<PAGE>
As filed with the Securities and Exchange Commission on April 20, 2000
Registration No.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
Form S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
---------------
Entravision Communications Corporation
(Exact name of registrant as specified in charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 4833 95-4783236
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------
Walter F. Ulloa
Entravision Communications Corporation
2425 Olympic Boulevard, Suite 6000 West
Santa Monica, California 90404
(310) 447-3870
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
<TABLE>
<CAPTION>
<S> <C>
Kenneth D. Polin, Esq. Richard M. Jones, Esq.
Zevnik Horton Guibord McGovern O'Melveny & Myers LLP
Palmer & Fognani, L.L.P. 1999 Avenue of the Stars, 7th Floor
101 West Broadway, 17th Floor Los Angeles, California 90067
San Diego, California 92101 (310) 553-6700
(619) 515-9600
</TABLE>
---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
<CAPTION>
Proposed maximum Amount of
Title of each class of securities to be registered aggregate offering price (1)(2) registration fee
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Class A common stock,
$0.0001 par value......... $615,000,000 $162,360
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes shares issuable upon exercise of an over-allotment option granted
to the underwriters.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(o) under the Securities Act of 1933.
---------------
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 hereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to such Section 8(a), may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+We will amend and complete the information in this prospectus. Although we +
+are permitted by U.S. federal securities laws to offer these securities using +
+this prospectus, we may not sell them or accept your offer to buy them until +
+the documentation filed with the Securities and Exchange Commission relating +
+to these securities has been declared effective by the Securities and +
+Exchange Commission. This prospectus is not an offer to sell these securities +
+or our solicitation of your offer to buy these securities in any jurisdiction +
+where that would not be permitted or legal. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION--APRIL 20, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Prospectus
, 2000
Entravision Communications Corporation
[JFAX LOGO APPEARS HERE]
Shares of Class A Common Stock
- --------------------------------------------------------------------------------
Entravision: The Offering:
. We are a leading . We are offering
diversified shares of our
Spanish-language Class A common
media company in stock.
the United States
with television, . The underwriters
radio, outdoor have an option to
and publishing purchase an
operations. additional
shares from us
and one of our
stockholders to
cover over-
allotments.
Proposed Market and
Symbol:
. We have applied . This is our
for listing on initial public
the New York offering, and no
Stock Exchange public market
under the symbol currently exists
EVC. for our shares.
We anticipate
that the initial
public offering
price for our
Class A common
stock will be
between $ and
$ per share.
. This offering is
contingent upon
and will close
concurrently with
our acquisition of
Z-Spanish Media
Corporation.
. Closing: ,
2000.
<TABLE>
<CAPTION>
------------------------------------------------------------------------
Per Share Total
------------------------------------------------------------------------
<S> <C> <C>
Public offering price................................... $ $
Underwriting fees.......................................
Proceeds to Entravision.................................
------------------------------------------------------------------------
</TABLE>
This investment involves risk. See "Risk Factors."
- --------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has determined whether this prospectus is truthful or complete. Nor
have they made, nor will they make, any determination as to whether anyone
should buy these securities. Any representation to the contrary is a criminal
offense.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Donaldson, Lufkin & Jenrette Credit Suisse First Boston Merrill Lynch & Co.
Book Running Manager Co-Lead Manager Co-Lead Manager
-----------
Salomon Smith Barney Bear, Stearns & Co. Inc. DLJdirect Inc.
</TABLE>
<PAGE>
[INSIDE FRONT COVER]
[ARTWORK]
[FRONT GATEFOLD]
[A MAP OF THE UNITED STATES IDENTIFYING THE LOCATION OF EACH OF OUR MEDIA
PROPERTIES AND THE CALL LETTERS AND CHANNEL OF EACH OF OUR STATIONS]
<PAGE>
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information that is different.
This prospectus may only be used where it is legal to sell these securities.
The information in this prospectus may only be accurate on the date of this
prospectus.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 4
Risk Factors............................................................. 10
Forward-Looking Statements............................................... 19
Use of Proceeds.......................................................... 20
Dividend Policy.......................................................... 20
Capitalization........................................................... 21
Dilution................................................................. 22
Selected Historical Financial Data....................................... 23
Selected Unaudited Pro Forma Financial Data.............................. 25
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 27
Business................................................................. 47
Management............................................................... 68
Principal Stockholders................................................... 74
Certain Relationships and Related Transactions........................... 75
Description of Capital Stock............................................. 78
Shares Eligible for Future Sale.......................................... 83
Underwriting............................................................. 85
Legal Matters............................................................ 87
Experts.................................................................. 87
Where You Can Find More Information...................................... 88
Index to Financial Statements............................................ F-1
</TABLE>
----------------
NOTE TO READER
We completed several acquisitions between January 1, 1999 and the date of
this prospectus. We have also agreed to acquire Z-Spanish Media Corporation
concurrently with the closing of this offering and broadcasting licenses
relating to two television stations and two radio stations before or after the
closing of this offering. We believe that you will have a better picture of us
if we present the information in this prospectus on a "what if" basis to show
how we would look as if we had completed all of our pending acquisitions as of
the date of this prospectus. Unless we indicate otherwise, all of the text of
this prospectus describes us on this "what if" basis. In addition, our
unaudited pro forma financial information shows how we would look as if we had
owned all of the businesses, licenses or assets that we have recently acquired
or agreed to acquire for all of 1999. Our audited financial statements and
summary and selected historical financial data, however, show us as we actually
were, without any "what if" changes, except for our reorganization described
elsewhere in this prospectus.
3
<PAGE>
PROSPECTUS SUMMARY
This summary contains general discussions of our business and this offering.
We encourage you to read the entire prospectus, including "Risk Factors" and
the financial statements, for a more complete understanding of Entravision and
this offering.
ENTRAVISION
Entravision is a leading diversified media company utilizing a combination
of television, radio, outdoor and publishing operations to reach Hispanic
consumers in the United States. We operate in 32 of the top 50 U.S. Hispanic
markets. Through our operations we have the ability to reach approximately 72%
of Hispanics living in the United States, or approximately 23 million people.
For the fiscal year ended December 31, 1999, we had pro forma net revenue of
$150 million, broadcast cash flow of $46 million and EBITDA of $33 million. The
table below briefly summarizes our operations, including our recent acquisition
of Latin Communications Group Inc. and our pending acquisition of Z-Spanish
Media Corporation:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Television Radio Outdoor Publishing
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
.Own and operate .Own and operate .Own approximately .Own two Spanish-
television 60 radio stations 10,000 billboards language
stations in 18 in 24 U.S. markets concentrated in publications, El
U.S. markets high-density Diario/La Prensa
Hispanic and VEA New York
.Largest .Operate the communities in Los
Univision- largest centrally Angeles and New .El Diario/La
affiliated programmed York, the two Prensa is the
television group Spanish-language largest markets in oldest Spanish-
in the United radio network in the United States language daily
States the United States newspaper in the
United States
.Stations are .Stations are .1999 pro forma .1999 pro forma
located in 17 of located in 22 of gross revenue gross revenue of
the top 50 the top 50 of $16 million, or $19 million, or
Hispanic markets Hispanic markets 10% of total 12% of total
in the United in the United
States States
.1999 pro forma .1999 pro forma
gross revenue gross revenue
of $69 million, or of $61 million, or
41% of total 37% of total
- ---------------------------------------------------------------------------------------------------
</TABLE>
Television. We own and operate Univision-affiliated stations in 17 of the
top 50 Hispanic markets in the United States. Through our 25-year network
affiliation agreements, Univision Communications Inc. makes available to these
stations 24 hours a day of Spanish-language programming. Univision's prime time
schedule is all first-run programming (i.e., no reruns) throughout the year. We
combine this premier programming with our local news programming to brand each
of our stations with a strong local identity. As a result, each of our
Univision-affiliated stations ranks first in Spanish-language television
viewership in its market.
Univision has invested an aggregate of $120 million in Entravision and will
own an approximately % equity interest in us after this offering. We believe
this investment reflects Univision's endorsement of our business model and its
commitment to us as a long-term strategic partner.
Radio. Our radio operations combine national programming with a strong local
presence. Through our radio programming, which is delivered via satellite to
our stations, we provide national programming with local time slots available
for advertising, news, traffic, weather, promotions and community events. This
strategy allows us to provide higher-quality programming with significantly
lower costs of operations than we could otherwise deliver solely with
independent programming. We produce seven primary formats, the most of any
Spanish-language radio company in the United States, in order to appeal to the
diverse musical tastes of the listeners in the markets we serve.
4
<PAGE>
Outdoor. Our billboards are concentrated in high-density Hispanic
communities in Los Angeles and New York. Because of its repetitive impact and
relatively low cost per thousand impressions, outdoor advertising attracts
national, regional and local advertisers. We believe national advertisers value
our ability to efficiently target specific demographic groups on a cost-
effective basis compared to other advertising media. In addition, we believe
local advertisers place significant value on our ability to provide marketing
solutions in close proximity to their stores or outlets.
Publishing. Our publishing operations, through El Diario/La Prensa, the
leading Spanish-language daily newspaper in New York, and VEA New York, a
tourist publication, offer advertisers another medium targeting consumers in
the second largest Hispanic market in the United States.
The Hispanic Market Opportunity
While Hispanics represent approximately 11% of the U.S. population and the
Hispanic population is growing approximately six times faster than the non-
Hispanic population, they are currently targeted by less than 1% of total
advertising dollars. Advertisers have recently begun to direct a greater
percentage of their advertising spending toward Hispanics and, consequently,
Spanish-language advertising is currently growing at more than four times the
rate of total advertising. We believe that we have benefited and will continue
to benefit from the following industry trends and attributes in the United
States:
. high Spanish-language use among Hispanic consumers;
. strong projected growth and high geographic concentration of the Hispanic
population;
. increasing Hispanic buying power;
. increasing advertising spending on Spanish-language media; and
. the attractive demographic profile of the Hispanic consumer.
Business Strategy
We seek to be the leading diversified Spanish-language media company in the
United States and to increase our advertising revenue through the following
strategies:
. use our Univision network affiliation and our leading radio network and
station brands to maximize our market share;
. invest in media research to provide advertisers with accurate measures of
our audience;
. continue to build and retain strong management teams;
. emphasize and invest in our local news and radio formats and support
community events to enhance our audience recognition, loyalty and
ratings;
. capitalize on cross-promotional opportunities created by our diverse
portfolio of media properties to maximize audience share and increase
advertising revenue; and
. continue to seek acquisitions and investment opportunities in high-growth
Hispanic markets.
Recent and Pending Acquisitions
Latin Communications Group. On April 20, 2000, we acquired Latin
Communications Group Inc., or LCG, for approximately $252 million. LCG owns and
operates 17 radio stations in nine high-growth markets, including Los Angeles,
Riverside-San Bernardino, San Francisco-San Jose, Las Vegas, Albuquerque-Santa
Fe, Sacramento, Denver-Boulder and Monterey-Salinas-Santa Cruz, and publishes
El Diario/La Prensa and VEA New York.
5
<PAGE>
Z-Spanish Media Corporation. On April 20, 2000, we agreed to acquire Z-
Spanish Media Corporation for $475 million. Z-Spanish Media owns and operates
33 radio stations in 13 markets, including Dallas-Ft. Worth, Phoenix and
Sacramento. In addition, Z-Spanish Media is one of the largest outdoor
advertising companies in the United States focusing on the Hispanic market,
with approximately 10,000 billboards.
Other Acquisitions. We have agreed to acquire two television stations in the
Hartford and Orlando markets and we have agreed to acquire two radio stations
in the Los Angeles market for an aggregate of approximately $126 million.
----------------
Our principal executive offices are located at 2425 Olympic Boulevard, Suite
6000 West, Santa Monica, California 90404, and our telephone number is (310)
447-3870. We operate a number of websites, including www.entravision.com,
www.zspanish.com, www.zmegahits.com, www.labonita.com, www.labuena.com,
www.casademusica.com and www.vistamediagroup.com. The information on our
websites is not a part of this prospectus.
6
<PAGE>
The Offering
<TABLE>
<S> <C>
Class A common stock offered......... shares
Common stock to be outstanding after
this offering....................... shares of Class A common stock
shares of Class B common stock
shares of Class C common stock
shares of common stock
Voting rights........................ Holders of our Class A common stock are
entitled to one vote per share. Holders
of our Class B common stock are entitled
to ten votes per share. Holders of our
Class C common stock are entitled to one
vote per share, are entitled to vote as
a separate class to elect two directors
and have the right to vote as a separate
class on material decisions involving
Entravision.
Use of proceeds...................... We intend to use the net proceeds of
this offering:
. to acquire Z-Spanish Media;
. to pay the balance of the purchase
price to acquire two radio stations
from Citicasters Co.;
. to reduce our debt; and
. for working capital and general
corporate purposes.
Proposed New York Stock Exchange
symbol.............................. EVC
</TABLE>
Unless indicated otherwise, the information in this prospectus:
. reflects the completion of our reorganization in which direct and
indirect ownership interests in our predecessor and Univision's
subordinated note and option will be exchanged for shares of our common
stock;
. includes the issuance of shares of Class A common stock to
acquire Z-Spanish Media concurrently with the closing of this offering;
. excludes shares of Class A common stock issuable upon the exercise of
the underwriters' over-allotment option;
. excludes shares of Class A common stock reserved for issuance
upon conversion of our Series A preferred stock; and
. excludes shares of Class A common stock reserved for issuance
under our omnibus equity incentive plan.
7
<PAGE>
Summary Historical and Unaudited Pro Forma Financial Data
(In thousands, except per share data)
The following table presents:
. our summary historical financial data as of December 31, 1999 and for
the years ended December 31, 1997, 1998 and 1999;
. our summary unaudited pro forma financial data as of and for the year
ended December 31, 1999, giving effect to our completed 1999 and 2000
acquisitions and our pending acquisition of Z-Spanish Media as if we had
owned these businesses for all of 1999, the conversion of TSG Capital
Fund III, L.P.'s convertible subordinated note into preferred stock and
the exchange of Univision's subordinated note and option for common
stock; and
. our summary unaudited pro forma as adjusted financial data giving
further effect to the sale of the shares of Class A common stock
that we are offering, assuming an initial public offering price of
$ per share, and the application of the net proceeds of this
offering, as described in "Use of Proceeds."
The summary unaudited pro forma and pro forma as adjusted financial data are
not necessarily indicative of the operating results or the financial condition
that would have been achieved if we had completed these transactions as of the
date indicated and should not be construed as representative of future
operating results or financial condition. The summary historical and unaudited
pro forma financial data should be read in conjunction with the audited
consolidated financial statements and related notes, with "Selected Unaudited
Pro Forma Financial Data" and with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
Historical
--------------------------
Year Ended
Year Ended December 31, December 31, 1999
-------------------------- ----------------------
Unaudited
Unaudited Pro Forma
1997 1998 1999 Pro Forma As Adjusted
------- ------- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Gross revenue:
Television............... $32,701 $48,689 $ 63,842 $ 68,938
Radio.................... 718 1,183 2,362 60,861
Outdoor and publishing... -- -- -- 35,134
------- ------- -------- --------- -------
Total gross revenue...... 33,419 49,872 66,204 164,933
Less agency commissions.... 2,963 5,052 7,205 14,867
------- ------- -------- --------- -------
Net revenue................ 30,456 44,820 58,999 150,066
------- ------- -------- --------- -------
Expenses:
Direct operating......... 9,184 15,794 24,441 58,915
Selling, general and
administrative.......... 5,845 8,877 11,611 45,486
Corporate................ 3,899 3,963 5,809 12,377
Depreciation and
amortization............ 8,847 9,565 14,613 83,168
Non-cash stock-based
compensation (1)........ 900 500 29,143 29,143
Gain on sale of assets... -- -- -- (4,442)
------- ------- -------- --------- -------
Total expenses............. 28,675 38,699 85,617 224,647
------- ------- -------- --------- -------
Operating income (loss).... 1,781 6,121 (26,618) (74,581)
Interest expense, net and
other..................... (5,107) (8,244) (12,091) (33,900)
Income tax (expense)
benefit (2)............... 7,531 (210) 121 27,998
------- ------- -------- --------- -------
Income (loss) from
continuing operations .. 4,205 (2,333) (38,588) (80,483)
Preferred stock dividends
(3)....................... -- -- -- 42,209
------- ------- -------- --------- -------
Income (loss) from
continuing operations
applicable to common
stock..................... $ 4,205 $(2,333) $(38,588) $(122,692)
======= ======= ======== ========= =======
Pro forma net loss from
continuing operations
applicable to common stock
(4)....................... $(2,672) $(1,796) $(35,210) $(122,692)
======= ======= ======== ========= =======
Pro forma basic and diluted
earnings per share:
Net loss from continuing
operations applicable to
common stock (4)........ $ (0.04) $ (0.03) $ (0.54)
======= ======= ======== ========= =======
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Historical
-----------------------
Year Ended
Year Ended December 31, December 31, 1999
----------------------- ---------------------
Unaudited
Unaudited Pro Forma
1997 1998 1999 Pro Forma As Adjusted
------- ------- ------- --------- -----------
<S> <C> <C> <C> <C> <C>
Other Financial Data:
Broadcast cash flow (5).......... $15,427 $20,149 $22,947 $45,665
EBITDA (6)....................... 11,528 16,186 17,138 33,288
</TABLE>
<TABLE>
<CAPTION>
As of December 31, 1999
---------------------------------
Unaudited
Unaudited Pro Forma
Historical Pro Forma As Adjusted
---------- ---------- -----------
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents.................... $ 2,357 $ 13,545 $
Total assets................................. 188,819 1,180,039
Long-term debt, including current portion.... 167,537 360,837
Redeemable preferred stock................... -- 345,990
Total stockholders' equity (7)............... 11,813 241,523
</TABLE>
- -------
(1) For 1999, non-cash stock-based compensation represents management's
estimate of the fair value of our employee stock award and our employee
stock option grant based on the estimated price of this offering.
(2) Included in the 1997 income tax expense is a $7.8 million tax benefit that
resulted from the reversal of previously recorded deferred tax liabilities
that were established in our 1997 acquisition of KNVO, McAllen, Texas.
This entity was converted from a C-corporation to an S-corporation in
1997. As a result, deferred taxes were reduced.
(3) Includes dividends on the 13.5% preferred stock that we could be required
to issue to finance our acquisition of Z-Spanish Media if this offering has
not closed by September 30, 2000 and dividends on the 8.5% redeemable
preferred stock issuable to TSG Capital Fund III, L.P. upon conversion of
its $90 million convertible subordinated note.
(4) Pro forma net loss from continuing operations applicable to common stock
and pro forma basic and diluted loss applicable to common stock per share
give effect to our conversion from a limited liability company to a
corporation for federal and state income tax purposes and assume that we
were subject to corporate income taxes at an effective combined federal
and state income tax rate of 40% before the effect of non-tax deductible
goodwill and non-cash stock-based compensation for each period presented.
(5) Broadcast cash flow means operating income (loss) before corporate
expenses, depreciation and amortization, non-cash stock-based compensation
and gain on sale of assets. We have presented broadcast cash flow which we
believe is comparable to the data provided by other companies in the
broadcast industry, because such data is commonly used as a measure of
performance for companies in our industry. However, broadcast cash flow
should not be construed as an alternative to operating income (as
determined in accordance with generally accepted accounting principles) as
an indicator of operating performance or to cash flows from operating
activities (as determined in accordance with generally accepted accounting
principles) as a measure of liquidity.
(6) EBITDA means broadcast cash flow less corporate expenses and is commonly
used in the broadcast industry to analyze and compare broadcast companies
on the basis of operating performance, leverage and liquidity. EBITDA, as
presented above, may not be comparable to similarly titled measures of
other companies unless such measures are calculated in substantially the
same fashion. EBITDA should not be construed as an alternative to
operating income (as determined in accordance with generally accepted
accounting principles) as an indicator of operating performance or to cash
flows from operating activities (as determined in accordance with
generally accepted accounting principles) as a measure of liquidity.
(7) The stockholders' equity data gives effect to our reorganization in which
direct and indirect ownership interests in our predecessor and Univision's
subordinated note and option will be exchanged for shares of our common
stock before the closing of this offering.
9
<PAGE>
RISK FACTORS
You should carefully consider the risks described below, together with all
of the other information included in this prospectus, before buying shares in
this offering.
Risks Related to Our Business
If we cannot integrate the operations of companies we acquire, our business and
financial condition will be adversely affected.
To implement our strategy of growing through acquisitions, we need to:
. retain key management and personnel of acquired companies;
. successfully merge corporate cultures and business processes;
. realize sales efficiencies and cost reduction benefits; and
. operate successfully in markets in which we may have little or no prior
experience.
In addition, after we have completed an acquisition, our management must be
able to assume significantly greater responsibilities, and this in turn may
cause them to divert their attention from our existing operations. If we are
unable to completely integrate into our business the operations of the
companies that we have recently acquired or that we may acquire in the future,
our business and financial condition will be adversely affected.
Because we have no operating history as a combined company, we face risks
generally associated with combining business enterprises.
We acquired LCG on April 20, 2000, and we will acquire Z-Spanish Media
concurrently with the closing of this offering. Because we have never operated
as a combined company, we face risks generally associated with combining
business enterprises. When considering our prospects, investors must consider
the risks, expenses and difficulties encountered by companies in their early
stages of combined operations, including possible disruptions and
inefficiencies associated with rapid growth and workplace expansion. In
addition, our lack of operating history as a combined company makes it
difficult to evaluate our current business and prospects or to accurately
predict our future revenue or results of operations.
If we fail to manage our growth effectively, our business and financial
condition will be adversely affected.
We have significantly increased our business within a short period of time
through our acquisition of LCG and our pending acquisition of Z-Spanish Media.
As a result of these acquisitions, our number of full-time employees grew from
544 as of December 31, 1999 to approximately 1,100 as of March 31, 2000. If we
are to grow successfully, we must:
. attract and retain qualified personnel;
. effectively implement new operational systems, procedures and controls;
. improve our administrative and financial systems; and
. manage relationships with various advertisers.
In particular, we believe that our future success will depend on our ability
to hire, train and retain highly-skilled personnel. Competition for quality
personnel is intense in our business. We may not be able to accomplish any of
these requirements, and our failure to do so could have a material adverse
effect on our business and financial condition. In addition, our rapid growth
currently and in the future could significantly strain our management and other
resources.
10
<PAGE>
We have a history of losses that if continued into the future could adversely
affect the market price of our Class A common stock and our ability to raise
capital.
We had net losses of approximately $2.3 million and $38.6 million for the
years ended December 31, 1998 and 1999. In addition, we had a pro forma net
loss of $122.7 million for the year ended December 31, 1999, after giving
effect to our acquisition of LCG and our pending acquisition of Z-Spanish
Media. We believe losses may continue while we pursue our acquisition strategy
and expand our radio network. Our inability to generate profits could adversely
affect the market price of our Class A common stock, which in turn could
adversely affect our ability to raise additional equity capital or to incur
additional debt.
If our strategy to grow through acquisition is limited by competition for
suitable media properties, or by other factors we cannot control, it could
adversely affect our future rate of growth.
We intend to pursue acquisitions of additional media properties as our
management believes appropriate. In order for us to succeed with this strategy,
we must be effective at quickly evaluating markets, accessing the capital
markets and obtaining the necessary regulatory approvals, including approvals
of the Federal Communications Commission, or the FCC, and the Department of
Justice, or the DOJ. We compete with many other buyers for target properties.
Some of those competitors have more money and resources than we do. We may not
succeed in making additional acquisitions. Also, our strategy includes buying
underperforming media properties and using our experience to improve their
performance. Thus, any likely benefit from any property we buy will be over
time, rather than immediately, and we may need to pay large initial costs for
these improvements.
If we cannot raise required capital, it may have a material adverse effect on
our business and our ability to grow through acquisitions.
We may require significant additional capital for future acquisitions and
general working capital needs. If our cash flow and existing working capital
are not sufficient to fund our general working capital requirements and debt
service, we will have to raise additional funds by selling equity, refinancing
some or all of our existing debt or selling assets or subsidiaries. Capital
markets are volatile and uncertain, and we may not be able to gain access to
these markets to raise additional capital. Consequently, none of these
alternatives for raising additional funds may be available on acceptable terms
to us or in amounts sufficient for us to meet our requirements. Our failure to
obtain any required new financing may have a material adverse effect on our
business and our ability to grow through acquisitions.
Our substantial level of debt and the terms of our Series A preferred stock
could limit our ability to grow and compete.
After repaying some of our outstanding indebtedness with a portion of the
proceeds from this offering, we will have approximately $200 million of debt
outstanding under our bank credit facilities, and $90 million of Series A
mandatorily redeemable convertible preferred stock. We expect to obtain a
portion of our required capital through debt financing that bears or is likely
to bear interest at a variable rate, subjecting us to interest rate risk.
Our substantial level of debt could have several important consequences,
including the following:
. a significant portion of our cash flow from operations will be dedicated
to servicing our debt obligations and will not be available for
operations, future business opportunities or other purposes;
. our ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions, general corporate or other
purposes may be limited; and
11
<PAGE>
. our substantial debt could make us more vulnerable to economic downturns,
limit our ability to withstand competitive pressures and reduce our
flexibility in responding to changing business and economic conditions.
Our ability to satisfy all of our debt obligations depends upon our future
operating performance, which will be affected by prevailing economic conditions
and financial, business and other factors, some of which are beyond our
control. We may not have sufficient future cash flow to meet our debt payments,
or we may not be able to refinance any of our debt at maturity. We have pledged
substantially all of our assets to our lenders as collateral. Our lenders could
proceed against the collateral granted to them to repay outstanding
indebtedness if we are unable to meet our debt service obligations. If the
amounts outstanding under the bank credit facility are accelerated, our assets
may not be sufficient to repay in full the money owed to such lenders.
The terms of our credit agreements restrict the decisions we can make about our
business.
Our bank credit facilities contains covenants that restrict, among other
things, our ability to:
. incur additional indebtedness;
. pay dividends;
. make acquisitions or investments; and
. merge, consolidate or sell assets.
Our bank credit facilities also require us to maintain specific financial
ratios. A breach of any of the covenants contained in our bank credit
facilities could allow our lenders to declare all amounts outstanding under the
bank credit facilities to be immediately due and payable.
Following this offering, our executive officers will have control over our
business, which may discourage a merger or sale of our company.
Following this offering, Walter F. Ulloa, our Chairman and Chief Executive
Officer, Philip C. Wilkinson, our President and Chief Operating Officer, and
Paul A. Zevnik, our Secretary, will own all of the shares of our Class B common
stock, and will have approximately 80% of the combined voting power of our
outstanding shares of common stock. The holders of our Class B common stock are
entitled to ten votes per share on any matter subject to a vote of the
stockholders. Accordingly, Messrs. Ulloa, Wilkinson and Zevnik will have the
ability to elect each of the remaining members of our board of directors, other
than the two members of our board of directors to be appointed by Univision,
and will have control of our policies and affairs. Messrs. Ulloa, Wilkinson and
Zevnik have agreed contractually to elect themselves, Amador S. Bustos and a
representative of TSG Capital Fund III, L.P. as directors of our company. This
control may discourage certain types of transactions involving an actual or
potential change of control of our company, such as a merger or sale of our
company.
Univision will have significant influence over our business and could make
certain transactions more difficult or impossible to complete.
Univision, as the holder of all of our Class C common stock upon
consummation of this offering, will have significant influence over material
decisions relating to our business, including the right to elect two of our
directors, and the right to approve material decisions involving our company,
including any merger, consolidation or other business combination, any
dissolution of our company and any transfer of the FCC licenses for any of our
Univision-affiliated television stations. Univision's ownership interest may
have the effect of delaying, deterring or preventing a change in control of our
company and may make some transactions more difficult or impossible to complete
without its support.
12
<PAGE>
Our television ratings and revenue could decline significantly if our
relationship with Univision or if Univision's success changes in an adverse
manner.
If our relationship with Univision changes in an adverse manner, or if
Univision's success diminishes, it could have a material adverse effect on our
ability to generate television advertising revenue on which our television
business depends. The ratings of Univision's network programming might decline
or Univision might not continue to provide programming, marketing, available
advertising time and other support to its affiliates on the same basis as
currently provided. Additionally, by aligning ourselves closely with Univision,
we might forego other opportunities that could diversify our television
programming and avoid dependence on any one television network. Univision's
relationships with Grupo Televisa, S.A. de C.V. and Corporacion Venezolana de
Television, C.A., or Venevision, are important to Univision's, and consequently
our, continued success. For example, we could be adversely affected by a
current dispute between Univision and Televisa. Under its program license
agreements with Televisa, Univision has the first right to air Televisa's
Spanish-language programming in the United States through 2017. Televisa now
asserts that it can directly broadcast that same programming into the United
States through a direct satellite venture in Mexico.
Loss of key personnel could harm our business.
Our business depends upon the efforts, abilities and expertise of our
executive officers and key employees, including Walter F. Ulloa, our Chairman
and Chief Executive Officer, Philip C. Wilkinson, our President and Chief
Operating Officer, Jeanette Tully, our Chief Financial Officer, Amador S.
Bustos, the President of our Radio Division, and Glenn Emanuel, the President
of our Outdoor Division. The loss of any of these officers or other key
personnel could harm our business.
Cancellations or reductions of advertising could cause our quarterly results to
fluctuate, which could adversely affect the market price of our Class A common
stock.
We do not obtain long-term commitments from our advertisers, and advertisers
may cancel, reduce or postpone orders without penalty. Cancellations,
reductions or delays in purchases of advertising could adversely affect our
revenue, especially if we are unable to replace such purchases. Our expense
levels are based, in part, on expected future revenue and are relatively fixed
once set. Therefore, unforeseen fluctuations in advertising sales could
adversely impact our operating results. These factors could cause our quarterly
results to fluctuate, which could adversely effect the market price of our
Class A common stock.
In addition, our advertising revenue could be adversely affected by a
recession or downturn in the U.S. economy, since advertising expenditures
generally decrease as the economy slows down, or by the loss of a major
industry segment of our advertisers. Our results in individual geographic
markets could be adversely affected by local or regional economic downturns.
Risks Related to the Television, Radio,
Outdoor Advertising and Publishing Industries
If we are unable to maintain our FCC licenses, our television and radio
operations could be harmed.
The domestic broadcasting industry is subject to extensive federal
regulation which, among other things, requires approval by the FCC for the
issuance, renewal, transfer and assignment of broadcasting station operating
licenses and limits the number of broadcasting properties we may acquire. In
addition, the Communications Act of 1934 and FCC rules impose limits on
ownership of our capital stock by foreign persons and entities.
The success of our television and radio operations depends, in part, on
acquiring and maintaining broadcast licenses issued by the FCC, which are
typically issued for a maximum term of eight years and are subject to renewal.
Pending or future renewal applications submitted by us may not be approved, and
renewals may include conditions or qualifications that could restrict our
television and radio operations. In addition, third parties may challenge our
renewal applications. If the FCC were to issue an order denying a license
renewal application or revoking a license, we could be required to cease
operating the broadcast station covered by the license.
13
<PAGE>
In addition, our bank credit facilities require us to maintain our FCC
licenses. If the FCC were to revoke any of our material licenses, our lenders
could declare all amounts outstanding under the bank credit facilities to be
immediately due and payable. If our indebtedness is accelerated, we may not
have sufficient funds to pay the amounts owed.
Our low-power television stations in Washington, D.C. and San Diego are
subject to frequency and power changes in full-power television authorizations
of the FCC. If we are unable to find suitable replacements without a loss in
coverage, our ratings and advertising revenue in these markets may decrease.
We must be able to respond to rapidly changing technology, services and
standards which characterize the television and radio industries in order to
remain competitive.
The FCC is considering ways to introduce new technologies to the television
and radio broadcast industries, including delivery of digital audio and video
broadcasting, and the standardization of available technologies that
significantly enhance the quality of broadcasts. Several new media technologies
are being developed for the delivery of radio programming, including the
following:
. cable television operators have introduced a service commonly referred to
as "cable radio" which provides cable television subscribers with several
high-quality channels of music, news and other information;
. the Internet offers new forms of audio programming distribution;
. the introduction of satellite digital audio technology could result in
new satellite radio services with sound quality equivalent to that of
compact discs and whose subscription programming (without commercial
advertising) is directed to specific program niches, including ours;
. the introduction of low-power, non-commercial FM radio stations into our
markets could increase competition for our radio stations; and
. the introduction of in-band, on-channel digital radio could provide
multi-channel, multi-format digital radio services in the same bandwidth
currently occupied by traditional AM and FM radio services.
We could face increased competition from these technologies if they become
broadly adopted. Our inability to respond to changes in technology on a timely
basis or at an acceptable cost could have a material adverse effect on our
business and financial condition.
The required conversion to digital television could impose significant costs on
us which may not be balanced by consumer demand.
