behalf of
any Grantor and any other costs or expenses incurred in connection with the
exercise of any right or remedy hereunder or under any other Loan Document;
SECOND, to the payment in full of the Obligations (the amounts so
applied to be distributed among the Secured Parties pro rata in accordance
with the amounts of the Obligations owed to them on the date of any such
distribution); and
THIRD, to the Grantors, their successors or assigns, or as a court of
competent jurisdiction may otherwise direct.
The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement. Upon any sale of the Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the Collateral Agent or of the officer making the sale shall be a
sufficient discharge to the purchaser or purchasers of the Collateral so sold
and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Collateral Agent
or such officer or be answerable in any way for the misapplication thereof.
SECTION 6.03. Grant of License to Use Intellectual Property. For the
purpose of enabling the Collateral Agent to exercise rights and remedies under
this Article at such time as the Collateral Agent shall be lawfully entitled to
exercise such rights and remedies, each Grantor hereby grants to the Collateral
Agent an irrevocable, non-exclusive license (exercisable without payment of
royalty or other compensation to the Grantors) to use, license or sub-license
any of the Collateral consisting of Intellectual Property now owned or hereafter
acquired by such Grantor, and wherever the same may be located, and including in
such license reasonable access to all media in which any of the licensed items
may be recorded or stored and to all computer software and programs used for the
compilation or printout thereof; provided that (a) nothing herein shall
constitute the grant of any license that would cause any default under any
existing licensing agreement to which the Grantor is party that could result in
the loss or termination of such license or result in any material liability on
the part of the Grantor and (b) the license granted by this Section shall
automatically terminate with respect to any Intellectual Property in which any
Grantor grants an exclusive license to a third party in the ordinary course of
its business (and shall not become effective as to any Intellectual Property in
which such an exclusive license has been granted prior to the date hereof). The
use of such license by the Collateral Agent may be exercised, at the option of
the Collateral Agent, upon the occurrence and during the continuation of an
Event of Default (but not in the absence of an Event of Default); provided that
any license, sub-license or other transaction entered into by the Collateral
Agent in accordance herewith shall be binding upon the Grantors notwithstanding
any subsequent cure of an Event of Default.
SECTION 6.04. FCC Compliance. (a) Notwithstanding anything to the
contrary contained herein or in any other agreement, instrument, or document
executed in connection herewith, (i) no party hereto shall take or be required
to take any actions hereunder that would constitute or result in a transfer or
assignment of any Station License, permit or authorization or a change of
control over such Station License, permit or authorization requiring the prior
approval of the FCC without first
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obtaining such prior approval of the FCC and (ii) no failure on the part of any
party hereto to take any such actions prior to the obtaining of such approval
shall constitute an Event of Default.
(b) If an Event of Default shall have occurred and be continuing, each
Grantor shall take any action which the Collateral Agent may reasonably request
in the exercise of its rights and remedies under this Agreement in order to
transfer or assign the Collateral to the Collateral Agent or to such one or more
third parties (being either bona fide purchasers or trustees or receivers as
contemplated by this Section 6.04) as the Collateral Agent may designate, or to
a combination of the foregoing. To enforce the provisions of this Section 6.04,
the Collateral Agent and the other Secured Parties are empowered to seek from
the FCC and any other Governmental Authority, to the extent required, consent to
or approval of any involuntary transfer of control of any Collateral subject to
this Agreement for the purpose of seeking a bona fide purchaser to whom control
ultimately will be transferred. Each Grantor agrees to cooperate with any such
purchaser and with the Collateral Agent and the other Secured Parties in the
preparation, execution and filing of any forms and providing any information
that may be necessary or helpful in obtaining the FCC's consent to the
assignment to such purchaser of the Collateral. Each Grantor hereby agrees to
consent to any such voluntary or involuntary transfer upon the occurrence and
during the continuation of an Event of Default and, without limiting any rights
of the Collateral Agent under this Agreement, to authorize the Collateral Agent
to nominate a trustee or receiver to assume control of the Collateral, subject
only to required judicial, FCC or other consents required by Governmental
Authorities or applicable law, in order to effectuate the transactions
contemplated by this Section 6.04. Such trustee or receiver shall have all the
rights and powers as provided to it by law or court order, or to the Collateral
Agent under this Agreement. Each Grantor shall cooperate fully in obtaining the
consent of the FCC and the approval or consent of each other Governmental
Authority required to effectuate the foregoing.
(c) Without limiting the obligations of any Grantor hereunder in any
respect, each Grantor further agrees that if such Grantor, upon the occurrence
and during the continuance of an Event of Default, should fail or refuse to take
any action required under paragraph (b) above for any reason whatsoever, without
limitation, including any refusal to execute any application necessary or
appropriate to obtain any governmental consent necessary or appropriate for the
exercise of any right of the Collateral Agent or any other Secured Party
hereunder, such Grantor agrees that such application may be executed on such
Grantor's behalf by the clerk of any court of competent jurisdiction without
notice to such Grantor pursuant to court order.
(d) In connection with this Section 6.04, the Collateral Agent shall
be entitled to rely in good faith upon an opinion of outside FCC counsel of the
Collateral Agent's choice with respect to any such assignment or transfer,
whether or not the advice rendered is ultimately determined to have been
accurate.
ARTICLE VII
Miscellaneous
SECTION 7.01. Notices. All communications and notices hereunder shall
(except as otherwise expressly permitted herein) be in writing and given as
provided in Section 10.01 of the Credit Agreement. All communications and
notices hereunder to any Guarantor shall be given to it at its address or
telecopy number set forth on Schedule I, with a copy to the Borrower.
SECTION 7.02. Security Interest Absolute. All rights of the Collateral
Agent hereunder, the Security Interest and all obligations of the Grantors
hereunder shall be absolute and unconditional irrespective of (a) any lack of
validity or enforceability of the Credit Agreement, any other Loan Document, any
agreement with respect to any of the Obligations or any other agreement or
instrument relating to any of the foregoing, (b) any change in the time, manner
or place of payment of, or in any other term of, all or any of the Obligations,
or any other amendment or waiver of or any consent to any departure from the
Credit Agreement, any other Loan Document or any other agreement or instrument,
(c) any exchange, release or non-perfection of any Lien on other collateral, or
any release
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16
or amendment or waiver of or consent under or departure from any guarantee,
securing or guaranteeing all or any of the Obligations, or (d) any other
circumstance that might otherwise constitute a defense available to, or a
discharge of, any Grantor in respect of the Obligations or this Agreement.
SECTION 7.03. Survival of Agreement. All covenants, agreements,
representations and warranties made by any Grantor herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement shall be considered to have been relied upon by the
Secured Parties and shall survive the making by the Lenders of the Loans, and
the execution and delivery to the Lenders of any notes evidencing such Loans,
regardless of any investigation made by the Lenders or on their behalf, and
shall continue in full force and effect until this Agreement shall terminate.
SECTION 7.04. Binding Effect; Several Agreement. This Agreement shall
become effective as to any Grantor when a counterpart hereof executed on behalf
of such Grantor shall have been delivered to the Collateral Agent and a
counterpart hereof shall have been executed on behalf of the Collateral Agent,
and thereafter this Agreement shall be binding upon such Grantor and the
Collateral Agent and their respective successors and assigns and shall inure to
the benefit of such Grantor, the Collateral Agent and the other Secured Parties
and their respective successors and assigns, except that no Grantor shall have
the right to assign or transfer its rights or obligations hereunder or any
interest herein or in the Collateral (and any such assignment or transfer shall
be void) except as expressly contemplated by this Agreement or the Credit
Agreement. This Agreement shall be construed as a separate agreement with
respect to each Grantor and may be amended, modified, supplemented, waived or
released with respect to any Grantor without the approval of any other Grantor
and without affecting the obligations of any other Grantor hereunder.
SECTION 7.05. Successors and Assigns. Whenever in this Agreement any of
the parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party; and all covenants, promises and agreements
by or on behalf of any Grantor or the Collateral Agent that are contained in
this Agreement shall bind and inure to the benefit of their respective
successors and assigns.
SECTION 7.06. Collateral Agent's Fees and Expenses; Indemnification. (a)
Each Grantor jointly and severally agrees to pay upon demand to the Collateral
Agent the amount of any and all reasonable expenses, including the reasonable
fees, disbursements and other charges of its counsel and of any experts or
agents, which the Collateral Agent may incur in connection with (i) the
administration of this Agreement (including the customary fees and charges of
the Collateral Agent for any audits conducted by it or on its behalf with
respect to the Account Rights or Inventory), (ii) the custody or preservation
of, or the sale of, collection from or other realization upon any of the
Collateral, or (iii) the exercise, enforcement or protection of any of the
rights of the Collateral Agent hereunder.
(b) Without limitation of its indemnification obligations under the other
Loan Documents, each Grantor jointly and severally agrees to indemnify the
Collateral Agent and the other Indemnitees against, and hold each of them
harmless from, any and all losses, claims, damages, liabilities and related
expenses, including reasonable fees, disbursements and other charges of counsel,
incurred by or asserted against any of them arising out of, in any way connected
with, or as a result of, the execution, delivery or performance of this
Agreement or any claim, litigation, investigation or proceeding relating hereto
or to the Collateral, whether or not any Indemnitee is a party thereto; provided
that such indemnity shall not, as to any Indemnitee, be available to the extent
that such losses, claims, damages, liabilities or related expenses are
determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of
such Indemnitee. In connection with any claim, litigation, investigation or
proceeding referred to in the preceding sentence, the Indemnitees will endeavor
to avoid duplication of effort and expense by employing common counsel
(including special or local counsel, where required), which shall be nominated
by the Collateral Agent (or, if the Collateral Agent shall not be a party or
prospective party to such claim, litigation, investigation or proceeding, by the
Lender party thereto
<PAGE>
17
with the largest credit exposure or potential credit exposure hereunder), it
being understood that an Indemnitee will in any event be entitled to separate
counsel (i) if such Indemnitee may have defenses available to it that are
different from or potentially inconsistent with defenses that may be asserted by
other Indemnitees, (ii) if the representation by a single counsel of such
Indemnitee and other Indemnitees would otherwise be inappropriate due to actual
or potential differences in the interests of the Indemnitees or (iii) if the
Borrower shall agree to the retention of separate counsel.
(c) Any such amounts payable as provided hereunder shall be additional
Obligations secured hereby and by the other Security Documents. The provisions
of this Section 7.06 shall remain operative and in full force and effect
regardless of the termination of this Agreement or any other Loan Document, the
consummation of the transactions contemplated hereby, the repayment of any of
the Obligations, the invalidity or unenforceability of any term or provision of
this Agreement or any other Loan Document, or any investigation made by or on
behalf of the Collateral Agent or any other Secured Party. All amounts due
under this Section 7.06 shall be payable on written demand therefor and shall
bear interest at the rate specified in Section 2.07 of the Credit Agreement.