The FCC requires us to provide a digitally transmitted signal by May 1, 2002
for all of our U.S. television stations and, generally, to stop broadcasting
analog signals by 2006. Our costs to convert our television stations to digital
television, or DTV, could be significant, and there may not be any consumer
demand for DTV services. The imposition of DTV and the removal of Channels 60-
69 from use for television broadcasting have reduced available channels, which
may affect our continued ability to operate certain of our low-power television
stations.
Changes in federal laws could result in increased competition for our broadcast
stations.
Recent and prospective actions by Congress, the FCC and the courts could
cause us to face significant competition in the future. The changes include:
. relaxation of restrictions on television and radio station ownership;
. relaxation of restrictions on the participation by regional telephone
operating companies in cable television and other direct-to-home audio
and video technologies;
. increased restrictions on the use of local marketing agreements;
14
<PAGE>
. the establishment of a Class A television service for low-power stations
that makes such stations primary stations and gives them protection
against full-service stations;
. plans to license low-power FM radio stations that will be designed to
serve small localized areas and niche audiences; and
. permission for direct broadcast satellite television to provide the
programming of traditional over-the-air stations, including local and
out-of-market network stations.
In addition, new laws or regulations may eliminate, or at least limit the
scope of, our cable carriage rights. Because our full-power television stations
rely on "must carry" rights to obtain cable carriage, either of those changes
could have a material adverse impact on our television operations. Pursuant to
the "must carry" provisions of the Cable Television Consumer Protection and
Competition Act of 1992, a broadcaster may demand carriage on a specific
channel on cable systems within its market. However, the future of those "must
carry" rights is uncertain, especially as they relate to the carriage of DTV
stations. The current FCC rules relate only to the carriage of analog
television signals. It is not clear what, if any, "must carry" rights
television stations will have after they make the transition to DTV.
Our low-power television stations do not have "must carry" rights. In eight
markets where we currently hold only a low-power license we may face future
uncertainty with respect to the availability of cable carriage. With the
exception of the San Angelo and Amarillo markets, all of our low-power stations
reach a substantial portion of the Hispanic cable households in their
respective markets.
We may face review by the Department of Justice for additional television and
radio station acquisitions in our existing markets.
Since the passage of the Telecommunications Act of 1996, the DOJ has become
more aggressive in reviewing proposed acquisitions of television and radio
stations and television and radio station networks. The DOJ is particularly
concerned when the proposed buyer already owns one or more television or radio
stations in the market of the station it is seeking to buy. In general, the DOJ
has more closely scrutinized television and radio broadcasting acquisitions
that result in market shares in excess of 40% of local television or radio
advertising revenue. If the DOJ fails to approve our proposed acquisitions in
the future, our ability to expand our operations will be limited.
If we are unable to compete effectively for advertising revenue against other
stations and other media companies, some of which have greater resources than
we do, we could suffer a decrease in advertising revenue.
The broadcasting industry is highly competitive. The financial success of
each of our stations depends upon its audience ratings and share of the overall
advertising revenue within its geographic market and the economic health of the
market. In addition, our advertising revenue depends upon the desire of
advertisers to reach our audience demographic. Our television and radio
stations compete for audience share and advertising revenue directly with other
television and radio stations and with other media within their respective
markets, such as the following:
. newspapers;
. cable television;
. the Internet;
. magazines;
. billboard advertising;
. transit advertising; and
. direct mail advertising.
15
<PAGE>
Some of these television and radio stations also broadcast Spanish-language
radio and television programming. Some of our competitors are larger and have
significantly greater resources than we do. In addition, the Telecommunications
Act facilitates the entry of other broadcasting companies into the markets in
which we operate stations or may operate stations in the future. If we are
unable to compete successfully in the markets we serve, we may suffer a
decrease in advertising revenue, which could adversely affect our business and
financial condition.
Increased regulation of outdoor advertising could harm our outdoor operations.
Our outdoor operations are significantly impacted by federal, state and
local government regulation of the outdoor advertising business. These
regulations impose restrictions on, among other things, the location, size and
spacing of billboards. If we are required to remove our existing billboards, or
are unable to construct new billboards or reconstruct damaged billboards, our
outdoor business could be harmed. In addition, we may not receive compensation
for billboards that we may be required to remove in the future.
Additional regulations may be imposed on outdoor advertising in the future.
Legislation regulating the content of billboard advertisements has been
introduced and passed in Congress from time to time in the past. Additional
regulations or changes in the current laws regulating and affecting outdoor
advertising at the federal, state or local level may harm the results of our
outdoor operations.
Strikes, work stoppages and slowdowns by our employees could negatively affect
our results of operations.
Our publishing business depends to a significant degree on our ability to
avoid strikes and other work stoppages by our employees. The Newspaper and Mail
Deliverers' Union of New York and Vicinity, or the NMDU, and the Newspaper
Guild of New York represent our publishing employees. Our collective bargaining
agreement with the NMDU expires on March 30, 2004. Our collective bargaining
agreement with the Newspaper Guild of New York expires on June 30, 2002.
Future collective bargaining agreements may not be negotiated without
service interruptions, and the results of these negotiations may adversely
affect our financial condition and results of operations. In addition, strikes
may occur in the future in connection with labor negotiations or otherwise. Any
prolonged strike or work stoppage could have a material adverse effect on our
results of operations and financial condition.
Risks Related to this Offering
Future sales by existing stockholders could depress the market price of our
Class A common stock.
Immediately after this offering, the public market for our common stock will
include only the shares of our Class A common stock that we are selling
in this offering. At that time, there will be outstanding an additional
shares of Class A common stock, shares of Class B common stock and
shares of Class C common stock. Shares of our Class B common stock and
Class C common stock are immediately convertible on a share-for-share basis
into Class A common stock at the option of the holder. The shares held by our
officers, directors and existing stockholders are subject to "lock-up"
agreements with Donaldson, Lufkin & Jenrette that prohibit such stockholders
from selling their common stock in the public market for 180 days after the
date of this prospectus. When the "lock-up" period expires, or if Donaldson,
Lufkin & Jenrette consents, in its sole discretion, to an earlier sale, such
stockholders will be able to sell their shares in the public market, subject to
certain legal restrictions. Upon completion of this offering, we will have
outstanding shares of Class A common stock. Of these shares, the shares
sold in this offering are freely tradeable. This leaves shares of Class A
common stock, of which will be eligible for sale in the public market after
the "lock-up" period expires, or 180 days after the date of this prospectus,
including shares of Class A common stock issuable upon conversion of
outstanding shares of Class B common stock and Class C common stock. If our
existing stockholders sell a large number of shares, the market price of our
Class A common stock could decline dramatically. Moreover, the perception in
the public market that these stockholders might sell shares of Class A common
stock could depress the market price of our Class A common stock.
16
<PAGE>
Our investors will pay a price for our Class A common stock that was not
determined in a competitive market.
Before this offering, there has not been any market for our Class A common
stock. We do not know the extent to which investor interest in our business
will lead to the development of a trading market or how liquid that market
might be. If you purchase shares of Class A common stock in this offering, you
will pay a price that was not established in a competitive market. Rather, you
will pay a price that was negotiated between us and our underwriters. The price
of our Class A common stock that will prevail in the market after this offering
may be higher or lower than the price you pay. For a description of the factors
we considered in negotiating the public offering price, see "Underwriting."
As a new investor, you will experience immediate and substantial dilution.
We expect the initial public offering price to be substantially higher than
the pro forma net tangible book value per share of the Class A common stock
outstanding immediately after this offering. Accordingly, if you purchase
shares of our Class A common stock in this offering, you will incur immediate
and substantial dilution in pro forma net tangible book value. The pro forma
net tangible book value upon completion of this offering will be $ per
share, representing an immediate dilution to you of $ per share, based
on an assumed initial public offering price of $ per share. In addition,
if the holders of outstanding options exercise those options, you will
experience further dilution.
Our common stockholders will not receive a current return on their investment
since we do not intend to pay cash dividends.
We intend to retain any earnings to support the growth and development of
our business, and we do not intend to pay cash dividends for the foreseeable
future. Under our bank credit facilities and the terms of our preferred stock,
we are restricted in our ability to pay dividends on all classes of our common
stock.
Stockholders who desire to change control of our company may be prevented from
doing so by provisions of our charter, applicable law and our credit agreement.
Our charter could make it more difficult for a third party to acquire us,
even if doing so would benefit our stockholders. Our charter provisions could
diminish the opportunities for a stockholder to participate in tender offers.
In addition, under our charter, our board of directors may issue preferred
stock that could have the effect of delaying or preventing a change in control
of our company. The issuance of preferred stock could also negatively affect
the voting power of holders of our common stock. The provisions of our charter
may have the effect of discouraging or preventing an acquisition or sale of our
business. In addition, Section 203 of the Delaware General Corporation Law
imposes restrictions on mergers and other business combinations between us and
any holder of 15% or more of our common stock.
The transfer restrictions imposed on the broadcast licenses we own also
restrict the ability of third parties to acquire us. Our licenses may only be
transferred with prior approval by the FCC. Accordingly, the number of
potential transferees of our licenses is limited, and any acquisition, merger
or other business combination involving Entravision would be subject to
regulatory approval.
In addition, the documents governing our indebtedness contain limitations on
our ability to enter into a change of control transaction. Under these
documents, the occurrence of a change of control transaction, in some cases
after notice and grace periods, would constitute an event of default permitting
acceleration of our outstanding indebtedness.
17
<PAGE>
Our stock price could be volatile.
The stock market in general, and the stock prices of new public companies in
particular, have experienced significant volatility that often has been
unrelated to the operating performance of any specific public company. Factors
that may have a significant impact on the market price of our Class A common
stock include:
. future announcements concerning us or Univision;
. changes in the prospects of our business partners;
. results of technological innovations;
. government regulation, including the FCC's review of our acquisition of
broadcast licenses; and
. changes in recommendations of securities analysts and rumors that may be
circulated about us or our competitors.
Our future earnings and stock price may be subject to significant
volatility, particularly on a quarterly basis. Shortfalls in our revenue or
earnings in any given period relative to the levels expected by securities
analysts could immediately, significantly and adversely affect the trading
price of our Class A common stock. In the past, following periods of volatility
in the market price of a company's securities, class action litigation has
often been instituted against such company. Litigation of this type could
result in substantial costs and a diversion of our management's attention and
resources, which could, in turn, have a material adverse effect on our business
and financial condition.
18
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements, including statements
under the captions "Prospectus Summary," "Risk Factors," "Selected Unaudited
Pro Forma Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business" and elsewhere in this
prospectus, concerning our expectations of future revenue, expenses, the
outcome of our growth and acquisition strategy and the projected growth of the
U.S. Hispanic population. Forward-looking statements often include words or
phrases such as "will likely result," "expect," "will continue," "anticipate,"
"estimate," "intend," "plan," "project," "outlook," "seek" or similar
expressions. These statements are not guarantees of future performance and are
subject to certain risks, uncertainties and other factors, some of which are
beyond our control, are difficult to predict and could cause actual results to
differ materially from those expressed in the forward-looking statements.
Factors which could cause actual results to differ from expectations include
those in the "Risk Factors" section of this prospectus. Our results of
operations may be adversely affected by one or more of these factors. We
caution you not to place undue reliance on these forward-looking statements,
which reflect our management's view only as of the date of this prospectus. We
are not obligated to update these statements or publicly release the results of
any revisions to them to reflect events or circumstances occurring after the
date of this prospectus or to reflect the occurrence of unanticipated events.
19
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds to us from the sale of shares of
Class A common stock in this offering will be approximately $ million,
based on an assumed initial public offering price of $ per share and
after deducting the estimated underwriting fees and offering expenses. If the
underwriters exercise their over-allotment in full, we estimate that the net
proceeds will be $ million. We intend to use the net proceeds from this
offering as follows:
<TABLE>
<S> <C>
. to acquire Z-Spanish Media................................. $ 256 million
. to repay a portion of existing indebtedness under our bank
credit facilities.......................................... 154 million
. to pay the balance of the purchase price for two radio
stations from Citicasters.................................. 68 million
. for working capital and general corporate purposes......... million
-------------
$ million
=============
</TABLE>
For a description of our acquisitions of Z-Spanish Media and two radio
stations from Citicasters, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Overview."
On April 19, 2000, we entered into a $115 million term loan to partially
finance our acquisition of LCG. We expect to repay this debt in full with
proceeds from this offering. The interest rate on this debt was 10.5% as of the
date of this prospectus. This debt must be repaid in full by April 18, 2001 and
can be prepaid without penalty.
In addition, we assumed $39 million of the debt that we are repaying from Z-
Spanish Media under two separate credit facilities. As of the date of this
prospectus, the interest rate on $35 million of this debt was 9.6%, and the
interest rate on $4 million of this debt was 8.7%. Debt outstanding under both
of these facilities must be repaid in full by September 30, 2006, unless the
maturity of the loans is accelerated pursuant to the provisions of the credit
facilities.
Until we use the net proceeds of this offering as described above, we will
invest them in short-term, interest-bearing, investment grade securities.
DIVIDEND POLICY
We have never declared or paid cash dividends on our capital stock. Our
predecessor, Entravision Communications Company, L.L.C., made cash
distributions to its members to pay income taxes. We intend to retain future
earnings for use in our business and do not anticipate declaring or paying any
cash or stock dividends on shares of our common stock for the foreseeable
future. In addition, our bank credit facilities and the terms of our
outstanding preferred stock restrict our ability to pay dividends.
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<PAGE>
CAPITALIZATION
(In thousands, except per share data)
The following table shows our cash and cash equivalents and capitalization
on:
. an actual basis as of December 31, 1999;
. a pro forma basis to reflect acquisitions we made or have agreed to make
after December 31, 1999, and investments made by Univision and TSG
Capital Fund III, L.P. in 2000 totaling $200 million; and
. a pro forma as adjusted basis to further reflect the sale of the
shares of Class A common stock we are offering at an estimated initial
public offering price of $ per share, after deducting the
underwriting fees and estimated offering expenses and the application of
the net proceeds of this offering.
This table should be read together with our audited consolidated financial
statements and unaudited pro forma consolidated financial statements and the
related notes included elsewhere in this prospectus.
<TABLE>
<CAPTION>
As of December 31, 1999
--------------------------------
Unaudited
Unaudited Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
<S> <C> <C> <C>
Cash and cash equivalents...................... $ 2,357 $ 13,545
======== ======== ======
Current maturities of long-term debt .......... $ 1,620 $ 24,468
Notes payable, less current maturities......... 155,917 336,369
Subordinated note--Univision (1)............... 10,000 --
Convertible subordinated note--TSG Capital Fund
III, L.P. (1)................................. -- --
-------- -------- ------
Total long-term debt.......................... 167,537 360,837
-------- -------- ------
Series A mandatorily redeemable convertible
preferred stock, $0.0001 par value, 11,000,000
shares authorized; 1999 actual no shares
issued or outstanding; pro forma and pro forma
as adjusted shares issued and
outstanding (1)............................... -- 90,000
Series B redeemable pay-in-kind preferred stock
(2)........................................... -- 255,990
-------- -------- ------
Total preferred stock......................... -- 345,990
-------- -------- ------
Stockholders' equity
Class A common stock, $0.0001 par value,
305,000,000 shares authorized; 1999 actual
9,875,708 shares issued and outstanding; pro
forma shares issued and outstanding; pro
forma as adjusted shares issued and
outstanding.................................. 1 12
Class B common stock, $0.0001 par value,
60,000,000 shares authorized; 1999 actual and
pro forma 54,858,626 shares issued and
outstanding; pro forma as adjusted
shares issued and outstanding................ 5 5
Class C common stock, $0.0001 par value,
50,000,000 shares authorized; 1999 actual no
shares issued and outstanding; pro forma and
pro forma as adjusted 45,124,619 shares
issued and outstanding (1)................... -- 5
Additional paid-in capital.................... 76,292 305,986
Accumulated deficit........................... (63,901) (63,901)
Stock subscription notes receivable (3)....... (584) (584)
-------- -------- ------
Total stockholders' equity.................... 11,813 241,523
-------- -------- ------
Total capitalization........................... $179,350 $948,350
======== ======== ======
</TABLE>
- -------
(1) The unaudited pro forma data reflects the exchange of the $120 million
subordinated note and option from Univision for shares of Class C common
stock in connection with our reorganization and the conversion of the $90
million subordinated note from TSG Capital Fund III, L.P. to Series A
mandatorily redeemable convertible preferred stock.
(2) Represents preferred stock that we could be required to issue to finance
our acquisition of Z-Spanish Media if this offering has not closed by
September 30, 2000.
(3) Represents unsecured loans made to two of our officers to purchase equity.
These loans are further described in "Certain Relationships and Related
Transactions."
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<PAGE>
DILUTION
Purchasers of our Class A common stock offered by this prospectus will
suffer an immediate and substantial dilution in pro forma net tangible book
value per share. Dilution is the amount by which the initial public offering
price paid by the purchasers of the shares of Class A common stock will exceed
the pro forma net tangible book value per share of our common stock after this
offering. The pro forma net tangible book value per share of common stock is
determined by subtracting total liabilities from the total tangible assets and
dividing the difference by the pro forma number of shares of our common stock
deemed to be outstanding on the date the tangible book value is determined. As
of , 2000, we had a tangible book value of $ million or
$ per share, excluding this offering. Assuming the sale of
shares at an initial public offering price of $ per
share and deducting the underwriters' discounts and commissions and estimated
offering expenses, our pro forma net tangible book value as of ,
2000 would have been $ million or $ per share. This represents an
immediate increase in pro forma net tangible book value to existing
stockholders of $ per share and an immediate dilution to new investors
of $ per share. The following table illustrates this per share
dilution:
<TABLE>
<CAPTION>
Per Share
---------
<S> <C>
Assumed initial public offering price............................ $
------
Pro forma net tangible book value before this offering...........
------
Increase in net tangible book value per share attributable to
this offering...................................................
------
Pro forma net tangible book value after this offering............
------
Dilution per share to new investors.............................. $
======
</TABLE>
The following table summarizes, on a pro forma as adjusted basis as of
, 2000, the number of shares of Class A common stock purchased from
us, the estimated value of the total consideration paid for or attributed to
the Class A common stock and the average price per share paid by or
attributable to existing stockholders and the new investors purchasing shares
in this offering at an assumed initial offering price of $ per
share before deducting estimated underwriters' fees and offering expenses:
<TABLE>
<CAPTION>
Shares
Purchased Total Consideration Average
-------------- --------------------- Price Per
Number Percent Amount Percent Share
------ ------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders.......
---- ---- --------- --------- ----
New investors ..............
---- ---- --------- --------- ----
Total.......................
==== ==== ========= ========= ====
</TABLE>
22
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
(In thousands, except per share data)
Presented below are our summary historical financial data. The data as of
December 31, 1998 and 1999 and for the years ended December 31, 1997, 1998 and
1999 were derived from our audited financial statements and related notes
included elsewhere in this prospectus, and should be read in conjunction with
this information as well as "Entravision Management's Discussion and Analysis
of Financial Condition and Results of Operations." The data as of December 31,
1995, 1996 and 1997 and for the years ended December 31, 1995 and 1996 were
derived from our audited financial statements and related notes, which are not
included in this prospectus.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1995(1) 1996 1997 1998 1999
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Gross revenue................. $ 7,797 $13,555 $33,419 $ 49,872 $ 66,204
Less agency commissions....... 688 1,481 2,963 5,052 7,205
------- ------- ------- -------- --------
Net revenue................... 7,109 12,074 30,456 44,820 58,999
------- ------- ------- -------- --------
Expenses:
Direct operating............ 1,846 3,819 9,184 15,794 24,441
Selling, general and
administrative............. 2,295 4,667 5,845 8,877 11,611
Corporate................... -- 564 3,899 3,963 5,809
Depreciation and
amortization............... 673 1,479 8,847 9,565 14,613
Non-cash stock-based
compensation (2)........... -- -- 900 500 29,143
------- ------- ------- -------- --------
Total expenses................ 4,814 10,529 28,675 38,699 85,617
------- ------- ------- -------- --------
Operating income (loss)....... 2,295 1,545 1,781 6,121 (26,618)
Interest expense, net......... (265) (1,035) (5,107) (8,244) (12,091)
------- ------- ------- -------- --------
Income (loss) before income
taxes...................... 2,030 510 (3,326) (2,123) (38,709)
Income tax (expense) benefit
(3).......................... (369) (145) 7,531 (210) 121
------- ------- ------- -------- --------
Net income (loss)........... 1,661 365 4,205 (2,333) (38,588)
======= ======= ======= ======== ========
Pro forma income tax (expense)
benefit (4).................. (812) (204) 654 327 3,499
======= ======= ======= ======== ========
Pro forma net income (loss)
(4).......................... $ 1,218 $ 306 $(2,672) $ (1,796) $(35,210)
======= ======= ======= ======== ========
Pro forma basic and diluted
earnings per share:
Pro forma net income (loss)
(4)........................ $ 0.02 $ 0.00 $ (0.04) $ (0.03) $ (0.54)
Weighted average common
shares outstanding......... 67,039 64,092 65,945 65,790 64,805
Other Financial Data:
Broadcast cash flow (5)....... $ 2,968 $ 3,588 $15,427 $ 20,149 $ 22,947
EBITDA (6).................... 2,968 3,024 11,528 16,186 17,138
Capital expenditures.......... 902 935 2,366 3,094 12,825
<CAPTION>
As of December 31,
----------------------------------------------
1995(1) 1996 1997 1998 1999
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents..... $ 726 $ 2,886 $ 2,250 $ 3,661 $ 2,357
Total assets.................. 8,630 28,767 93,017 113,724 188,819
Long-term debt, including
current portion.............. 5,265 17,449 74,781 99,938 167,537
Total stockholders' equity
(7).......................... 2,322 9,743 13,122 7,304 11,813
</TABLE>
- --------
(1) The 1995 financial data presents the combined financial statements of our
broadcast properties prior to the 1996 formation of our holding company
structure.
(2) For 1999, non-cash stock-based compensation represents management's
estimate of the fair value of our employee stock award and our employee
stock option grant based on the estimated price of this offering.
23
<PAGE>
(3) Included in the 1997 income tax expense is a $7.8 million tax benefit that
resulted from the reversal of previously recorded deferred tax liabilities
that were established in our 1997 acquisition of KNVO, McAllen, Texas. This
entity was converted from a C-corporation to an S-corporation in 1997. As a
result, deferred tax liabilities were reduced.
(4) Pro forma net income (loss) and pro forma basic and diluted net income
(loss) per share give effect to our conversion from a limited liability
company to a corporation for federal and state income tax purposes and
assume that we were subject to corporate income taxes at an effective
combined federal and state income tax rate of 40% before the effect of non-
tax deductible goodwill and non-cash stock-based compensation for each
period presented.
(5) Broadcast cash flow means operating income (loss) before corporate
expenses, depreciation and amortization and non-cash stock-based
compensation. We have presented broadcast cash flow, which we believe is
comparable to the data provided by other companies in the broadcast
industry, because such data is commonly used as a measure of performance in
our industry. However, broadcast cash flow should not be construed as an
alternative to operating income (as determined in accordance with generally
accepted accounting principles) as an indicator of operating performance or
to cash flows from operating activities (as determined in accordance with
generally accepted accounting principles) as a measure of liquidity.
(6) EBITDA means broadcast cash flow less corporate expenses and is commonly
used in the broadcast industry to analyze and compare broadcast companies
on the basis of operating performance, leverage and liquidity. EBITDA, as
presented above, may not be comparable to similarly titled measures of
other companies unless such measures are calculated in substantially the
same fashion. EBITDA should not be construed as an alternative to operating
income (as determined in accordance with generally accepted accounting
principles) as an indicator of operating performance or to cash flows from
operating activities (as determined in accordance with generally accepted
accounting principles) as a measure of liquidity.
(7) The stockholders' equity data gives effect to our reorganization in which
direct and indirect ownership interests in our predecessor and Univision's
subordinated note and option will be exchanged for shares of our common
stock before the closing of this offering.
24
<PAGE>
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
(In thousands)
Our selected unaudited pro forma financial data as of and for the year ended
December 31, 1999 presents:
. our summary historical financial data for the year ended December 31,
1999;
. the historical financial data of our completed and pending acquisitions
for the year ended December 31, 1999 including the period from January 1,
1999 through the acquisition dates for our 1999 acquisitions;
. our summary unaudited pro forma financial data as of and for the year
ended December 31, 1999, giving effect to acquisitions completed in 1999
and 2000 and our pending acquisition of Z-Spanish Media as if we had
owned these businesses for all of 1999, the effect of conversion of TSG
Capital Fund III, L.P.'s $90 million convertible subordinated note into
preferred stock and the exchange of Univision's $120 million subordinated
note and option for common stock; and
. our unaudited pro forma as adjusted financial data, giving further effect
to the sale of the shares of common stock that we are offering,
assuming an initial public offering price of $ per share and the
application of the net proceeds of this offering.
The summary unaudited pro forma and pro forma as adjusted financial data are
not necessarily indicative of the operating results or the financial condition
that would have been achieved if we had owned these businesses for all of 1999
and should not be construed as representative of future operating results or
financial condition. The summary historical and unaudited pro forma financial
data should be read in conjunction with the audited consolidated financial
statements and related notes and with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
Year Ended December 31, 1999
-----------------------------------------------
Completed Unaudited
Entravision and Pending Unaudited Pro Forma
Historical Acquisitions Pro Forma As Adjusted
----------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Statement of Operations Data:
Gross revenue:
Television................... $ 63,842 $ 5,096 $ 68,938
Radio........................ 2,362 58,499 60,861
Outdoor and publishing....... -- 35,134 35,134
-------- -------- --------- ----
Total gross revenue.......... 66,204 98,729 164,933
Less agency commissions........ 7,205 7,662 14,867
-------- -------- --------- ----
Net revenue.................... 58,999 91,067 150,066
Expenses:
Direct operating............. 24,441 34,474 58,915
Selling, general and
administrative.............. 11,611 33,875 45,486
Corporate.................... 5,809 6,568 12,377
Depreciation and
amortization................ 14,613 13,954 83,168
Non-cash stock-based
compensation................ 29,143 -- 29,143
Gain on sale of assets....... -- (4,442) (4,442)
-------- -------- --------- ----
Total expenses................. 85,617 84,429 224,647
-------- -------- --------- ----
Operating income (loss)........ (26,618) 6,638 (74,581)
Interest expense, net and
other......................... (12,091) (13,244) (33,900)
Income tax benefit ............ 121 1,872 27,998
-------- -------- --------- ----
Loss from continuing
operations.................. (38,588) (4,734) (80,483)
Preferred stock dividends
(1)......................... -- -- 42,209
-------- -------- --------- ----
Net loss from continuing
operations applicable to
common stock................ $(38,588) $ (4,734) $(122,692) $
======== ======== ========= ====
</TABLE>
<TABLE>
<CAPTION>
Year Ended
December 31, 1999
---------------------
Unaudited
Unaudited Pro Forma
Pro Forma As Adjusted
--------- -----------
<S> <C> <C>
Other Financial Data:
Broadcast cash flow (2)................................... $45,665
EBITDA (3)................................................ 33,288
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
As of
December 31, 1999
Unaudited
Pro Forma
As Adjusted
-----------------
<S> <C>
Balance Sheet Data:
Cash and cash
equivalents............ $
Total assets............
Long-term debt,
including current
portion................
Series A mandatorily
redeemable convertible
preferred stock........
Total stockholders'
equity (4).............
</TABLE>
- --------
(1) Includes dividends on the 13.5% preferred stock that we could be required
to issue to finance our acquisition of Z-Spanish Media if this offering has
not closed by September 30, 2000 and dividends on the 8.5% redeemable
preferred stock issuable to TSG Capital Fund III, L.P. upon conversion of
its $90 million convertible subordinated note.
(2) Broadcast cash flow means operating income (loss) from continuing
operations before corporate expenses, depreciation and amortization, non-
cash stock-based compensation and gain on sale of assets. We have presented
broadcast cash flow which we believe is comparable to the data provided by
other companies in the broadcast industry, because such data is commonly
used as a measure of performance in our industry. However, broadcast cash
flow should not be construed as an alternative to operating income (as
determined in accordance with generally accepted accounting principles) as
an indicator of operating performance or to cash flows from operating
activities (as determined in accordance with generally accepted accounting
principles) as a measure of liquidity.
(3) EBITDA means broadcast cash flow less corporate expenses and is commonly
used in the broadcast industry to analyze and compare broadcast companies
on the basis of operating performance, leverage and liquidity. EBITDA, as
presented above, may not be comparable to similarly titled measures of
other companies unless such measures are calculated in substantially the
same fashion. EBITDA should not be construed as an alternative to operating
income (as determined in accordance with generally accepted accounting
principles) as an indicator of operating performance or to cash flows from
operating activities (as determined in accordance with generally accepted
accounting principles) as a measure of liquidity.
(4) The stockholders' equity data gives effect to our reorganization in which
direct and indirect ownership interests in our predecessor and Univision's
subordinated note and option will be exchanged for shares of our common
stock before the closing of this offering.
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
We have included Management's Discussion and Analysis for each of
Entravision, LCG, which we have acquired, and Z-Spanish Media, which we have
agreed to acquire. The words "we" and "our" as used in each of these sections
refer to Entravision, LCG or Z-Spanish Media individually and not as a combined
entity. You should read these sections together with the historical audited
financial statements of Entravision, LCG and Z-Spanish Media and the related
notes contained elsewhere in this prospectus.
We agreed to acquire all of the outstanding capital stock of Z-Spanish Media
on April 20, 2000 for $475 million including the assumption of approximately
$109 million in debt. The consideration to be paid consists of approximately
$256 million in cash and shares of Class A common stock, valued at a
price of $ per share. The acquisition will be accounted for as a purchase
business combination and the excess purchase price will be allocated to
intangible assets and goodwill, which will be amortized over 15 years. The
closing of the acquisition is subject to conditions, including the receipt of
required regulatory approvals. The closing of this offering is conditioned upon
the closing of the acquisition.
We acquired all of the outstanding capital stock of LCG on April 20, 2000
for approximately $252 million. The acquisition was accounted for as a purchase
business combination and the excess purchase price was allocated to intangible
assets and goodwill, which will be amortized over 15 years.
We have agreed to acquire substantially all of the assets related to two
radio stations in the Los Angeles market from Citicasters Co. for $85 million,
of which $17 million was previously placed in escrow as a deposit. In addition,
we have agreed to acquire two television stations in Hartford, Connecticut, and
Orlando, Florida for a total of approximately $41 million. We are acquiring FCC
licenses and the entire purchase price for these acquisitions will be allocated
to intangible assets and will be amortized over 15 years. The closing of these
acquisitions is subject to conditions, including the receipt of required
regulatory approvals. We expect to close the Citicasters acquisition in the
second quarter of 2000 and the television station acquisitions in the third
quarter of 2000.
We have no operating history as a combined company on which to base an
evaluation of our business and prospects. Our business is evolving rapidly,
and, therefore, we believe that period-to-period comparisons of operating
results of Entravision, LCG and Z-Spanish Media are not meaningful, and you
should not rely on them as an indicator of our future performance as a combined
company.
27
<PAGE>
ENTRAVISION MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
We operate 31 television stations (and own the construction permits to build
two additional television stations) and ten radio stations primarily in the
Southwestern United States where the majority of U.S. Hispanics live, including
the U.S./Mexican border markets. Our television stations consist primarily of
Univision affiliates serving 17 of the top 50 U.S. Hispanic markets. Our radio
stations consist of six FM and four AM stations serving portions of the
California and Texas markets.
We were organized as a Delaware limited liability company in January 1996 to
combine the operations of our predecessor entities. We currently conduct
operations through a group of affiliated limited liability companies and S-
corporations. Before the closing of this offering we will complete a
reorganization in which all of the outstanding membership interests of our
predecessor and Univision's subordinated note and option will be exchanged for
shares of our common stock. This reorganization is described in "Certain
Relationships and Related Transactions--Reorganization."
We generate revenue from sales of national and local advertising time on
television and radio stations. Advertising rates are, in large part, based on
each station's ability to attract audiences in demographic groups targeted by
advertisers. We recognize advertising revenue when the commercials are
broadcast. We incur commissions from agencies on local, regional and national
advertising. Our revenue reflects deductions from gross revenue for commissions
to these agencies.
Our primary expenses are employee compensation, including commissions paid
to our sales staffs, marketing, promotion and selling costs, technical, local
programming, engineering costs and general and administrative expenses. Our
local programming costs consist of costs related to producing a local newscast
in each of our markets.
During 1999, we recorded an operating expense of $29.1 million for non-cash
stock-based compensation incurred in connection with an employee stock award
and option grant. We expect to continue to make stock-based awards in the
future.
We have historically not had material income tax expense or benefit
reflected in our statement of operations as the majority of our subsidiaries
have been non-taxpaying entities. Federal and state income taxes attributable
to income during such periods were incurred and paid directly by the members.
Accordingly, no discussion of income taxes is included in this section. Before
the closing of this offering we will become a taxpaying organization. We have
included in our historical financial statements a pro forma provision for
income taxes and a pro forma net loss to show what our net income or loss would
have been if we were a taxpaying entity. We anticipate that our future
effective income tax rate will vary from 40% due to a portion of our
preliminary purchase price for the LCG and Z-Spanish Media acquisitions being
allocated to non-tax deductible goodwill.
28
<PAGE>
Year Ended December 31, 1999 Compared to the Year Ended December 31, 1998
The following table sets forth selected data from our operating results for
the years ended December 31, 1998 and 1999 (dollars in thousands):
<TABLE>
<CAPTION>
Historical
-----------------
1998 1999 % Change
------- -------- ----------
<S> <C> <C> <C>
Statement of Operations
Data:
Gross revenue........... $49,872 $ 66,204 32.7%
Less agency
commissions............ 5,052 7,205 42.6
------- --------
Net revenue............. 44,820 58,999 31.6
Direct operating
expenses............... 15,794 24,441 54.7
Selling, general and
administrative
expenses............... 8,877 11,611 30.8
Corporate expenses...... 3,963 5,809 46.6
Depreciation and
amortization........... 9,565 14,613 52.8
Non-cash stock-based
compensation........... 500 29,143 n/m
------- --------
Operating income
(loss)................. 6,121 (26,618)
Interest expense, net... (8,244) (12,091)
------- --------
Loss before income tax.. (2,123) (38,709)
Income tax benefit
(expense).............. (210) 121
------- --------
Net loss................ $(2,333) $(38,588)
======= ========
Other Data:
Broadcast cash flow..... $20,149 $ 22,947 13.9%
EBITDA.................. 16,186 17,138 5.9
</TABLE>
Net Revenue. Net revenue increased to $59.0 million in 1999 from $44.8
million in 1998, an increase of $14.2 million. This increase was primarily
attributable to the acquisition of television stations in 1999 and the benefit
of 12 months of our 1998 acquisitions. On a same station basis, for stations we
owned or operated for all of 1998, net revenue increased $3.6 million, or 8%.
This increase is attributable to an increase in advertising rates of
approximately 20% in certain of our markets, offset by a $2.5 million decrease
in network compensation from Univision.
Direct Operating Expenses. Direct operating expenses increased to $24.4
million in 1999 from $15.8 million in 1998, an increase of $8.6 million. The
increase was primarily attributable to the additional operations of five
television stations in 1999. On a same station basis, for stations owned or
operated for all of 1998, direct operating expenses increased $3.2 million, or
20.3%. This increase was due to approximately $1.5 million in technical and
news costs to implement local news programming in our McAllen, Texas and Las
Vegas, Nevada markets and an additional newscast at our station in San Diego,
California. The addition of local newscasts to our television stations is
consistent with our strategy of increasing advertising revenue and viewership
by producing news programming specifically designed for each of our markets. As
a percentage of net revenue, direct operating expenses increased to 41.4% in
1999 from 35.2% in 1998. Although direct operating expenses as a percentage of
net revenue increased by 6.2%, we anticipate that these expenses as a
percentage of net revenue will return to historical levels as we integrate our
acquisitions.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $11.6 million in 1999 from $8.9 million in
1998, an increase of $2.7 million. The increase was primarily attributable to
the acquisition of television stations in 1999. On a same station basis, for
stations owned or operated for all of 1998, selling, general and administrative
expenses decreased $0.7 million, or 7.9%. The decrease was due to the
elimination of duplicative costs in integrating our 1998 acquisitions as well
as volume discounts obtained due to the increase in the number of stations and
employees. This decrease was partially offset by the increase in selling costs
associated with increased sales, management and staff levels and
29
<PAGE>
increased market research costs, all of which are consistent with our strategy
of investing in sales, management and market research. As a percentage of net
revenue, selling, general and administrative expenses decreased to 19.7% in
1999 from 19.8% in 1998.
Corporate Expenses. Corporate expenses increased to $5.8 million in 1999
from $4.0 million in 1998, an increase of $1.8 million. The increase was
primarily due to additional staffing as a result of our growth and additional
costs associated with our acquisitions. As a percentage of net revenue,
corporate expenses increased by 1% to 9.8% in 1999. We expect corporate
expenses as a percentage of net revenue to continue to increase as we hire
additional corporate personnel due to our growth and the costs associated with
being a public company.
Depreciation and Amortization. Depreciation and amortization increased to
$14.6 million in 1999 from $9.6 million in 1998, an increase of $5.0 million.
The increase was primarily attributable to the acquisition of television
stations in 1999. On a same station basis, for stations we owned or operated
for all of 1998, depreciation and amortization increased $0.3 million. This
increase was due to additional depreciation from a new facility we built in
McAllen, Texas and the capital expenditures to replace broadcast equipment for
this station.
Non-Cash Stock-Based Compensation. We have an employment agreement with an
executive vice president in which the employee was awarded 1,845,656 shares of
Class A common stock, which vested through January 2000. At December 31, 1999,
the estimated fair value of this award was $27.7 million, of which $0.9
million, $0.5 million and $26.3 million were recorded as non-cash stock-based
compensation for the years ended December 31, 1997, 1998 and 1999 respectively.
In January 1999, we entered into an employment agreement with a senior vice
president. As amended, the agreement allowed the employee to purchase 164,390
restricted shares of Class A common stock at $0.01 per share. The shares vest
ratably over three years. Non-cash stock-based compensation associated with
both of the awards was determined using an estimate by management and based
primarily on the estimated offering price of this offering. With respect to the
restricted shares, we recorded $2.8 million in non-cash stock-based
compensation during 1999. Total non-cash stock-based compensation was $29.1
million for 1999.
Operating Income (Loss). As a result of the above factors, we recognized an
operating loss of $26.6 million in 1999 compared to operating income of $6.1
million in 1998. Excluding non-cash stock-based compensation, operating income
decreased to $2.5 million in 1999 from $6.6 million in 1998, a decrease of $4.1
million. As a percentage of net revenue, operating income, excluding non-cash
stock-based compensation, decreased to 4.3% in 1999 from 14.8% in 1998.
Interest Expense, Net. Interest expense increased to $12.1 million in 1999
from $8.2 million in 1998, an increase of $3.8 million. The increase is due to
additional borrowings to fund our acquisitions, higher interest rates due to
our increased debt to cash flow ratio and $2.5 million related to the estimated
intrinsic value of the option feature of our original $10 million subordinated
note payable to Univision.
Net Loss. We recognized a net loss of $38.6 million in 1999, compared to a
net loss of $2.3 million in 1998. Excluding non-cash stock-based compensation,
our net loss increased to $9.4 million in 1999 from $1.8 million in 1998, an
increase of $7.6 million. As a percentage of net revenue, our net loss,
excluding non-cash stock-based compensation, increased to 16% in 1999 from 4.1%
in 1998.
Broadcast Cash Flow. Broadcast cash flow increased to $22.9 million in 1999
from $20.1 million in 1998, an increase of $2.8 million. The increase was
primarily attributable to the additional operations of five television stations
in 1999. On a same station basis, for stations we owned or operated for all of
1998, broadcast cash flow increased $1.1 million. The increase was attributable
to an increase in advertising rates of approximately 20% in some of our
markets, offset by a $2.5 million decrease in network compensation from
Univision and our investment in local news programming in our McAllen, Texas
and Las Vegas, Nevada markets, and additional costs to implement an additional
newscast at our station in San Diego, California. As a percentage of net
revenue, broadcast cash flow decreased to 38.9% in 1999 from 45% in 1998.
30
<PAGE>
EBITDA. EBITDA increased to $17.1 million in 1999 from $16.2 million in
1998, an increase of $0.9 million. As a percentage of net revenue, EBITDA
decreased to 29% in 1999 from 36.1% in 1998.
Year Ended December 31, 1998 Compared to the Year Ended December 31, 1997
The following table sets forth selected data from our operating results for
the years ended December 31, 1997 and 1998 (dollars in thousands):
<TABLE>
<CAPTION>
Historical
----------------
1997 1998 % Change
------- ------- --------
<S> <C> <C> <C> <C>
Statement of Operations Data:
Gross revenue................................... $33,419 $49,872 49.2%
Less agency commissions......................... 2,963 5,052 70.5
------- -------
Net revenue..................................... 30,456 44,820 47.2
Direct operating expenses....................... 9,184 15,794 72.0
Selling, general and administrative expenses.... 5,845 8,877 51.9
Corporate expenses.............................. 3,899 3,963 1.6
Depreciation and amortization................... 8,847 9,565 8.1
Non-cash stock-based compensation............... 900 500 (44.4)
------- -------
Operating income................................ 1,781 6,121
Interest expense, net........................... (5,107) (8,244)
------- -------
Loss before income tax.......................... (3,326) (2,123)
Income tax benefit (expense).................... 7,531 (210)
------- -------
Net income (loss)............................... $ 4,205 $(2,333)
======= =======
Other Data:
Broadcast cash flow............................. $15,427 $20,149 30.6%
EBITDA.......................................... 11,528 16,186 40.4
</TABLE>
Net Revenue. Net revenue increased to $44.8 million in 1998 from $30.5
million in 1997, an increase of $14.4 million. The increase was primarily
attributable to the benefit of a full year of our 1997 acquisitions of KINT and
KNVO. These acquisitions accounted for $5.5 million of the increase in 1998. In
addition, the increase was due to a rate shift from local to national
advertising and an increase in the average rate charged for national
advertising. The acquisition of television stations in 1998 accounted for $2.6
million of the increase. On a same station basis, for stations owned or
operated for all of 1997, net revenue increased $11.7 million, or 38.4%.
Direct Operating Expenses. Direct operating expenses increased to $15.8
million in 1998 from $9.2 million in 1997, an increase of $6.6 million. The
increase was partially attributable to a full year of operations from our 1997
acquisitions of KINT and KNVO. These acquisitions accounted for $2.2 million of
the increase in 1998. The acquisition of television stations in 1998 accounted
for $1.2 million of the increase. On a same station basis, for stations owned
or operated for all of 1997, direct operating expenses increased $5.4 million,
or 58.8%. As a percentage of net revenue, direct operating expenses increased
to 35.3% in 1998 from 30.2% in 1997.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $8.9 million in 1998 from $5.8 million in
1997, an increase of $3.0 million. The increase is partially attributable to a
full year of operations from our 1997 acquisitions of KINT and KNVO. These
acquisitions accounted for $0.6 million of the increase in 1998. Additional
costs of sales and research tools associated with our strategy to improve our
sales efforts accounted for an additional $0.5 million of this increase. The
acquisition of two television stations in 1998 accounted for $1.0 million of
the increase. On a same station basis, for stations owned or operated for all
of 1997, selling, general and administrative expenses increased
31
<PAGE>
$2.1 million, or 35.9%. As a percentage of net revenue, selling, general and
administrative expenses increased to 19.8% in 1998 from 19.2% in 1997.
Corporate Expenses. Corporate expenses increased to $4.0 million in 1998
from $3.9 million in 1997, an increase of $0.1 million. The increase was
primarily associated with our acquisitions. As a percentage of net revenue,
corporate expenses decreased to 8.8% in 1998 from 12.8% in 1997.
Depreciation and Amortization. Depreciation and amortization increased to
$9.6 million in 1998 from $8.8 million in 1997, an increase of $0.8 million.
The increase was primarily attributable to a full year of operations from our
1997 acquisitions of KINT and KNVO and a partial year of depreciation and
amortization from our 1998 acquisitions.
Operating Income. As a result of the above factors, our operating income was
$6.1 million in 1998 compared to operating income of $1.8 million in 1997, an
increase of $4.3 million. Excluding non-cash stock-based compensation,
operating income increased to $6.6 million in 1998 from $2.7 million in 1997,
an increase of $3.9 million. As a percentage of net revenue, operating income,
excluding non-cash stock-based compensation, increased to 14.8% in 1998 from
8.8% in 1997.
Interest Expense, Net. Interest expense increased to $8.2 million in 1998
from $5.1 million in 1997, an increase of $3.1 million. The increase is due to
additional borrowings to fund our acquisitions.
Net Income (Loss). As a result of the above factors, we had a net loss of
$2.3 million in 1998 compared to net income of $4.2 million in 1997. Excluding
the tax benefit of $7.8 million related to KNVO's change in tax status in 1997,
the net loss decreased to $2.3 million in 1998 from $3.6 million in 1997, a
decrease of $1.3 million.
Broadcast Cash Flow. Broadcast cash flow increased to $20.1 million in 1998
from $15.4 million in 1997, an increase of $4.7 million. The increase was
partially attributable to a full year of operations from our 1997 acquisitions
of KINT and KNVO. These acquisitions accounted for $2.8 million of the increase
in 1998. In addition, the increase was due to a rate shift from local to
national advertising and an increase in the average rate charged for national
advertising of approximately 20% in some of our markets. The acquisition of
television stations in 1998 accounted for $0.4 million of the increase. On a
same station basis, for stations owned or operated for all of 1997, broadcast
cash flow increased $4.3 million, or 27.9%. As a percentage of net revenue,
broadcast cash flow decreased to 45% in 1998 from 50.7% in 1997.
EBITDA. EBITDA increased to $16.2 million in 1998 from $11.5 million in
1997, an increase of $4.7 million. The increase was partially attributable to a
full year of operations from our 1997 acquisitions of KINT and KNVO. These
acquisitions accounted for $2.8 million of the increase in 1998. The
acquisition of television stations in 1998 accounted for $0.4 million of the
increase. On a same station basis, for stations owned or operated for all of
1997, EBITDA increased $4.3 million, or 37.3%. The increase was offset by
additional technical, programming and local news costs. As a percentage of net
revenue, EBITDA decreased to 36.1% in 1998 from 37.8% in 1997.
Liquidity and Capital Resources
Our primary source of liquidity is cash provided by operations, available
borrowings under our bank credit facilities and investments made by Univision
and TSG Capital Fund III, L.P. in 2000. We have a $158 million revolving line
of credit with a group of lenders, which expires November 10, 2006 and contains
scheduled quarterly reductions in the available borrowings through such date.
Our obligations under this facility are secured by all of our stock and
substantially all of our assets, as well as a pledge of the stock of several of
our subsidiaries, including our special purpose subsidiary formed to hold our
FCC licenses. Five of these subsidiaries have also pledged their assets as
collateral for this facility and guaranteed repayment of outstanding
borrowings. The facility contains financial covenants, including a requirement
not to exceed a maximum debt to cash flow ratio
32
<PAGE>
and interest and fixed charge coverage ratios. The facility requires us to
maintain our FCC licenses for our broadcast properties and contains other
operating covenants, including restrictions on our ability to incur additional
indebtedness and pay dividends. The balance outstanding on our revolving credit
facility as of the date of this prospectus was $150 million bearing interest at
the rate of 9%.
On March 2, 2000, Univision invested $110 million in the form of a
subordinated note. From these proceeds, we used $33 million for our investment
in a San Diego television station, $17 million to make a deposit toward our
acquisition of two FM radio stations in the Los Angeles market and $60 million
to reduce outstanding borrowings on our revolving bank credit facility.
On April 19, 2000, we entered into a $115 million term loan to partially
finance our acquisition of LCG. Amounts outstanding under this facility are due
April 18, 2001 and bear interest at LIBOR plus 4%. The facility is secured by a
pledge of all of the stock of LCG, a pledge of all of the stock of LCG's
special purpose entity formed to hold its FCC licenses, a lien on all of LCG's
assets and a secondary lien on all of our assets. This credit facility contains
a covenant that requires us to maintain a minimum level of EBITDA measured on a
quarterly basis. As of the date of this prospectus, borrowings outstanding
under this facility were $115 million, which we expect to repay in full using
proceeds from this offering.
On April 20, 2000, we acquired LCG for $252 million. We financed the balance
of the purchase price remaining after our previous deposit of $7 million using
advances of $50 million on our revolving line of credit and $105 million on our
term loan and $90 million from the issuance to TSG Capital Fund III, L.P. of a
convertible subordinated note.
On April 20, 2000, we agreed to acquire Z-Spanish Media for $475 million,
including the assumption of approximately $109 million of debt, of which
approximately $39 million will be repaid using proceeds from this offering. For
a description of the terms of this debt see "Z-Spanish Media Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."
In addition, we have agreed to acquire two television stations in the
Hartford and Orlando markets and two radio stations in the Los Angeles market
for an aggregate of $126 million. We expect to use $68 million of the proceeds
from this offering to pay the balance of the purchase price for the two Los
Angeles radio stations and borrowings under our revolving credit facility and
the credit facilities that we are assuming from Z-Spanish Media to finance the
television station acquisitions.
Net cash flow from operating activities decreased to approximately $6.1
million for 1999, from approximately $7.7 million for 1998.
Net cash flow used in investing activities increased to approximately $59.1
million for 1999, compared to approximately $25.6 million for 1998. During
1999, we acquired broadcast properties for a total of approximately $46 million
(including deposits of $8.7 million for acquisitions closed in 2000) and made
capital expenditures totaling approximately $13 million, which included the
purchases of three parcels of land for $1.5 million, the building of a new
facility in McAllen, Texas for $3.5 million and the upgrade of broadcasting
equipment at all of our stations totalling $8 million. During 1998, we acquired
broadcast properties for a total of approximately $23 million and made
purchases of capital equipment totaling approximately $3 million.
During 2000, we anticipate our capital expenditures will be approximately
$18 million, including the building of three studio facilities and the
transition to DTV. During 2000, we anticipate that Z-Spanish Media's and LCG's
capital expenditures will be $5 million, including upgrades and maintenance on
broadcasting equipment and facility improvements to radio stations in some of
our markets, including Denver and Phoenix. We anticipate paying for these
capital expenditures out of net cash flow from operating activities. The amount
of these capital expenditures may change based on future changes in business
plans, our financial conditions and general economic conditions.
Net cash flow from financing activities was approximately $52 million for
1999. During 1999, we drew on our bank credit facility to acquire television
stations from LCG and a television station in Venice (Sarasota),
33
<PAGE>
Florida. In 1998, we completed acquisitions totaling $24 million, which were
financed with borrowings under our revolving credit facility. These
acquisitions included KORO and KLDO.
We currently anticipate that funds generated from operations and available
borrowings under our credit facilities, together with the net proceeds from
this offering, will be sufficient to meet our anticipated cash requirements for
the foreseeable future. We are currently in discussions with our lenders to
refinance our existing indebtedness and increase available borrowings, which we
expect to complete before the closing of this offering.
We continuously review, and are currently reviewing, opportunities to
acquire additional television and radio stations as well as billboards and
other opportunities targeting the U.S. Hispanic market. We expect to finance
any future acquisitions through funds generated from operations and borrowings
under our credit facilities and through additional debt and equity financings.
Any additional financings, if needed, might not be available to us on
reasonable terms or at all. Failure to raise capital when needed could
seriously harm our business and our acquisition strategy. If additional funds
were raised through the issuance of equity securities, the percentage of
ownership of our stockholders would be reduced. Furthermore, these equity
securities might have rights, preferences or privileges senior to our Class A
common stock.
Seasonality
Seasonal net broadcast revenue fluctuations are common in the broadcasting
industry and are due primarily to fluctuations in advertising expenditures by
local and national advertisers. Our first fiscal quarter generally produces the
lowest net broadcast revenue for the year.
Segments
In accordance with FASB Statement No. 131, Disclosures About Segments of an
Enterprise and Related Information, we have determined that we have one
reportable segment. Furthermore, we have determined that all of our broadcast
properties are subject to the same regulatory environment because they target
similar classes of viewers and listeners through similar distribution methods.
New Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, or the Statement,
which is required to be adopted in all fiscal quarters of all fiscal years
beginning after June 15, 2000. The Statement permits early adoption as of the
beginning of any fiscal quarter after its issuance. We will be required to
adopt the Statement effective January 1, 2001. The Statement will require that
we recognize all derivatives on the balance sheet at fair value. Derivatives
that are not hedges must be adjusted to fair value through income. If the
derivative is a hedge, depending on the nature of the hedge, changes in the
fair value of derivatives will either be offset against the change in fair
value of the hedged assets, liabilities or firm commitment through earnings or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The ineffective portion of a derivative's change in fair value will
be immediately recognized in earnings. Because of our minimal use of
derivatives, we do not anticipate that the adoption of the Statement will have
a significant effect on our or our acquired companies' earnings or financial
position.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements, or
SAB 101. SAB 101 provides guidance on the recognition, presentation and
disclosure of revenue in financial statements filed with the Securities and
Exchange Commission. This accounting bulletin, as amended in March 2000, is
effective for us beginning in the second quarter of our fiscal year beginning
January 1, 2000. We do not believe that the adoption of SAB 101 will have a
material impact on our or our acquired companies' financial statements.
34
<PAGE>
Quantitative and Qualitative Disclosures About Market Risk
General
Market risk represents the potential loss that may impact our financial
position, results of operations or cash flows due to adverse changes in the
financial markets. We are exposed to market risk from changes in the base rates
on our variable rate debt. We periodically enter into derivative financial
instrument transactions such as swaps or interest rate caps, in order to manage
or reduce our exposure to risk from changes in interest rates. Under no
circumstances do we enter into derivatives or other financial instrument
transactions for speculative purposes. Our credit facilities require us to
maintain an interest rate protection agreement.
Interest Rates
Our bank revolving line of credit bears interest at a variable rate of LIBOR
(6.5% at December 31, 1999) plus 1.625%, and our term loan used to finance the
LCG acquisition bears interest at LIBOR plus 4% at April 19, 2000. At December
31, 1999 we had $143 million of variable rate bank debt. We currently hedge a
portion of our outstanding variable rate debt by using an interest rate cap.
This interest rate cap effectively converts $50 million of our variable rate
debt to a LIBOR fixed rate of 7% for a two-year period. Based on the current
level of borrowings under our credit facilities at our interest rate cap
agreements, an increase in LIBOR from the rates at December 31, 1999 to the cap
rates would not materially change our interest expense. The estimated fair
value of this interest rate cap agreement was not material and we expect to
continue to use similar types of interest rate protection agreements in the
future.
35
<PAGE>
LCG MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
LCG has 17 radio stations which are programmed with one of our three
nationally recognized formats delivered via satellite to all of our stations,
except for KSSE-FM, Los Angeles, California, which is programmed locally using
our "Super Estrella" format, and one station which is programmed pursuant to a
time brokerage agreement. Stations using our satellite-delivered formats offer
a local sound by using time slots or inserts for news, advertising and
community affairs.
The principal source of our revenue is the sale of broadcasting time on our
radio stations to local and national advertisers. Our advertisers pay rates
that are primarily affected by our ability to attract audiences in the
demographic groups targeted by those advertisers. Ratings are measured
principally by Arbitron Radio Market Reports. Our revenue is recognized when
commercials are run.
Operating expenses primarily consist of programming expenses, salaries and
commissions and advertising and promotion expenses.
In February 1999, we sold our television broadcasting business to
Entravision. As a result, related net assets at December 27, 1998 and the
results of television broadcasting operations for the three years ended
December 26, 1999 were classified as discontinued operations. The following
discussion focuses on the continuing radio broadcasting and newspaper
publishing operations. On April 20, 2000, Entravision acquired all of our
outstanding capital stock for $252 million.
Year Ended December 26, 1999 Compared to the Year Ended December 27, 1998
The following table sets forth selected data from our operating results for
the years ended December 27, 1998 and December 26, 1999 (dollars in thousands):
<TABLE>
<CAPTION>
Historical
----------------
1998 1999 % Change
------- ------- --------
<S> <C> <C> <C>
Statement of Operations Data:
Gross revenue................................. $41,588 $48,868 17.5%
Less agency commissions....................... 3,692 4,623 25.2
------- -------
Net revenue................................... 37,896 44,245 16.8
Direct operating expenses..................... 15,196 15,560 2.4
Selling, general and administrative expenses.. 17,677 18,910 7.0
Corporate expenses............................ 2,901 1,795 (38.1)
Depreciation and amortization................. 4,593 4,907 6.8
------- -------
Operating income (loss)....................... (2,471) 3,073
Interest expense and other, net............... (6,449) (5,527)
------- -------
Loss from continuing operations before income
tax benefit.................................. (8,920) (2,454)
Income tax benefit............................ 2,570 736
------- -------
Loss from continuing operations............... $(6,350) $(1,718)
======= =======
Other Data:
Broadcast cash flow........................... $ 5,023 $ 9,775 94.6%
EBITDA........................................ 2,122 7,980 n/m
</TABLE>
Net Revenue. Net revenue increased to $44.2 million in 1999 from $37.9
million in 1998, an increase of $6.3 million. Radio advertising accounted for
about $5.8 million of the increase. The increase can be primarily attributed to
favorable ratings and a strong demand for advertising, which allowed for rate
increases ranging from 10% to 70% in our top markets.
36
<PAGE>
Direct Operating Expenses. Direct operating expenses increased to $15.6
million in 1999 from $15.2 million in 1998, an increase of $0.4 million. The
increase was primarily due to increases in radio engineering and programming
costs. As a percentage of net revenue, direct operating expenses decreased to
35.2% in 1999 from 40.1% in 1998. For newspaper publishing, direct operating
costs remained relatively flat.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $18.9 million in 1999 from $17.7 million
in 1998, an increase of $1.2 million. The increase was primarily the result of
increased general and administrative costs related to newspaper publishing and
increased radio sales commissions. As a percentage of net revenue, selling,
general and administrative expenses decreased to 42.6% in 1999 from 46.6% in
1998.
Corporate Expenses. Corporate expenses decreased to $1.8 million in 1999
from $2.9 million in 1998, a decrease of $1.1 million. The decrease related
primarily to a one-time 1998 charge for executive severance and increased
professional fees. As a percentage of net revenue, corporate expenses decreased
to 4.1% in 1999 from 7.7% in 1998.
Depreciation and Amortization. Depreciation and amortization increased to
$4.9 million in 1999 from $4.6 million in 1998, an increase of $0.3 million.
Depreciation accounted for 77% of the increase due to the purchase of a new
fully-automated publishing system.
Operating Income (Loss). As a result of the above factors, operating income
increased to $3.1 million in 1999 from an operating loss of $2.5 million in
1998, an increase of $5.5 million. Radio operations accounted for $4.7 million
of the increase.
Interest Expense and Other, Net. Interest expense and other decreased to
$5.5 million in 1999 from $6.4 million in 1998, a decrease of $0.9 million. The
decrease in interest expense was due primarily to a decrease in outstanding
debt resulting from the sale of our television business in February 1999.
Loss from Continuing Operations. As a result of the above factors, the loss
from continuing operations decreased to $1.7 million in 1999 from $6.4 million
in 1998, an decrease of $4.7 million.
Broadcast Cash Flow. Broadcast cash flow increased to $9.8 million in 1999
from $5.0 million in 1998, an increase of $4.8 million. Radio operations
accounted for $4.7 million of the increase. As a percentage of net revenue,
broadcast cash flow increased to 22.1% in 1999 from 13.3% in 1998.
EBITDA. EBITDA increased to $8.0 million in 1999 from $2.1 million in 1998,
an increase of $5.9 million. The radio operations accounted for $4.7 million of
the increase. As a percentage of net revenue, EBITDA increased to 18% in 1999
from 5.6% in 1998.
37
<PAGE>
Year Ended December 27, 1998 Compared to the Year Ended December 28, 1997
The following table sets forth selected data from our operating results for
the years ended December 28, 1997 and December 27, 1998 (dollars in thousands):
<TABLE>
<CAPTION>
Historical
----------------
1997 1998 % Change
------- ------- --------
<S> <C> <C> <C>
Statement of Operations Data:
Gross revenue................................. $40,467 $41,588 2.8%
Less agency commissions....................... 3,472 3,692 6.3
------- -------
Net revenue................................... 36,995 37,896 2.4
Direct operating expenses..................... 15,131 15,196 0.4
Selling, general and administrative expenses.. 17,535 17,677 0.8
Corporate expenses............................ 1,713 2,901 69.4
Depreciation and amortization................. 3,762 4,593 22.1
------- -------
Operating loss................................ (1,146) (2,471)
Interest expense and other, net............... (4,511) (6,449)
------- -------
Loss from continuing operations before income
tax benefit.................................. (5,657) (8,920)
Income tax benefit............................ 2,213 2,570
------- -------
Loss from continuing operations............... $(3,444) $(6,350)
======= =======
Other Data:
Broadcast cash flow........................... $ 4,329 $ 5,023 16.0%
EBITDA........................................ 2,616 2,122 (18.9)
</TABLE>
Net Revenue. Net revenue increased to $37.9 million in 1998 from $37.0
million in 1997, an increase of $0.9 million. Newspaper publishing accounted
for $0.8 million of the increase.
Direct Operating Expenses. Direct operating expenses were relatively flat
compared to 1997 with an increase of $0.1 million.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $17.7 million in 1998 from $17.5 million
in 1997, an increase of $0.2 million. Radio operations accounted for the
majority of the increase. The increase primarily resulted from increased sales,
marketing and promotion expenses. As a percentage of net revenue, selling,
general and administrative expenses decreased to 46.6% in 1998 from 47.4% in
1997.
Corporate Expenses. Corporate expenses increased to $2.9 million in 1998
from $1.7 million in 1997, an increase of $1.2 million. The increase was
related primarily to one-time charges for executive severance and increased
professional fees. As a percentage of net revenue, corporate expenses increased
to 7.7% in 1998 from 4.6% in 1997.
Depreciation and Amortization. Depreciation and amortization increased to
$4.6 million in 1998 from $3.8 million in 1997, an increase of $0.8 million.
Radio operations accounted for $0.7 million of the increase. The increase
represented increased amortization associated with the 1997 acquisition of
eight radio stations.
Operating Loss. As a result of the above factors, the operating loss
increased to $2.5 million in 1998 from $1.1 million in 1997, an increase of
$1.4 million.
Interest Expense and Other, Net. Interest expense increased to $6.4 million
in 1998 from $4.5 million in 1997, an increase of $1.9 million. The increase
was due primarily to higher interest rates in 1998 compared to 1997 and
increases in outstanding debt incurred in connection with our acquisitions.
Loss from Continuing Operations. As a result of the above factors, the loss
from continuing operations increased to $6.4 million in 1998 from $3.4 million
in 1997, an increase of $3.0 million.
38
<PAGE>
Broadcast Cash Flow. Broadcast cash flow increased to $5.0 million in 1998
from $4.3 million in 1997, an increase of $0.7 million. As a percentage of net
revenue, broadcast cash flow increased to 13.3% in 1998 from 11.7% in 1997.
EBITDA. EBITDA decreased to $2.1 million in 1998 from $2.6 million in 1997,
a decrease of $0.5 million. The decline is due to the increase in corporate
expense. As a percentage of net revenue, EBITDA decreased to 5.6% in 1998 from
7.1% in 1997.
Segment Operations
We operate in two reportable segments, radio broadcasting and newspaper
publishing. The radio broadcasting segment has operations in the San Francisco,
San Jose, Monterey-Salinas-Santa Cruz, Riverside-San Bernardino, Sacramento,
Albuquerque-Santa Fe, Denver-Boulder and Washington D.C. The publishing segment
consists of two Spanish-language publications in New York City. Each segment is
managed separately. We evaluate performance based on several factors, of which
the primary financial measure is segment operating profit. Total revenue of
each segment represents sales to unaffiliated customers. There are no inter-
segment sales. No single customer provides more than 10% of our revenue. The
accounting policies of the segments are the same as those described in Note 2
to our audited financial statements. Corporate expenses include general and
administrative costs that are not directly related to the reportable segments.
Financial information for these business segments includes (in thousands):
<TABLE>
<CAPTION>
Historical
----------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Net Revenue:
Radio Broadcasting............................... $ 19,200 $ 19,345 $ 25,136
Newspaper Publishing............................. 17,795 18,551 19,109
-------- -------- --------
$ 36,995 $ 37,896 $ 44,245
======== ======== ========
Operating Profit (loss):
Radio Broadcasting............................... $ (98) $ (974) $ 3,718
Newspaper Publishing............................. 672 1,411 1,150
-------- -------- --------
Total Reportable Segments....................... 574 437 4,868
Corporate expenses............................... (1,720) (2,908) (1,795)
-------- -------- --------
$ (1,146) $ (2,471) $ 3,073
======== ======== ========
Identifiable Assets:
Radio Broadcasting............................... $130,863 $131,887 $130,909
Newspaper Publishing............................. 23,308 23,827 24,563
-------- -------- --------
Total Reportable Segments....................... 154,171 155,714 155,472
Corporate........................................ 4,335 5,476 2,014
Discontinued operations.......................... 4,500 4,832 --
-------- -------- --------
$163,006 $166,022 $157,486
======== ======== ========
Depreciation and Amortization:
Radio Broadcasting............................... $ 3,023 $ 3,777 $ 3,862
Newspaper Publishing............................. 739 816 1,044
-------- -------- --------
$ 3,762 $ 4,593 $ 4,906
======== ======== ========
Capital Expenditures:
Radio Broadcasting............................... $ 672 $ 187 $ 1,061
Newspaper Publishing............................. 263 868 1,230
-------- -------- --------
Total Reportable Segments....................... 935 1,055 2,291
Discontinued Operations........................... 75 216 --
-------- -------- --------
$ 1,010 $ 1,271 $ 2,291
======== ======== ========
</TABLE>
39
<PAGE>
Liquidity and Capital Resources
LCG's primary source of liquidity is from its net cash flow provided by its
radio and newspaper operations and borrowings under our $35 million revolving
bank credit facility. Funds for debt service, capital expenditures and
operations historically have been provided by income from continuing
operations.