SECTION 7.07. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 7.08. Waivers; Amendment. (a) No failure or delay of the
Collateral Agent in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Collateral Agent hereunder
and of the Collateral Agent, the Issuing Bank, the Administrative Agent and the
Lenders under the other Loan Documents are cumulative and are not exclusive of
any rights or remedies that they would otherwise have. No waiver of any
provisions of this Agreement or any other Loan Document or consent to any
departure by any Grantor therefrom shall in any event be effective unless the
same shall be permitted by paragraph (b) below, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice to or demand on any Grantor in any case shall entitle such
Grantor or any other Grantor to any other or further notice or demand in similar
or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to an agreement or agreements in writing entered
into by the Collateral Agent and the Grantor or Grantors with respect to which
such waiver, amendment or modification is to apply, subject to any consent
required in accordance with Section 10.08 of the Credit Agreement.
SECTION 7.09. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.09.
SECTION 7.10. Severability. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable
<PAGE>
18
provisions with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.
SECTION 7.11. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract (subject to Section 7.04), and
shall become effective as provided in Section 7.04. Delivery of an executed
signature page to this Agreement by facsimile transmission shall be effective as
delivery of a manually executed counterpart hereof.
SECTION 7.12. Headings. Article and Section headings used herein are for
the purpose of reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Agreement.
SECTION 7.13. Jurisdiction; Consent to Service of Process. (a) Each
Grantor hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that the
Collateral Agent, the Administrative Agent, the Issuing Bank or any Lender may
otherwise have to bring any action or proceeding relating to this Agreement or
the other Loan Documents against any Grantor or its properties in the courts of
any jurisdiction.
(b) Each Grantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Loan Documents in any
New York State or Federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 7.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 7.14. Termination. This Agreement and the Security Interest shall
terminate when all the Obligations have been indefeasibly paid in full, the
Lenders have no further commitment to lend, the L/C Exposure has been reduced to
zero and the Issuing Bank has no further commitment to issue Letters of Credit
under the Credit Agreement, at which time the Collateral Agent shall execute and
deliver to the Grantors, at the Grantors' expense, all Uniform Commercial Code
termination state ments, terminations and reassignments for mortgages and
assignments of copyrights, patents and trademarks, and similar documents which
the Grantors shall reasonably request to evidence such termination. Any
execution and delivery of termination statements or documents pursuant to this
Section 7.14 shall be without recourse to or warranty by the Collateral Agent
other than that the Collateral (other than any Collateral that shall have been
sold in accordance with Section 6.01) is not subject to any interest granted by
the Collateral Agent in favor of any other person. A Guarantor shall
automatically be released from its obligations hereunder and the Security
Interest in the Collateral of such Guarantor shall be automatically released in
the event that all the capital stock of such Guarantor shall be sold,
transferred or otherwise disposed of to a person that is not an Affiliate of the
Borrower in accordance with the terms of the Credit Agreement; provided that the
Required Lenders shall have consented to such sale, transfer or other
disposition (to the extent required by the Credit Agreement) and the terms of
such consent did not provide otherwise.
<PAGE>
SECTION 7.15. Additional Grantors. Pursuant to Section 5.09 of the Credit
Agreement, each Subsidiary (other than any Foreign Subsidiary) that was not in
existence on the date of the Credit Agreement is required to enter into the
Security Agreement as a Grantor upon becoming such a Subsidiary. Upon execution
and delivery by the Collateral Agent and such a Subsidiary of a Supplement in
the form of Annex 2 hereto, such Subsidiary shall become a Grantor hereunder
with the same force and effect as if originally named as a Grantor herein. The
execution and delivery of any such instrument shall not require the consent of
any Grantor hereunder. The rights and obligations of each Grantor hereunder
shall remain in full force and effect notwithstanding the addition of any new
Grantor as a party to this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
TELEMUNDO GROUP, INC..,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO HOLDINGS, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
ESTRELLA COMMUNICATIONS, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
ESTRELLA LICENSE CORPORATION,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
<PAGE>
NEW JERSEY TELEVISION BROADCASTING CORP. (N.Y.),
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
SACC ACQUISITION CORP.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
SAT CORP.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
SPANISH AMERICAN COMMUNICATIONS CORPORATION,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO OF PUERTO RICO LICENSE CORPORATION,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
<PAGE>
TELEMUNDO NETWORK, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO NEWS NETWORK, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO OF AUSTIN, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO OF CHICAGO, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO OF COLORADO SPRINGS, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
<PAGE>
TELEMUNDO OF FLORIDA, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO OF FLORIDA LICENSE CORPORATION,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO OF GALVESTON-HOUSTON, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO OF GALVESTON-HOUSTON LICENSE CORPORATION,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO OF MEXICO, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
<PAGE>
TELEMUNDO OF NORTHERN CALIFORNIA, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO OF NORTHERN CALIFORNIA LICENSE CORPORATION,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO OF SAN ANTONIO, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO OF SAN ANTONIO LICENSE CORPORATION,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO OF SANTA FE, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
<PAGE>
TELENOTICIAS DEL MUNDO, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELENOTICIAS DEL MUNDO, L.P.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TU MUNDO MUSIC, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
VIDEO 44 ACQUISITION CORP., INC. (formerly
Harriscope of Chicago, Inc.),
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
WNJU LICENSE CORPORATION,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
<PAGE>
WNJU-TV BROADCASTING CORPORATION,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
CREDIT SUISSE FIRST BOSTON,
as Collateral Agent,
by
/s/ Judith E. Smith
---------------------------
Name: Judith E. Smith
Title: Director
by
/s/ Todd C. Morgan
-------------------------
Name: Todd C. Morgan
Title: Director
<PAGE>
EXHIBIT 10.9
SUBSIDIARY GUARANTEE AGREEMENT (together with instruments
executed and delivered pursuant to Section 20, the "Agreement")
dated as of August 12, 1998, among each of the subsidiaries of
Telemundo Holdings, Inc., a Delaware corporation (the "Parent")
of which Telemundo Group, Inc., a Delaware corporation (the
"Borrower"), is a wholly owned subsidiary, listed on Schedule I
hereto (such subsidiaries being called individually a "Subsidiary
Guarantor" and collectively the "Subsidiary Guarantors") and
CREDIT SUISSE FIRST BOSTON, a bank organized under the laws of
Switzerland, acting though its New York Branch ("CSFB"), as
collateral agent (in such capacity, the "Collateral Agent") for
the Secured Parties (as defined in the Credit Agreement referred
to below).
Reference is made to the Credit Agreement dated as of August 4, 1998 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Borrower, the Parent, the lenders from time to time party
thereto (the "Lenders"), CSFB, as administrative agent (in such capacity, the
"Administrative Agent"), Collateral Agent and issuing bank (in such capacity,
the "Issuing Bank"), and Canadian Imperial Bank of Commerce, as documentation
agent (in such capacity, the "Documentation Agent"). Capitalized terms used and
not defined herein (including, without limitation, the term "Obligations", as
used in Section 1 and elsewhere herein) are used with the meanings assigned to
such terms in the Credit Agreement.
The Lenders have agreed to make Loans to the Borrower, and the Issuing Bank
has agreed to issue Letters of Credit for the account of the Borrower, pursuant
to, and upon the terms and subject to the conditions specified in, the Credit
Agreement. Each of the Subsidiary Guarantors is a Subsidiary of the Parent and
acknowledges that it will derive substantial benefit from the making of the
Loans by the Lenders to the Borrower and the issuance of the Letters of Credit
by the Issuing Bank for the account of the Borrower. The obligations of the
Lenders to make Loans and of the Issuing Bank to issue Letters of Credit are
conditioned on, among other things, the execution and delivery by the Subsidiary
Guarantors of a Subsidiary Guarantee Agreement in the form hereof. As
consideration therefor and in order to induce the Lenders to make Loans and the
Issuing Bank to issue Letters of Credit, the Subsidiary Guarantors are willing
to execute this Agreement.
Accordingly, the parties hereto agree as follows:
SECTION 1. Guarantee. Each Subsidiary Guarantor unconditionally
guarantees, jointly with the other Guarantors and severally, as a primary
obligor and not merely as a surety, the due and punctual payment by the Borrower
of the Obligations. Each Subsidiary Guarantor waives notice of and hereby
consents to any agreements or arrangements whatsoever by the Secured Parties
with any other person pertaining to the Obligations, including agreements and
arrangements for payment, extension, renewal, subordination, composition,
arrangement, discharge or release of the whole or any part of the Obligations,
or for the discharge or surrender of any or all security, or for the compromise,
whether by way of acceptance of part payment or otherwise, and the same shall in
no way impair such Subsidiary Guarantor's liability hereunder.
SECTION 2. Obligations Not Waived. To the fullest extent permitted by
applicable law, each Subsidiary Guarantor waives presentment to, demand of
payment from and protest to the Borrower of any of the Obligations, and also
waives notice of acceptance of its guarantee, notice of protest for nonpayment
and all other formalities. The obligations of each Subsidiary Guarantor
hereunder shall not be affected by (a) the failure of the Collateral Agent or
any other Secured Party to assert any claim or demand or to enforce or exercise
any right or remedy against any Loan Party under the provisions of any Loan
Document or otherwise, (b) any extension, renewal or increase of or in any of
the Obligations, (c) any rescission, waiver, amendment or modification of, or
any release from, any of the terms or provisions of any Loan Document, any
guarantee or any other agreement or instrument, (d) the release of (or the
failure to perfect a security interest in) any of the security held by the
Collateral Agent or any other Secured Party for the performance of the
Obligations or any of them or
<PAGE>
2
(e) the failure or delay of any Secured Party to exercise any right or remedy
against any other guarantor of the Obligations.
SECTION 3. Security. Each of the Subsidiary Guarantors authorizes the
Collateral Agent and each of the other Secured Parties to (a) take and hold
security for the payment of this Guarantee and the Obligations and exchange,
enforce, waive and release any such security, (b) apply such security and direct
the order or manner of sale thereof as they in their sole discretion may
determine and (c) release or substitute any one or more endorsees, other
guarantors or other obligors.
SECTION 4. Guarantee of Payment. Each Subsidiary Guarantor further agrees
that its guarantee constitutes a guarantee of payment when due and not of
collection, and waives any right to require that any resort be had by the
Collateral Agent or any other Secured Party to any security held for payment of
the Obligations or to any balance of any deposit account or credit on the books
of the Collateral Agent or any other Secured Party in favor of the Borrower or
any other person.
SECTION 5. No Discharge or Diminishment of Guarantee. The obligations of
each Subsidiary Guarantor hereunder shall not be subject to any reduction,
limitation, impairment or termination for any reason, including any claim of
waiver, release, surrender, alteration or compromise, and shall not be subject
to any defense or setoff, counterclaim, recoupment or termination whatsoever by
reason of the invalidity, illegality or unenforceability of the Obligations or
otherwise. Without limiting the generality of the foregoing, the obligations of
each Subsidiary Guarantor hereunder shall not be discharged or impaired or
otherwise affected by the failure of the Collateral Agent or any other Secured
Party to assert any claim or demand or to enforce any remedy under any Loan
Document, any guarantee or any other agreement or instrument, by any waiver or
modification of any provision thereof, by any default, failure or delay, wilful
or otherwise, in the performance of the Obligations, or by any other act,
omission or delay to do any other act that may or might in any manner or to any
extent vary the risk of such Subsidiary Guarantor or that would otherwise
operate as a discharge of such Subsidiary Guarantor as a matter of law or equity
(other than the indefeasible payment in full in cash of all the Obligations) or
which would impair or eliminate any right of such Subsidiary Guarantor to
subrogation.