The bank credit facility is secured by a first priority lien on the capital
stock of our subsidiaries and bears interest at various interest rates
depending on our total leverage ratio. At March 31, 2000, $22.5 million of debt
was outstanding on our facility, bearing interest at the rate of 10.25%. In
connection with our sale to Entravision, all indebtedness outstanding under the
facility was paid, and the facility was terminated. As of March 31, 2000, we
had $21.5 million of senior subordinated debt outstanding held by some of our
stockholders and officers bearing interest at the rate of 5%. The unamortized
original issue discount was approximately $4.5 million at December 31, 1999.
For 1999, net cash flow provided by operating activities was $1.1 million
compared to $0.6 million for 1998 and $2.3 million for 1997. The change from
1998 to 1999 can be attributed primarily to an increase in operating income.
The change from 1997 to 1998 related primarily to a decline in operating
income.
Net cash flow provided by investing activities was $16.7 million during 1999
as compared to $2.5 million used in 1998 and $66.6 million used in 1997. During
1999, we sold our television stations to Entravision for approximately $12.9
million and sold other assets including a tower site in Portland, Oregon for
approximately $6.6 million. We had capital expenditures of $2.3 million for
1999, including the purchase of a new fully-integrated publishing system for
our newspaper business. During 1997, we acquired eight radio stations for
approximately $70 million.
Net cash flow used in financing activities was $14.1 million during 1999
compared to cash provided by financing activities of $2.0 million in 1998 and
$37.7 million in 1997. The change in net cash flow provided by financing
activities in 1999 relates to a net reduction in our debt using the proceeds
from the sale of our television stations. The increase in net cash flow
provided by financing activities in 1997 can be attributed to the borrowings
associated with our acquisition of eight radio stations during 1997.
40
<PAGE>
Z-SPANISH MEDIA MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
Z-Spanish Media was formed to combine national radio programming with a
local presence. Through our four formats, which are delivered via satellite to
our stations and our affiliates, we provide a national quality radio sound
with local time slots available for news, traffic, weather, promotions and
community events.
On December 31, 1999, Z-Spanish Media merged with Vista Media Group, Inc.,
or Vista, whereby Vista became a wholly owned subsidiary of Z-Spanish Media.
Z-Spanish Media and Vista have shared a common controlling stockholder group
since August 29, 1997. As such, the business combination has been accounted
for as a common control business combination, and the accounts of Vista are
included in the accompanying combined financial statements from August 29,
1997.
The principal source of our revenue is the sale of broadcasting time on our
radio stations and network and the sale of outdoor display contracts for our
billboard operations. As a result, our revenue is affected primarily by the
advertising rates our radio stations and network charge, and the rates charged
for billboard contracts. For our radio operations, the rates are based upon a
station's and the network's ability to attract audiences in the demographic
groups targeted by its advertisers, as measured principally by Arbitron Radio
Market Reports. We recognize revenue when advertising or network programming
is broadcast. For our billboard operations, the rates are based on the
particular display's exposure in relation to the demographic of a particular
market and the location of the particular display. We recognize billboard
advertising revenue over the life of the advertising contract. Our operating
expenses primarily consist of salaries and commissions and advertising and
promotional expenses.
On April 20, 2000, we agreed to sell all of our outstanding capital stock
to Entravision for $475 million.
Year Ended December 31, 1999 Compared to the Year Ended December 31, 1998
The following table sets forth selected data from our operating results for
the years ended December 31, 1998 and 1999 (dollars in thousands):
<TABLE>
<CAPTION>
Historical
----------------
1998 1999 % Change
------- ------- --------
<S> <C> <C> <C>
Statement of Operations Data:
Gross revenue.................................... $27,598 $38,561 39.7%
Less agency and broker commissions............... 1,740 2,523 45.0
------- -------
Net revenue...................................... 25,858 36,038 39.4
Direct operating expenses........................ 10,108 14,183 40.3
Selling, general and administrative expenses..... 6,459 8,382 29.8
Corporate expenses............................... 3,669 4,773 30.1
Depreciation and amortization.................... 6,736 8,670 28.7
Gain on sale of assets, net...................... (5,685) (4,442) (21.9)
------- -------
Operating income................................. 4,571 4,472
Interest expense, net............................ (5,324) (6,471)
------- -------
Loss before income tax and extraordinary loss.... (753) (1,999)
Minority interest................................ (86) 182
Income tax benefit (expense)..................... (394) 102
Extraordinary loss on debt extinguishment........ -- (1,047)
------- -------
Net loss......................................... $(1,233) $(2,762)
======= =======
Other Data:
Broadcast/billboard cash flow.................... $ 9,291 $13,619 46.6%
EBITDA........................................... 5,622 8,846 57.3
</TABLE>
41
<PAGE>
Net Revenue. Net revenue increased to $36.0 million in 1999 from $25.9
million in 1998, an increase of $10.1 million. Approximately $6.3 million of
this increase was due to the inclusion of the full year of results of the
operations of Z-Spanish Radio which we acquired on May 29, 1998. The increase
in net revenue also resulted from an increase of $5.4 million from radio
station acquisitions. Additionally, billboard sales increased $1.8 million, a
portion of which was due to the inclusion of Seaboard Outdoor Advertising Co.
Inc., or Seaboard, which we purchased on September 30, 1999. The increase in
net revenue was partially offset by a decrease of $3.4 million due to the sale
of stations in 1999 and 1998.
Direct Operating Expenses and Selling, General and Administrative
Expenses. Direct operating expenses increased to $14.2 million in 1999 from
$10.1 million in 1998, an increase of $4.1 million. Selling, general and
administrative expenses increased to $8.4 million in 1999 from $6.5 million in
1998, an increase of $1.9 million. Approximately $4.8 million of the increase
in direct operating expenses and selling, general and administrative expenses
was caused by the inclusion of the full year of Z-Spanish Radio's operations.
Additional radio stations acquired in 1999 resulted in an increase in direct
operating expenses and selling, general and administrative expenses of $2.1
million. Also, $1.7 million of the direct operating expense increase was caused
by a loss on the disposal of assets from our billboard operations. These
increases in direct operating expenses and selling, general and administrative
expenses were partially offset by a decrease of $2.6 million due to the sale of
stations in 1998 and 1999. As a percentage of net revenue, direct operating
expenses increased from 39.1% in 1998 to 39.4% in 1999. As a percentage of net
revenue, selling, general and administrative expenses decreased to 23.3% in
1999 from 25% in 1998.
Corporate Expenses. Corporate expenses increased to $4.8 million in 1999
from $3.7 million in 1998, an increase of $1.1 million. The increase in
corporate expenses resulted primarily from increases in the number of
employees, higher salary expense and higher professional fees associated with
potential acquisitions and related financings. As a percentage of net revenue,
corporate expenses decreased to 13.2% in 1999 from 14.2% in 1998.
Depreciation and Amortization. Depreciation and amortization increased to
$8.7 million in 1999 from $6.7 million in 1998, an increase of $2.0 million.
The increase in depreciation and amortization was due to the acquisitions of
radio stations and billboards.
Net Gain on Sale of Assets. Net gain on sale of assets decreased to $4.4
million in 1999 from $5.7 million in 1998, a decrease of $1.3 million. Net gain
recorded in 1999 included gain on sale of radio stations WBPS in Cambridge,
Massachusetts and WYPA in Chicago, Illinois of $2.2 million and $2.3 million,
partially offset by a loss on sale of KZNO in Nogales, Arizona of $0.1 million.
The aggregate net gain recorded in 1998 of $5.7 million resulted from the
disposition of radio stations WNJR in Newark, New Jersey, KYPA in Los Angeles,
California, KWPA in Pomona, California, KXPA in Bellevue, Washington, KOBO in
Yuba City, California, KEST in San Francisco, California, KSJX in San Jose,
California and KKMO in Seattle, Washington, as well as the disposition of
certain assets and liabilities of PAR Holdings, Inc. As a percentage of net
revenue, net gain on sale of assets decreased to 12.3% in 1999 from 22% in
1998.
Operating Income. Operating income decreased to $4.5 million in 1999 from
$4.6 million in 1998, a decrease of $0.1 million. The decrease was primarily
the result of gains on the sale of assets of $4.4 million in 1999 as compared
to $5.7 million in 1998. Excluding our 1999 and 1998 gains from sales of radio
stations, operating income for 1999 would have been $30,000 and our operating
loss for 1998 would have been $1.1 million.
Interest Expense, Net. Net interest expense increased to $6.5 million in
1999 from $5.3 million in 1998, an increase of $1.2 million. The increase was
due primarily to higher borrowings to fund acquisitions in 1999.
Net Loss. As a result of the above factors, we had a net loss of $2.8
million in 1999 compared to a net loss of $1.2 million in 1998, an increase in
net loss of $1.6 million. As a percentage of net revenue, net loss increased to
7.7% in 1999 from 4.8% in 1998. Excluding our 1999 extraordinary loss of $1.0
million related to early extinguishment of debt, net loss for 1999 would have
been $1.8 million. As a percentage of net revenue, our net loss, excluding
extraordinary loss, was 4.8% in 1999 and 4.8% in 1998.
42
<PAGE>
Broadcast/Billboard Cash Flow. Broadcast/billboard cash flow increased to
$13.6 million in 1999 from $9.3 in 1998, an increase of $4.3 million. The
inclusion of the full year of results of Z-Spanish Radio and the effect of
station purchases accounted for an increase of $5.4 million of
broadcast/billboard cash flow, which was partially offset by a loss of $1.7
million due to the disposal of some of our billboard assets. The increase in
broadcast/billboard cash flow was also attributable to our billboard
operations, a portion of which was due to the inclusion of Seaboard. As a
percentage of net revenue, broadcast/billboard cash flow increased to 37.8% in
1999 from 35.9% in 1998.
EBITDA. EBITDA increased to $8.8 million in 1999 from $5.6 million in 1998,
an increase of $3.2 million. The inclusion of the full year of results of Z-
Spanish Radio, three months of operations of Seaboard plus the effect of
purchases of stations during the year accounted for an increase of
$5.0 million, offset by a decrease of $1.7 million due to the loss on the
disposal of assets from our billboard operations. As a percentage of net
revenue, EBITDA increased to 24.5% in 1999 from 21.7% in 1998.
Year Ended December 31, 1998 Compared to the Year Ended December 31, 1997
The following table sets forth selected data from our operating results for
the years ended December 31, 1997 and 1998 (dollars in thousands):
<TABLE>
<CAPTION>
Historical
----------------
1997 1998 % Change
------- ------- --------
<S> <C> <C> <C>
Statement of Operations Data:
Gross revenue....................................... $13,339 $27,598 106.9%
Less agency and broker commissions.................. 297 1,740 n/m
------- -------
Net revenue......................................... 13,042 25,858 98.3
Direct operating expenses........................... 4,391 10,108 130.2
Selling, general and administrative expenses........ 5,105 6,459 26.5
Corporate expenses.................................. 2,975 3,669 23.3
Depreciation and amortization....................... 2,747 6,736 145.2
Gain on sale of assets, net......................... (2,671) (5,685) 112.8
------- -------
Operating income.................................... 495 4,571
Interest expense, net............................... (2,069) (5,324)
------- -------
Loss before income tax and extraordinary items...... (1,574) (753)
Minority interest................................... (31) (86)
Income tax benefit (expense)........................ 538 (394)
Extraordinary loss on debt extinguishment........... (568) --
------- -------
Net loss............................................ $(1,635) $(1,233)
======= =======
Other Data:
Broadcast/billboard cash flow....................... $ 3,546 $ 9,291 162.0%
EBITDA.............................................. 571 5,622 n/m
</TABLE>
Net Revenue. Net revenue increased to $25.9 million in 1998 from $13.0
million in 1997, an increase of $12.9 million. Approximately $7.3 million of
the increase was due to the inclusion of a full year of results of Vista, and
approximately $9.2 million of the increase was due to the inclusion of seven
months of results of Z-Spanish Radio. The increase in net revenue was partially
offset by a decrease of $3.7 million due to the sale of nine radio stations in
1998 and the sale of two radio stations in 1997.
Direct Operating Expenses and Selling, General and Administrative
Expenses. Direct operating expenses increased to $10.1 million in 1998 from
$4.4 million in 1997, an increase of $5.7 million. Selling, general and
administrative expenses increased to $6.5 million in 1998 from $5.1 million in
1997, an increase of $1.4 million. Approximately $4.1 million of the increase
in direct operating expenses and selling, general and administrative expenses
was caused by the inclusion of the full year of results of Vista, and
approximately $4.8 million of the increase was due to the inclusion of seven
months of results of Z-Spanish Radio. The
43
<PAGE>
increase in direct operating expenses and selling, general and administrative
expenses was partially offset by a decrease of $1.8 million due to the sale of
nine stations in 1998 and two stations in 1997. As a percentage of net revenue,
direct operating expenses increased to 39.1% in 1998 from 33.7% in 1997. As a
percentage of net revenue, selling, general and administrative expenses
decreased to 25.0% in 1998 from 39.1% in 1997.
Corporate Expenses. Corporate expenses increased to $3.7 million in 1998
from $3.0 million in 1997, an increase of $0.7 million. The increase in
corporate expenses was caused by higher salary expense and professional fees
associated with acquisitions and related financings. As a percentage of net
revenue, corporate expenses decreased to 14.2% in 1998 from 22.8% in 1997.
Depreciation and Amortization. Depreciation and amortization increased to
$6.7 million in 1998 from $2.7 million in 1997, an increase of $4.0 million.
The increase in depreciation and amortization was due primarily to the
additional fixed and intangible assets from the acquisition of radio stations
and billboards.
Net Gain on Sale of Assets. Net gain on sale of assets increased to $5.7
million in 1998 from $2.7 million in 1997, an increase of $3.0 million. The
aggregate net gain recorded in 1998 of $5.7 million consisted of the
disposition of radio stations WNJR in Newark, New Jersey, KYPA in Los Angeles,
California, KWPA in Pomona, California, KXPA in Bellevue, Washington, KOBO in
Yuba City, California, KEST in San Francisco, California, KSJX in San Jose,
California and KKMO in Seattle, Washington, as well as the disposition of
certain assets and liabilities of PAR Holdings, Inc. Net gain recorded in 1997
included gain on sale of radio stations WEJM in Chicago, Illinois and WVVX in
Chicago, Illinois of $1.9 million and $0.8 million, respectively. As a
percentage of net revenue, net gain on sale of assets increased to 22% in 1998
from 20.5% in 1997.
Operating Income. Operating income increased to $4.6 million in 1998 from
$0.5 million in 1997, an increase of $4.1 million. The increase was primarily
the result of gains on the sale of assets of $5.7 million in 1998, as compared
to $2.7 million in 1997. The inclusion of the full year results of Vista
accounted for $1.6 million of the increase, which was partially offset by
higher expenses from the acquisition of radio stations. As a percentage of net
revenue, operating income increased to 17.7% in 1998 from 3.8% in 1997.
Excluding our 1998 and 1997 gains from sales of radio stations, operating
losses for 1998 would have been $1.1 million and for 1997 would have been
$2.2 million.
Interest Expense. Net interest expense increased to $5.3 million in 1998
from $2.1 million in 1997, an increase of $3.2 million. The increase was due
primarily to higher borrowings to fund acquisitions in 1998.
Net Loss. As a result of the above factors, we had a net loss of $1.2
million in 1998 compared to a net loss of $1.6 million in 1997, a decrease in
net loss of $0.4 million. As a percentage of net revenue, net loss decreased to
4.8% in 1998 from 12.5% in 1997. Excluding our 1997 extraordinary loss of $0.5
million related to early extinguishment of debt, net loss for 1997 would have
been $1.1 million. As a percentage of net revenue, our net loss, excluding
extraordinary loss, decreased to 4.8% in 1998 from 8.2% in 1997.
Broadcast/Billboard Cash Flow. Broadcast/billboard cash flow increased to
$9.3 million in 1998 from $3.5 million in 1997, an increase of $5.8 million.
The inclusion of the full year results of Vista accounted for $3.2 million of
the increase. The remainder of the increase was due to the inclusion of Z-
Spanish Radio operations, offset by the station sales during 1998 and 1997. As
a percentage of net revenue, broadcast/billboard cash flow increased to 35.9%
in 1998 from 27.2% in 1997.
EBITDA. EBITDA increased to $5.6 million in 1998 from $0.6 million in 1997,
an increase of $5.0 million. The inclusion of the full year results of Vista
accounted for $2.9 million of the increase. The remainder of the increase was
due to the inclusion of Z-Spanish Radio operations, offset by the station sales
during 1998 and 1997. As a percentage of net revenue, EBITDA increased to 21.7%
in 1998 from 4.4% in 1997.
44
<PAGE>
Segment Operations
Z-Spanish Media provides services through the following two reportable
segments:
. Radio Group--the Radio Group's portfolio consisted of 32 radio stations
(19 FM and 13 AM) at December 31, 1999, including one station operated
under a local marketing agreement.
. Outdoor Advertising--the Outdoor Advertising Group owned and operated
approximately 10,000 outdoor billboards at December 31, 1999.
The factors for determining reportable segments were based on services
provided. Each segment is responsible for executing a segment-specific business
strategy. The accounting policies of the segments are the same as those
described in the summary of significant accounting policies. We evaluate
performance based on profit or loss of operations before income taxes. The
following table summarizes the net revenue, operating income, total assets,
depreciation and amortization, and capital expenditures by segment for the
years ended December 31, 1997, 1998 and 1999 (in thousands):
<TABLE>
<CAPTION>
Historical
---------------------------
1997 1998 1999
------- -------- --------
<S> <C> <C> <C>
Net Revenue:
Radio Broadcasting................................ $ 9,812 $ 15,391 $ 23,811
Outdoor Advertising............................... 3,230 10,467 12,227
------- -------- --------
$13,042 $ 25,858 $ 36,038
======= ======== ========
Operating Income:
Radio Broadcasting................................ $ 2,448 $ 5,394 $ 8,376
Outdoor Advertising............................... 1,022 2,846 869
------- -------- --------
Total Reportable Segments........................ 3,470 8,240 9,245
Corporate......................................... (2,975) (3,669) (4,773)
------- -------- --------
$ 495 $ 4,571 $ 4,472
======= ======== ========
Total Assets:
Radio Broadcasting................................ $68,076 $169,664 $218,231
Outdoor Advertising............................... 28,279 27,610 70,812
------- -------- --------
$96,355 $197,274 $289,043
======= ======== ========
Depreciation and Amortization:
Radio Broadcasting................................ $ 2,130 $ 4,785 $ 5,983
Outdoor Advertising............................... 617 1,951 2,687
------- -------- --------
$ 2,747 $ 6,736 $ 8,670
======= ======== ========
Capital Expenditures:
Radio Broadcasting................................ $ -- $ 695 $ 4,926
Outdoor Advertising............................... 855 1,346 535
------- -------- --------
$ 855 $ 2,041 $ 5,461
======= ======== ========
</TABLE>
Segment income from operations excludes interest income, interest expense
and provision for income tax.
Liquidity and Capital Resources
Our primary source of liquidity is cash provided by broadcasting and
billboard operations, and to the extent necessary, undrawn commitments
available under our bank credit facilities. We have both term and revolving
lines of credit totaling $145 million, of which $109 million was outstanding as
of December 31, 1999.
45
<PAGE>
We have a $30 million revolving line of credit and a $45 million term
facility with a group of lenders. The facilities expire on January 20, 2006 and
are secured by substantially all of the assets and stock of Z-Spanish Media,
except for radio stations KLNZ-FM, Phoenix, and KZMP-FM, Dallas. The term
facility contains scheduled quarterly repayments beginning March 31, 2000. The
revolving facility contains scheduled quarterly reductions in availability
beginning March 31, 2001. Both facilities contain financial covenants including
a requirement not to exceed a maximum debt to EBITDA ratio and interest and
fixed charge coverage ratios. The facilities contain other operating covenants,
including limits or our capital expenditures and restrictions on our ability to
incur additional indebtedness and pay dividends. The facilities require us to
maintain our FCC licenses for our broadcast properties. As of the date of this
prospectus, the balance outstanding on the revolving credit facility was $8.2
million and the balance outstanding on the term facility was $43.9 million. The
interest rate on these facilities was 9.1% at December 31, 1999.
Our acquisitions of KLNZ-FM and KZMP-FM were financed by a separate $20
million term facility with a group of lenders. This facility expires in full on
December 31, 2000, and is secured by the assets KLNZ-FM and KZMP-FM.
Outstanding borrowings under this facility were $18.1 million at December 31,
1999 bearing interest at 9.5%. The facility contains covenants, including
restrictions on our ability to incur additional indebtedness and pay dividends
and limits on capital expenditures. The terms of the facility also require us
to maintain the FCC licenses on the two stations.
Vista has a separate $15 million revolving credit facility and a $35 million
term facility with a single lender. Both of these facilities expire September
30, 2006 and are secured by substantially all of the assets and stock of Vista.
Vista's revolving facility contains scheduled quarterly reductions in
availability beginning March 31, 2001, and the term facility requires quarterly
repayments of principal beginning June 30, 2001. These facilities contain
financial covenants including a requirement not to exceed a maximum debt to
cash flow ratio, interest and fixed charge coverage ratios, and also limit
Vista's corporate overhead expenditures. The facilities also contain operating
covenants, including restrictions on Vista's ability to incur additional
indebtedness and pay dividends. As of the date of this prospectus, the balance
outstanding on the revolving facility was $4 million, and the balance
outstanding on the term facility was $35 million. The interest rate on these
facilities was 9.6% at December 31, 1999.
Net cash flow used in operating activities during 1999 decreased to $0.3
million compared to $4.4 million in 1998. The decrease was primarily due to
acquisitions made in 1999 along with the inclusion of a full year of operations
from acquisitions made in 1998.
Net cash flow used in investing activities was $79 million in 1999 compared
to net cash flow provided by investing activities of $32.3 million in 1998.
During 1999, we made radio acquisitions totaling approximately $56.7 million,
and Vista made acquisitions of billboard and outdoor advertising properties
totaling approximately $36.9 million. We funded these acquisitions through a
combination of proceeds from the issuance of common and preferred stock. The
funding of these acquisitions was partially offset by proceeds of approximately
$23.7 million from radio station sales during 1999.
Additionally, capital expenditures, which included broadcast equipment for
our radio stations, advertising displays, building, land, leasehold
improvements and computer and telecommunications equipment, totaled
$5.5 million in 1999 and $2.0 million in 1998. The capital expenditures in 1999
included approximately $3.0 million in purchases of land for transmitter sites
and studio/office buildings.
Net cash flow from financing activities was approximately $80.2 million
during the year ended December 31, 1999. During 1999, we entered into new
credit facilities totaling $130 million, of which approximately $70.6 million
was used to repay the existing debt facilities.
46
<PAGE>
BUSINESS
Overview
We are a leading diversified media company utilizing a combination of
television, radio, outdoor and publishing operations to reach Hispanic
consumers in the United States. We operate in 32 of the top 50 U.S. Hispanic
markets. We currently own and operate television stations serving 18 U.S.
markets. We are the largest Univision-affiliated station group in the United
States. Univision is a key source of programming for our television
broadcasting business and is a valuable strategic partner of ours. We also
operate 60 radio stations in 24 markets, including leading Spanish-language
stations in Los Angeles, San Francisco, Phoenix and Dallas-Ft. Worth. Our
outdoor operations consist of approximately 10,000 billboards concentrated in
high-density Hispanic communities in Los Angeles and New York. We also own two
publications, El Diario/La Prensa, the oldest Spanish-language newspaper in the
United States, and VEA New York, a tourist publication.
The LCG Acquisition. Through our acquisition of LCG on April 20, 2000 for
$252 million, we added 17 radio stations to our ten existing radio stations and
LCG's publishing operations. LCG's radio stations are located in nine radio
markets, including Los Angeles and San Francisco, which are two of the top ten
U.S. Hispanic markets.
The Z-Spanish Media Acquisition. Through our pending acquisition of Z-
Spanish Media, we are acquiring the second largest group of Spanish-language
radio stations and the largest centrally programmed radio network in the United
States targeting primarily Hispanic listeners. Z-Spanish Media also operates
one of the largest outdoor advertising companies in the United States focusing
on the Hispanic market. We have agreed to purchase Z-Spanish Media for $475
million, which includes the assumption of approximately $109 million of debt.
Other Acquisitions. We have agreed to acquire two television stations in the
Hartford and Orlando markets and we have agreed to acquire two radio stations
in the Los Angeles market for an aggregate of approximately $126 million.
The Hispanic Market Opportunity
While Hispanics represent approximately 11% of the U.S. population and the
U.S. Hispanic population is growing six times faster than the non-Hispanic
population, they are currently targeted by less than 1% of total advertising
dollars. Advertisers have recently begun to direct a greater percentage of
their advertising spending toward U.S. Hispanics and, consequently, Spanish-
language advertising is currently growing at more than four times the rate of
total advertising. We believe that we have benefited and will continue to
benefit from the following industry trends and attributes in the United States:
Spanish-Language Use. Approximately 68% of all Hispanics, regardless of
income or educational level, speak Spanish at home. This percentage is expected
to remain relatively constant through 2010. The number of Hispanics who speak
Spanish in the home is expected to grow from 22.1 million in 2000 to 27.8
million in 2010. We believe that the strong Spanish-language use among
Hispanics indicates that Spanish-language media will continue to be an
important source of news, sports and entertainment for Hispanics and an
important vehicle for our marketing and advertising.
47
<PAGE>
Hispanic Population Growth and Concentration. Our audience consists
primarily of Hispanics, one of the fastest growing segments of the U.S.
population. In 2000, the Hispanic population is estimated to grow to 32.4
million in the United States (11.8% of the total population), an increase of
36.4% from 23.7 million (9.5% of the total population) in 1990. The overall
Hispanic population is growing at approximately six times the rate of the non-
Hispanic U.S. population and is expected to grow to 42.4 million (14.2% of the
total U.S. population) by 2010.
Source: Standard & Poor's DRI.
HISPANIC POPULATION CHART
Greater Hispanic Buying Power. The Hispanic population accounted for total
consumer expenditures of $380 billion in 1999, an increase of 57% since 1990.
Hispanics are expected to account for $460 billion in consumer expenditures in
2000, and $965 billion by 2010. We believe these factors make Hispanics an
attractive target audience for many major U.S. advertisers.
Source: Standard & Poor's DRI.
Increased Spanish-Language Advertising. According to published sources,
$1.9 billion of total advertising expenditures in the United States were placed
in Spanish-language media in 1999. Approximately
48
<PAGE>
57% of that $1.9 billion was placed in Spanish-language television advertising.
We believe that major advertisers have found that Spanish-language media is a
more cost-effective means to target the growing Hispanic audience than English-
language broadcast media.
Attractive Profile of Hispanic Consumers. We believe the demographic profile
of the Hispanic audience makes it attractive to advertisers. The larger size
and younger age of Hispanic households (averaging 3.4 persons and 27.5 years of
age as compared to the general public's average of 2.5 persons and 36.5 years
of age) leads Hispanics to spend more per household on many categories of goods
and services. The average U.S. Hispanic household spends 28% more per year than
the average U.S. household on food at home, 100% more on children's clothing,
35% more on footwear, 11.4% more on phone services and 23.2% more on laundry
and household cleaning products than the average non-Hispanic household. We
expect Hispanics to continue to account for a disproportionate share of growth
in spending nationwide in many important consumer categories as the Hispanic
population and its disposable income continue to grow.
Business Strategy
We seek to be the leading diversified Spanish-language media company in the
United States and to increase our advertising revenue through the following
strategies:
Effectively Use Our Leading Network and Media Brands. We are the largest
Univision television affiliate group, the largest operator of Spanish-language
radio stations and the largest centrally programmed radio network in the United
States. Univision reaches 92% of all Hispanic households and has an
approximately 84% share of the U.S. Spanish-language network television prime-
time audience. Univision makes available to our television stations 24 hours a
day of Spanish-language programming including a prime time schedule of
substantially all first-run programming (i.e., no reruns) throughout the year.
We operate our radio networks using seven primary formats designed to appeal to
different listener tastes. We format the programming of our network and radio
stations to capture a substantial share of the U.S. Hispanic audience.
Invest in Media Research and Sales. We believe that continued use of
reliable ratings and surveys will allow us to further increase our advertising
rates and narrow the gap which has historically existed between our audience
share and our share of advertising revenue. We use industry ratings and
surveys, including Nielsen, Arbitron, the Traffic Audit Bureau and the Audit
Bureau of Circulation, to provide a more accurate measure of consumers that we
reach with our operations. We believe that our focused research and sales
efforts will enable us to continue to achieve significant revenue growth.
Continue to Build and Retain Strong Management Teams. We believe we have one
of the most experienced management teams in the industry. Walter F. Ulloa, our
Chairman and Chief Executive Officer, Philip C. Wilkinson, our President and
Chief Operating Officer, Jeanette Tully, our Chief Financial Officer, Amador S.
Bustos, the President of our Radio Division, and Glenn Emanuel, the President
of our Outdoor Division, have an average of 20 years of media experience. We
intend to continue to build and retain our key management personnel and to
capitalize on their knowledge and experience in the Spanish-language markets.
Emphasize Local Content, Programming and Community Involvement. We believe
that local content in each market we serve is an important part of building our
brand identity within the community. By combining our local news and high
quality network programming, we believe we have a significant competitive
advantage. We also believe that our active community involvement, including
station remote broadcasting appearances at client and customer events, concerts
and tie-ins to major events, helps to build station awareness and identity as
well as viewer and listener loyalty.
Increase In-Market Cross Promotion. Our strategy is to cross-promote our
television and radio stations, outdoor and publishing properties. In addition,
we believe we will add significant value to our advertisers by providing
attractive media packages to target the Hispanic consumer.
Target Other Attractive Hispanic Markets and Fill-In Acquisitions. We
believe our knowledge of, and experience with, the Hispanic marketplace will
enable us to continue to identify acquisitions in the television, radio,
outdoor and publishing markets. Since our inception, we have used our
management expertise, programming and brand identity to improve our acquired
media properties.
49
<PAGE>
Television
Overview
We own and operate Univision-affiliated stations in 17 of the top 50
Hispanic markets in the United States. Our television operations are the
largest affiliated group of Univision stations. Univision is the leading
Spanish-language broadcaster in the United States, reaching more than 92% of
all Hispanic households, which represents an approximately 84% market share of
the U.S. Spanish-language network television audience as of December 1999.
Univision is the most watched television network (English- or Spanish-language)
among Hispanic households and makes available to our Univision-affiliated
stations 24 hours a day of Spanish-language programming. Univision's prime time
schedule is all first-run programming (i.e., no reruns) through the year. In
each of our markets, our stations produce local news. We believe that the
breadth and diversity of Univision's programming, combined with our local news
and community-oriented segments, provide us with a competitive advantage over
other Spanish-language and English-language broadcasters in reaching Hispanic
viewers. Our local content is designed to brand each of our stations as the
best source for relevant community information that accurately reflects local
interests and needs. As a result, each of our Univision-affiliated stations
ranks first in Spanish-language television viewership in its market.
Television Programming
Univision Network Programming. Univision directs its programming primarily
toward its young, family-oriented audience. It begins daily with Despierta
America and talk and information shows, Monday through Friday, followed by
novelas. In the late afternoon and early evening, Univision offers a talk show,
a news-magazine and national news, in addition to local news produced by our
television stations. During prime time, Univision airs novelas, variety shows,
a talk show, comedies, news magazines and lifestyle shows, as well as specials
and movies. Prime time is followed by late news and a late night talk show.
Overnight programming consists primarily of repeats of programming aired
earlier in the day. Weekend daytime programming begins with children's
programming, followed by sports, variety, teen lifestyle shows and movies.
Approximately eight to ten hours of programming per weekday, including a
substantial portion of weekday prime time, are currently programmed with
novelas supplied primarily by Grupo Televisa and Venevision. Although novelas
have been compared to daytime soap operas on ABC, NBC or CBS, the differences
are significant. Novelas, originally developed as serialized books, have a
beginning, middle and end, generally run five days per week and conclude four
to eight months after they begin. Novelas also have a much broader audience
appeal than soap operas, delivering audiences that contain large numbers of
men, children and teens in addition to women.
Entravision Local Programming. We produce and broadcast local news in all of
our markets. We believe that our local news brands each of our stations and
creates a strong identity with our viewers. We shape our local news to relate
to our target audiences. In eight of our television markets, our local news is
ranked first among viewers 18-34 in any language. We have made substantial
investments in people and equipment in order to provide each of our local
communities with a top quality local newscast. Our local newscasts have won
numerous awards, and we strive to be the most important community voice in each
of our local markets.
Network Affiliation Agreements. All but four of our television stations have
entered into network affiliation agreements with Univision that provide each
station with the exclusive right to broadcast the Univision network programming
in its respective market. These affiliation agreements have initial terms of 25
years expiring in 2021. Under the affiliation agreements, Univision retains the
right to sell approximately six minutes per hour of the advertising time
available during the Univision schedule, with the remaining six minutes per
hour available for sale by our stations.
Our network affiliation agreement with the United Paramount Network, or UPN,
gives us the right to provide UPN network programming for a ten-year period on
XUPN-TV serving the Tecate/San Diego market. A related participation agreement
grants UPN a 20% interest in the appreciation of XUPN-TV above $35 million.
XHAS-TV broadcasts Telemundo network programming serving the Tijuana/San Diego
market pursuant to a network affiliation agreement which expires on December
31, 2000. We intend to renegotiate this contract when it expires.
50
<PAGE>
Our Television Station Portfolio
The following table lists information concerning each of our television
stations and its respective market:
<TABLE>
<CAPTION>
Market Rank
(by Hispanic Total Hispanic % Hispanic
Market Households)(1) Households(1) Households(1) Households(1) Call Letters, Channel
- -----------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <S>
Harlingen-Weslaco- 9 254,460 206,720 81.2% KNVO-TV, Channel 48
Brownsville-McAllen,
Texas
- ------------------------------------------------------------------------------------------------------------------
San Diego, California 11 980,620 189,110 19.3% KBNT-LP, Channel 19
KTCD-LP, Channel 46 (2)
KHAX-LP, Channel 49 (2)
- ------------------------------------------------------------------------------------------------------------------
Albuquerque-Santa Fe, 12 568,650 189,050 33.2% KLUZ-TV, Channel 41
New Mexico K48AM, Channel 48
- ------------------------------------------------------------------------------------------------------------------
El Paso, Texas 13 276,980 177,980 64.3% KINT-TV, Channel 26
- ------------------------------------------------------------------------------------------------------------------
Denver-Boulder, Colorado 16 1,268,230 137,780 10.9% KCEC-TV, Channel 50
K43DK, Channel 43
K03EM, Channel 3
- ------------------------------------------------------------------------------------------------------------------
Washington, D.C. 18 1,999,870 103,340 5.2% WMDO-LP, Channel 30
- ------------------------------------------------------------------------------------------------------------------
Corpus Christi, Texas 19 184,900 98,970 53.5% KORO-TV, Channel 28
- ------------------------------------------------------------------------------------------------------------------
Tampa-St. Petersburg 19 1,485,980 98,970 6.7% WBSV-TV, Channel 62
(Sarasota), Florida WVEA-LP, Channel 61
- ------------------------------------------------------------------------------------------------------------------
Orlando-Daytona Beach- 24 1,101,920 79,000 7.2% WNTO-TV, Channel 26 (3)
Melbourne, Florida WVEN-LP, Channel 63
- ------------------------------------------------------------------------------------------------------------------
Las Vegas, Nevada 25 521,200 72,460 13.9% KINC-TV, Channel 15
K27AF, Channel 27
K47EG, Channel 47
- ------------------------------------------------------------------------------------------------------------------
Monterey-Salinas-Santa Cruz, 26 228,630 60,820 26.6% KSMS-TV, Channel 67
California
- ------------------------------------------------------------------------------------------------------------------
Hartford-New Haven, 28 915,940 53,740 5.9% WHCT-TV, Channel 18 (3)
Connecticut
- ------------------------------------------------------------------------------------------------------------------
Laredo, Texas 31 54,540 50,350 92.3% KLDO-TV, Channel 27
- ------------------------------------------------------------------------------------------------------------------
Colorado Springs-Pueblo, 33 290,830 45,400 15.6% KGHB-LP, Channel 27
Colorado
- ------------------------------------------------------------------------------------------------------------------
Santa Barbara-Santa 34 228,350 44,590 19.5% KPMR-TV, Channel 36 (3)(4)
Maria-San Luis Obispo,
California
- ------------------------------------------------------------------------------------------------------------------
Yuma, Arizona-El Centro, 36 86,960 43,000 49.5% KVYE-TV, Channel 7
California
- ------------------------------------------------------------------------------------------------------------------
Odessa-Midland, Texas 37 138,510 41,890 30.2% KUPB-TV, Channel 18 (4)
- ------------------------------------------------------------------------------------------------------------------
Lubbock, Texas 39 147,570 39,700 26.9% KBZO-LP, Channel 51
- ------------------------------------------------------------------------------------------------------------------
Palm Springs, California 42 115,070 34,260 29.8% KVER-LP, Channel 4
K05JY, Channel 5
K28ET, Channel 28
- ------------------------------------------------------------------------------------------------------------------
Amarillo, Texas 43 191,450 31,460 16.4% K48FR, Channel 48 (4)
- ------------------------------------------------------------------------------------------------------------------
San Angelo, Texas 66 51,460 13,920 27.1% K31DM, Channel 31
- ------------------------------------------------------------------------------------------------------------------
Tecate, Baja California, -- -- -- -- XUPN-TV, Channel 49 (5)
Mexico
- ------------------------------------------------------------------------------------------------------------------
Tijuana, Mexico -- -- -- -- XHAS-TV, Channel 33 (5)
</TABLE>
(1) Source: Nielsen Media Research year 2000 population estimates.
(2) We own a 47.5% equity interest in the entity that holds the FCC license
to this station, with an option to acquire an additional 47.5%. We
provide substantially all of the programming and related services
available on this station pursuant to a time brokerage agreement.
(3) Pending acquisition.
(4) Regular broadcast operations not yet commenced.
(5) We hold a minority, non-voting interest in the entity that holds the
broadcast license for this station. We provide substantially all of the
programming and related services available on this station under a time
brokerage agreement.
51
<PAGE>
Television Advertising
Since 1997, no single advertiser has accounted for more than 2% of our
annual gross television revenue. In 1998, 47% of our television revenue
consisted of national television advertising sales and 52% of our television
revenue consisted of local television advertising sales. National television
advertising revenue accounted for 42% of our total television advertising
revenue for 1999, with 57% being local television advertising revenue.
National Advertising. National advertising revenue represents commercial
time sold to a national advertiser within a specific market by Univision, our
national representative firm. For these sales, Univision is paid a 15%
commission on the net revenue from each sale (gross revenue less agency
commission). We target the largest national Spanish-language advertisers that
collectively purchase the greatest share of national advertisements through
Univision. The Univision representative works closely with each station's
national sales manager. This has enabled us to secure premier national
advertisers, including Ford Motor Company, General Motors, Southwestern Bell,
McDonald's, Burger King and Anheuser-Busch.
Local Advertising. Local advertising revenue is generated from commercial
air time and is sold directly by the station to an in-market advertiser or its
agency.
Television Audience Research
We derive our revenue primarily from selling advertising time. The relative
advertising rates charged by competing stations within a market depend
primarily on four factors:
. the station's ratings (households or people viewing its programs as a
percentage of total television households or people in the viewing
area);
. audience share (households or people viewing its programs as a
percentage of households or people actually watching television at a
specific time);
. the time of day the advertising will run; and
. the demographic qualities of a program's viewers (primarily age and
gender).
Nielsen ratings provide advertisers with the industry-accepted measure of
Hispanic audience television viewership and have been important in allowing us
to demonstrate to advertisers our ability to reach the Hispanic audience. We
believe that continued use of accurate, reliable ratings will allow us to
further increase our advertising rates and narrow the gap which has
historically existed between our audience share and our share of advertising
revenue. We have made significant investments in experienced sales managers and
account executives and have provided our sales professionals with state-of-the-
art research tools to continue to attract major advertisers.
The various Nielsen rating services that we use are described below:
Nielsen Hispanic Station Index (NHSI). The NHSI service measures Hispanic
household viewing at the local market level. Each NHSI sample also reflects the
varying levels of language usage by Hispanics in each market in order to more
accurately reflect the Hispanic household population in the relevant market.
NHSI only measures the audience viewing of Hispanic households, that is,
households where the head of the household is of Hispanic descent or origin.
Although NHSI offers improvements over previous measurement indices, we believe
it still underreports the number of viewers watching Entravision programming
because we have viewers who do not live in Hispanic households.
Nielsen Station Index (NSI). The NSI service measures local station viewing
of all households in a specific market. We buy NSI in all of our markets in
order to effectively position our viewing against both English- and Spanish-
language competitors. While Hispanic households are present in proportion to
their percentage of total households within a market in NSI, this rating
service is not language-stratified and generally underrepresents Spanish-
speaking households. As a result, we believe that NSI typically underreports
52
<PAGE>
viewing of Spanish-language television. Despite this limitation, NSI
demonstrates that many of our full-power broadcast affiliates achieve total
market ratings that are fully comparable with their English-language
counterparts, with two of our full-power television stations ranking as the top
station in their respective markets.
Television Competition
We compete for viewers and revenue with English-language television stations
and networks, including the four principal English-language television
networks, ABC, CBS, NBC and Fox, and in most markets, UPN and WB, and with
other Spanish-language networks. We also compete for viewers and revenue with
independent television stations, other video media, suppliers of cable
television programs, direct broadcast satellite systems, newspapers, magazines,
radio, the Internet and other forms of entertainment and advertising.
Radio
Overview
We currently own and operate 60 radio stations in 24 markets. Our radio
stations cover in aggregate approximately 57% of the Hispanic audience and are
located in 22 of the top 50 Hispanic markets. We also provide programming to 42
affiliate stations in 38 markets. Our radio operations combine national
programming with a strong local presence. Through our radio programming, which
is delivered via satellite to our stations, we provide national programming
with local time slots available for advertising, news, traffic, weather,
promotions and community events. This strategy allows us to provide higher-
quality programming with significantly lower costs of operations than we could
otherwise deliver solely with independent programming.
Radio Programming
Radio Networks. Our national radio networks have developed a loyal listener
base, which looks to us for information and entertainment across the country.
Through our radio network, we have created the single largest U.S. Hispanic
radio market, currently with over 19 million potential listeners. Our networks
allow listeners to call a toll-free number and communicate with family and
friends across our markets. Our networks also allow clients with national
product distribution, or Internet-based companies, to deliver a uniform
advertising message to the fast growing Hispanic market around the country in
an efficient and cost-effective manner.
Although our networks have a broad reach across the United States, our
formats allow for local content. Technology allows our stations to offer the
necessary local feel and to be responsive to local clients and community needs.
Designated time slots are used for local advertising, news, traffic, weather,
promotions and community events. The audience gets the benefit of a national
quality radio sound along with important local content. Furthermore, all of our
stations can disconnect from the networks and operate independently in the case
of a local emergency or a problem with the central satellite transmission.
To further strengthen our national/local combination market presence, our
on-air personalities frequently travel to participate in local promotional
events. For example, in selected key markets we have the talent appear at
special shows on location for network-wide broadcast. We promote these events
as "broadcasting live from" to bond the national personalities to local
listeners.
Our network formats are currently used by 42 affiliates located in 38
markets across the United States. Our affiliates receive our programming in
exchange for two minutes per hour for network commercials. Affiliates are
allowed up to 16 minutes per hour for local advertisements and content. Our
affiliates receive high-quality programming at a significantly lower cost than
they could produce themselves. We benefit by having extended national coverage
without the capital expenditures necessary to buy and manage stations in those
markets. The extended coverage also allows the network to charge higher rates
as its delivery of the U.S. Hispanic market grows.
53
<PAGE>
Radio Formats. We produce high-quality radio programming in a variety of
music formats that are simultaneously distributed via satellite with a digital
CD-quality sound to our owned and affiliate stations. We offer seven primary
formats which appeal to different listener preferences:
. Radio Romantica is an adult-contemporary, romantic ballads/current hits
format, targeting Hispanics 18-49 (primarily females).
. Radio Tricolor is a personality-driven, Mexican country-style format,
targeting Hispanics 18-49 (primarily males).
. Super Estrella is a music-driven, pop and alternative Spanish rock
format, targeting Hispanics 18-34 (males and females).
. La Zeta is a top hits Spanish format with recognizable radio
personalities. The music is primarily from the northern and central
regions of Mexico, targeting Hispanics 18-49 (primarily males).
. La Bonita is an international Spanish classic hits/nostalgia format,
targeting Hispanics 25-54 (primarily females).
. La Buena is a Spanish version of an English format called "young
country." This music-intensive format features music primarily from
central and northern Mexico, targeting Hispanics 18-34 (males and
females).
. Z MegaHits is an English-language rhythmic oldies format consisting of
70's and early 80's top 40 hits geared to second and third generation
Hispanics, targeting Hispanics 25-54 (primarily females).
54
<PAGE>
Our Radio Station Portfolio
The following table lists information concerning each of our owned and
operated radio stations and its respective market:
<TABLE>
<CAPTION>
Market Rank
(by Hispanic
Market Households)(1) Station Frequency Format
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Los Angeles, California 1 KACD-FM 103.1 MHz Super Estrella (2)
KBCD-FM 103.1 MHz Super Estrella (2)
KSSE-FM 97.5 MHz Super Estrella
Riverside-San Bernardino, KCAL-AM 1410 kHz Radio Tricolor
California KSZZ-AM 590 kHz Radio Tricolor
- ----------------------------------------------------------------------------------------
Miami-Ft. Lauderdale- 3 WLQY-AM 1320 kHz Time Brokered (3)
Hollywood, Florida
- ----------------------------------------------------------------------------------------
San Jose, California 4 KBRG-FM 100.3 MHz Radio Romantica
KLOK-AM 1170 kHz Radio Tricolor
KZSF-AM 1370 kHz La Zeta
- ----------------------------------------------------------------------------------------
Chicago, Illinois 5 WRZA-FM 99.9 MHz La Zeta
WZCH-FM 103.9 MHz La Zeta
WNDZ-AM 750 kHz Time Brokered (3)
- ----------------------------------------------------------------------------------------
Houston-Galveston, Texas 6 KGOL-AM 1180 kHz Time Brokered (3)
- ----------------------------------------------------------------------------------------
Dallas-Ft. Worth, Texas 8 KRVA-FM (4) 106.9 MHz La Buena
KRVF-FM (4) 107.1 MHz La Buena
KZMP-FM 101.7 MHz La Zeta
KRVA-AM 1600 kHz La Buena
KZMP-AM 1540 kHz La Bonita
- ----------------------------------------------------------------------------------------
Phoenix, Arizona 10 KLNZ-FM 103.5 MHz La Zeta
KVVA-FM 107.1 MHz Spanish Contemporary
KUET-AM (5) 710 kHz --
- ----------------------------------------------------------------------------------------
Albuquerque-Santa Fe, New
Mexico 12 KRZY-FM 105.9 MHz Radio Romantica
KRZY-AM 1450 kHz Radio Tricolor
- ----------------------------------------------------------------------------------------
El Paso, Texas 13 KINT-FM 93.9 MHz La Caliente (top 40)
KATH-FM 94.7 MHz Country (English)
KOFX-FM 92.3 MHz Oldies (English)
KSVE-AM 1150 kHz Radio Unica
KBIV-AM (6) 1650 kHz --
- ----------------------------------------------------------------------------------------
Fresno, California 14 KZFO-FM 92.1 MHz La Zeta
KHOT-AM 1250 kHz La Bonita
- ----------------------------------------------------------------------------------------
Sacramento, California 15 KHZZ-FM 104.3 MHz Z MegaHits
KRCX-FM 99.9 MHz Radio Tricolor
KRRE-FM 101.9 MHz Radio Romantica
KZSA-FM 92.1 MHz La Zeta
KSQR-AM 1240 kHz La Bonita
Stockton, California KMIX-FM 100.9 MHz La Buena
KCVR-AM 1570 kHz La Bonita
Modesto, California KTDO-FM 98.9 MHz Z MegaHits
KZMS-FM 97.1 MHz La Zeta
KLOC-AM 920 kHz La Bonita
- ----------------------------------------------------------------------------------------
Denver-Boulder, Colorado 16 KJMN-FM 92.1 MHz Radio Romantica
KMXA-AM 1090 kHz Radio Tricolor
- ----------------------------------------------------------------------------------------
Washington, D.C. 18 WACA-AM (7) 1540 kHz Time Brokered (3)
- ----------------------------------------------------------------------------------------
Tucson, Arizona 21 KZLZ-FM 105.3 MHz La Zeta
- ----------------------------------------------------------------------------------------
Las Vegas, Nevada 25 KVBC-FM 105.1 MHz Radio Romantica
- ----------------------------------------------------------------------------------------
Monterey-Salinas-Santa 26 KLOK-FM 99.5 MHz Radio Tricolor
Cruz, California KLXM-FM (4) 97.9 MHz Z MegaHits
KLUE-FM (4) 106.3 MHz Z MegaHits
KRAY-FM 103.5 MHz La Buena
KSES-FM 107.1 MHz Super Estrella
KZSL-FM 93.9 MHz La Zeta
KCTY-AM 980 kHz La Bonita
KSES-AM 700 kHz Super Estrella
KTGE-AM 1570 kHz Regional Mexican
- ----------------------------------------------------------------------------------------
Brawley, California 36 KWST-FM 94.5 MHz Country (English)
El Centro, California KAMP-AM 1430 kHz News/Talk
Imperial, California KMXX-FM 99.3 MHz Radio Tricolor
- ----------------------------------------------------------------------------------------
Lubbock, Texas 39 KBZO-AM 1460 kHz La Zeta
- ----------------------------------------------------------------------------------------
Palm Springs, California 42 KLOB-FM 94.7 MHz Radio Tricolor
- ----------------------------------------------------------------------------------------
Reno, Nevada 51 KRNV-FM 101.7 MHz Radio Tricolor
- ----------------------------------------------------------------------------------------
Chico, California 69 KZCO-FM 97.7 MHz Z MegaHits
KEWE-AM 1340 kHz Time Brokered (3)
</TABLE>
55
<PAGE>
(1) Source: Nielsen Media Research year 2000 population estimates.
(2) Pending acquisition--intended format.
(3) Operated pursuant to a local marketing agreement under which we grant to
the operator the right to program the station.
(4) Simulcast station.
(5) Under an FCC construction permit.
(6) Not yet operating--expanded band for Station KSVE-AM.
(7) We have agreed to sell this station, the closing of which we expect will
take place after the closing of this offering.
Radio Advertising
Substantially all of the revenue from our radio operations is derived from
local, national and network advertising.
Local. This form of revenue refers to advertising usually purchased by a
local client or agency directly from the station's sales force. In 1999, local
radio revenue comprised 64% of our total radio revenue.
National. This form of revenue refers to advertising purchased by a national
client targeting a specific market. Usually this business is placed by a
national advertising agency or media buyer and ordered through one of the
offices of our national sales representative, Caballero Spanish Media. The
national accounts are handled locally by the station's general sales manager.
In 1999, 26% of our total radio revenue was from national radio advertising.
Network. This form of revenue refers to advertising that is placed on our
entire network of stations. This business is placed as a single order and is
broadcast from the network's central location. The network advertising can be
placed by a local account executive that has a client in its market that wants
national exposure. Network inventory can also be sold by corporate executives,
by our national representative or by two other entities with whom we have
network sales agreements, the Jones Radio Network and the Hispanic Broadcasting
Company Radio Network. In 1999, network radio revenue accounted for 10% of our
total radio revenue.
Radio Marketing/Audience Research
We believe that radio is a highly efficient and cost-effective means for
advertisers to reach targeted demographic groups. Advertising rates charged by
our radio stations are based primarily on the following factors:
. the station's ability to attract listeners in a given market;
. the demand for available air time;
. the attractiveness of the demographic qualities of the listeners
(primarily age and purchasing power);
. the time of day that the advertising runs;
. the program's popularity with listeners; and
. the availability of alternative media in the market.
In the smaller and mid-sized markets, Spanish-language radio continues to be
more of a concept sale. In the larger markets, Arbitron provides advertisers
with the industry-accepted measure of listening audience classified by
demographic segment and time of day that the listeners spend on particular
radio stations. Radio advertising rates generally are highest during the
morning and afternoon drive-time hours which are the peak times for radio
audience listening.
We believe that having multiple stations in a market is desirable to enable
the broadcaster to provide alternatives and to command higher advertising rates
and budget share. Historically, advertising rates for Spanish-language radio
stations have been lower than those of English-language stations with similar
audience
56
<PAGE>
levels. We believe we will be able to increase our rates as new and existing
advertisers recognize the growing desirability of targeting the Hispanic
population in the United States.
Each station broadcasts an optimal number of advertisements each hour,
depending upon its format, in order to maximize the station's revenue without
jeopardizing its audience listenership. Our owned stations have up to
15 minutes per hour for commercial inventory and local content. Our network has
up to four additional minutes of commercial inventory per hour. The pricing is
based on a rate card and negotiations subject to the supply and demand for the
inventory in each particular market and the network.
Radio Competition
Radio broadcasting is a highly competitive business. The financial success
of each of our radio stations and markets depends on the power of each of our
stations, advertising trends and demand, audience ratings, our ability to
increase our market share of the overall radio advertising revenue and the
economic health of the market. In addition, our advertising revenue depends
upon the desire of advertisers to reach our audience demographic. Our radio
stations compete for audience share and advertising revenue directly with other
radio stations and with other media within their respective markets, such as
newspapers, the Internet, broadcast and cable television, magazines, billboard
advertising, transit advertising and direct mail advertising. Some of these
radio stations and networks also broadcast music programming aimed at a
particular Hispanic audience. In many of our markets, our primary competitors
in Hispanic radio are Hispanic Broadcasting Corporation, Radio Unica and
Spanish Broadcasting Systems. Some of our competitors are larger and may have
greater resources than we do. If a competing station within a market converts
to a format similar to that of one of our stations, or if one of our
competitors upgrades the power and reach of one of its stations, we could
suffer a reduction in ratings and advertising revenue in that market. The
audience ratings and advertising revenue of our individual stations are subject
to change and any adverse change in a particular market could have a material
adverse effect on our operations.
Outdoor Advertising/Publishing
Overview
Our outdoor and publishing operations complement our television and radio
businesses and will allow for cross-promotional opportunities. Because of its
repetitive impact and relatively low cost per thousand impressions, outdoor
advertising attracts national, regional and local advertisers. We believe
national advertisers value our ability to efficiently target specific
demographic groups on a cost-effective basis compared to other advertising
media. In addition, we believe local advertisers place significant value on our
ability to provide advertising solutions in close proximity to their stores or
outlets.
Our outdoor portfolio adds to our television and radio reach by providing
local advertisers with significant coverage of the Hispanic communities in Los
Angeles and New York. Our outdoor advertising strategy is designed to
complement our existing television and radio businesses by allowing us to
capitalize on our Hispanic market expertise. The primary components of our
strategy are to leverage the strengths of our inventory, continue to focus on
ethnic communities and increase market penetration.
Outdoor Advertising Markets
We own approximately 10,000 billboards concentrated in high-density Hispanic
communities in Los Angeles and New York, the two largest markets in the United
States. According to the Outdoor Advertising Association of America, Inc., an
industry trade association, outdoor advertising in the United States generated
total revenue of approximately $4.8 billion in 1999, compared to $4.4 billion
in 1998. We believe our outdoor advertising appeals to both large and small
businesses.
Los Angeles. The greater Los Angeles market has a population of
approximately 15.3 million, of which approximately six million or 39% are
Hispanic. As such, Los Angeles ranks as the largest Hispanic advertising market
in the United States. Approximately 87% of our billboard inventory in Los
Angeles is located in
57
<PAGE>
neighborhoods where Hispanics represent at least 30% of the local population,
based on the 1990 Census Report. We believe that this coverage of the Hispanic
population has increased significantly since 1990 as the Hispanic community
continues to grow into communities previously populated by other demographic
groups. The Los Angeles metropolitan area has miles of freeways and surface
streets where the average commuter spends in excess of 90 minutes per day in
the car.
New York. The greater New York City area has a population of approximately
18.3 million, of which approximately 3.2 million or 17.6% are Hispanic. As
such, New York ranks as the second largest Hispanic advertising market in the
United States.
Billboard Inventory as of December 31, 1999
<TABLE>
<CAPTION>
Inventory Type Los Angeles New York
- -------------- ----------- --------
<S> <C> <C>
8-sheet posters............................................ 6,000 3,500
City-Lights................................................ 250 0
30-sheet posters........................................... 0 165
Wall-Scapes................................................ 5 96
Bulletins.................................................. 20 24
----- -----
Total.................................................... 6,275 3,785
===== =====
</TABLE>
Our inventory consists of the following types of billboards that are
typically located on sites that we have leased or have a permanent easement:
8-sheet posters are generally 6 feet high by 12 feet wide. Due to the
smaller size of this type of billboard, 8-sheet posters are often located in
densely populated or fast growing areas where larger signs do not fit or are
not permitted, such as parking lots and other tight areas. Accordingly, most of
our 8-sheet posters are concentrated on city streets, targeting both pedestrian
and vehicular traffic and are sold to advertisers for periods of four weeks.
City-Lights is a product we created in 1998 to serve national advertisers
with a "high-impact" advertising format both during the day and nighttime. The
format is typically used by national fashion, entertainment and consumer
products companies desiring to target consumers within proximity of local malls
or retail outlets. A City-Lights structure is approximately 7 feet by 10 feet
set vertically on a single pole structure. The advertisement is usually housed
in an illuminated glass casing for greater visibility at night and is sold to
advertisers for a period of four weeks.
30-sheet posters are generally 12 feet high by 25 feet wide and are the most
common type of billboard. Lithographed or silk-screened paper sheets that are
supplied by the advertiser are pre-pasted and packaged in airtight bags by the
outdoor advertising company and applied, like wallpaper, to the face of the
display. The 30-sheet posters are concentrated on major traffic arteries and
space is usually sold to advertisers for periods of four weeks.
Wall-Scapes generally consist of advertisements ranging in a variety of
sizes (from 120 to 800 square feet) which are displayed on the sides of
buildings in densely populated locations. Advertising formats can include
either vinyl prints or painted artwork. Because of a Wall-Scape's greater
impact and higher cost relative to other types of billboards, space is usually
sold to advertisers for periods of six to 12 months.
Bulletins are generally 14 feet high and 48 feet wide and consist of panels
or a single sheet of vinyl that are hand painted at the facilities of the
outdoor advertising company or computer painted in accordance with design
specifications supplied by the advertiser and mounted to the face of the
display. Because of painted bulletins' greater impact and higher cost relative
to other types of billboards, they are usually located near major highways and
are sold for periods of six to 12 months.
58
<PAGE>
Outdoor Advertising Revenue
Advertisers usually contract for outdoor displays through advertising
agencies, which are responsible for the artistic design and written content of
the advertising. Advertising contracts are negotiated on the basis of monthly
rates published in our "rate card." These rates are based on a particular
display's exposure (or number of "impressions" delivered) in relation to the
demographics of the particular market and its location within that market. The
number of "impressions" delivered by a display (measured by the number of
vehicles passing the site during a defined period and weighted to give effect
to such factors as its proximity to other displays and the speed and viewing
angle of approaching traffic) is determined by surveys that are verified by the
Traffic Audit Bureau, an independent agency which is the outdoor advertising
industry's equivalent of television's Nielsen ratings and radio's Arbitron
ratings.
In each of our markets, we employ salespeople who sell both local and
national advertising. Our 1999 outdoor advertising revenue mix consisted of
approximately 60% national advertisers and 40% local advertisers. National
advertisers value our product due to our ability to efficiently target specific
demographic groups on a cost-effective basis. Local advertisers, in addition to
these factors, place significant value on our ability to provide advertising
solutions in the form of billboards in close proximity to the advertisers'
stores or outlets. We believe that our local sales force is crucial to
maintaining relationships with key advertisers and agencies and identifying
new advertisers.
Outdoor Advertising Competition
We compete in each of our outdoor markets with other outdoor advertisers as
well as other media. In addition, we also compete with a wide variety of out-
of-home media, including advertising in shopping centers, airports, stadiums,
movie theaters and supermarkets, as well as on taxis, trains and buses. In
competing with other media, outdoor advertising relies on its relative cost
efficiency and its ability to reach a broad segment of the population in a
specific market or to target a particular geographic area or population with a
particular set of demographic characteristics within that market.
Publishing
The primary publication in our publishing segment is El Diario/La Prensa,
the oldest Spanish-language daily newspaper in the United States and the
premier Spanish-language publishing franchise in the Northeast.
El Diario/La Prensa's daily paid circulation of approximately 50,000 reaches a
total daily readership of 321,000. This figure, as reported in Simmons Hispanic
Market Study, reflects the highest pass-along rates recorded by any newspaper
in the United States. El Diario/La Prensa won the award for "Outstanding
Spanish-language Daily" from the National Association of Hispanic Publications
in 1994 and 1996 and is one of only two newspapers in New York City with
growing circulation. We also own VEA New York, a Spanish-language tourist
publication serving visitors to New York from Latin America, Spain and other
Spanish-language countries. We believe our combined media provide an effective
vehicle for national and local advertisers to reach the fast growing Hispanic
population.
Material Trademarks, Trade Names and Service Marks
In the course of our business, we use various trademarks, trade names and
service marks, including our logos, in our advertising and promotions. We
believe the strength of our trademarks, trade names and service marks are
important to our business and intend to protect and promote them as
appropriate. We do not hold or depend upon any material patent, government
license, franchise or concession, except our broadcast licenses granted by the
FCC.
Employees
As of March 31, 2000, giving effect to our acquisitions of LCG and Z-Spanish
Media, we had approximately 1,100 full-time employees. As of March 31, 2000,
146 of our publishing employees were
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represented by labor unions that have entered into collective bargaining
agreements with us. As of March 31, 2000, five of our outdoor employees were
represented by labor unions that have entered into or are currently in
negotiations for collective bargaining agreements with us. We believe our
relations with our employees are good.
Regulation of Television and Radio Broadcasting
General. The FCC regulates television and radio broadcast stations pursuant
to the Communications Act. Among other things, the FCC:
. determines the particular frequencies, locations and operating power of
stations;
. issues, renews, revokes and modifies station licenses;
. regulates equipment used by stations; and
. adopts and implements regulations and policies that directly or
indirectly affect the ownership, changes in ownership, control,
operation and employment practices of stations.
A licensee's failure to observe the requirements of the Communications Act
or FCC rules and policies may result in the imposition of various sanctions,
including admonishment, fines, the grant of renewal terms of less than eight
years, the grant of a license with conditions or, in the case of particularly
egregious violations, the denial of a license renewal application, the
revocation of an FCC license or the denial of FCC consent to acquire additional
broadcast properties.
Congress and the FCC have had under consideration or reconsideration, and
may in the future consider and adopt, new laws, regulations and policies
regarding a wide variety of matters that could, directly or indirectly, affect
the operation, ownership and profitability of our television and radio
stations, result in the loss of audience share and advertising revenue for our
television and radio broadcast stations or affect our ability to acquire
additional television and radio broadcast stations or finance such
acquisitions. Such matters may include:
. changes to the license authorization and renewal process;
. proposals to impose spectrum use or other fees on FCC licensees;
. changes to the FCC's equal employment opportunity regulations and other
matters relating to involvement of minorities and women in the
broadcasting industry;
. proposals to change rules relating to political broadcasting including
proposals to grant free air time to candidates, and other changes
regarding program content;
. proposals to restrict or prohibit the advertising of beer, wine and
other alcoholic beverages;
. technical and frequency allocation matters, including creation of a new
Class A television service for existing low-power television stations
and a new low-power FM radio broadcast service;
. the implementation of digital audio broadcasting on both satellite and
terrestrial bases;
. the implementation of rules governing the transmission of local
television signals by direct broadcast satellite services in their local
areas;
. changes in broadcast multiple ownership, foreign ownership, cross-
ownership and ownership attribution policies; and
. proposals to alter provisions of the tax laws affecting broadcast
operations and acquisitions.
We cannot predict what changes, if any, might be adopted, nor can we predict
what other matters might be considered in the future, nor can we judge in
advance what impact, if any, the implementation of any particular proposal or
change might have on our business.