SECTION 6. Defenses of Borrower Waived. To the fullest extent permitted
by applicable law, each of the Subsidiary Guarantors waives any defense based on
or arising out of the unenforceability of the Obligations or any part thereof
from any cause or the cessation from any cause of the liability (other than the
final and indefeasible payment in full in cash of the Obligations) of the
Borrower. The Collateral Agent and the other Secured Parties may, at their
election, foreclose on any security held by one or more of them by one or more
judicial or nonjudicial sales, accept an assignment of any such security in lieu
of foreclosure, compromise or adjust any part of the Obligations, make any other
accommodation with the Borrower or any other guarantor or exercise any other
right or remedy available to them against the Borrower or any other guarantor,
without affecting or impairing in any way the liability of any Subsidiary
Guarantor hereunder except to the extent the Obligations have been fully,
finally and indefeasibly paid in cash. Pursuant to applicable law, each of the
Subsidiary Guarantors waives any defense arising out of any such election even
though such election operates, pursuant to applicable law, to impair or to
extinguish any right of reimbursement or subrogation or other right or remedy of
such Subsidiary Guarantor against the Borrower or any other guarantor or any
security.
SECTION 7. Agreement to Pay; Subordination. In furtherance of the
foregoing and not in limitation of any other right that the Collateral Agent or
any other Secured Party has at law or in equity against any Subsidiary Guarantor
by virtue hereof, upon the failure of the Borrower or any other Loan Party to
pay any Obligation when and as the same shall become due, whether at maturity,
by acceleration, after notice of prepayment or otherwise, each Subsidiary
Guarantor hereby promises to and will, upon receipt of written demand by (i) in
the case of principal of and interest on the Loans and Fees, the Collateral
Agent or (ii) in the case of any other Obligation, the applicable Secured Party,
forthwith pay, or cause to be paid, to the Collateral Agent or such other
Secured Party as designated thereby in cash an amount equal to the unpaid
principal amount of such Obligations then due, together with accrued and unpaid
interest and fees on such Obligations. Upon payment by any Subsidiary
<PAGE>
3
Guarantor of any sums to the Collateral Agent or any Secured Party as provided
above, all rights of such Subsidiary Guarantor against the Borrower arising as a
result thereof by way of right of subrogation, contribution, reimbursement,
indemnity or otherwise shall in all respects be subordinate and junior in right
of payment to the prior indefeasible payment in full in cash of all the
Obligations. In addition, any indebtedness of the Borrower now or hereafter held
by any Subsidiary Guarantor is hereby subordinated in right of payment to the
prior payment in full of the Obligations. If any amount shall be paid to any
Subsidiary Guarantor on account of (i) such subrogation, contribution,
reimbursement, indemnity or similar right or (ii) any such indebtedness of the
Borrower, such amount shall be held in trust for the benefit of the Secured
Parties and shall forthwith be paid to the Collateral Agent to be credited
against the payment of the Obligations, whether matured or unmatured, in
accordance with the terms of the Loan Documents.
SECTION 8. Information. Each of the Subsidiary Guarantors assumes all
responsibility for being and keeping itself informed of the Borrower's financial
condition and assets, all other circumstances bearing upon the risk of
nonpayment of the Obligations and the nature, scope and extent of the risks that
such Subsidiary Guarantor assumes and incurs hereunder and agrees that none of
the Collateral Agent or the other Secured Parties will have any duty to advise
any of the Guarantors of information known to it or any of them regarding such
circumstances or risks.
SECTION 9. Representations and Warranties. Each of the Subsidiary
Guarantors represents and warrants as to itself that all representations and
warranties relating to it contained in the Credit Agreement are true and
correct.
SECTION 10. Termination. The Guarantees made hereunder (a) shall
terminate when all the Obligations have been indefeasibly paid in full and the
Lenders have no further commitment to lend under the Credit Agreement, the L/C
Exposure has been reduced to zero and the Issuing Bank has no further obligation
to issue Letters of Credit under the Credit Agreement and (b) shall continue to
be effective or be reinstated, as the case may be, if at any time any payment,
or any part thereof, on any Obligation is rescinded or must otherwise be
restored by any Secured Party or any Guarantor upon the bankruptcy or
reorganization of the Borrower or any Guarantor or otherwise.
SECTION 11. Binding Effect; Several Agreement; Assignments. Whenever in
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of the Subsidiary Guarantors that are
contained in this Agreement shall bind and inure to the benefit of each party
hereto and their respective successors and assigns. This Agreement shall become
effective as to any Subsidiary Guarantor when a counterpart hereof (or a
Supplement referred to in Section 20)executed on behalf of such Subsidiary
Guarantor shall have been delivered to the Collateral Agent and a counterpart
hereof (or a Supplement referred to in Section 20) shall have been executed on
behalf of the Collateral Agent, and thereafter shall be binding upon such
Subsidiary Guarantor and the Collateral Agent and their respective successors
and assigns, and shall inure to the benefit of such Subsidiary Guarantor, the
Collateral Agent and the other Secured Parties, and their respective successors
and assigns, except that no Subsidiary Guarantor shall have the right to assign
its rights or obligations hereunder or any interest herein (and any such
attempted assignment shall be void). If all the capital stock of a Subsidiary
Guarantor is sold, transferred or otherwise disposed of in a transaction
permitted by Section 6.05 of the Credit Agreement, such Subsidiary Guarantor
shall be released from its obligations under this Agreement without further
action. This Agreement shall be construed as a separate agreement with respect
to each Subsidiary Guarantor and may be amended, modified, supplemented, waived
or released with respect to any Subsidiary Guarantor without the approval of any
other Guarantor and without affecting the obligations of any other Guarantor.
SECTION 12. Waivers; Amendment. (a) No failure or delay of the Collateral
Agent in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Collateral Agent hereunder and of
the other Secured Parties under the other Loan Documents are cumulative and are
not exclusive of any rights or remedies that
<PAGE>
4
they would otherwise have. No waiver of any provision of this Agreement or
consent to any departure by any Subsidiary Guarantor therefrom shall in any
event be effective unless the same shall be permitted by paragraph (b) below,
and then such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. No notice or demand on any Subsidiary
Guarantor in any case shall entitle such Subsidiary Guarantor to any other or
further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to a written agreement entered into between the
Subsidiary Guarantors with respect to which such waiver, amendment or
modification relates and the Collateral Agent, with the prior written consent of
the Required Lenders (except as otherwise provided in the Credit Agreement).
SECTION 13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 14. Notices. All communications and notices hereunder shall be in
writing and given as provided in Section 10.01 of the Credit Agreement. All
communications and notices hereunder to each Subsidiary Guarantor shall be given
to it at its address set forth in Schedule I.
SECTION 15. Survival of Agreement; Severability. (a) All covenants,
agreements, representations and warranties made by the Subsidiary Guarantors
herein and in the certificates or other instruments prepared or delivered in
connection with or pursuant to this Agreement or any other Loan Document shall
be considered to have been relied upon by the Collateral Agent and the other
Secured Parties and shall survive the making by the Lenders of the Loans and the
issuance of the Letters of Credit by the Issuing Bank regardless of any
investigation made by the Secured Parties or on their behalf, and shall continue
in full force and effect until terminated in accordance with Section 10.
(b) In the event any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby (it being understood
that the invalidity of a particular provision in a particular jurisdiction shall
not in and of itself affect the validity of such provision in any other
jurisdiction). The parties shall endeavor in good-faith negotiations to replace
the invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 16. Counterparts. This Agreement may be executed in counterparts,
each of which shall constitute an original, but all of which when taken together
shall constitute a single contract, and shall become effective as provided in
Section 11. Delivery of an executed signature page to this Agreement by
facsimile transmission shall be as effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 17. Rules of Interpretation. The rules of interpretation
specified in Section 1.02 of the Credit Agreement shall be applicable to this
Agreement.
SECTION 18. Jurisdiction; Consent to Service of Process. (a) Each
Subsidiary Guarantor hereby irrevocably and unconditionally submits, for itself
and its property, to the nonexclusive jurisdiction of any New York State court
or Federal court of the United States of America sitting in New York City, and
any appellate court from any thereof, in any action or proceeding arising out of
or relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that the
Collateral Agent or any other Secured Party may otherwise
<PAGE>
5
have to bring any action or proceeding relating to this Agreement or the other
Loan Documents against any Guarantor or its properties in the courts of any
jurisdiction.
(b) Each Subsidiary Guarantor hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or the other
Loan Documents in any New York State or Federal court. Each of the parties
hereto hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 14. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 19. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 19.
SECTION 20. Additional Guarantors. Pursuant to Section 5.09 of the Credit
Agreement, each Subsidiary (other than any Foreign Subsidiary) that was not in
existence on the date of the Credit Agreement is required to enter into this
Agreement as a Subsidiary Guarantor upon becoming a Subsidiary. Upon execution
and delivery after the date hereof by the Collateral Agent and such a Subsidiary
of a Supplement in the form of Annex 1, such Subsidiary shall become a
Subsidiary Guarantor hereunder with the same force and effect as if originally
named as a Subsidiary Guarantor herein. The execution and delivery of any
Supplement adding an additional Subsidiary Guarantor as a party to this
Agreement shall not require the consent of any other Subsidiary Guarantor
hereunder. The rights and obligations of each Subsidiary Guarantor hereunder
shall remain in full force and effect notwithstanding the addition of any new
Subsidiary Guarantor as a party to this Agreement.
SECTION 21. Right of Setoff. If an Event of Default shall have occurred
and be continuing, each Secured Party is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other Indebtedness at any time owing by such Secured Party to
or for the credit or the account of any Subsidiary Guarantor against any or all
the obligations of such Subsidiary Guarantor now or hereafter existing under
this Agreement and the other Loan Documents held by such Secured Party,
irrespective of whether or not the Collateral Agent or any Secured Party shall
have made any demand under this Agreement or any other Loan Document and
<PAGE>
although such obligations may be unmatured. The rights of each Secured Party
under this Section 21 are in addition to other rights and remedies (including
other rights of setoff) which such Secured Party may have.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
ESTRELLA COMMUNICATIONS, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
ESTRELLA LICENSE CORPORATION,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
NEW JERSEY TELEVISION BROADCASTING CORP. (N.Y.),
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
SACC ACQUISITION CORP.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
SAT CORP.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
<PAGE>
SPANISH AMERICAN COMMUNICATIONS CORPORATION,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO NETWORK, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO NEWS NETWORK, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO OF AUSTIN, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO OF CHICAGO, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
<PAGE>
TELEMUNDO OF COLORADO SPRINGS, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO OF FLORIDA, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO OF FLORIDA LICENSE CORPORATION,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO OF GALVESTON-HOUSTON, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO OF GALVESTON-HOUSTON LICENSE CORPORATION,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
<PAGE>
TELEMUNDO OF MEXICO, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO OF NORTHERN CALIFORNIA, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO OF NORTHERN CALIFORNIA LICENSE CORPORATION,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO OF PUERTO RICO LICENSE CORPORATION,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO OF SAN ANTONIO, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
<PAGE>
TELEMUNDO OF SAN ANTONIO LICENSE CORPORATION,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELEMUNDO OF SANTA FE, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELENOTICIAS DEL MUNDO, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TELENOTICIAS DEL MUNDO, L.P.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
TU MUNDO MUSIC, INC.,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
<PAGE>
VIDEO 44 ACQUISITION CORP., INC. (formerly
Harriscope of Chicago, Inc.),
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
WNJU LICENSE CORPORATION,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
WNJU-TV BROADCASTING CORPORATION,
by
/s/ Peter J. Housman II
--------------------------------
Name: Peter J. Housman II
Title: CFO & Treasurer
CREDIT SUISSE FIRST BOSTON, as Collateral Agent,
by
/s/ Judith E. Smith
-----------------------------
Name: Judith E. Smith
Title: Director
by
/s/ Todd C. Morgan
-----------------------------
Name: Todd C. Morgan
Title: Director
<PAGE>
Exhibit 12.1
Telemundo Holdings, Inc.