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FCC Licenses. Television and radio stations operate pursuant to licenses
that are granted by the FCC for a term of eight years, subject to renewal upon
application to the FCC. During the periods when renewal applications are
pending, petitions to deny license renewal applications may be filed by
interested parties, including members of the public. The FCC is required to
hold hearings on renewal applications if it is unable to determine that renewal
of a license would serve the public interest, convenience and necessity, or if
a petition to deny raises a "substantial and material question of fact" as to
whether the grant of the renewal applications would be inconsistent with the
public interest, convenience and necessity. However, the FCC is prohibited from
considering competing applications for a renewal applicant's frequency, and is
required to grant the renewal application if it finds:
. that the station has served the public interest, convenience and
necessity;
. that there have been no serious violations by the licensee of the
Communications Act or the rules and regulations of the FCC; and
. that there have been no other violations by the licensee of the
Communications Act or the rules and regulations of the FCC that, when
taken together, would constitute a pattern of abuse.
If as a result of an evidentiary hearing, the FCC determines that the
licensee has failed to meet the requirements for renewal and that no mitigating
factors justify the imposition of a lesser sanction, the FCC may deny a license
renewal application. Historically, FCC licenses have generally been renewed. We
have no reason to believe that our licenses will not be renewed in the ordinary
course, although there can be no assurance to that effect. The non-renewal of
one or more of our stations' licenses could have a material effect on our
business.
Ownership Matters. The Communications Act requires prior approval of the FCC
for the assignment of a broadcast license or the transfer of control of a
corporation or other entity holding a license. In determining whether to
approve an assignment of a television or radio broadcast license or a transfer
of control of a broadcast licensee, the FCC considers a number of factors
pertaining to the licensee including compliance with various rules limiting
common ownership of media properties, the "character" of the licensee and those
persons holding "attributable" interests therein, and the Communications Act's
limitations on foreign ownership and compliance with the FCC rules and
regulations.
To obtain the FCC's prior consent to assign or transfer a broadcast license,
appropriate applications must be filed with the FCC. If the application to
assign or transfer the license involves a substantial change in ownership or
control of the licensee, for example, the transfer or acquisition of more than
50% of the voting stock, the application must be placed on public notice for a
period of 30 days during which petitions to deny the application may be filed
by interested parties, including members of the public. If an assignment
application does not involve new parties, or if a transfer of control
application does not involve a "substantial change" in ownership or control, it
is a pro forma application, which is not subject to the public notice and 30
day petition to deny procedure. The regular and pro forma applications are
nevertheless subject to informal objections that may be filed any time until
the FCC acts on the application. If the FCC grants an assignment or transfer
application, interested parties have 30 days from public notice of the grant to
seek reconsideration of that grant. The FCC has an additional ten days to set
aside such grant on its own motion. When ruling on an assignment or transfer
application, the FCC is prohibited from considering whether the public interest
might be served by an assignment or transfer to any party other than the
assignee or transferee specified in the application.
Under the Communications Act, a broadcast license may not be granted to or
held by persons who are not U.S. citizens, by any corporation that has more
than 20% of its capital stock owned or voted by non-U.S. citizens or entities
or their representatives, by foreign governments or their representatives or by
non-U.S. corporations. Furthermore, the Communications Act provides that no FCC
broadcast license may be granted to or held by any corporation directly or
indirectly controlled by any other corporation of which more than 25% of its
capital stock is owned of record or voted by non-U.S. citizens or entities or
their representatives, or foreign governments or their representatives or by
non-U.S. corporations, if the FCC finds the public interest will be served by
the refusal or revocation of such license. Thus, the licenses for our stations
could be revoked
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if more than 25% of our outstanding capital stock is issued to or for the
benefit of non-U.S. citizens in excess of these limitations. Our first restated
certificate of incorporation restricts the ownership and voting of our capital
stock to comply with these requirements.
The FCC generally applies its other broadcast ownership limits to
"attributable" interests held by an individual, corporation or other
association or entity. In the case of a corporation holding broadcast licenses,
the interests of officers, directors and those who, directly or indirectly,
have the right to vote 5% or more of the stock of a licensee corporation are
generally deemed attributable interests, as are positions as an officer or
director of a corporate parent of a broadcast licensee.
Stock interests held by insurance companies, mutual funds, bank trust
departments and certain other passive investors that hold stock for investment
purposes only become attributable with the ownership of 20% or more of the
voting stock of the corporation holding broadcast licenses.
A time brokerage agreement with another television or radio station in the
same market creates an attributable interest in the brokered television or
radio station as well for purposes of the FCC's local television or radio
station ownership rules, if the agreement affects more than 15% of the brokered
television or radio station's weekly broadcast hours.
Debt instruments, non-voting stock, options and warrants for voting stock
that have not yet been exercised, insulated limited partnership interests where
the limited partner is not "materially involved" in the media-related
activities of the partnership and minority voting stock interests in
corporations where there is a single holder of more than 50% of the outstanding
voting stock whose vote is sufficient to affirmatively direct the affairs of
the corporation generally do not subject their holders to attribution.
However, the FCC recently adopted a new rule, known as the equity-debt-plus
or EDP rule that causes certain creditors or investors to be attributable
owners of a station, regardless of whether there is a single majority
stockholder or other applicable exception to the FCC's attribution rules. Under
this new rule, a major programming supplier (any programming supplier that
provides more than 15% of the station's weekly programming hours) or a same-
market media entity will be an attributable owner of a station if the supplier
or same-market media entity holds debt or equity, or both, in the station that
is greater than 33% of the value of the station's total debt plus equity. For
purposes of the EDP rule, equity includes all stock, whether voting or
nonvoting, and equity held by insulated limited partners in limited
partnerships. Debt includes all liabilities, whether long-term or short-term.
Generally, the FCC only permits an owner to have one television station per
market. A single owner is permitted to have two stations with overlapping
signals so long as they are assigned to different markets. Recent changes to
the FCC's rules regarding ownership now permit an owner to operate two
television stations assigned to the same market so long as either:
. the television stations do not have overlapping broadcast signals; or
. there will remain after the transaction eight independently owned, full
power noncommercial or commercial operating television stations in the
market and one of the two commonly-owned stations is not ranked in the
top four based upon audience share.
The FCC will consider waiving these ownership restrictions in certain cases
involving failing or failed stations or stations which are not yet built.
The FCC permits a television station owner to own one radio station in the
same market as its television station. In addition, a television station owner
is permitted to own additional radio stations, not to exceed the local
ownership limits for the market, as follows:
. in markets where 20 media voices will remain, an owner may own an
additional five radio stations, or, if the owner only has one television
station, an additional six radio stations; and
. in markets where ten media voices will remain, an owner may own an
additional three radio stations.
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A "media voice" includes each independently-owned and operated full-power
television and radio station and each daily newspaper that has a circulation
exceeding 5% of the households in the market, plus one voice for all cable
television systems operating in the market.
The FCC has eliminated the limitation on the number of radio stations a
single individual or entity may own nationwide and increased the limits on the
number of stations an entity or individual may own in a market as follows:
. In a radio market with 45 or more commercial radio stations, a party may
own, operate or control up to eight commercial radio stations, not more
than five of which are in the same service (AM or FM).
. In a radio market with between 30 and 44 (inclusive) commercial radio
stations, a party may own, operate or control up to seven commercial
radio stations, not more than four of which are in the same service (AM
or FM).
. In a radio market with between 15 and 29 (inclusive) commercial radio
stations, a party may own, operate or control up to six commercial radio
stations, not more than four of which are in the same service (AM or
FM).
. In a radio market with 14 or fewer commercial radio stations, a party
may own, operate or control up to five commercial radio stations, not
more than three of which are in the same service (AM or FM), except that
a party may not own, operate, or control more than 50% of the radio
stations in such market.
The FCC staff has notified the public of its intention to review
transactions that comply with these numerical ownership limits but that might
involve undue concentration of market share.
Because of these multiple and cross-ownership rules, if a stockholder,
officer or director of Entravision holds an "attributable" interest in
Entravision, such stockholder, officer or director may violate the FCC's rules
if such person or entity also holds or acquires an attributable interest in
other television or radio stations or daily newspapers, depending on their
number and location. If an attributable stockholder, officer or director of
Entravision violates any of these ownership rules, we may be unable to obtain
from the FCC one or more authorizations needed to conduct our broadcast
business and may be unable to obtain FCC consents for certain future
acquisitions.
In connection with our acquisitions of LCG and Z-Spanish Media, we are
required to comply with the FCC rules governing multiple ownership of radio and
television stations. The addition of the Z-Spanish Media radio stations to the
LCG radio stations being acquired in the Monterey-Salinas-Santa Cruz,
California radio market, together with our existing ownership of a television
station in that market, will result in our owning up to three more radio
stations than are permitted by the FCC's radio multiple ownership rules. In
order to comply with these rules, we intend to divest of up to three stations
in the Monterey-Salinas-Santa Cruz market. In addition, the Z-Spanish Media
radio stations, when combined with the LCG radio stations in the Modesto,
California market, may result in our owning one more radio station than is
permitted by the FCC's rules. In order to comply with these rules, we may be
required to divest of one station in this market.
The Communications Act requires broadcasters to serve the "public interest."
The FCC has relaxed or eliminated many of the more formalized procedures it
developed to promote the broadcast of certain types of programming responsive
to the needs of a broadcast station's community of license. Nevertheless, a
broadcast licensee continues to be required to present programming in response
to community problems, needs and interests and to maintain certain records
demonstrating its responsiveness. The FCC will consider complaints from the
public about a broadcast station's programming when it evaluates the licensee's
renewal application, but complaints also may be filed and considered at any
time. Stations also must pay regulatory and application fees, and follow
various FCC rules that regulate, among other things, political broadcasting,
the broadcast of obscene or indecent programming, sponsorship identification,
the broadcast of contests and lotteries and technical operation.
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The FCC requires that licensees not discriminate in hiring practices,
develop and implement programs designed to promote equal employment
opportunities and submit reports to the FCC on these matters periodically and
in connection with each license renewal application.
The FCC rules also prohibit a broadcast licensee from simulcasting more than
25% of its programming on another radio station in the same broadcast service
(that is, AM/AM or FM/FM). The simulcasting restriction applies if the licensee
owns both radio broadcast stations or owns one and programs the other through a
local marketing agreement, provided that the contours of the radio stations
overlap in a certain manner.
"Must Carry" Rules. FCC regulations implementing the Cable Television
Consumer Protection and Competition Act of 1992 require each television
broadcaster to elect, at three year intervals beginning October 1, 1993, to
either:
. require carriage of its signal by cable systems in the station's market,
which is referred to as "must carry" rules; or
. negotiate the terms on which such broadcast station would permit
transmission of its signal by the cable systems within its market which
is referred to as "retransmission consent."
We have elected "must carry" with respect to each of our full-power
stations.
Time Brokerage Agreements. We have, from time to time, entered into local
marketing agreements, generally in connection with pending station
acquisitions. By using local marketing agreements, we can provide programming
and other services to a station proposed to be acquired before we receive all
applicable FCC and other governmental approvals.
FCC rules and policies generally permit time brokerage agreements if the
station licensee retains ultimate responsibility for and control of the
applicable station. We cannot be sure that we will be able to air all of our
scheduled programming on a station with which we have local marketing
agreements or that we will receive the anticipated revenue from the sale of
advertising for such programming.
Stations may enter into cooperative arrangements known as joint sales
agreements or JSAs. Under the typical JSA, a station licensee obtains, for a
fee, the right to sell substantially all of the commercial advertising on a
separately-owned and licensed station in the same market. The typical JSA also
involves the provision by the selling party of certain sales, accounting and
services to the station whose advertising is being sold. Unlike a local
marketing agreement, the typical JSA does not involve programming.
As part of its increased scrutiny of radio and television station
acquisitions, the DOJ has stated publicly that it believes that local marketing
agreements and JSAs could violate the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 if such agreements take effect prior to the expiration of the
waiting period under such Act. Furthermore, the DOJ has noted that JSAs may
raise antitrust concerns under Section 1 of the Sherman Antitrust Act and has
challenged JSAs in certain locations. The DOJ also has stated publicly that it
has established certain revenue and audience share concentration benchmarks
with respect to television and radio station acquisitions, above which a
transaction may receive additional antitrust scrutiny.
Digital Television Services. The FCC has adopted rules for implementing DTV
service in the United States. Implementation of DTV will improve the technical
quality of television signals and provide broadcasters the flexibility to offer
new services, including high-definition television and data broadcasting.
The FCC has established service rules and adopted a table of allotments for
DTV. Under the table, certain eligible broadcasters with a full-power
television station are allocated a separate channel for DTV operation. Stations
will be permitted to phase in their DTV operations over a period of years after
which they will be required to surrender their license to broadcast the analog,
or non-digital television signal. Our stations must be on the air with a
digital signal by May 1, 2002. We must return one of our channels to the
government by 2006.
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Equipment and other costs associated with DTV transition, including the
necessity of temporary dual-mode operations and the relocation of stations from
one channel to another, will impose some near-term financial costs on
television stations providing the services. The potential also exists for new
sources of revenue to be derived from DTV. We cannot predict the overall effect
the transition to DTV might have on our business.
Digital Radio Services. The FCC currently is considering standards for
evaluating, authorizing and implementing terrestrial digital audio broadcasting
technology, including In-Band On-Channel(TM) technology for FM radio stations.
Digital audio broadcasting's advantages over traditional analog broadcasting
technology include improved sound quality and the ability to offer a greater
variety of auxiliary services. In-Band On-Channel(TM) technology would permit
an FM station to transmit radio programming in both analog and digital formats,
or in digital only formats, using the bandwidth that the radio station is
currently licensed to use. It is unclear what regulations the FCC will adopt
regarding digital audio broadcasting or In-Band On-Channel(TM) technology and
what effect such regulations would have on our business or the operations of
our radio stations.
RF Radiation. The FCC has adopted rules limiting human exposure to levels of
radio frequency (RF) radiation. These rules require applicants for renewal of
broadcast licenses or modification of existing licenses to inform the FCC
whether the applicant's broadcast facility would expose people or employees to
excessive RF radiation. We believe that all of our stations are in compliance
with the FCC's current rules regarding RF radiation.
Satellite Digital Audio Radio Service. The FCC has allocated spectrum to a
new technology, SDARS, to deliver satellite-based audio programming to a
national or regional audience. The nationwide reach of SDARS could allow niche
programming aimed at diverse communities that we are targeting. Two companies
that hold licenses for authority to offer multiple channels of digital,
satellite-delivered radio could compete with conventional terrestrial radio
broadcasting. These potential competitors are expected to begin operations no
later than 2001.
Low-Power Radio Broadcast Service. On January 20, 2000, the FCC adopted
rules creating a new low-power FM, or LPFM, radio service. The rules have been
published in the Federal Register and became effective on April 17, 2000. The
new LPFM service will consist of two classes of radio stations, with maximum
power levels of either 10 Watts or 100 Watts. The 10 Watt stations will reach
an area with a radius of between one and two miles and the 100 Watt stations
will reach an area with a radius of approximately three and one-half miles. The
new LPFM stations will not be required to protect other existing FM stations on
frequencies three channels away, as currently required of full-powered FM
stations.
The new LPFM service will be exclusively non-commercial. Current broadcast
licensees or parties with interests in cable television or newspapers will not
be eligible to hold LPFM licenses. It is difficult to predict what impact, if
any, the new LPFM service will have on technical interference with our
stations' signals or competition for our stations' audiences. The new FCC rules
for LPFM services are the subject of court challenges and Congress is
considering legislation which would substantially modify the rules adopted by
the FCC.
Other Pending FCC and Legislative Proceedings. The Satellite Home Viewer Act
allows satellite carriers to deliver broadcast programming to subscribers who
are unable to obtain television network programming over the air from local
television stations. Congress in 1999 enacted legislation to amend the
Satellite Home Viewer Improvement Act to facilitate the ability of satellite
carriers to provide subscribers with programming from local television
stations. These policies do not achieve "must-carry" status until January 1,
2002, when any satellite company that has chosen to provide local-into-local
service must provide subscribers with all of the local broadcast television
signals that are assigned to the market and where television licensees ask to
be carried on the satellite system.
On November 29, 1999, Congress enacted the Community Broadcasters Protection
Act of 1999, which provides for a new Class A television service, consisting of
certain low-power television stations. Low-power
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television stations that qualify for Class A status will no longer be secondary
in nature and will be protected against certain full-power stations. In turn,
the existence of Class A stations may impact the ability of full-power stations
to modify their facilities. The FCC has recently completed a rulemaking
proceeding to implement these rules. As the owner of both full-power and low-
power stations, we are not certain as to whether the creation of the Class A
service will, on balance, be beneficial or detrimental to us.
Regulation of Outdoor Advertising
Outdoor advertising is subject to governmental regulation at the federal,
state and local levels. Federal law, principally the Highway Beautification Act
of 1965, or the HBA, regulates outdoor advertising on federally aided primary
and interstate highways. As a condition to federal highway assistance, the HBA
requires states to restrict billboards on such highways to commercial and
industrial areas and imposes certain additional size, spacing and other
limitations. All states have passed state billboard control statutes and
regulations at least as restrictive as the federal requirements, including
removal of any illegal signs on such highways at the owner's expense and
without compensation. We believe that the number of our billboards that may be
subject to removal as illegal is immaterial. No state in which we operate has
banned billboards, but some have adopted standards more restrictive than the
federal requirements. Municipal and county governments generally also have sign
controls as part of their zoning laws. Some local governments prohibit
construction of new billboards and some allow new construction only to replace
existing structures, although most allow construction of billboards subject to
restrictions on zones, size, spacing and height.
Federal law does not require the removal of existing lawful billboards, but
does require payment of compensation if a state or political subdivision
compels the removal of a lawful billboard along a federally aided primary or
interstate highway. State governments have purchased and removed legal
billboards for beautification in the past, using federal funding for
transportation enhancement programs, and may do so in the future. Governmental
authorities from time to time use the power of eminent domain to remove
billboards. Thus far, we have been able to obtain satisfactory compensation for
any of our billboards purchased or removed as a result of governmental action,
although there is no assurance that this will continue to be the case in the
future. Local governments do not generally purchase billboards for
beautification, but some have attempted to force the removal of legal but
nonconforming billboards (billboards which conformed with applicable zoning
regulations when built but which do not conform to current zoning regulations)
after a period of years under a concept called "amortization," by which the
governmental body asserts that just compensation is earned by continued
operation over time. Although there is some question as to the legality of
amortization under federal and many state laws, amortization has been upheld in
some instances. We generally have been successful in negotiating settlements
with municipalities for billboards required to be removed. Restrictive
regulations also limit our ability to rebuild or replace nonconforming
billboards.
Under the terms of a settlement agreement among U.S. tobacco companies and
46 states, tobacco companies discontinued all advertising on billboards and
buses in the 46 participating states as of April 23, 1999. The remaining four
states had already reached separate settlements with the tobacco industry. We
removed all tobacco billboards and advertising in these states in compliance
with the settlement deadlines.
In addition to the above settlement agreements, state and local governments
are also considering regulating the outdoor advertising of alcohol products.
Alcohol related advertising represented approximately 8.4% of the total revenue
of our outdoor billboard business in 1999. As a matter of both company policy
and industry practice (on a voluntary basis), we do not post any alcohol
advertisements within a 500 square foot radius of any school, church or
hospital.
Legal Proceedings
We currently and from time to time are involved in litigation incidental to
the conduct of our business, but we are not currently a party to any lawsuit or
proceeding which, in the opinion of management, is likely to have a material
adverse effect on us.
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Properties and Facilities
Our corporate headquarters are located in Santa Monica, California. We lease
approximately 9,307 square feet of space in the building housing our corporate
headquarters under a lease expiring in 2006. The types of properties required
to support each of our television and radio stations typically include offices,
broadcasting studios and antenna towers where broadcasting transmitters and
antenna equipment are located. The majority of our office, studio and tower
facilities are leased pursuant to long-term leases. We also own the buildings
and/or land used for office, studio and tower facilities at two of our
television stations. We own substantially all of the equipment used in our
television and radio broadcasting business. We believe that all of our
facilities and equipment are adequate to conduct our present operations.
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MANAGEMENT
Executive Officers and Directors
The following table sets forth information about our executive officers and
directors upon completion of this offering. Each of our directors serves until
his or her successor is elected and is qualified.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Walter F. Ulloa...... 51 Chairman and Chief Executive Officer
Philip C. Wilkinson.. 44 President, Chief Operating Officer and Director
Executive Vice President, Treasurer and Chief
Jeanette Tully....... 53 Financial Officer
Paul A. Zevnik....... 49 Secretary and Director
Amador S. Bustos..... 49 President of Radio Division and Director
Glenn Emanuel........ 47 President of Outdoor Division
Darryl B. Thompson... 38 Director
Andrew W. Hobson..... 38 Director
Michael D. Wortsman.. 52 Director
</TABLE>
Walter F. Ulloa. Mr. Ulloa, the Chairman and Chief Executive Officer of
Entravision since its inception in 1996, has over 24 years of experience in
Spanish-language television and radio in the United States. Mr. Ulloa will be
elected as a member of our board of directors pursuant to a voting agreement
among Messrs. Ulloa, Wilkinson and Zevnik. From 1989 to 1996, Mr. Ulloa was
involved in the development, management or ownership of the predecessor
entities to Entravision. From 1976 to 1989, he worked at KMEX, Los Angeles,
California, as operations manager, production manager, news director, local
sales manager and an account executive.
Philip C. Wilkinson. Mr. Wilkinson, the President and Chief Operating
Officer of Entravision since its inception in 1996, has over 19 years of
experience in Spanish-language television and radio in the United States. Mr.
Wilkinson will be elected as a member of our board of directors pursuant to a
voting agreement among Messrs. Ulloa, Wilkinson and Zevnik. From 1990 to 1996,
Mr. Wilkinson was involved in the development, management or ownership of the
predecessor entities to Entravision. From 1982 to 1990, he worked at the
Univision television network and served in the positions of account executive,
Los Angeles national sales manager and West Coast sales manager.
Jeanette Tully. Ms. Tully, an Executive Vice President and the Chief
Financial Officer and Treasurer of Entravision since September 1996, has over
22 years of experience in the media industry. From 1994 until early 1996 when
the company was sold to Infinity Broadcasting, Ms. Tully was the Executive Vice
President and Chief Financial Officer of Alliance Broadcasting. From May 1986
until she joined Alliance Broadcasting, Ms. Tully was a Vice President of
Communications Equity Associates, where she advised a variety of broadcast
companies on financial matters.
Paul A. Zevnik. Mr. Zevnik has been the Secretary of Entravision since its
inception in 1996. Mr. Zevnik will be elected as a member of our board of
directors pursuant to a voting agreement among Messrs. Ulloa, Wilkinson and
Zevnik. From 1989 to 1996, Mr. Zevnik was involved in the development,
management or ownership of the predecessor entities to Entravision. Mr. Zevnik
is a partner in the Washington, D.C. office of the law firm of Zevnik Horton
Guibord McGovern Palmer & Fognani, L.L.P.
Amador S. Bustos. Mr. Bustos will be the President of our Radio Division
upon completion of this offering and our acquisition of Z-Spanish Media. Mr.
Bustos will also be elected as a member of our board of directors pursuant to a
voting agreement among Messrs. Ulloa, Wilkinson and Zevnik. From November 1992
until our acquisition of Z-Spanish Media, Mr. Bustos served as Chairman, Chief
Executive Officer and
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President of Z-Spanish Media or one of its predecessors. From December 1979
until September 1992, Mr. Bustos held various positions, including general
sales manager, senior account executive and community affairs coordinator, at
several radio stations and a television station in the San Francisco Bay area.
Glenn Emanuel. Mr. Emanuel will be the President of our Outdoor Division
upon completion of this offering and our acquisition of Z-Spanish Media. Mr.
Emanuel has over 20 years of experience in the outdoor advertising industry.
From 1997 until our acquisition of Z-Spanish Media, Mr. Emanuel served as the
President of Vista, Z-Spanish Media's outdoor advertising group. Before joining
Vista, he served as general manager of Regency Outdoor Advertising's operations
in Los Angeles for ten years.
Darryl B. Thompson. Mr. Thompson will serve on our board of directors as a
representative of TSG Capital Fund III, L.P. upon completion of this offering
and our acquisition of Z-Spanish Media, and will be elected pursuant to a
voting agreement among Messrs. Ulloa, Wilkinson and Zevnik. Mr. Thompson has
been a partner of TSG Capital Group, L.L.C. since 1993. Mr. Thompson serves on
the boards of directors of several public and private companies, including
LatinForce.Net, Inc., Pointe Communications Corporation and Millennium Digital
Media Holdings, L.L.C.
Andrew W. Hobson. Mr. Hobson, who will be a member of our board of directors
as a representative of Univision upon completion of this offering, has been an
Executive Vice President of the Univision Network since 1993. From 1990 through
1993 he was a principal at Chartwell Partners, Univision's majority owner.
Before joining Chartwell, Mr. Hobson was a Vice President in the investment
banking group of Bankers Trust Corp., where he was employed from 1984 to 1990.
Michael D. Wortsman. Mr. Wortsman, who will be a member of our board of
directors as a representative of Univision upon completion of this offering, is
the Co-President of Univision Television Group Inc. Before holding this
position, Mr. Wortsman served as the Executive Vice President of corporate
development for the Univision Television Group from 1993 to 1996.
Board Committees
The board of directors intends to establish an audit committee and a
compensation committee. Univision, as the holder of our Class C common stock,
will have the right to appoint one member to each of these committees, as well
as any other committee established by our board of directors.
The audit committee will recommend to the board of directors the selection
of independent auditors, review the results and scope of audit and other
services provided by our independent auditors and review and evaluate our audit
and control functions.
The compensation committee will review and recommend to the board of
directors the compensation and benefits of all of our officers and will
establish and review general policies relating to compensation and benefits of
our employees.
Compensation Committee Interlocks and Insider Participation
At the completion of this offering, the members of our compensation
committee will consist of , and , none of whom has ever been an
officer or employee of Entravision. None of our executive officers serves as a
member of the board of directors or compensation committee of any entity that
has one or more executive officers who serve on our board or compensation
committee.
Director Compensation
We intend to establish fees for all non-employee directors within six months
after the date of this prospectus, which will include grants of stock options
to our directors. We also expect to reimburse our non-employee directors for
reasonable expenses they may incur in attending board of directors or committee
meetings.
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Executive Compensation
The following table sets forth all compensation earned in the fiscal year
ended December 31, 1999 by our Chief Executive Officer and the four other most
highly compensated officers whose annual salary and bonus exceeded $100,000.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation(1)
------------------------------
Other Annual All Other
Name and Principal Position Year Salary Bonus Compensation Compensation
- --------------------------- ---- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Walter F. Ulloa................ 1999 $360,000 $429,938 -- --
Chairman and Chief Executive
Officer
Philip C. Wilkinson............ 1999 360,000 429,938 -- --
President and Chief Operating
Officer
Jeanette Tully................. 1999 230,000 -- -- --
Chief Financial Officer
Amador S. Bustos............... 1999 168,000 7,560 -- --
President of Radio Division
Glenn Emanuel.................. 1999 225,000 75,000 -- --
President of Outdoor Division
</TABLE>
- --------
(1) Excludes perquisites and other personal benefits, securities or property
which aggregate the lesser of $50,000 or 10% of the total of annual salary
and bonus.
Employee Benefit Plans
2000 Omnibus Equity Incentive Plan
On , 2000 we adopted our 2000 Omnibus Equity Incentive Plan to provide an
additional means to attract, motivate, reward and retain key personnel. The
plan gives the administrator the authority to grant different types of stock
incentive awards and to select participants. Our employees, officers, directors
and consultants may be selected to receive awards under the plan. The following
summary is qualified by reference to the complete plan, which is on file with
the Securities and Exchange Commission.
Share Limits. A maximum of shares of our Class A common stock may be
issued under the plan, or approximately % of our outstanding shares after
giving effect to this offering. The aggregate number of shares subject to stock
options and stock appreciation rights granted under the plan to any one person
in a calendar year cannot exceed one million shares.
Each share limit and award under the plan is subject to adjustment for
certain changes in our capital structure, reorganizations and other
extraordinary events. Shares subject to awards that are not paid or exercised
before they expire or are terminated are available for future grants under the
plan.
Awards. Awards under the plan may be in the form of:
. incentive stock options;
. nonqualified stock options;
. stock appreciation rights;
. restricted stock; or
. stock units.
Awards may be granted individually or in combination with other awards.
Certain types of stock-based performance awards under the plan will depend upon
the extent to which performance goals set by the administrator are met during
the performance period.
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Awards under the plan generally will be nontransferable, subject to
exceptions such as a transfer to a family member or to a trust, as authorized
by the administrator.
Nonqualified stock options and other awards may be granted at prices below
the fair market value of the common stock on the date of grant. Restricted
stock awards can be issued for nominal or the minimum lawful consideration.
Incentive stock options must have an exercise price that is at least equal to
the fair market value of the common stock, or 110% of fair market value of the
common stock for any owner of more than 10% of our common stock, on the date of
grant. These and other awards may also be issued solely or in part for
services.
Administration. The plan will be administered by a committee of directors
appointed by our board of directors.
The administrator of the plan has broad authority to:
. designate recipients of awards;
. determine or modify, subject to any required consent, the terms and
provisions of awards, including the price, vesting provisions, terms of
exercise and expiration dates;
. approve the form of award agreements;
. determine specific objectives and performance criteria with respect to
performance awards;
. construe and interpret the plan; and
. reprice, accelerate and extend the exercisability or term, and establish
the events of termination or reversion of outstanding awards.
Change of Control. Upon a change of control event, any award may become
immediately vested and/or exercisable, unless the administrator determines to
the contrary. Generally speaking, a change of control event will be triggered
under the plan:
. in connection with certain mergers or consolidations of Entravision with
or into another entity where our stockholders before the transaction own
less than 50% of the surviving entity;
. if a majority of our board of directors changes over a period of two
years or less; or
. upon a sale of all or substantially all of our assets if a change in
ownership of more than 50% of our outstanding voting securities occurs.
The administrator of the plan may also provide for alternative settlements
of awards, the assumption or substitution of awards or other adjustments of
awards in connection with a change of control or other reorganization of
Entravision.
Plan Amendment, Termination and Term. Our board of directors may amend,
suspend or discontinue the plan at any time, but no such action will affect any
outstanding award in any manner materially adverse to a participant without the
consent of the participant. Plan amendments will generally not be submitted to
stockholders for their approval unless such approval is required by applicable
law.
The plan will remain in existence as to all outstanding awards until such
awards are exercised or terminated. The maximum term of options, stock
appreciation rights and other rights to acquire common stock under the plan is
ten years after the initial date of award, subject to provisions for further
deferred payment in certain circumstances. No award can be granted ten years
after adoption of the plan by our board of directors.
Payment for Shares. The exercise price of options or other awards may
generally be paid in cash or, subject to certain restrictions, shares of common
stock. Subject to any applicable limits, we may finance or offset shares to
cover any minimum withholding taxes due in connection with an award.
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Federal Tax Consequences. The current federal income tax consequences of
awards authorized under the plan follow certain basic patterns. Generally,
awards under the plan that are includable in the income of the recipient at the
time of exercise, vesting or payment, such as nonqualified stock options, stock
appreciation rights and restricted stock awards, are deductible by us, and
awards that are not required to be included in the income of the recipient,
such as incentive stock options, are not deductible by us.
Generally speaking, Section 162(m) of the Internal Revenue Code provides
that a public company may not deduct compensation, except for compensation that
is commission or performance-based paid to its chief executive officer or to
any of its four other highest compensated officers to the extent that the
compensation paid to such person exceeds $1 million in a tax year. The
regulations exclude from these limits compensation that is paid pursuant to a
plan in effect before the time that a company is publicly held. We expect that
compensation paid under the plan will not be subject to Section 162(m) in
reliance on this transition rule, as long as such compensation is paid or stock
options, stock appreciation rights and/or restricted stock awards are granted
before the earlier of a material amendment to the plan or our annual
stockholders meeting in the year 2004.
In addition, we may not be able to deduct certain compensation attributable
to the acceleration of payment and/or vesting of awards in connection with a
change of control event should that compensation exceed certain threshold
limits under Section 280G of the Internal Revenue Code.
Non-Exclusive Plan. The plan is not exclusive. Our board of directors (or
its delegate), under Delaware law, may grant stock and performance incentives
or other compensation, in stock or cash, under other plans or authority.
401(k) Plan
We offer a 401(k) savings and retirement plan to all of our employees.
Participants in the 401(k) plan may elect to contribute up to 15% of their
annual salary but may not exceed the annual maximum contribution limits
established by the Internal Revenue Service. We currently match 25% of the
amounts contributed up to a maximum of $1,000 per year by each participant. The
401(k) plan is intended to qualify under the Internal Revenue Code, so that
contributions by employees or by us to the plan and income earned on plan
contributions are not taxable to employees until distributed to them, and
contributions by us will be deductible by us when made. The trustees under the
401(k) plan, at the direction of each participant, invest such participant's
assets in the 401(k) plan in selected investment options.
As a result of our acquisition of LCG and our pending acquisition of Z-
Spanish Media, we are (or will be) the successor-in-interest to the 401(k)
plans of LCG and Z-Spanish Media. To the extent permissible, we intend to
terminate all such plans, and each of the employees covered by such plans will
have the opportunity to roll-over their investment accounts into our 401(k)
plan.
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Indemnification of Directors and Executive Officers and Limitation of Liability
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit indemnification for
liabilities, including reimbursement for expenses incurred, arising under the
Securities Act. This indemnification may, however, be unenforceable as against
public policy.
As permitted by Delaware law, our first restated certificate of
incorporation, which will become effective upon the closing of this offering,
includes a provision that eliminates the personal liability of our directors
for monetary damages for breach of fiduciary duty as a director, except for
liability:
. for any breach of the director's duty of loyalty to us or our
stockholders;
. for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
. under Section 174 of the Delaware law regarding unlawful dividends and
stock purchases; or
. for any transaction from which the director derived an improper personal
benefit.
As permitted by Delaware law, our first restated certificate of
incorporation provides that:
. we are required to indemnify our directors and officers to the fullest
extent permitted by Delaware law, so long as the person being indemnified
acted in good faith and in a manner the person reasonably believed to be
in or not opposed to our best interests, and with respect to any criminal
action or proceeding, had no reasonable cause to believe the person's
conduct was unlawful;
. we are permitted to indemnify our other employees and agents to the
extent that we indemnify our officers and directors, unless otherwise
required by law;
. we are required to advance expenses to our directors and officers
incurred in connection with a legal proceeding to the fullest extent
permitted by Delaware law, subject to very limited exceptions; and
. the rights conferred in our first restated certificate of incorporation
are not exclusive.
Before the closing of this offering, we intend to enter into indemnity
agreements with each of our current directors and officers to give such
directors and officers additional contractual assurances regarding the scope of
the indemnification set forth in our first restated certificate of
incorporation and to provide additional procedural protections. At present,
there is no pending litigation or proceeding involving any of our directors,
officers or employees regarding which indemnification is sought, nor are we
aware of any threatened litigation that may result in claims for
indemnification.
We have obtained directors' and officers' liability insurance.
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PRINCIPAL STOCKHOLDERS
The following table summarizes information regarding the beneficial
ownership of our outstanding common stock as of , 2000 based on an
estimated initial public offering price of $ for:
. each person or entity known by us to beneficially own 5% or more of our
outstanding common stock;
. our executive officers noted in the Summary Compensation Table;
. each of our directors; and
. all executive officers and directors as a group.
<TABLE>
<CAPTION>
Percentage of Shares
Beneficially
Owned (2)
-----------------------
Name and Address of Class of Number of Shares Before After
Beneficial Owner (1) Shares Beneficially Owned Offering Offering
- -------------------- -------- ------------------ ---------- ----------
<S> <C> <C> <C> <C>
Walter F. Ulloa (3)..... B
Philip C. Wilkinson
(4).................... B
Paul A. Zevnik (5)...... B
Univision Communications
Inc. (6)............... C
TSG Capital Group (7)... A
Jeanette Tully.......... A * *
Amador S. Bustos........ A * *
Glenn Emanuel........... A * *
Darryl B. Thompson (8).. A
Andrew W. Hobson (9)....
Michael D. Wortsman
(10)...................
All executive officers
and directors as a
group (nine persons)... A
B
</TABLE>
- --------
* Represents beneficial ownership of less than 1%.
(1) Unless otherwise noted, the address for each person or entity named below
is c/o Entravision Communications Corporation, 2425 Olympic Boulevard,
Suite 6000 West, Santa Monica, California 90404. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission and generally includes voting or investment power with respect
to securities. Except as indicated by footnote, and subject to community
property laws where applicable, the persons named in the table below have
sole voting and investment power with respect to all shares of common
stock shown as beneficially owned by them.
(2) Because this table assumes no exercise of the underwriters' over-allotment
option and because the selling stockholder will only sell to the extent
the option is exercised, the table does not reflect any shares he may
sell.
(3) Includes shares held by The Walter F. Ulloa Irrevocable Trust of
1996.
(4) Includes shares held by The Wilkinson Family Trust and
shares held by The 1994 Wilkinson Children's Gift Trust.
(5) Includes shares held by The Paul A. Zevnik Irrevocable Trust of
1996, shares held by The Zevnik Family L.L.C. and shares
held by The Zevnik Charitable Foundation. Mr. Zevnik has shared voting
power in The Zevnik Charitable Foundation.
(6) The address for Univision Communications Inc. is 1999 Avenue of the
Stars, Suite 3050, Los Angeles, California 90067.
(7) TSG Capital Group includes TSG Capital Fund II, L.P., TSG Capital Fund
III, L.P., TSG Associates II Inc. and TSG Associates III, LLC. The address
for each of these entities is 177 Broad Street, 12th Floor, Stamford,
Connecticut 06901.
(8) Includes shares held by TSG Capital Group. Mr. Thompson is a
principal in each of the TSG Capital Group entities. Mr. Thompson may be
deemed to exercise voting and investment power over such shares. Mr.
Thompson disclaims beneficial ownership of such shares, except to the
extent of his proportionate interest therein.
(9) Mr. Hobson is an executive officer of an affiliate of Univision
Communications Inc.
(10) Mr. Wortsman is an executive officer of an affiliate of Univision
Communications Inc.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reorganization. Before the closing of this offering, we will complete a
reorganization. As a result of this reorganization, the beneficial ownership of
Entravision will be virtually identical to the beneficial ownership of
Entravision Communications Company, L.L.C., our predecessor, immediately before
the reorganization. This reorganization will occur as follows:
. Walter F. Ulloa, Philip C. Wilkinson and Paul A. Zevnik and each of
their trusts and other controlled entities will exchange their direct
and indirect ownership interests in our predecessor for newly-issued
shares of our Class B common stock;
. each of the stockholders in the seven corporate member entities of our
predecessor (other than Messrs. Ulloa, Wilkinson and Zevnik and their
trusts and related entities) will exchange their shares in such
corporate members for newly-issued shares of our Class A common stock;
. each of the remaining individuals, trusts and other entities holding
direct membership interests in our predecessor will exchange such
interests for newly-issued shares of our Class A common stock; and
. Univision will exchange its subordinated note and option in our
predecessor for shares of our Class C common stock.
Relationship with Univision. In December 1996, Univision invested $10
million in our predecessor in exchange for a subordinated note and an option to
acquire an approximately 25% ownership interest in our predecessor. The note is
due December 30, 2021 and bears interest at 7.01% per year, for which Univision
has agreed to provide us with network compensation equal to the amount of
annual interest due. In April 1999, we acquired television stations KLUZ and
K48AM in Albuquerque, New Mexico from Univision in exchange for $1 million in
cash and a 2% increase in Univision's option to acquire an ownership interest
in our predecessor. In March 2000, Univision invested an additional
$110 million in our predecessor, which increased the subordinated note to an
aggregate of $120 million, and increased its option to the right to acquire a
40% ownership interest in our predecessor. In connection with our
reorganization, Univision will exchange its subordinated note and option for
shares of our Class C common stock, or an approximately % ownership
interest in us. As long as Univision owns at least 30% of its initial Class C
shares, it will have the right to vote as a separate class to elect two
directors, to appoint a member to any board committee and to approve material
decisions involving our company, including any merger consolidation or any
other business combination, any dissolution and any transfer of the FCC
licenses for any of our Univision-affiliated television stations. Also,
pursuant to our Univision network affiliation agreements, Univision acts as our
national advertising sales representative for our Univision-affiliated
television stations. Our director-nominee, Andrew W. Hobson, is an Executive
Vice President of the Univision Network and our director-nominee, Michael D.
Wortsman, is the Co-President of Univision Television Group Inc.
Voting Agreement. On the closing of this offering, we will enter into a
voting agreement with Walter F. Ulloa, our Chairman and Chief Executive
Officer, Philip C. Wilkinson, our President and Chief Operating Officer, and
Paul A. Zevnik, our Secretary, under which they will agree to vote all of their
shares of Class B common stock in favor of such director-nominees as Messrs.
Ulloa and Wilkinson may nominate. Mr. Zevnik will further agree to vote his
shares on all other matters in the same manner as both Mr. Ulloa and
Mr. Wilkinson, unless they vote differently, in which case Mr. Zevnik will be
free to vote his shares however he may choose. Messrs. Ulloa and Wilkinson will
irrevocably designate themselves and Mr. Zevnik as director-nominees. In
addition, Messrs. Ulloa and Wilkinson will agree to nominate as directors
Amador S. Bustos, the President of our Radio Division, and a representative of
TSG Capital Fund III, L.P. as long as Mr. Bustos and the TSG representative
continue to have a contractual right to be elected to our board of directors.
This agreement will remain in effect with respect to each of Messrs. Ulloa,
Wilkinson and Zevnik as long as he owns 30% of his initial Class B shares.
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Registration Rights. We will enter into investor rights agreements with all
of our existing stockholders and with all of the stockholders receiving Class A
common stock in connection with our acquisition of Z-Spanish Media. The
investor rights agreements provide these stockholders with rights to require us
to register their stock with the Securities and Exchange Commission. These
rights do not apply to this offering.
Transactions with Walter F. Ulloa and Philip C. Wilkinson
Employment agreements between our predecessor and Messrs. Ulloa and
Wilkinson entitle each of them to receive an annual bonus in an amount equal to
1% of our predecessor's annual net revenue. For the period from January 1, 2000
through June 30, 2000, we will pay bonuses under these agreements of
approximately $300,000 to each of Mr. Ulloa and Mr. Wilkinson. These employment
agreements will be terminated before the closing of this offering.
Mr. Ulloa is the sole shareholder of Las Tres Campanas Television, Inc., the
FCC licensee of low-power television stations K27AF and K47EG in Las Vegas,
Nevada. In 1997, Las Tres Campanas issued a note to a former shareholder in the
principal amount of $262,500. We have assumed the payment obligations of Las
Tres Campanas under the note in exchange for Las Tres Campanas's agreement to
contribute to us all of its assets, including the licenses to stations K27AF
and K47EG. As of December 31, 1999, the unpaid balance of principal and
interest under the note was approximately $231,000.
In 1996, Cabrillo Broadcasting Corporation, one of the member entities of
our predecessor, made a loan in the principal amount of $159,000 to Mr.
Wilkinson, which was used by Mr. Wilkinson to purchase equity in KSMS, Inc.,
another of our predecessor entities. When the roll-up of our predecessor was
consummated in 1997, all of the assets and liabilities of Cabrillo were
contributed to our predecessor. As payment for this obligation, Mr. Wilkinson
has agreed to transfer to us his ownership interest in the FCC license for
radio station KPVW, Aspen, Colorado.
Transactions with Paul A. Zevnik
Mr. Zevnik is a partner of Zevnik Horton Guibord McGovern Palmer & Fognani,
L.L.P., which has regularly represented us as our legal counsel and will
continue to do so.
In October 1996, we made a loan to Mr. Zevnik evidenced by a promissory note
in the principal amount of $360,366, which bears interest at a rate of 5.625%
per year and is due and payable in full in October 2001. Mr. Zevnik used the
loan to purchase 10,313 Class A units of our predecessor. As of December 31,
1999, the aggregate outstanding principal and interest amount on this loan was
$425,366.
Transactions with TSG Entities and Darryl B. Thompson
Our director-nominee, Darryl B. Thompson, is an equityholder, officer and
director of TSG Capital Fund II, L.P., TSG Capital Fund III, L.P., TSG
Ventures, L.P. and TSG Associates III, L.P.
On April 20, 2000, TSG Capital Fund III, L.P. and its affiliates invested
$90 million in our predecessor in the form of a convertible subordinated note,
which was used to fund a portion of the purchase price to acquire LCG. The note
will automatically convert upon the closing of this offering into shares
of our Series A preferred stock.
In connection with our acquisition of Z-Spanish Media, TSG Capital Fund II,
L.P. and its affiliates will receive $ in cash and shares of
our Class A common stock, and TSG Associates III, L.P. and its affiliates will
receive $ in cash and shares of our Class A common stock.
On March 31, 1998, TSG Ventures, L.P. issued a promissory note to KZSF
Broadcasting, Inc., a wholly owned subsidiary of Z-Spanish Media, in the
principal amount of approximately $1.1 million with an interest
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<PAGE>
rate of 12% per year, which was paid in full in January 1999. On March 31,
1998, TSG Ventures, L.P. issued a promissory note to Z-Spanish Radio Network,
Inc., a wholly owned subsidiary of Z-Spanish Media, in the principal amount of
$1.8 million with an interest rate of 15% per year, which was paid in full in
January 1999.
In December 1999, Z-Spanish Media and Vista agreed to provide an aggregate
of $5 million in advertising to LatinForce.Net Inc., an incubator for websites
targeting Hispanics in the United States and Latin America, in exchange for
shares of Series A preferred stock. Mr. Thompson is a director, and TSG
Capital Fund III, L.P. is a stockholder, of LatinForce.Net.
Transactions with Amador S. Bustos
In connection with our acquisition of Z-Spanish Media, Amador S. Bustos, the
President of our Radio Division, and his affiliates will receive $ in cash
and shares of our Class A common stock.
In October 1999, Z-Spanish Media acquired all of the outstanding capital
stock of JB Broadcasting, Inc., an entity owned by Mr. Bustos and his brother
John Bustos, for $3.4 million, of which $0.4 million was paid in cash and the
remainder was paid in shares of Z-Spanish Media's Class B common stock. From
1996 until October 1999, Z-Spanish Media operated radio station KZMS in
Modesto, California, which was owned by JB Broadcasting, under a local
marketing agreement. Total fees of $0.7 million due under this agreement were
included in the consideration paid to acquire JB Broadcasting.
During 1998, Z-Spanish Media operated radio station KZSJ in San Jose under a
local marketing agreement with KZSJ Radio LLC, an entity owned by Mr. Bustos,
pursuant to which KZSJ Radio LLC received a monthly fee of $10,000. The local
marketing agreement was terminated by mutual agreement between the parties in
December 1998, and $0.1 million remains due and payable to KZSJ Radio LLC.
Pursuant to a lease that expires in 2009, Z-Spanish Media rents a studio
building from Mr. Bustos for $42,000 per year. Pursuant to a lease that expires
in 2019, Z-Spanish Media leases a corporate office building from Mr. Bustos for
$63,000 a year. Rent increases annually by 5% per year for the term of both
leases.
Transactions with Glenn Emanuel
In connection with our acquisition of Z-Spanish Media, Glenn Emanuel, the
President of our Outdoor Division, will receive $ in cash and shares of
our Class A common stock.
In August 1997, Mr. Emanuel executed a promissory note in favor of Vista in
the principal amount of $198,315 with an interest rate of 9.75% per year, which
is due and payable in full on August 9, 2002. Mr. Emanuel used the loan to
purchase shares of Vista's common and preferred stock. The loan will be secured
by the shares of Class A common stock to be received by Mr. Emanuel in
connection with our acquisition of Z-Spanish Media. As of December 31, 1999,
the outstanding balance of principal and interest under the loan was $243,548.
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DESCRIPTION OF CAPITAL STOCK
Set forth below is a summary of the material provisions of our capital stock
as set forth in our first restated certificate of incorporation. This summary
does not purport to be complete. For a more detailed description, see our first
restated certificate of incorporation, a copy of which we have filed as an
exhibit to the registration statement, and the applicable provisions of
Delaware law.
Our first restated certificate of incorporation provides for authorized
capital stock of:
. 415 million authorized shares of common stock, $0.0001 par value per
share, which consists of 305 million shares of Class A common stock, 60
million shares of Class B common stock and 50 million of Class C common
stock; and
. 50 million authorized shares of preferred stock, $0.0001 par value per
share, which consists of 11 million shares of Series A preferred stock
to be authorized pursuant to a certificate of designations, preferences
and rights and 39 million undesignated shares.
As of , 2000, assuming our reorganization described elsewhere in
this prospectus, there will be outstanding shares of Class A common
stock held of record by stockholders, shares of Class B common
stock held of record by stockholders, shares of Class C common
stock held of record by one stockholder and shares of Series A preferred
stock held of record by one stockholder.
All of the shares of Class A common stock being issued pursuant to this
offering will be fully-paid and non-assessable.
Common Stock
General. The holders of our Class A common stock, Class B common stock and
Class C common stock have the same rights except with respect to voting,
conversion and transfer.
Dividends. Subject to the right of the holders of any class of our preferred
stock, holders of shares of our common stock are entitled to receive dividends
that may be declared by our board of directors out of legally available funds.
No dividend may be declared or paid in cash or property on any share of any
class of our common stock unless simultaneously the same dividend is declared
or paid on each share of that and every other class of our common stock; except
with respect to the payment of stock dividends, in which case holders of a
specific class of our common stock are entitled to receive only additional
shares of that class. We may not reclassify, subdivide or combine shares of any
class of our common stock without, at the same time, proportionally
reclassifying, subdividing or combining shares of the other classes.
Voting Rights. Holders of our Class A common stock and Class C common stock
are entitled to one vote per share on all matters to be voted on by
stockholders, while holders of our Class B common stock are entitled to ten
votes per share. Generally, all matters to be voted on by stockholders must be
approved by a majority of the votes entitled to be cast by all holders of our
common stock present in person or represented by proxy, voting together as a
single class, subject to any voting rights granted to holders of any class of
our preferred stock. Univision, as the holder of all of our Class C common
stock upon completion of this offering, is entitled to vote as a separate class
to elect two of our directors, and will have the right to vote as a class on
certain material decisions involving Entravision, including any merger,
consolidation or other business combination, any dissolution of Entravision and
any transfer of the FCC licenses for any of our Univision-affiliated stations.
These special voting rights will terminate upon Univision selling below 30% of
its initial ownership level of our Class C common stock.
Messrs. Ulloa, Wilkinson and Zevnik, as the holders of all of the Class B
common stock upon completion of this offering, will enter into a voting
agreement in which each of such individuals will agree, in any election of our
directors, to vote the shares of our Class B common stock held by such
individual in favor of the
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<PAGE>
director-nominees designated by Messrs. Ulloa and Wilkinson. Under the voting
agreement, Messrs. Ulloa, Wilkinson and Zevnik will contractually agree to
elect themselves, Amador S. Bustos and a representative of TSG Capital Fund
III, L.P. as directors of Entravision.
Liquidation Rights. The holders of each class of our common stock will share
equally on a per share basis upon liquidation or dissolution of all of our
assets available for distribution to common stockholders.
Conversion. Shares of our Class B common stock will be convertible into
shares of our Class A common stock on a share-for-share basis at the option of
the holder at any time, or automatically:
. upon the transfer to a person or entity which is not a permitted
transferee;
. upon the death of such holder;
. when such holder is no longer actively involved in the business of
Entravision; or
. if such holder owns less than 30% of his, her or its initial ownership
level.
In general, permitted transferees will include Messrs. Ulloa, Wilkinson and
Zevnik, and any of their respective spouses, legal descendants, adopted
children, minor children supported by such holder and controlled entities. In
addition, each share of our Class B common stock shall automatically convert
into Class A common stock on a share-for-share basis upon the death of the
second of Mr. Ulloa and Mr. Wilkinson or when the second of Mr. Ulloa and
Mr. Wilkinson ceases to be actively involved in the business of Entravision.
Shares of our Class C common stock will be convertible into shares of our
Class A common stock on a share-for-share basis at the option of the holder at
any time or automatically upon the transfer to a person or entity which is not
a permitted transferree or if such holder owns less than 30% of its initial
ownership level.
Other Rights. The holders of our common stock have no preemptive or other
subscription rights, and there are no redemption or sinking fund provisions
with respect to these shares.
Preferred Stock
Series A Mandatorily Redeemable Convertible Preferred Stock
Dividends. The holders of the Series A preferred stock shall have
dividends declared at the rate of 8.5% per annum compounded annually. Such
dividends accrue and are only payable upon liquidation of Entravision or
redemption of the Series A preferred stock, payable in cash. Accrued but unpaid
dividends are waived and forgiven upon conversion of the Series A preferred
stock into Class A common stock.
Liquidation Preference. The Series A preferred stock is senior to the
rights of each class of our common stock upon liquidation or distribution of
our assets in dissolution.
Voting Rights. The affirmative vote of a majority of the holders of the
Series A preferred stock is required to:
. issue any equity security that is senior to the Series A preferred
stock;
. amend our first restated certificate of incorporation or first amended
and restated bylaws in a manner that adversely affects the rights of the
Series A preferred stock; or
. enter into or engage in any transaction with an affiliate of Entravision
or its stockholders not at arms length.
Redemption. The Series A preferred stock is subject to mandatory
redemption at par value plus accrued dividends at the option of the holder of
the Series A preferred stock for a period of 90 days beginning five years after
its issuance and must be redeemed in full ten years after its issuance. The
Series A preferred stock which does not elect to convert into our common stock
is also fully redeemable at par value plus accrued dividends upon a change in
control of Entravision. We have the right to redeem the Series A preferred
stock at our option at any time one year after its issuance, provided that the
trading price of our Class A common stock is at least $ per share for 15
consecutive trading days immediately before such redemption.
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Conversion. The Series A preferred stock is convertible into our Class A
common stock at a conversion price of the lower of:
. $8.4746 per share; or
. the greater of 93% of the price per share of the Class A common stock
sold in this offering or $7.3692 per share.
Blank-Check Preferred Stock
Our board of directors is empowered, without approval of the stockholders,
to cause additional shares of preferred stock to be issued from time to time in
one or more series, and the board of directors may fix the number of shares of
each series and the designation, powers, privileges, preferences and rights and
the qualifications, limitations and restrictions of the shares of each series.
The specific matters that our board of directors may determine with respect
to additional series of preferred stock include the following:
. the number of shares of each series;
. the designation of each series;
. the rate of any dividends;
. whether any dividends shall be cumulative or non-cumulative;
. any voting rights;
. rights and terms of any conversion or exchange;
. the terms of any redemption, or any sinking fund with respect to any
redemption of each series;
. the amount payable in the event of any voluntary liquidation,
dissolution or winding up of the affairs of Entravision; and
. any other relative rights, privileges and limitations of each series.
Alien Ownership
Our first restated certificate of incorporation restricts the ownership of
our capital stock in accordance with the Communications Act and the rules of
the FCC that prohibit direct ownership of more than 20% of our outstanding
capital stock (or beneficial ownership of more than 25% of our capital stock
through others) by or for the account of aliens, foreign governments or non-
U.S. corporations or corporations otherwise subject to control by those persons
or entities. Our first restated certificate of incorporation also prohibits any
transfer of our capital stock which would cause us to violate this prohibition.
In addition, our first restated certificate of incorporation authorizes our
board of directors to adopt other provisions that it deems necessary to enforce
these prohibitions.
Delaware Anti-Takeover Law and Charter Provisions
Provisions of our first restated certificate of incorporation are intended
to enhance continuity and stability in our board of directors and in our
policies, but might have the effect of delaying or preventing a change in
control of Entravision and may make the removal of incumbent management more
difficult even if the transactions could be beneficial to the interests of
stockholders. A summary description of these provisions follows:
Change in Control. We are subject to the provisions of Section 203 of the
Delaware General Corporation Law, an anti-takeover law. In general, the statute
prohibits a publicly-held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an interested
stockholder, unless the business
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<PAGE>
combination is approved in a prescribed manner. For purposes of Section 203, a
"business combination" includes a merger, asset sale or other transaction
resulting in a financial benefit to the interested stockholder. An "interested
stockholder" is a person who, together with affiliates and associates, owns (or
within three years prior, did own) 15% or more of a corporation's voting stock.
The provisions of Section 203, together with the ability of our board of
directors to issue preferred stock without further stockholder action, could
delay or frustrate the removal of incumbent directors or a change in control of
Entravision. The provisions also could discourage, impede or prevent a merger,
tender offer or proxy contest, even if this event would be favorable to the
interests of stockholders. Our stockholders, by adopting an amendment to our
first restated certificate of incorporation or our first amended and restated
bylaws, may elect not to be governed by Section 203 effective 12 months after
adoption. Neither our first restated certificate of incorporation nor our first
amended and restated bylaws currently exclude us from the restrictions imposed
by Section 203.
Authority to Issue Additional Preferred Stock. Our first restated
certificate of incorporation authorizes our board of directors, without
stockholder approval, to issue additional shares of one or more series of
preferred stock, each series having the voting rights, dividend rates,
liquidation, redemption, conversion and other rights as may be fixed by our
board of directors. The issuance of additional shares of preferred stock, or
the issuance of rights to purchase additional shares of preferred stock, could
be used to discourage an unsolicited acquisition proposal. For example, a
business combination could be impeded by issuing a series of preferred stock
containing class voting rights that would enable the holder or holders of this
series to block the transaction. Alternatively, a business combination could be
facilitated by issuing a series of preferred stock having sufficient voting
rights to provide a required percentage vote of the stockholders. In addition,
under certain circumstances, the issuance of additional shares of preferred
stock could adversely affect the voting power and other rights of the holders
of our common stock. Although our board of directors is required to make any
determination to issue any additional shares of preferred stock based on its
judgment as to the best interests of our stockholders, it could act in a manner
that would discourage an acquisition attempt or other transaction that some, or
a majority, of the stockholders might believe to be in their best interests or
in which stockholders might receive a premium for their stock over prevailing
market prices of the stock. Our board of directors does not, at present, intend
to seek stockholder approval prior to any issuance of currently authorized
stock, unless otherwise required by law or applicable stock exchange
requirements.
Limitation of Director Liability. Section 102(b)(7) of the Delaware General
Corporation Law authorizes corporations to limit or eliminate the personal
liability of directors to corporations and their stockholders for monetary
damages for breach of directors' fiduciary duty of care. Although Section
102(b) does not change directors' duty of care, it enables corporations to
limit available relief to equitable remedies such as injunction or rescission.
Our first restated certificate of incorporation limits the liability of
directors to Entravision or its stockholders to the fullest extent permitted by
Section 102(b). Specifically, our directors will not be personally liable for
monetary damages for breach of a director's fiduciary duty as a director,
except for liability:
. for any breach of the director's duty of loyalty to us or our
stockholders;
. for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General
Corporation Law; or
. for any transaction from which the director derived an improper personal
benefit.
Indemnification. To the maximum extent permitted by law, our first restated
certificate of incorporation provides for mandatory indemnification of
directors and officers and discretionary indemnification of our employees and
agents against all expense, liability and loss to which they may become subject
or which they may incur as a result of being or having been our director,
officer, employee or agent, as the case may be.
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<PAGE>
Registration Rights
All of our stockholders before the closing of this offering and all of the
stockholders receiving our Class A common stock in connection with the
acquisition of Z-Spanish Media are entitled to certain rights with respect to
registration of their shares under the Securities Act, which do not apply to
this offering.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is ChaseMellon
Shareholder Services, L.L.C.
Listing
We have applied for listing of our Class A common stock on the New York
Stock Exchange under the trading symbol "EVC."
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Before this offering, there has been no market for our common stock. Future
sales of substantial amounts of our common stock in the public market could
adversely affect prevailing market prices. As described below, no shares
currently outstanding will be available for sale immediately after this
offering because of contractual restrictions on resale. Sales of substantial
amounts of our common stock in the public market after the restrictions lapse
or are released could adversely affect the prevailing market price and impair
our ability to raise equity capital in the future.
Upon completion of the offering, we will have outstanding shares of
Class A common stock, outstanding shares of Class B common stock and
outstanding shares of Class C common stock. Of the shares of Class A
common stock, the shares sold in this offering, plus any shares
issued upon exercise of the underwriters' over-allotment option, will be freely
tradable without restriction under the Securities Act, unless purchased by our
"affiliates" as that term is defined in Rule 144 under the Securities Act. In
general, affiliates include officers, directors or 10% stockholders.
The remaining shares of common stock outstanding will be
"restricted securities" within the meaning of Rule 144. Restricted securities
may be sold in the public market only if registered or if they qualify for an
exemption from registration under Rules 144 or 701 promulgated under the
Securities Act, which are summarized below. Sales of the restricted securities
in the public market, or the availability of such shares for sale, could
adversely affect the market price of our common stock.
Each of our officers, directors and existing stockholders has entered into a
"lock-up" agreement with Donaldson, Lufkin & Jenrette Securities Corporation in
connection with this offering generally providing that they will not offer,
sell, contract to sell or grant any option to purchase or otherwise dispose of
our common stock or any securities exercisable for or convertible into our
common stock without the prior written consent of Donaldson, Lufkin & Jenrette
Securities Corporation. The "lock-up" restrictions will expire on the date
which is 180 days after the date of this prospectus. Notwithstanding possible
earlier eligibility for sale under the provisions of Rules 144 and 701, shares
subject to "lock-up" agreements will not be salable until such agreements
expire or are waived by Donaldson, Lufkin & Jenrette Securities Corporation.
Taking into account the "lock-up" agreements, and assuming Donaldson, Lufkin &
Jenrette Securities Corporation does not release stockholders from these
agreements, the following shares will be eligible for sale in the public market
at the following times:
. beginning on the date of this prospectus, only the shares of Class A
common stock sold in the offering will be immediately available for sale
in the public market; and
. beginning 180 days after the date of this prospectus, an additional
shares of common stock will be freely tradeable pursuant to
Rule 144(k), and an additional shares will be eligible for sale
subject to volume limitations, as explained below, pursuant to Rules 144
and 701, including, in both cases, shares of Class A common stock
issuable upon conversion of Class B common stock or Class C common
stock.
In general, under Rule 144 as currently in effect, after the expiration of
the "lock-up" agreements with Donald, Lufkin & Jenrette Securities Corporation,
a person who has beneficially owned restricted securities for at least one year
would be entitled to sell within any three-month period a number of shares that
does not exceed the greater of:
. 1% of the number of shares of common stock then outstanding which will
equal approximately shares immediately after the offering; or
. the average weekly trading volume of the common stock during the four
calendar weeks preceding the sale.
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Sales under Rule 144 are also subject to requirements with respect to manner
of sale, notice and the availability of current public information about us.
Under Rule 144(k), a person who is not deemed to have been our affiliate at any
time during the three months preceding a sale, and who has beneficially owned
the shares proposed to be sold for at least two years, is entitled to sell such
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.
Rule 701, as currently in effect, permits our employees, officers, directors
or consultants who purchased shares pursuant to a written compensatory plan or
contract to resell such shares in reliance upon Rule 144 but without compliance
with specific restrictions. Rule 701 provides that affiliates may sell their
Rule 701 shares under Rule 144 without complying with the holding period
requirement and that non-affiliates may sell such shares in reliance on Rule
144 without complying with the holding period, public information, volume
limitation or notice provisions of Rule 144.
In addition, we intend to file a registration statement on Form S-8 under
the Securities Act within 180 days following the date of this prospectus to
register shares to be issued pursuant to our omnibus equity incentive plan. As
a result, any options or rights exercised under our omnibus equity incentive
plan or any other benefit plan after the effectiveness of the registration
statement will also be freely tradable in the public market. However, such
shares held by affiliates will still be subject to the volume limitation,
manner of sale, notice and public information requirements of Rule 144 unless
otherwise resaleable under Rule 701.
All of our stockholders before the closing of this offering and all of the
stockholders receiving our Class A common stock in connection with the
acquisition of Z-Spanish Media are entitled to certain rights with respect to
registration of their shares under the Securities Act, which do not apply to
this offering.
We cannot predict as to the effect, if any, that sales of shares of our
Class A common stock, or the availability of shares for future sale, will have
on the market price of our Class A common stock prevailing from time to time.
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UNDERWRITING
Subject to terms and conditions of an underwriting agreement, dated as of
, 2000, the underwriters named below, who are represented by
Donaldson, Lufkin & Jenrette Securities Corporation, Credit Suisse First Boston
Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Salomon Smith
Barney Inc., Bear, Stearns & Co. Inc. and DLJdirect Inc., have severally agreed
to purchase from us the respective number of shares of Class A common stock
shown opposite their names below.
<TABLE>
<CAPTION>
Number
of
Underwriters: Shares
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation...................
Credit Suisse First Boston Corporation................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated ...................
Salomon Smith Barney Inc..............................................
Bear, Stearns & Co. Inc...............................................
DLJdirect Inc.........................................................
Total...............................................................
====
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase and accept delivery of the shares of Class A common
stock included in this offering are subject to approval of legal matters by
their counsel and to customary conditions, including the effectiveness of the
registration statement, the continuing correctness of our representations and
those of the selling stockholder, the listing of the Class A common stock on
the New York Stock Exchange and no occurrence of an event that would have a
material adverse effect on us. The underwriters are obligated to purchase and
accept delivery of all the shares of Class A common stock, other than those
covered by the over-allotment option described below, if they purchase any of
the shares of Class A common stock.