Exhibit - Ratio of Earnings to Fixed Charges
(Dollars In Thousands)
<TABLE>
<CAPTION>
Year Ended
Predecessor (a) ---------- Six Months Ended
-------------- ----------------
1993 1994 1995 1996 1997 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C>
Net income (loss), before extraordinary
items, income taxes net loss from
investment in and disposal of Telenoticias,
and Merger related expenses
(214) 8,261 (7,536) (11,705) (10,378)
Fixed charges:
Interest expense, including interest
component of operating leases 14,889 19,320 21,249 10,410 10,881
------- ------- ------- ------- -------
Earnings 14,675 27,581 13,713 (1,295) 503
======= ======= ======= ======= =======
Ratio of earnings to fixed charges 1.43
Fixed charges in excess of earnings 214 -- 7,536 11,705 10,378
</TABLE>
(a) As a result of the effects of the restructuring whereby Telemundo was
recapitalized and adopted fresh start reporting as of December 31, 1994, the
ratio of earnings to fixed charges is not applicable for 1994 and prior periods.
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES
------------
Estrella Communications, Inc.
Estrella License Corporation
New Jersey Television Broadcasting Corp. (N.Y.)
SACC Acquisition Corp.
SAT Corp.
Spanish American Communications Corporation
Telemundo Hispanic Scholarship Fund
Telemundo Group, Inc.
Telemundo Network, Inc.
Telemundo News Network, Inc.
Telemundo of Austin, Inc.
Telemundo of Chicago, Inc.
Telemundo of Colorado Springs, Inc.
Telemundo of Florida, Inc.
Telemundo of Florida License Corporation
Telemundo of Galveston-Houston, Inc.
Telemundo of Galveston-Houston License Corporation
Telemundo of Mexico, Inc.
Telemundo of Northern California, Inc.
Telemundo of Northern California License Corporation
Telemundo of Puerto Rico, Inc.
Telemundo of Puerto Rico License Corporation
Telemundo of San Antonio, Inc.
Telemundo of San Antonio License Corporation
Telemundo of Santa Fe, Inc.
Telemundo Studios Mexico, S.A. de C.V.
Telenoticias del Mundo, Inc.
Telenoticias del Mundo, L.P.
Tu Mundo Music, Inc.
Video 44
Video 44 Acquisition Corp., Inc.
WNJU License Corporation
WNJU-TV Broadcasting Corporation
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Telemundo Holdings,
Inc. on Form S-4 of our report dated March 19, 1998, appearing in the
Prospectus, which is part of this Registration Statement, and of our report
dated March 19, 1998 relating to the financial statement schedules appearing
elsewhere in this Registration Statement.
We also consent to the reference to us under the headings "Selected
Financial Data" and "Experts" in such Prospectus.
Deloitte & Touche LLP
/s/ Deloitte & Touche LLP
September 29, 1998
<PAGE>
EXHIBIT 25.1
______________________________________________________________________________
______________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________________
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility of a trustee Pursuant to
Section 305(b) ____
BANK OF MONTREAL TRUST COMPANY
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
New York 13-4941093
(JURISDICTION OF INCORPORATION OR ORGANIZATION (I.R.S. EMPLOYER
IF NOT A U.S. NATIONAL BANK) IDENTIFICATION NO.)
Wall Street Plaza
88 Pine Street
New York, New York 10005
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Mark F. McLaughlin
Bank of Montreal Trust Company
Wall Street Plaza
88 Pine Street, New York, New York 10005
(212) 701-7602
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
____________________________________
TELEMUNDO HOLDINGS, INC.
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
Delaware 13-3993031
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
2290 West 8th Avenue
Hialeah, FL 33010
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
______________________________________
11 1/2% Senior Discount Notes due 2008
(TITLE OF THE INDENTURE SECURITIES)
________________________________________________________________________________
________________________________________________________________________________
<PAGE>
ITEM 1. GENERAL INFORMATION.
--------------------
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Federal Reserve Bank of New York
33 Liberty Street, New York N.Y. 10045
State of New York Banking Department
2 Rector Street, New York, N.Y. 10006
(b) Whether it is authorized to exercise corporate trust powers.
The Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
------------------------------
If the obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee.
ITEM 16. LIST OF EXHIBITS.
-----------------
List below all exhibits filed as part of this statement of eligibility.
Exhibit 1 - Copy of Organization Certificate of Bank of Montreal Trust
Company to transact business and exercise corporate trust
powers; incorporated herein by reference as Exhibit "A" filed
with Form T-1 Statement, Registration No. 33-46118.
Exhibit 4 - Copy of the existing By-Laws of Bank of Montreal Trust Company;
incorporated herein by reference as Exhibit "B" filed with Form
T-1 Statement, Registration No. 33-80928.
Exhibit 6 - The consent of the Trustee required by Section 321(b) of the
Act; incorporated herein by reference as Exhibit "C" with Form
T-1 Statement, Registration No. 33-46118.
Exhibit 7 - A copy of the latest report of condition of Bank of Montreal
Trust Company published pursuant to law or the requirements of
its supervising or examining authority, attached hereto as
Exhibit "D".
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, Bank of Montreal Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this
statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of New York, and State of New
York, on the 8th day of September, 1998.
BANK OF MONTREAL TRUST COMPANY
By: /s/ Amy S. Roberts
---------------------------
Amy S. Roberts
Vice President
<PAGE>
EXHIBIT 7
EXHIBIT "D"
STATEMENT OF CONDITION
BANK OF MONTREAL TRUST COMPANY
NEW YORK
------------------------------
<TABLE>
<S> <C>
ASSETS
Due From Banks $ 528,979
-----------
Investment Securities:
State & Municipal 17,085,290
Other 100
-----------
TOTAL SECURITIES 17,085,390
Loans and Advances
Federal Funds Sold 4,400,000
Overdrafts 10,000
-----------
TOTAL LOANS AND ADVANCES 4 ,410,000
-----------
Investment in Harris Trust, NY 8,509,571
Premises and Equipment 288,644
Other Assets 2,965,076
-----------
11,763,291
-----------
TOTAL ASSETS $33,787,660
===========
LIABILITIES
Trust Deposits $ 8,680,937
Other Liabilities 824,388
-----------
TOTAL LIABILITIES 9,505,325
-----------
CAPITAL ACCOUNTS
Capital Stock, Authorized, Issued and
Fully Paid - 10,000 Shares of $100 1,000,000
Surplus 4,222,188
Retained Earnings 19,048,815
Equity - Municipal Gain/Loss 11,332
-----------
TOTAL CAPITAL ACCOUNTS 24,282,335
-----------
TOTAL LIABILITIES
AND CAPITAL ACCOUNTS $33,787,660
===========
</TABLE>
I, Mark F. McLaughlin, Vice President, of the above-named bank do hereby
declare that this Report of Condition is true and correct to the best of my
knowledge and belief.
Mark F. McLaughlin
December 31, 1997
We, the undersigned directors, attest to the correctness of this statement
of resources and liabilities. We declared that it has been examined by us, and
to the best of our knowledge and belief has been prepared in conformance with
the instructions and is true and correct.
Sanjiv Tandon
Kevin O. Healy
Steven R. Rothbloom
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 2,825
<SECURITIES> 0
<RECEIVABLES> 58,626
<ALLOWANCES> 8,414
<INVENTORY> 0
<CURRENT-ASSETS> 78,733
<PP&E> 99,341
<DEPRECIATION> 32,411
<TOTAL-ASSETS> 284,985
<CURRENT-LIABILITIES> 42,767
<BONDS> 188,255
0
0
<COMMON> 107
<OTHER-SE> 17,622
<TOTAL-LIABILITY-AND-EQUITY> 284,985
<SALES> 101,536
<TOTAL-REVENUES> 101,536
<CGS> 0
<TOTAL-COSTS> 99,691
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,681
<INCOME-PRETAX> (13,190)
<INCOME-TAX> (2,337)
<INCOME-CONTINUING> (15,527)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,527)
<EPS-PRIMARY> (1.50)
<EPS-DILUTED> (1.50)
</TABLE>
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
OFFER TO EXHANGE
11 1/2% SENIOR DISCOUNT NOTES DUE 2008, SERIES B
FOR AN EQUAL PRINCIPAL AMOUNT AT MATURITY OF
11 1/2% SENIOR DISCOUNT NOTES DUE 2008, SERIES A
OF
TELEMUNDO HOLDINGS, INC.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON 1998, (AS SUCH DATE AND TIME MAY BE EXTENDED BY THE
COMPANY IN ITS SOLE DISCRETION (THE "EXPIRATION DATE")). TENDERS MAY BE
WITHDRAWN PRIOR TO THE EXPIRATION DATE.
The Exchange Agent For The Exchange Offer Is
BANK OF MONTREAL TRUST COMPANY:
By Registered or Facsimile By Hand Or Overnight
Certified Mail Transmissions: Delivery
(Eligible Institutions
Only)
(212) 701-7636
Bank of Montreal Trust Bank of Montreal Trust
Company Company
88 Pine Street 88 Pine Street
Wall Street Plaza--19th Wall Street Plaza--19th
Floor Floor
New York, New York New York, New York
10005 10005
Attn: Reorganization Attn: Reorganization
Department Department
For Information Call:
(212) 701-7624
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A NUMBER
OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
The undersigned hereby acknowledges receipt of the Prospectus dated (
the "Prospectus") of Telemundo Holdings, Inc., a Delaware corporation (the
"Company"), and this Letter of Transmittal (the "Letter of Transmittal"), that
together constitute the Company's offer (the "Exchange Offer") to exchange
$1,000 in principal amount at maturity of its newly issued 11 1/2% Senior
Discount Notes due 2008, Series B, which have been registered under the
Securities Act of 1933, as amended (the "Securities Act") (the "New Notes")
for each $1,000 in principal amount at maturity of its outstanding 11 1/2%
Senior Discount Notes due 2008, Series A (the "Old Notes"). The New Notes and
the Old Notes are collectively referred to as the "Notes." Capitalized terms
used and not defined herein have the meanings ascribed to them in the
Prospectus.
This Letter of Transmittal is to be completed by holders of Old Notes either
if Old Notes are to be forwarded herewith or if tenders of Old Notes are to be
made by book-entry transfer to an account maintained by Bank of Montreal Trust
Company (the "Exchange Agent") at The Depository Trust Company (the "Book-
Entry Transfer Facility" or "DTC") pursuant to the procedures set forth in
"The Exchange Offer--Procedure for Tendering" in the Prospectus.
Holders of Old Notes who wish to tender their Old Notes and whose Old Notes
are not immediately available or who cannot deliver their Old Notes, the
Letter of Transmittal or any other documents required by the Letter of
Transmittal to the Exchange Agent prior to the Expiration Date must tender
their Old Notes according to the guaranteed delivery procedures set forth in
"The Exchange Offer--Guaranteed Delivery Procedures."
1
<PAGE>
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY
BEFORE COMPLETING THE BOXES
The undersigned has completed the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
BOX 1
- --------------------------------------------------------------------------------
DESCRIPTION
OF OLD
NOTES
TENDERED 1 2 3
- --------------------------------------------------------------------------------
NAME(S) AND
ADDRESS(ES) OF
REGISTERED
HOLDER(S),
EXACTLY AS
NAME(S)
APPEAR(S) ON
OLD NOTES
CERTIFICATE(S): AGGREGATE PRINCIPAL AMOUNT
(PLEASE FILL CERTIFICATE PRINCIPAL AMOUNT OF OLD NOTES
IN, IF BLANK) NUMBER(S)* OF OLD NOTES TENDERED**
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
TOTAL
- ---------------------------------------------------------------------
* Need not be completed if Old Notes are being tendered by book-entry
holders.
** Unless otherwise indicated in the column, a holder will be deemed to
have tendered all Old Notes represented by the aggregate principal
amount of Old Notes indicated in Column 2. See Instruction 4.
BOX 2
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
BENEFICIAL
OWNER(S)
- ----------------------------------------------------------------------
<S> <C>
STATE OF PRINCIPAL RESIDENCE OF EACH AGGREGATE PRINCIPAL AMOUNT OF TENDERED NOTES
BENEFICIAL OWNER OF TENDERED NOTES TENDERED HELD FOR ACCOUNT OF BENEFICIAL OWNER
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
</TABLE>
2
<PAGE>
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
[_]CHECK HERE IF OLD NOTES TENDERED ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution ______________________________________________
Account Number _____________________________________________________________
Transaction Code Number ____________________________________________________
[_]CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY
IF OLD NOTES TENDERED ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING:
Name of Registered Holder(s) _______________________________________________
Window Ticket Number (if any) ___________________________________________
Date of Execution of Notice of Guaranteed Delivery ______________________
Name of Institution which Guaranteed Delivery ______________________________
If Guaranteed Delivery is to be made By Book-Entry Transfer:
Name of Tendering Institution ______________________________________________
Account Number _____________________________________________________________
Transaction Code Number ____________________________________________________
[_]CHECK HERE IF OLD NOTES TENDERED BY BOOK-ENTRY TRANSFER AND NOT ACCEPTED
FOR EXCHANGE OR OTHERWISE NOT EXCHANGED ARE TO BE RETURNED BY CREDITING
THE BOOK-ENTRY TRANSFER FACILITY ACCOUNT NUMBER SET FORTH ABOVE.
[_]CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD NOTES FOR ITS
OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES
OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: ______________________________________________________________________
Address: ___________________________________________________________________
3
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders the principal amount of Old Notes described
in the Box 1 above (the "Tendered Notes") pursuant to the terms and conditions
described in the Prospectus and this Letter of Transmittal. The undersigned is
the registered owner of all the Tendered Notes and the undersigned represents
that it has received from each beneficial owner of the Tendered Notes
("Beneficial Owners") a duly completed and executed form of "Instruction to
Registered Holder and/or book entry transfer participant from Beneficial
Owner" accompanying this Letter of Transmittal, instructing the undersigned to
take the action described in the Letter of Transmittal.
Subject to, and effective upon, the acceptance for exchange of all or any
portion of the Tendered Notes, the undersigned hereby exchanges, assigns and
transfers to, or upon the order of, the Company, all right, title and interest
in, to and under the Tendered Notes.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the New Notes be
issued in the name(s) of the undersigned or, in the case of a book-entry
transfer of Tendered Notes, that such New Notes be credited to the account
indicated above maintained at DTC. If applicable, substitute Certificates
representing Old Notes not exchanged or not accepted for exchange will be
issued to the undersigned or, in the case of a book-entry transfer of Tendered
Notes, will be credited to the account indicated above maintained at DTC.
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please deliver New Notes to the undersigned at the address shown below the
undersigned's signature.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as its agent and attorney-in-fact (with full knowledge that the Exchange
Agent also acts as the agent of the Company in connection with the Exchange
Offer and as Trustee under the Indenture for the Notes) with respect to the
Tendered Notes, with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), subject only to
the right of withdrawal described in the Prospectus, to (i) deliver Tendered
Notes to the Company together with all accompanying evidences of transfer and
authenticity to, or upon the order of, the Company, upon receipt by the
Exchange Agent, as the undersigned's agent, of the New Notes to be issued in
exchange for Tendered Notes, (ii) present such Tendered Notes for transfer,
and to transfer the Tendered Notes on the books of the Company, and (iii)
receive for the account of the Company all benefits and otherwise exercise all
rights of beneficial ownership of such Tendered Notes, all in accordance with
the terms and conditions of the Exchange Offer.
The undersigned understands that tenders of Old Notes pursuant to any one of
the procedures described in "The Exchange Offer--Procedure for Tendering" in
the Prospectus and in the instructions attached hereto will, upon the
Company's acceptance for exchange of such Old Notes tendered, constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer. The undersigned recognizes
that, under certain circumstances set forth in the Prospectus, the Company may
not be required to accept for exchange any of the Old Notes tendered hereby.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and any Beneficial Owner(s), and every
obligation of the undersigned or any Beneficial Owners hereunder shall be
binding upon their heirs, representatives, successors, and assigns of the
undersigned and such Beneficial Owner(s).
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, exchange, assign and transfer the Tendered
Notes and that, when the same are accepted for exchange, the company will
acquire good, marketable and unencumbered title thereto, free and clear of all
liens, restrictions, charges and encumbrances, and that the old notes tendered
hereby are not subject to any adverse claims or proxies. The undersigned will,
upon request, execute and deliver any additional documents deemed by the
company or the exchange agent to be necessary or desirable to complete the
exchange, assignment and transfer of the Tendered Notes, and the undersigned
will comply with its obligations under the registration rights agreement. The
undersigned has read and agrees to all of the terms of the Exchange Offer.
<PAGE>
If any Old Notes tendered are not exchanged pursuant to the Exchange Offer
for any reason, or if the certificate or certificates (the "Certificates") for
such Old Notes are submitted in a principal amount not tendered or accepted
for exchange, Certificates for such nonexchanged or nontendered Old Notes will
be returned (or, in the case of Old Notes tendered by book-entry transfer,
such Old Notes will be credited to an account maintained at DTC), without
expense to the tendering holder, promptly following the expiration or
termination of the Exchange Offer.
The undersigned hereby represents and warrants that the information set
forth in Box 2 is true and correct.
By tendering Old Notes and executing this Letter of Transmittal, the
undersigned, and each Beneficial Owner hereby represents and warrants that (i)
the New Notes acquired pursuant to the Exchange Offer are being acquired in
the ordinary course of business of the undersigned, (ii) neither the
undersigned nor any such other person has an arrangement or understanding with
any person to participate in the distribution within the meaning of the
Securities Act of 1933, as amended (the "Securities Act") of such New Notes,
(iii) if the undersigned is not a broker-dealer, or is a broker-dealer but
will not receive New Notes for its own account in exchange for Old Notes,
neither the undersigned nor any such other person is engaged in or intends to
participate in the distribution of such New Notes and (iv) neither the
undersigned nor any such other person is an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act or, if the undersigned is an
"affiliate," that the undersigned will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent
applicable.
The undersigned and each Beneficial Owner acknowledge and agree that any
person participating in the Exchange Offer for the purpose of distributing the
New Notes must comply with the registration and prospectus delivery
requirements of the Securities Act, in connection with a secondary resale
transaction of the New Notes acquired by such person and cannot rely on the
position of the Staff of the Securities and Exchange Commission (the
Commission) set forth in the no-action letters that are discussed in the
section of the Prospectus entitled "The Exchange Offer--Purpose and Effects of
the Exchange Offer." The undersigned and each Beneficial Owner understands
that any such secondary resale transaction should be covered by an effective
registration statement containing the selling securityholder information
required by Item 507 of Regulation S-K of the Commission.
If the undersigned is a broker-dealer that will receive New Notes for its
own account in exchange for Old Notes that were acquired as a result of
market-making or other trading activities, it acknowledges that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes; however, by so acknowledging and
delivering a prospectus, the undersigned will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
The New Notes will begin to accrue cash interest at a rate of 11 1/2% per
annum commencing of August 15, 2003, and cash interest will be payable
thereafter on February 15 and August 15 of each year, commencing on February
15, 2004.
<PAGE>
HOLDER(S) SIGN HERE
(SEE INSTRUCTIONS 2, 5 AND 6)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON PAGE 19)
(NOTE: SIGNATURE(S) MUST BE GUARANTEED
IF REQUIRED BY INSTRUCTION 2)
Must be signed by registered holder(s) exactly as name(s) appear(s) on
the face of the Certificate(s) for the Old Notes hereby tendered or in
whose name Old Notes are registered on the books of the Company, or by any
person(s) authorized to become the registered holder(s) by endorsements
and documents transmitted herewith (including such opinions of counsel,
certifications and other information as may be required by the Company for
the Old Notes to comply with the restrictions on transfer applicable to
the Old Notes). If signature is by an attorney-in-fact, executor,
administrator, trustee, guardian, officer of a corporation or another
acting in a fiduciary capacity or representative capacity, please set
forth the signer's full title. See Instruction 5.
___________________________________________________________________________
___________________________________________________________________________
(SIGNATURE(S) OF HOLDER(S)
Date: , 199
Name(s) ___________________________________________________________________
---------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title) _____________________________________________________
Address ___________________________________________________________________
---------------------------------------------------------------------
---------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number ____________________________________________
---------------------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER(S))
<PAGE>
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 2 AND 5)
____________________________________________________________________________
AUTHORIZED SIGNATURE
Date: _______________________, 199
Name of Firm _______________________________________________________________
Capacity (full title) ______________________________________________________
(PLEASE PRINT)
Address: ___________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
(INCLUDE ZIP CODE
Area Code and Telephone Number _____________________________________________
3
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6) (SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if the New To be completed ONLY if New
Notes or Old Notes not tendered Notes or Old Notes not tendered
are to be issued in the name of are to be sent to someone other
someone other than the registered than the registered holder of the
holder of the Old Notes whose Old Notes whose name(s) appear(s)
name(s) appear(s) above. above, or such registered hold-
er(s) at an address other than
that shown above.
Issue
[_] Old Notes not tendered to: Mail
[_] New Notes To:
[_] Old Notes not tendered to:
Name(s) __________________________ [_] New Notes to:
Address __________________________ Name(s)___________________________
__________________________________ Address __________________________
(INCLUDE ZIP CODE) __________________________________
Area Code and Telephone Number ___ (INCLUDE ZIP CODE)
__________________________________ Area Code and Telephone Number ___
(TAX IDENTIFICATION OR SOCIAL __________________________________
SECURITY NUMBER(S)) (TAX IDENTIFICATION OR SOCIAL
SECURITY NUMBER(S))
8
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be completed either if (a)
Certificates are to be forwarded herewith or (b) tenders are to be made
pursuant to the procedures for tender by book-entry transfer set forth in "The
Exchange Offer--Procedure for Tendering" in the Prospectus. Certificates, or
timely confirmation of a book-entry transfer of such Old Notes into the
Exchange Agent's account at DTC, as well as this Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, and any other documents required by this Letter of
Transmittal, must be received by the Exchange Agent at its address set forth
herein on or prior to the Expiration Date. Old Notes may be tendered in whole
or in part.
Holders of Old Notes who wish to tender their Old Notes and whose Old Notes
are not immediately available or who cannot deliver their Old Notes, the
Letter of Transmittal or any other documents required by the Letter of
Transmittal to the Exchange Agent prior to the Expiration Date must tender
their Old Notes according to the guaranteed delivery procedures set forth in
"The Exchange Offer--Guaranteed Delivery Procedures." Pursuant to such
procedures: (i) such tender must be made by or through an Eligible Institution
(as defined below); (ii) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form made available by the Company,
must be received by the Exchange Agent prior to the Expiration Date; and (iii)
the Certificates (or a book-entry confirmation (as defined in the Prospectus))
representing all tendered Old Notes, in proper form for transfer, together
with a Letter of Transmittal (or facsimile thereof), properly completed and
duly executed, with any required signature guarantees and any other documents
required by this Letter of Transmittal, must be received by the Exchange Agent
within three business days after the date of execution of such Notice of
Guaranteed Delivery, all as provided in "The Exchange Offer--Guaranteed
Delivery Procedures" in the Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or overnight
courier or transmitted by telegram, telex, facsimile or mail to the Exchange
Agent, and must include a guarantee by an Eligible Institution in the form set
forth in such Notice. For Old Notes to be properly tendered pursuant to the
guaranteed delivery procedure, the Exchange Agent must receive a Notice of
Guaranteed Delivery on or prior to the Expiration Date. As used herein and in
the Prospectus, "Eligible Institution" means a firm or other entity identified
in Rule 17Ad-15 under the Exchange Act as an "eligible guarantor institution,"
including (as such terms are defined therein) (i) a bank; (ii) a broker,
dealer, municipal securities broker or dealer or government securities broker
or dealer; (iii) a credit union; (iv) a national securities exchange,
registered securities association or clearing agency; or (v) a savings
association that is a participant in a Securities Transfer Association.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, OR OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN
ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The Company will not accept any alternative, conditional or contingent
tenders. Each tendering holder, by execution of a Letter of Transmittal (or
facsimile thereof), waives any right to receive any notice of the acceptance
of such tender.
2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required if:
(i) this Letter of Transmittal is signed by the registered holder (which
term, for purposes of this document, shall include any participant in DTC
whose name is registered on the books of the Company as the owner of the Old
Notes) of Old Notes tendered herewith, unless such holder(s) has completed
either the box entitled "Special Issuance Instructions" or the box entitled
"Special Delivery Instructions" above, or
9
<PAGE>
(ii) such Old Notes are tendered for the account of a firm that is an
Eligible Institution.
In all other cases, an Eligible Institution must guarantee the signature(s)
on this Letter of Transmittal. See Instruction 5.
3. INADEQUATE SPACE. If the space provided in the box captioned "Description
of Old Notes" is inadequate, the Certificate number(s) and/or the aggregate
principal amount of Old Notes and any other required information should be
listed on a separate signed schedule which is attached to this Letter of
Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. If less than all the Old Notes
evidenced by any Certificate submitted are to be tendered, fill in the
principal amount of Old Notes which are to be tendered in the box entitled
"Principal Amount of Old Notes Tendered." In such case, new Certificate(s) for
the remainder of the Old Notes that were evidenced by your old Certificate(s)
will only be sent to the holder of the Old Notes, promptly after the
Expiration Date. All Old Notes represented by Certificates delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise
indicated.
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date,
unless previously accepted for exchange.
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to the Expiration Date and prior
to acceptance for exchange by the Company. Any such notice of withdrawal must
(i) specify the name of the person having deposited the Old Notes to be
withdrawn (the "Depositor"), (ii) identify the Old Notes to be withdrawn
(including the certificate number or numbers and principal amount of such Old
Notes), (iii) be signed by the Depositor in the same manner as the original
signature on the Letter of Transmittal by which such Old Notes were tendered
(including required signature guarantees) or be accompanied by documents of
transfer sufficient to permit the trustee with respect to the Old Notes to
register the transfer of such Old Notes into the name of the Depositor
withdrawing the tender and (iv) specify the name in which any such Old Notes
are to be registered, if different from that of the Depositor. All questions
as to the validity, form and eligibility (including time of receipt) of such
withdrawal notices will be determined by the Company, whose determination
shall be final and binding on all parties. Any Old Notes so withdrawn will be
deemed not to have been validly tendered for purposes of the Exchange Offer
and no New Notes will be issued with respect thereto unless the Old Notes so
withdrawn are validly retendered. Any Old Notes which have been tendered but
which are not accepted for exchange will be returned by the Exchange Agent to
the holder thereof without cost to such holder as promptly as practicable
after withdrawal, rejection of ender or termination of the Exchange Offer.
Properly withdrawn Old Notes may be retendered by following one of the
procedures described in "The Exchange Offer--Procedure for Tendering" in the
Prospectus at any time prior to the Expiration Date.
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Old
Notes tendered hereby, the signature(s) must correspond exactly with the
name(s) as written on the face of the Certificate(s) without alteration,
enlargement or any change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Old Notes are registered in different name(s) on several
Certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal (or facsimiles thereof) as there are different
registrations of Certificates.
If this Letter of Transmittal or any Certificates or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing and must submit proper evidence
satisfactory to the Company, in their sole discretion, of each such person's
authority so to act.
When this Letter of Transmittal is signed by the registered owner(s) of the
Old Notes listed and transmitted hereby, no endorsement(s) of Certificate(s)
or separate bond power(s) are required unless New Notes are to be issued in
the name of a
10
<PAGE>
person other than the registered holder(s). Signature(s) on such
Certificate(s) or bond power(s) must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Old Notes listed, the Certificates must be endorsed
or accompanied by appropriate bond powers, signed exactly as the name or names
of the registered owner(s) appear(s) on the face of the Certificates, and also
must be accompanied by such opinions of counsel, certifications and other
information as the Company may require in accordance with the restrictions on
transfer applicable to the Old Notes. Signatures on such Certificates or bond
powers must be guaranteed by an Eligible Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If New Notes are to be issued
in the name of a person other than the signer of this Letter of Transmittal,
or if New Notes are to be sent to someone other than the signer of this Letter
of Transmittal or to an address other than that shown above, the appropriate
boxes on this Letter of Transmittal should be completed. Certificates for Old
Notes not exchanged will be returned by mail or, if tendered by book-entry
transfer, by crediting the account indicated above maintained at DTC. See
Instruction 4.
7. IRREGULARITIES. The Company will determine, in its sole discretion, all
questions as to the form of documents, validity, eligibility (including time
of receipt) and acceptance for exchange of any tender of Old Notes, which
determination shall be final and binding on all parties. The Company reserves
the absolute right to reject any and all tenders determined by either of them
not to be in proper form or the acceptance of which, or exchange for which,
may, in the view of counsel to the Company, be unlawful. The Company also
reserves the absolute right, subject to applicable law, to waive any of the
conditions of the Exchange Offer set forth in the Prospectus under "The
Exchange Offer--Conditions" or any conditions or irregularity in any tender of
Old Notes of any particular holder whether or not similar conditions or
irregularities are waived in the case of other holders. The Company's
interpretation of the terms and conditions of the Exchange Offer (including
this Letter of Transmittal and the instructions hereto) will be final and
binding. No tender of Old Notes will be deemed to have been validly made until
all irregularities with respect to such tender have been cured or waived. The
Company, any affiliates or assigns of the Company, the Exchange Agent, or any
other person shall not be under any duty to give notification of any
irregularities in tenders or incur any liability for failure to give such
notification.
8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions and
requests for assistance may be directed to the Exchange Agent at its address
and telephone number set forth on the front of this Letter of Transmittal.
Additional copies of the Prospectus, the Notice of Guaranteed Delivery and the
Letter of Transmittal may be obtained from the Exchange Agent or from your
broker, dealer, commercial bank, trust company or other nominee.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal income
tax law, a holder whose tendered Old Notes are accepted for exchange is
required to provide the Exchange Agent with such holder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 below. If the Exchange
Agent is not provided with the correct TIN, the Internal Revenue Service (the
"IRS") may subject the holder or other payee to a $50 penalty. In addition,
payments to such holders or other payees with respect to Old Notes exchanged
pursuant to the Exchange Offer may be subject to 31% backup withholding.
The box in Part 2 of the Substitute Form W-9 may be checked if the tendering
holder has not been issued a TIN and has applied for a TIN or intends to apply
for a TIN in the near future. If the box in Part 2 is checked, the holder or
other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 2 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Exchange Agent will
withhold 31% of all payments made prior to the time a properly certified TIN
is provided to the Exchange Agent. The Exchange Agent will retain such amounts
withheld during the 60 day period following the date of the Substitute Form W-
9. If the holder furnishes the Exchange Agent with its TIN within 60 days
after the date of the Substitute Form W-9, the amounts retained during the 60
day period will be remitted to the holder and no further amounts shall be
retained or withheld from payments made to the holder thereafter. If, however,
the holder has not provided the Exchange Agent with its TIN within such 60 day
period, amounts withheld will be remitted to the IRS as backup withholding. In
addition, 31% of all payments made thereafter will be withheld and remitted to
the IRS until a correct TIN is provided.
11
<PAGE>
The holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered owner of
the Old Notes or of the last transferee appearing on the transfers attached
to, or endorsed on, the Old Notes. If the Old Notes are registered in more
than one name or are not in the name of the actual owner, consult the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional guidance on which number to report.
Certain holders (including, among others, corporations, financial
institutions and certain foreign persons) may not be subject to these backup
withholding and reporting requirements. Such holders should nevertheless
complete the attached Substitute Form W-9 below, and write "exempt" on the
face thereof, to avoid possible erroneous backup withholding. A foreign person
may qualify as an exempt recipient by submitting a properly completed IRS Form
W-8, signed under penalties of perjury, attesting to that holder's exempt
status. Please consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
holders are exempt from backup withholding.
Backup withholding is not an additional U.S. Federal income tax. Rather, the
U.S. Federal income tax liability of a person subject to backup withholding
will be reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive
satisfaction of any or all conditions enumerated in the Prospectus.
11. NO CONDITIONAL TENDERS. No alternative, conditional, irregular or
contingent tenders will be accepted. All tendering holders of Old Notes, by
execution of this Letter of Transmittal, shall waive any right to receive
notice of the acceptance of their Old Notes for exchange.
Neither the Company, the Exchange Agent nor any other person is obligated to
give notice of any defect or irregularity with respect to any tender of Old
Notes nor shall any of them incur any liability for failure to give any such
notice.
12. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Certificate(s)
representing Old Notes have been lost, destroyed or stolen, the holder should
promptly notify the Exchange Agent. The holder will then be instructed as to
the steps that must be taken in order to replace the Certificate(s). This
Letter of Transmittal and related documents cannot be processed until the
procedures for replacing lost, destroyed or stolen Certificate(s) have been
followed.
13. SECURITY TRANSFER TAXES. Holders who tender their Old Notes for exchange
will not be obligated to pay any transfer taxes in connection therewith. If,
however, New Notes are to be delivered to, or are to be issued in the name of,
any person other than the registered holder of the Old Notes tendered, or if a
transfer tax is imposed for any reason other than the exchange of Old Notes in
connection with the Exchange Offer, then the amount of any such transfer tax
(whether imposed on the registered holder or any other persons) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with the Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
holder.
12
<PAGE>
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF)
AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE
EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
TO BE COMPLETED BY ALL TENDERING SECURITY HOLDERS
(SEE INSTRUCTION 9)
PAYER'S NAME: BANK OF MONTREAL TRUST COMPANY
PART I--PLEASE PROVIDE YOUR
SUBSTITUTE TIN ON THE LINE AT RIGHT TIN: _________________
FORM W-9 AND CERTIFY BY SIGNING AND Social Security Number
DATING BELOW. or
PART 2--TIN Applied for [_]
Employer Identification
Number
--------------------------------------------------------
DEPARTMENT OF CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I
THE TREASURY CERTIFY THAT:
INTERNAL (2) I am not subject to backup withholding either
REVENUE because (i) I am exempt from backup withholding,
SERVICE (ii) I have not been notified by the Internal
Revenue Service ("IRS") that I am subject to
backup withholding as a result of a failure to
report all interest or dividends, or (iii) the
IRS has notified me that I am no longer subject
to backup withholding, and
--------------------------------------------------------
(1) the number shown on this form is my correct
taxpayer identification number (or I am waiting
for a number to be issued to me),
PAYOR'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER ("TIN") AND CERTIFICATION
(3)any other information provided on this form is
true and correct.
Signature: _____________ Date: ____, 1998
You must cross out item (iii) in Part (2) above if you have been notified
by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return and you have not
been notified by the IRS that you are no longer subject to backup
withholding.
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN CIRCUMSTANCES
RESULT IN BACKUP WITHHOLDING OF 31% OF ANY AMOUNTS PAID TO YOU PURSUANT TO
THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION
OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
13
<PAGE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECKED THE BOX IN PART 2 OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (1) I have mailed or delivered
an application to receive a taxpayer identification number to the
appropriate Internal Revenue Service Center or Social Security
Administration Office or (2) I intend to mail or deliver an application in
the near future. I understand that if I do not provide a taxpayer
identification number by the time of payment, 31% of all payments made to
me on account of the New Notes shall be retained until I provide a taxpayer
identification number to the Exchange Agent and that, if I do not provide
my taxpayer identification number within 60 days, such retained amounts
shall be remitted to the Internal Revenue Service as backup withholding and
31% of all reportable payments made to me thereafter will be withheld and
remitted to the Internal Revenue Service until I provide a taxpayer
identification number.
Signature _________________________________ Date _________, 1998
-------------------------------------------
Name (Please Print)
14
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
TELEMUNDO HOLDINGS, INC.
11 1/2% SENIOR DISCOUNT NOTES DUE 2008, SERIES A
This Notice of Guaranteed Delivery, or one substantially equivalent to this
form, must be used by a holder of the 11 1/2% Senior Discount Notes due 2008,
Series A (the "Old Notes") of Telemundo Holdings, Inc. who wishes to tender
Old Notes to the Exchange Agent pursuant to the guaranteed delivery procedures
described in The "Exchange Offer--Guaranteed Delivery Procedures" of the
Prospectus dated (as the same may be amended or supplemented from time to
time, the "Prospectus") and in Instruction 1 to the Letter of Transmittal. In
addition, in order to utilize the guaranteed delivery procedure to tender Old
Notes pursuant to the Exchange Offer, a completed, signed and dated Letter of
Transmittal relating to the Old Notes (or facsimile thereof) must also be
received by the Exchange Agent prior to the Expiration Date. Capitalized terms
not defined herein have the meanings assigned to them in the Prospectus or the
Letter of Transmittal.
The Exchange Agent For The Exchange Offer Is:
BANK OF MONTREAL TRUST COMPANY
By Registered or Certified Mail
Facsimile Transmissions: By Hand Or Overnight
(Eligible Institutions Only) Delivery
Bank of Montreal Trust
(212) 701-7636 For Information Call:
Bank of Montreal Trust
Company (212) 701-7624 Company
88 Pine Street 88 Pine Street
Wall Street Plaza--19th Wall Street Plaza--19th
Floor Floor
New York, New York 10005 New York, New York 10005
Attn: Reorganization Attn: Reorganization
Department Department
Delivery of this Notice of Guaranteed Delivery to an address other than as
set forth above or transmission of this Notice of Guaranteed Delivery via
facsimile to a number other than as set forth above will not constitute a
valid delivery.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to Telemundo Holdings, Inc., upon the terms
and subject to the conditions set forth in the Prospectus and the related
Letter of Transmittal (which together constitute the "Exchange Offer"),
receipt of which is hereby acknowledged, the principal amount of Old Notes set
forth below pursuant to the guaranteed delivery procedures set forth in the
Prospectus under the caption "The Exchange Offer--Procedure for Tendering" and
in Instruction 1 of the Letter of Transmittal.
Aggregate Principal Name(s) of Registered Holder(s):
Amount Tendered: $ __________________ -------------------------------------
Certificate No(s)
(if known): _________________________
(Total Principal Amount Represented by
Old Notes Certificate(s))
$ ___________________________________
[_]The Depositary Trust Company ("DTC")
(Check if Old Notes will be tendered by book-entry transfer and provide the
following information):
DTC Account Number: _________________
Date: _______________________________
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs personal representatives, successors
and assigns of the undersigned.
PLEASE SIGN HERE
X ___________________________________ _____________________________________
X ___________________________________ _____________________________________
Signature(s) of Owner(s) or Date
Authorized Signatory
Area Code and Telephone Number: _____
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):_______________________________________________________________________
----------------------------------------------------------------------
----------------------------------------------------------------------
Capacity:______________________________________________________________________
Address(es):___________________________________________________________________
----------------------------------------------------------------------
----------------------------------------------------------------------
<PAGE>
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., or is a commercial bank or trust company having an office or
correspondent in the United States, or is otherwise an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended, hereby guarantees deposit with the
Exchange Agent, at one of its addresses set forth above, either the Old
Notes tendered hereby in proper form for transfer, or confirmation of the
book-entry transfer of such Old Notes to the Exchange Agent's account at
DTC, pursuant to the procedures for book-entry transfer set forth in the
Prospectus, in either case together with one or more properly completed
and duly executed Letter(s) of Transmittal (or facsimile thereof) and any
other required documents within three business days after the date of
execution of this Notice of Guaranteed Delivery.
The undersigned acknowledges that it must deliver the Letter(s) of
Transmittal and the Old Notes tendered hereby to the Exchange Agent within
the time period set forth above and that failure to do so could result in
a financial loss to the undersigned.
----------------------------------- -----------------------------------
Name of Firm
Authorized Signature
----------------------------------- -----------------------------------
Address
Title
----------------------------------- -----------------------------------
Zip Code
(Please Type or Print)
Area Code and Telephone No. _______ Dated: ______________________________
NOTE: DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS FORM. ACTUAL
SURRENDER OF NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN
EXECUTED LETTER OF TRANSMITTAL.
<PAGE>
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY. A properly completed and
duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by
the Exchange Agent at its address set forth herein prior to the Expiration
Date. The method of delivery of this Notice of Guaranteed Delivery and any
other required documents to the Exchange Agent is at the election and risk of
the holder, and the delivery will be deemed made only when actually received
by the Exchange Agent. If delivery is by mail, registered mail with return
receipt requested, properly insured, is recommended. Instead of delivery by
mail, it is recommended that the holder use an overnight or hand delivery
service. In all cases sufficient time should be allowed to assure timely
delivery. For a description of the guaranteed delivery procedure, see
Instruction 1 of the Letter of Transmittal.
2. SIGNATURES ON THIS NOTICE OF GUARANTEED DELIVERY. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Old Notes
referred to herein, the signature must correspond with the name(s) written on
the face of the Old Notes without alteration, enlargement, or any change
whatsoever.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Old Notes listed, this Notice of Guaranteed
Delivery must be accompanied by appropriate bond powers, signed as the name of
the registered holder(s) appears on the Old Notes.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing.
3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance and requests for additional copies of the Prospectus may be
directed to the Exchange Agent at the address specified in the Prospectus.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
<PAGE>
EXHIBIT 99.3
LETTER TO BROKERS AND OTHER NOMINEES
FOR
TENDER OF 11 1/2% SENIOR DISCOUNT NOTES DUE 2008, SERIES A
IN EXCHANGE FOR
11 1/2% SENIOR DISCOUNT NOTES DUE 2008, SERIES B
OF TELEMUNDO HOLDINGS, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
OLD NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO THE EXPIRATION DATE.
To Registered Holders and Depository
Trust Company Participants:
We are enclosing herewith the material listed below relating to the offer by
Telemundo Holdings, Inc. (the "Company"), a Delaware corporation, to exchange
its 11 1/2% Senior Discount Notes due 2008, Series B, (the "New Notes"), which
have been, registered under the Securities Act of 1933, as amended (the
"Securities Act"), for a like principal amount of its issued and outstanding
11 1/2% Senior Discount Notes due 2008, Series A (the "Old Notes") upon the
terms and subject to the conditions set forth in the Company's Prospectus,
dated , and the related Letter of Transmittal (which together constitute
the "Exchange Offer").
Enclosed herewith are copies of the following documents:
1. Prospectus dated ;
2. Letter of Transmittal (together with accompanying Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9);
3. Notice of Guaranteed Delivery; and
4. Letter which may be sent to your clients to whose account you hold Old
Notes in your name or in the name of your nominee, with a form for obtaining
such client's instruction with regard to the Exchange Offer.
We urge you to contact your clients promptly. Please note that the Exchange
Offer will expire on the Expiration Date.
The Exchange Offer is not conditioned upon any minimum number of Old Notes
being tendered.
Pursuant to the Letter of Transmittal, each holder of Old Notes will,
represent to the Company that (i) the New Notes acquired pursuant to the
Exchange Offer are being acquired in the ordinary course of business of the
undersigned, (ii) neither the undersigned nor any such other person has an
arrangement or understanding with any person to participate in the
distribution within the meaning of the Securities Act of such New Notes, (iii)
if the undersigned is not a broker-dealer, or is a broker-dealer but will not
receive New Notes for its own account in exchange for Old Notes, neither the
undersigned nor any such other person is engaged in or intends to participate
in the distribution of such New Notes and (iv) neither the undersigned nor any
such other person is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act or, if the undersigned is an "affiliate," that
the undersigned will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable. If the
undersigned is a broker-dealer (whether or not it is also an "affiliate") that
will receive New Notes for its own account in exchange for Old Notes, it
represents that such Old Notes were acquired as a result of market-making
activities or other trading activities, and it acknowledges
<PAGE>
that it will deliver a prospectus meeting the requirements of the Securities
Act in connection with any resale of such New Notes. By acknowledging that it
will deliver and by delivering a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes, the
undersigned is not deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
The enclosed Letter to Clients and Instruction to Registered Holder and/or
Book Entry Transfer Participant from Beneficial Owner contain an authorization
by the beneficial owners of the Old Notes for you to make the foregoing
representations.
The Company will not pay any fee or commission to any broker or dealer or to
any other persons (other than the Exchange Agent) in connection with the
solicitation of tenders of Old Notes pursuant to the Exchange Offer. The
Company will pay or cause to be paid any transfer taxes payable on the
transfer of Old Notes to it, except as otherwise provided in Instruction 9 of
the enclosed Letter of Transmittal.
Additional copies of the enclosed material may be obtained from the
undersigned.
Very truly yours,
2
<PAGE>
INSTRUCTION TO REGISTERED HOLDER AND/OR BOOK
ENTRY TRANSFER PARTICIPANT FROM BENEFICIAL OWNER FOR
TENDER OF 11 1/2% SENIOR DISCOUNT NOTES DUE 2008, SERIES A
IN EXCHANGE FOR
11 1/2% SENIOR DISCOUNT NOTES DUE 2008, SERIES B
TELEMUNDO HOLDINGS, INC.
----------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
----------------
ORIGINAL NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO THE EXPIRATION DATE.
To Registered Holder and/or Participant
of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus dated (the
"Prospectus") of Telemundo Holdings, Inc., a Delaware corporation (the
"Company"), and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Company's offer (the "Exchange
Offer") to exchange its 11 1/2% Senior Discount Notes due 2008, Series B (the
"New Notes") for all of its outstanding 11 1/2% Senior Discount Notes due
2008, Series A (the "Old Notes"). Capitalized terms used but not defined
herein have the meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to the action to be taken by you relating to the
Exchange Offer with respect to the Old Notes held by you for the account of
the undersigned.
The aggregate face amount of the Old Notes held by you for the account of
the undersigned is (FILL IN AMOUNT): $ of the 11 1/2% Senior Discount Notes
due 2008, Series A.
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
[_]To TENDER the following Old Notes held by you for the account of the
undersigned (INSERT PRINCIPAL AMOUNT OF OLD NOTES TO BE TENDERED (IF
ANY)): $
[_]Not to TENDER any Old Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Old Notes held by you for the
account of the undersigned, it is understood that you are authorized to make,
on behalf of the undersigned (and the undersigned, by its signature below,
hereby makes to you), the representation and warranties contained in the
Letter of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including, but not limited to, the representations, that (i)
the New Notes acquired pursuant to the Exchange Offer are being acquired in
the ordinary course of business of the undersigned, (ii) neither the
undersigned nor any such other person has an arrangement or understanding with
any person to participate in the distribution within the meaning of the
Securities Act of 1933, as amended (the "Securities Act") of such New Notes,
(iii) if the undersigned is not a broker-dealer, or is a broker-dealer but
will not receive New Notes for its own account in exchange for Old Notes,
neither the undersigned nor any such other person is engaged in or intends to
participate in the distribution of such New Notes and (iv) neither the
undersigned nor any such other person is an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act or, if the undersigned is an
"affiliate," that the undersigned will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent
applicable. If the undersigned is a broker-dealer (whether or not it is also
an "affiliate") that will receive New Notes for its
3
<PAGE>
own account in exchange for Old Notes, it represents that such Old Notes were
acquired as a result of market-making activities or other trading activities,
and it acknowledges that it will deliver a prospectus meeting the requirements
of the Securities Act in connection with any resale of such New Notes. By
acknowledging that it will deliver and by delivering a Prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Notes, the undersigned is not deemed to admit that it is an "underwriter"
within the meaning of the Securities Act.
SIGN HERE
Name of beneficial owner(s): __________________________________________________
Signature(s): _________________________________________________________________
Name(s) (please print): _______________________________________________________
Address: ______________________________________________________________________
Telephone Number: _____________________________________________________________
Taxpayer Identification or Social Security Number: ____________________________
Date: _________________________________________________________________________
4
<PAGE>
EXHIBIT 99.4
LETTER TO CLIENTS
FOR
TENDER OF 11 1/2% SENIOR DISCOUNT NOTES DUE 2008, SERIES A
IN EXCHANGE FOR
11 1/2% SENIOR DISCOUNT NOTES DUE 2008, SERIES B
OF TELEMUNDO HOLDINGS, INC.
----------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , 1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
----------------
ORIGINAL NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO THE EXPIRATION DATE.
TO OUR CLIENTS:
We are enclosing herewith a Prospectus, dated , of Telemundo Holdings,
Inc. (the "Company"), a Delaware corporation, and a related Letter of
Transmittal (which together constitute the "Exchange Offer") relating to the
offer by the Company, to exchange its 11 1/2% Senior Discount Notes due 2008,
Series B (the "New Notes"), which have been registered under the Securities
Act of 1933, as amended (the "Securities Act"), for a like principal amount of
its issued and outstanding Senior Discount Notes due 2008, Series A (the "Old
Notes"), upon the terms and subject to the conditions set forth in the
Exchange Offer.
The Exchange offer is not conditioned upon any minimum number of Old Notes
being tendered.
We are the holder of record of Old Notes held by us for your own account. A
tender of such Old Notes can be made only by us as the record holder and
pursuant to your instructions. The Letter of Transmittal is furnished to you
for your information only and cannot be used by you to tender Old Notes held
by us for your account.
We request instructions as to whether you wish to tender any or all of the
Old Notes held by us for your account pursuant to the terms and conditions of
the Exchange Offer. We also request that you confirm that we may on your
behalf make the representations contained in the Letter of Transmittal.
Pursuant to the Letter of Transmittal, each holder of Old Notes will
represent to the Company that (i) the New Notes acquired pursuant to the
Exchange Offer are being acquired in the ordinary course of business of the
undersigned, (ii) neither the undersigned nor any such other person has an
arrangement or understanding with any person to participate in the
distribution within the meaning of the Securities Act of such New Notes, (iii)
if the undersigned is not a broker-dealer, or is a broker-dealer but will not
receive New Notes for its own account in exchange for Old Notes, neither the
undersigned nor any such other person is engaged in or intends to participate
in the distribution of such New Notes and (iv) neither the undersigned nor any
such other person is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act or, if the undersigned is an "affiliate," that
the undersigned will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable. If the
undersigned is a broker-dealer (whether or not it is also an "affiliate") that
will receive New Notes for its own account in exchange for Old Notes, it
represents that such Old Notes were acquired as a result of market-making
activities or other trading activities, and it acknowledges that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes. By acknowledging that it will
deliver and by delivering a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes, the
undersigned is not deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
Very truly yours,
<PAGE>
EXHIBIT 99.5
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.-
Social Security numbers have nine digits separated by two hyphens: i.e., 000-00-
0000. Employer identification numbers have nine digits separated by only one
hyphen: i.e., 00-0000000. The table below will help determine the number to give
the payer.
- --------------------------------------------------------------------------------
GIVE THE
SOCIAL
SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF -
- --------------------------------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals
(joint account) The actual owner of the account or,
if combined funds, any one of the
individuals(1)
3. Husband and wife (joint account) The actual owner of the account or,
if joint funds, either person (1)
4. Custodian account of a minor
(Uniform Gift to Minors Act) The minor (2)
5. Adult and minor (joint account) The adult or, if the minor is the
only contributor, the minor (1)
6. Account in the name of guardian of The ward, minor, or incompetent
committee for a designated ward, person (3)
minor or incompetent person
7. a. The usual revocable savings trust The grantor-trustee(1)
account (grantor is also trustee)
b. So-called trust account that is The actual owner(1)
not a legal or valid trust under
state law
- --------------------------------------------------------------------------------
GIVE THE
SOCIAL
SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF -
- --------------------------------------------------------------------------------
8. Sole proprietorship account The owner(4)
9. A valid trust, estate, or pension The legal entity (Do not furnish the
trust identification number of the
personal representative or trustee
unless the legal entity itself is
not designated in the account
title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or educational The organization
organization account
12. Partnership account The partnership
13. Association, club or other tax-exempt The organization
organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of The public entity
Agriculture in the name of a public
entity (such as a State or local
government, school district or
prison) that receives agricultural
program payments
- --------------------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local offices of
the Social Security Administration or the Internal Revenue Service and apply for
a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments including
the following:
. A corporation.
. A financial institution
. An organization exempt from tax under section 501(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), or an individual
retirement plan.
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States,
or any subdivision or instrumentality thereof.
. A registered dealer in the securities or commodities registered in the
United States or a possession of the United States.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a) of the
Code.
. An exempt charitable remainder trust, or a nonexempt trust described
in section 4947(a)(1) of the Code.
. An entity registered at all times under the Investment Company Act of
1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
witholding include the following:
. Payments to nonresident aliens subject to withholding under section
1441 of the Code.
. Payments to partnerships not engaged in a trade or business in the
United States and which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid
in money.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. Note: You
may be subject to backup withholding if this interest is $600 or more
and is paid in the course of the payer's trade or business and you
have not provided your correct taxpayer identification number to the
payer.
. Payments of tax-exempt interest (including exempt-interest dividends
under section 852 of the Code).
. Payments described in section 6049(b)(5) of the Code to non-resident
aliens.
. Payments on tax-free covenant bond under section 1451 of the Code.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
EXEMPT PAYEES DESCRIBED ABOVE MUST STILL COMPLETE THE SUBSTITUTE FORM W-9
ENCLOSED HEREWITH TO AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE
SUBSTITUTE FORM W-9 WITH THE PAYER, REMEMBERING TO CERTIFY YOUR TAXPAYER
IDENTIFICATION NUMBER ON PART III OF THE FORM, WRITE "EXEMPT" ON THE FACE OF THE
FORM AND SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER.
Payments that are not subject to information reporting are also not subject
to backup withholding. For details, see section 6041, 6041A(a), 6042, 6044,
6045, 6049, 605A, and 6050N of the Code and their regulations.
PRIVACY ACT NOTICE - Section 6109 requires most recipients of dividends,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments of IRS. The IRS uses the numbers for
identification purposes and to help verify the accuracy of your tax return.
Payers must be given the numbers whether or not recipients are required to file
a tax return. Payers must generally withhold 31% of taxable interest,
dividends, and certain other payments to a payee who does not furnish a taxpayer
identification number to a payer. Certain penalties must also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER - If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING - If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION - Falsifying certification or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL
REVENUE SERVICE.