The underwriters initially propose to offer some of the shares of Class A
common stock directly to the public at the initial public offering price on the
cover page of this prospectus and some of the shares of Class A common stock to
dealers, including the underwriters, at the initial public offering price less
a concession not in excess of $ per share. The underwriters may allow, and
these dealers may re-allow, a concession not in excess of $ per share to
other dealers. After the initial offering of the Class A common stock to the
public, the representatives of the underwriters may change the public offering
price and these concessions. The underwriters do not intend to confirm sales to
any accounts over which they exercise discretionary authority.
The following table shows the underwriting fees to be paid to the
underwriters by us and by the selling stockholder in this offering. These
amounts are shown assuming both no exercise and full exercise of the
underwriters' option to purchase additional shares of Class A common stock.
<TABLE>
<CAPTION>
No Exercise Full Exercise
<S> <C> <C>
Entravision:
Per share........................................ $ $
Total............................................ $ $
Selling Stockholder:
Per share........................................ $ $
Total............................................ $ $
</TABLE>
We estimate expenses related to this offering will be $ .
We and the selling stockholder have granted to the underwriters an option,
exercisable within 30 days after the date of the underwriting agreement, to
purchase up to additional shares of Class A common stock at the initial
public offering price less underwriting fees. The underwriters may exercise
this option solely to cover over-allotments, if any, made in connection with
the offering. To the extent that the underwriters exercise this option, each
underwriter will become obligated, subject to conditions, to purchase a number
of additional shares approximately proportionate to that underwriter's initial
purchase commitment.
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We and the selling stockholder have agreed to indemnify the underwriters
against specified liabilities, including liabilities under the Securities Act,
or to contribute to payments that the underwriters may be required to make in
respect of any of those liabilities.
Entravision, our executive officers and directors and all of our
stockholders before the closing of the offering (including the selling
stockholder) have agreed, for a period of 180 days from the date of this
prospectus, they will not, without the prior written consent of Donaldson,
Lufkin & Jenrette Securities Corporation, do either of the following:
. offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of,
directly or indirectly, any shares of Class A common stock or any
securities convertible into or exercisable or exchangeable for common
stock; or
. enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of any Class
A common stock.
Either of the foregoing transfer restrictions will apply regardless of
whether a covered transaction is to be settled by the delivery of Class A
common stock or such other securities, in cash or otherwise. In addition,
during this 180 day period and subject to specified exceptions, we have agreed
not to file any registration statement with respect to, and each of our
executive officers and directors and all of our stockholders have agreed not to
exercise any right with respect to, the registration of any shares of Class A
common stock or any securities convertible into or exercisable for Class A
common stock without the prior written consent of Donaldson, Lufkin & Jenrette
Securities Corporation.
At our request, the underwriters have reserved for sale up to shares
of Class A common stock offered by this prospectus for sale at the initial
public offering price to our employees, officers and directors and other
persons designated by us. The number of shares of Class A common stock
available for sale to the general public in this offering will be reduced to
the extent these persons purchase or confirm for purchase, orally or in
writing, these reserved shares. Any reserved shares not purchased or confirmed
for purchase will be offered by the underwriters to the general public on the
same basis as the other shares offered by this prospectus.
We have applied for listing of our Class A common stock on the New York
Stock Exchange under the symbol "EVC."
Other than in the United States, no action has been taken by Entravision,
the selling stockholder or the underwriters that would permit a public offering
of the shares of Class A common stock offered by this prospectus offering in
any jurisdiction where action for that purpose is required. The shares of Class
A common stock offered through this prospectus may not be offered or sold,
directly or indirectly, nor may this prospectus or any other offering material
or advertisements associated with the offer and sale of any of the shares of
Class A common stock offered through this prospectus be distributed or
published in any jurisdiction, except under circumstances that will result in
compliance with the applicable rules and regulations of that jurisdiction. You
should inform yourself and observe any restrictions relating to the offering of
the Class A common stock and the distribution of this prospectus. This
prospectus does not constitute an offer to sell or a solicitation of an offer
to buy any shares of Class A common stock included in this offering in any
jurisdiction where that would not be permitted or legal.
DLJdirect Inc., an affiliate of Donaldson, Lufkin & Jenrette Securities
Corporation, is facilitating the distribution of the shares sold in this
offering over the Internet.
Stabilization
In connection with the offering, the underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the Class A common
stock. Specifically, the underwriters may over-allot the offering, creating a
syndicate short position. The underwriters may bid for and purchase shares of
Class A
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common stock in the open market to cover a syndicate short position or to
stabilize the price of the Class A common stock. In addition, the underwriting
syndicate may reclaim selling concessions from syndicate members and selected
dealers if Donaldson, Lufkin & Jenrette Securities Corporation repurchases
previously distributed Class A common stock in syndicate covering transactions,
in stabilization transactions or otherwise or if Donaldson, Lufkin & Jenrette
Securities Corporation receives a report that indicates that the clients of
such syndicate members have purchased the Class A common stock and immediately
resold the shares for a profit. These activities may stabilize or maintain the
market price of the Class A common stock above independent market levels. The
underwriters are not required to engage in these activities, may end any of
these activities at any time, and in any event will discontinue these
activities no later than 30 days after the closing of this offering.
Pricing of the Class A common stock
Prior to this offering, there has been no established trading market for our
Class A common stock. The initial public offering price of our Class A common
stock will be determined by negotiation among Entravision, the selling
stockholder and the representatives of the underwriters. The factors to be
considered in determining the initial public offering price include:
. the history of and the prospects for the industry in which we compete;
. our past and present operations;
. our historical results of operations;
. our prospects for future earnings;
. the recent market prices of securities of generally comparable
companies; and
. the general condition of the securities markets at the time of this
offering.
LEGAL MATTERS
The validity of the Class A common stock being offered by this prospectus
will be passed upon for us by Zevnik Horton Guibord McGovern Palmer & Fognani,
L.L.P., San Diego, California. Paul A. Zevnik, a partner of Zevnik Horton
Guibord McGovern Palmer & Fognani, L.L.P., owns shares of our Class B
common stock. Other legal matters will be passed upon for the underwriters by
O'Melveny & Myers LLP, Los Angeles, California.
EXPERTS
The financial statements of Entravision Communications Corporation as of
December 31, 1998 and 1999, and for each of the years ended December 31, 1997,
1998, 1999, and DeSoto-Channel 62 Associates, Ltd. for the period from January
1, 1999 through September 24, 1999, included in this prospectus and
registration statement have been audited by McGladrey & Pullen, LLP,
independent accountants, to the extent and for the periods indicated in their
reports included elsewhere herein, and are included in reliance upon such
reports and upon the authority of such firm as experts in accounting and
auditing.
The financial statements of Latin Communications Group Inc. as of December
27, 1998 and December 26, 1999, and for each of the three years in the period
ended December 26, 1999, included in this prospectus and registration statement
have been audited by Ernst & Young LLP, independent auditors, as indicated in
their report with respect thereto, and are included herein in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
The combined financial statements of Z-Spanish Media Corporation and its
predecessor as of December 31, 1998 and 1999, and for each of the years ended
December 31, 1997, 1998 and 1999 included in this prospectus have been audited
by Deloitte & Touche LLP, independent auditors, as indicated in their report
with respect thereto, and are included herein in reliance upon the report of
such firm given upon their authority as experts in accounting and auditing.
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WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 (including exhibits, schedules and amendments thereto)
under the Securities Act with respect to the shares of our Class A common stock
to be sold in this offering. This prospectus does not contain all the
information set forth in the registration statement. Certain parts of the
registration statement are omitted as allowed by the rules and regulations of
the Securities and Exchange Commission. We refer you to the registration
statement and the exhibits to such registration statement for further
information with respect to us and the shares of our Class A common stock to be
sold in this offering. Statements contained in this prospectus as to the
contents of any contract, agreement or other document referred to are not
necessarily complete and in each instance we refer you to the copy of that
contract, agreement or other document filed as an exhibit to the registration
statement, and each such statement is deemed qualified in all respects by such
reference.
You may read and copy all or any portion of the registration statement or
any other information we file at the public reference room at the Securities
and Exchange Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington D.C. 20549 and at the regional offices of the Securities and
Exchange Commission located at Seven World Trade Center, 13th Floor, New York,
New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. You can request copies of these documents, upon payment of a duplicating
fee, by writing to the Securities and Exchange Commission. Please call the
Securities and Exchange Commission at 1-800-SEC-0330 for further information on
the operation of the public reference rooms. Our filings with the Securities
and Exchange Commission, including the registration statement, are also
available to you on the Securities and Exchange Commission's website
(http://www.sec.gov).
As a result of this offering, we will become subject to the information and
reporting requirements of the Securities Exchange Act, and, in accordance with
those requirements, we will file periodic reports, proxy statements and other
information with the Securities and Exchange Commission.
We intend to furnish our stockholders with annual reports containing audited
financial statements and with quarterly reports for the first three quarters of
each year containing unaudited interim financial information.
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<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ENTRAVISION COMMUNICATIONS CORPORATION (PRO FORMA)
Unaudited Pro Forma Financial Information, Basis of Presentation......... F-2
Unaudited Pro Forma Condensed Consolidated Statement of Operations....... F-4
Unaudited Pro Forma Condensed Consolidated Balance Sheet................. F-5
Notes to Unaudited Pro Forma Financial Statements........................ F-6
ENTRAVISION COMMUNICATIONS CORPORATION (HISTORICAL)
INDEPENDENT AUDITOR'S REPORT............................................... F-8
FINANCIAL STATEMENTS
Consolidated Balance Sheets.............................................. F-9
Consolidated Statements of Operations.................................... F-10
Consolidated Statements of Stockholders' Equity.......................... F-11
Consolidated Statements of Cash Flows.................................... F-12
Notes to Consolidated Financial Statements............................... F-13
LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES
REPORT OF INDEPENDENT AUDITORS............................................. F-30
FINANCIAL STATEMENTS
Consolidated Balance Sheets.............................................. F-31
Consolidated Statements of Operations.................................... F-32
Consolidated Statements of Stockholders' Equity.......................... F-33
Consolidated Statements of Cash Flows.................................... F-34
Notes to Consolidated Financial Statements............................... F-35
Z-SPANISH MEDIA CORPORATION
INDEPENDENT AUDITOR'S REPORT............................................... F-46
FINANCIAL STATEMENTS
Combined Balance Sheets.................................................. F-47
Combined Statements of Operations........................................ F-48
Combined Statements of Stockholders' Equity.............................. F-49
Combined Statements of Cash Flows........................................ F-50
Notes to Combined Financial Statements................................... F-51
DESOTO-CHANNEL 62 ASSOCIATES, LTD.
INDEPENDENT AUDITOR'S REPORT............................................... F-69
FINANCIAL STATEMENTS
Statement of Operations and Partners' Deficit............................ F-70
Statement of Cash Flows.................................................. F-71
Notes to Financial Statements............................................ F-72
</TABLE>
F-1
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
BASIS OF PRESENTATION
The following unaudited pro forma financial information is based on our
historical financial statements and those of LCG, Z-Spanish Media and other
acquired or to be acquired companies and has been prepared to illustrate the
effects of the acquisitions described below and the related financing
transactions.
The unaudited pro forma condensed consolidated statement of operations for
the year ended December 31, 1999 gives effect to acquisitions completed between
January 1, 1999 and the date of this prospectus, including our acquisition of
LCG, and our pending acquisition of Z-Spanish Media, as if such transactions
had been completed January 1, 1999.
The unaudited pro forma condensed consolidated balance sheet as of December
31, 1999 has been prepared as if such acquisitions had occurred as of December
31, 1999.
The unaudited pro forma condensed consolidated balance sheet as of December
31, 1999 column "Univision and TSG Capital Investments" reflects an additional
$110 million investment from Univision and $90 million from TSG Capital Fund
III, L.P. For purposes of this presentation, these investments are presented as
a reduction of our existing bank debt.
These acquisitions will be accounted for using the purchase method of
accounting. The total purchase costs of these acquisitions will be allocated to
the tangible and intangible assets and liabilities acquired based upon their
respective fair values. The allocation of the aggregate purchase price
reflected in the unaudited pro forma financial information is preliminary. The
final allocation of the purchase price will be contingent upon the receipt of
final appraisals of the acquired assets. The unaudited pro forma financial
information is not necessarily indicative of either future results of
operations or the results that might have occurred if the foregoing
transactions had been consummated on the indicated dates.
The unaudited pro forma financial information should be read in conjunction
with our audited consolidated financial statements and notes thereto and those
of LCG, Z-Spanish Media and Desoto-Channel 62 Associates, Ltd. included
elsewhere in this prospectus.
Recently Completed and Pending Acquisitions
Recently Completed Acquisitions
1999 Acquisitions
El Centro/Brawley/Imperial, California Acquisition. On January 6, 1999, we
acquired certain assets of Brawley Broadcasting Company and KAMP Radio, Inc.,
which includes the radio stations KAMP (AM) El Centro, California; KWST (FM)
Brawley, California; KMXX (FM) Imperial, California for approximately
$2.5 million. This was financed with an advance under our existing bank line of
credit.
Orlando/Tampa, Florida and Washington, D.C. Acquisition. On February 4,
1999, we purchased all of the assets of Latin Communications Group Television,
Inc. relating to television stations WVEN-LP, in Orlando, Florida and WVEA-LP
in Tampa, Florida. In addition, we purchased all of the outstanding capital
stock of Los Cerezos Television Company, which operates television station
WMDO-LP in Washington, D.C. The aggregate purchase price was approximately
$14.3 million including the assumption of certain liabilities totaling $1.1
million. This was financed with an advance under our existing bank line of
credit.
Albuquerque, New Mexico Acquisition. On April 1, 1999, we acquired certain
assets of Univision affiliate television stations KLUZ and K48AM from Univision
for a purchase price of approximately $14.9 million. We provided a 2% increase
in Univision's option under its note agreement and $1 million cash.
Venice (Sarasota), Florida Acquisition. On September 20, 1999, we acquired
certain assets of DeSoto Broadcasting, Inc., DeSoto Channel 62 Associates, and
Omni Investments, Inc. for a purchase price of $17.0 million. These companies
collectively own the assets and licenses to operate television station WBSV in
Venice, Florida. This was financed with an advance under our existing bank line
of credit.
F-2
<PAGE>
Lubbock/San Angelo/Amarillo, Texas Acquisition. On December 20, 1999, we
acquired certain assets of Paisano Communications, which includes low-power
television stations KBZO-LP, Lubbock, Texas; K31DM, San Angelo, Texas; K48FR,
Amarillo, Texas and radio station KBZO (AM), Lubbock, Texas for $2.3 million.
This was financed with an advance under our existing bank line of credit.
2000 Acquisitions
El Paso, Texas Acquisition. On January 14, 2000, we acquired substantially
all of assets relating to the operations of radio stations KATH (FM) and KOFX
(FM) from Magic Media, Inc. for approximately $14 million. This was financed
with an advance under our existing bank line of credit.
Tijuana, Mexico Acquisition. In March 2000, our 40% owned affiliate acquired
the outstanding capital stock of a Mexican corporation which holds the
necessary authorizations from the Mexican government to own and operate
television station XHAS, Channel 33. Additionally, we acquired a 47.5% interest
in Vista Television, Inc., and Channel 57, Inc. for approximately $35.2
million. Additionally, we will enter into a time brokerage agreement in
connection with this acquisition. This was financed with proceeds from the
$110 million Univision investment.
California, Colorado, New Mexico and Washington D.C. Acquisition. On April
20, 2000, we acquired all of the outstanding capital stock of LCG for
approximately $252 million. LCG operates 17 radio stations in California,
Colorado, New Mexico and Washington D.C. and also owns two Spanish-language
publications. This acquisition was financed using our bank credit facilities
and TSG Capital Fund III, L.P.'s investment of $90 million.
Pending Acquisition
California, Texas, Illinois, Arizona, New York and Florida Acquisition. On
April 20, 2000, we agreed to acquire all of the outstanding capital stock of Z-
Spanish Media for a purchase price of approximately $475 million including the
assumption of approximately $109 million of debt. Z-Spanish Media owns 33 radio
stations and an outdoor billboard business. These pro forma financial
statements also give effect to Z-Spanish Media's September 30, 1999 acquisition
of Seaboard Outdoor Advertising, as if Z-Spanish Media had owned these
operations for all of 1999. The acquisition of Z-Spanish Media will be financed
with the issuance of shares of Class A common stock valued at $110 million
and $256 million cash from offering proceeds. If this offering is not
completed, the agreement provides for the issuance of $256 million of
redeemable preferred stock with a dividend at LIBOR plus 7%.
Other Pending Transactions
The following transactions represent our purchases of FCC licenses. For
purposes of these pro forma financial statements, these transactions do not
represent business acquisitions and therefore historical financial information
is not meaningful. As a result, these transactions are not included in our pro
forma financial information.
Hartford, Connecticut Acquisition. In February 2000, we agreed to acquire
the FCC license of television station WHCT in Hartford, Connecticut for
$18 million.
Santa Monica/Newport Beach, California Acquisition. In March 2000, we agreed
to acquire from Citicasters Co., a subsidiary of Clear Channel Communications,
Inc., the FCC licenses relating to the operations of radio stations KACD (FM)
Santa Monica, California and KBCD (FM) Newport Beach, California for $85
million of which $17 million was placed into escrow as a deposit.
Orlando/Daytona Beach/Melbourne, Florida Acquisition. On April 14, 2000, we
agreed to acquire certain assets of television station WNTO-TV for $23 million.
F-3
<PAGE>
ENTRAVISION COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 1999
(In thousands, except per share data)
<TABLE>
<CAPTION>
Unaudited
Historical Other Pro Forma Unaudited Unaudited
Historical Historical Z-Spanish Completed Adjust- Unaudited Offering Pro Forma
Entravision LCG Media Acquisitions ments Pro Forma Adjustments As Adjusted
----------- ---------- ---------- ------------ --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gross revenue:
Television............ $ 63,842 $ -- $ -- $ 5,096 $ -- $ 68,938
Radio................. 2,362 29,759 26,334 2,406 -- 60,861
Outdoor and
publishing........... -- 19,109 12,227 3,798 -- 35,134
-------- ------- ------- ------- -------- --------- ---- ----
Total gross revenue.... 66,204 48,868 38,561 11,300 -- 164,933
Less agency
commissions........... 7,205 4,623 2,523 516 -- 14,867
-------- ------- ------- ------- -------- --------- ---- ----
Net revenue............ 58,999 44,245 36,038 10,784 -- 150,066
-------- ------- ------- ------- -------- --------- ---- ----
Expenses:
Direct operating...... 24,441 15,560 14,183 4,731 -- 58,915
Selling, general and
administrative....... 11,611 18,910 8,382 6,583 -- 45,486
Corporate............. 5,809 1,795 4,773 -- -- 12,377
Depreciation and
amortization......... 14,613 4,907 8,670 377 54,601 (1) 83,168
Non-cash stock-based
compensation......... 29,143 -- -- -- -- 29,143
Gain on sale of
assets............... -- -- (4,442) -- -- (4,442)
-------- ------- ------- ------- -------- --------- ---- ----
Total expenses......... 85,617 41,172 31,566 11,691 54,601 224,647
-------- ------- ------- ------- -------- --------- ---- ----
Operating income
(loss)................ (26,618) 3,073 4,472 (907) (54,601) (74,581)
Interest expense, net
and other............. (12,091) (5,527) (6,471) (1,246) (24,280)(2)
(335)(3)
16,050 (4) (33,900)
Income tax benefit..... 121 736 284 852 22,506 (5)
3,499 (6) 27,998
-------- ------- ------- ------- -------- ---------
Loss from continuing
operations............ (38,588) (1,718) (1,715) (1,301) (37,161) (80,483)
Preferred stock
dividends............. -- -- -- -- 42,209 (7) 42,209
-------- ------- ------- ------- -------- --------- ---- ----
Loss from continuing
operations applicable
to common stock....... $(38,588) $(1,718) $(1,715) $(1,301) $(79,370) $(122,692)
======== ======= ======= ======= ======== =========
Basic and diluted
earnings per share:
Net loss from
continuing operations
applicable to common
stock................
========= ====
Weighted average
common shares
outstanding..........
========= ====
</TABLE>
F-4
<PAGE>
ENTRAVISION COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of December 31, 1999
(In thousands)
<TABLE>
<CAPTION>
Univision
Historical and TSG Unaudited Unaudited Unaudited
Historical Historical Z-Spanish Capital Group Pro Forma Unaudited Offering Pro Forma As
Entravision LCG Media Investments Adjustments Pro Forma Adjustments Adjusted
----------- ---------- ---------- ------------- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash
equivalents......... $ 2,357 $ 6,695 $ 4,493 $ -- -- $ 13,545
Receivables......... 12,665 8,184 15,971 -- -- 36,820
Prepaid expenses
and taxes........... 355 1,632 1,983 -- -- 3,970
-------- -------- -------- --------- --------- ---------- ---- ----
Total current
assets............ 15,377 16,511 22,447 -- -- 54,335
Property and
equipment............ 27,230 7,259 34,267 -- 600 (8) 69,356
Intangible assets.... 136,189 131,162 225,408 -- 554,136 (8) 1,046,895
Other assets......... 10,023 2,554 6,921 -- (10,045)(11) 9,453
-------- -------- -------- --------- --------- ---------- ---- ----
Total assets...... $188,819 $157,486 $289,043 $ -- $ 544,691 $1,180,039
======== ======== ======== ========= ========= ========== ==== ====
Current liabilities:
Accounts payable,
accrued liabilities
and other........... $ 7,479 $ 6,081 $ 12,254 $ -- $ -- $ 25,814
Long-term debt,
current portion..... 1,620 69 22,779 -- -- 24,468
-------- -------- -------- --------- --------- ---------- ---- ----
Total current
liabilities....... 9,099 6,150 35,033 -- -- 50,282
Long-term debt....... 155,917 42,037 89,066 (200,000) 251,894 (9)
(2,545)(11) 336,369
Subordinated notes... 10,000 -- -- 200,000 (210,000)(10) --
Deferred taxes and
other................ 1,990 20,331 28,554 -- 155,000 (9) 205,875
-------- -------- -------- --------- --------- ---------- ---- ----
Total
liabilities....... 177,006 68,518 152,653 -- 194,349 592,526
-------- -------- -------- --------- --------- ---------- ---- ----
Series A mandatorily
redeemable
convertible preferred
stock................ -- -- -- -- 90,000 (10) 90,000 -- --
Series B redeemable
pay-in-kind preferred
stock................ -- -- -- -- 255,990 (9) 255,990 -- --
Common stock put
options.............. -- -- 37,591 -- (37,591)(11) --
-------- -------- -------- --------- --------- ---------- ---- ----
-- -- -- -- 308,399 345,990 -- --
-------- -------- -------- --------- --------- ---------- ---- ----
Stockholders' equity:
Class A common
stock............... 1 92 251 -- 11 (9) --
(343)(11) 12
Class B common
stock............... 5 -- -- -- -- 5
Class C common
stock............... -- -- -- -- 5 (10) 5
Additional paid-in
capital............. 76,292 94,485 115,751 -- (210,236)(11)
109,699 (9)
119,995 (10) 305,986
Deferred
compensation and
other............... -- -- (5,197) -- 5,197 (11) --
Accumulated
deficit............. (63,901) (5,609) (12,006) -- 17,615 (11) (63,901)
Stock subscriptions
notes receivable.... (584) -- -- -- (584) --
-------- -------- -------- --------- --------- ---------- ---- ----
Total
stockholders'
equity............ 11,813 88,968 98,799 -- 41,943 241,523
-------- -------- -------- --------- --------- ---------- ---- ----
Total liabilities
and stockholders'
equity............ $188,819 $157,486 $289,043 $ -- $ 544,691 $1,180,039
======== ======== ======== ========= ========= ========== ==== ====
</TABLE>
F-5
<PAGE>
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS ADJUSTMENTS
(1) These adjustments reflect additional depreciation and amortization expense
resulting from the allocation of our purchase price of the assets
acquired, including increases in property and equipment and identifiable
intangible assets, to their estimated fair market values and the goodwill
associated with the acquisitions.
<TABLE>
<CAPTION>
Amortization Depreciation Less Pro Forma
Expense Expense Historical Adjustment
------------ ------------ ---------- ----------
<S> <C> <C> <C> <C>
LCG......................... $ 22,306 $1,037 $ (4,907) $18,436
Z-Spanish Media............. 35,181 4,895 (8,670) 31,406
Other....................... 5,136 -- (377) 4,759
--------- ------ -------- -------
$ 62,623 $5,932 $(13,954) $54,601
========= ====== ======== =======
</TABLE>
Goodwill and other specifically identified intangibles are amortized over
15 years and fixed assets over 7 years.
(2) These adjustments conform historical interest expense to pro forma
interest expense associated with our borrowings under our existing credit
facility prior to our adjustments for our subordinated notes and LCG
credit facility which were used to finance the completed and pending
acquisitions. The pro forma interest expense adjustment is as follows:
<TABLE>
<CAPTION>
Debt After Interest Less Pro Forma
Acquisitions Expense Historical Adjustment
------------ -------- ---------- ----------
<S> <C> <C> <C> <C>
LCG............................. $245,000 $21,070 $ (5,527) $15,543
Z-Spanish Media................. 109,300 9,400 (6,289) 3,111
Other........................... 82,500 7,095 (1,469) 5,626
------- -------- -------
$37,565 $(13,285) $24,280
======= ======== =======
</TABLE>
The assumed interest rate under our existing revolving credit facility was
8.6%, which represents our current rate.
(3) This adjustment represents the reduction or increase in interest expense on
the borrowings under our existing credit facility due to the reduced rate
associated with our 8.5% $90 million convertible subordinated note from TSG
Capital Fund III, L.P., Univision's 7% $110 million subordinated note and
option and the increase in interest rate to 10.5% associated with our $115
million term loan for our acquisition of LCG.
<TABLE>
<CAPTION>
Interest
Expense
--------
<S> <C>
TSG Capital Fund III, L.P......................................... $ 90
Univision......................................................... 1,760
Term loan for acquisition of LCG.................................. (2,185)
------
$ (335)
======
</TABLE>
(4) This adjustment represents the interest savings on the exchange of
Univision's 7% subordinated note and option of $120 million to Class C
common stock and the conversion of TSG Capital Fund III, L.P.'s 8.5%
convertible subordinated note of $90 million to preferred stock.
(5) To provide for the tax effect of pro forma adjustments using an estimated
effective rate of 40%. Our acquisitions of LCG and Z-Spanish Media and our
acquisitions of stations KORO and KNVO will include non-tax deductible
goodwill which is estimated to be $6.9 million for the year ended December
31, 1999.
(6) This represents the provision for income taxes on pro forma net loss to
give effect to our conversion from a limited liability company to a C-
corporation for federal and state income tax purposes as if it had
F-6
<PAGE>
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS--(Continued)
occurred on December 31, 1999. An effective combined tax rate of 40% was
used after giving effect to non-tax deductible goodwill of $0.8 million
and non-cash stock-based compensation of $29.1 million.
(7) This adjustment represents the 8.5% dividend on TSG Capital Fund III,
L.P.'s mandatorily redeemable convertible preferred stock and the 13.5%
dividend on our redeemable preferred stock issued in conjunction with our
acquisition of Z-Spanish Media, if this offering is not completed.
<TABLE>
<CAPTION>
Preferred Stock Dividends
--------------- ---------
<S> <C>
Series A mandatorily redeemable convertible preferred stock..... $ 7,650
Series B redeemable pay-in-kind preferred stock................. 34,559
-------
$42,209
=======
</TABLE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET ADJUSTMENTS
(8) These adjustments represent the allocation of purchase price of our 2000
acquisitions to the estimated fair market value of the assets acquired
and liabilities assumed, and the recording of goodwill and FCC license
intangibles associated with the acquisitions.
<TABLE>
<CAPTION>
FCC Licenses
and Other Less Total
Intangibles Goodwill Historical Intangibles Equipment
------------ -------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
LCG................. $300,588 $34,000 $(131,162) $203,426 $ --
Z-Spanish Media..... 474,718 53,000 (225,408) 302,310 --
Other............... 43,400 5,000 -- 48,400 600
-------- ------- --------- -------- -------
$818,706 $92,000 $(356,570) $554,136 $ 600
======== ======= ========= ======== =======
</TABLE>
(9) The adjustment represents the issuance of stock and borrowings under
credit facilities to finance acquisitions and to record related deferred
tax liabilities.
(10) This adjustment represents the exchange of Univision's 7% subordinated
note and option of $120 million to Class C common stock and the
conversion of TSG Capital Fund III, L.P.'s 8.5% convertible subordinated
note of $90 million into shares of Series A mandatorily redeemable
convertible preferred stock.
<TABLE>
<CAPTION>
Borrowings
Under Common
Credit Stock Preferred Deferred
Facilities Issued Stock Taxes
---------- -------- --------- --------
<S> <C> <C> <C> <C>
LCG.................................. $202,894 $ -- $ -- $ 82,000
Z-Spanish Media...................... -- 109,710 255,990 73,000
Other................................ 49,000 -- -- --
-------- -------- -------- --------
$251,894 $109,710 $255,990 $155,000
======== ======== ======== ========
</TABLE>
(11) This adjustment represents the elimination of our deposit related to our
acquisition of LCG and the historical stockholders' equity of LCG and Z-
Spanish Media as these acquisitions were accounted for as purchase
business combinations.
UNAUDITED PROFORMA OFFERING ADJUSTMENTS
(12) This adjustment represents the interest savings from using the estimated
net proceeds we receive from this offering for the repayment of $ of
the pro forma borrowings.
(13) This adjustment represents the tax effect of offering adjustments using
an estimated statutory tax rate of 40%.
(14) This adjustment represents our issuance of shares of our Class A
common stock at a public offering price of $ per share, net of in
estimated offering expenses. The application of the estimated proceeds we
receive from this offering will be used to repay our credit facilities.
F-7
<PAGE>
The accompanying consolidated financial statements of Entravision
Communications Corporation and its subsidiaries have been prepared to give
effect to an exchange transaction of the Company from a limited liability
company (LLC) to a corporation and contemporaneously with the closing of the
public offering contemplated by this prospectus the conversion of all LLC
membership units to Class A, B and C common stock as described in Note 1. On
the effective date of the registration statement covering the shares of Class A
common stock to be sold in the public offering, we will issue the following
report:
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Entravision Communications Corporation
Santa Monica, California
We have audited the accompanying consolidated balance sheets of Entravision
Communications Corporation and its subsidiaries as of December 31, 1998 and
1999, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Entravision
Communications Corporation and its subsidiaries as of December 31, 1998 and
1999, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999 in conformity with generally
accepted accounting principles.
As described in Note 1, the accompanying consolidated financial statements
of Entravision Communications Corporation and its subsidiaries have been
prepared to give effect to the exchange transaction as discussed in Note 1,
before the closing of the public offering contemplated by this prospectus.
/s/ McGladrey & Pullen, LLP
Pasadena, California
March 18, 2000, except for the
seventh and eighth paragraphs
of Note 11, as to which the
date is April 20, 2000
F-8
<PAGE>
ENTRAVISION COMMUNICATIONS CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, 1998 and 1999
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................................. $ 3,661 $ 2,357
Receivables:
Trade, net of allowance for doubtful accounts of 1998
$790; 1999 $979......................................... 9,143 12,392
Related parties.......................................... 284 273
Prepaid expenses and taxes................................ 268 355
-------- --------
Total current assets.................................... 13,356 15,377
Property and equipment, net................................ 16,788 27,230
Intangible assets, net..................................... 77,891 136,189
Other assets, including deposits on acquisitions of 1998
$5,533; 1999 $8,742....................................... 5,689 10,023
-------- --------
$113,724 $188,819
======== ========
LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of notes and advances payable, related
parties.................................................. $ 201 $ 231
Current maturities of long-term debt...................... 943 1,389
Accounts payable and accrued expenses (including related
parties of 1998 $71; 1999 $280).......................... 6,199 7,479
-------- --------
Total current liabilities............................... 7,343 9,099
-------- --------
Long-term debt
Subordinated note payable to Univision.................... 10,000 10,000
Notes payable, less current maturities.................... 88,794 155,917
-------- --------
98,794 165,917
Deferred taxes............................................. 283 1,990
-------- --------
Total liabilities....................................... 106,420 177,006
-------- --------
Commitments and Contingencies
Series A mandatorily redeemable convertible preferred
stock, $0.0001 par value, 11,000,000 shares authorized; no
shares issued or outstanding in 1998 or 1999.............. -- --
Stockholders' equity
Class A common stock, $0.0001 par value, 305,000,000
shares authorized; shares issued and outstanding 1998
10,004,228 and 1999 9,875,708............................ 1 1
Class B common stock, $0.0001 par value, 60,000,000 shares
authorized; shares issued and outstanding 1998, 1999
54,858,626............................................... 5 5
Class C common stock, $0.0001 par value, 50,000,000 shares
authorized; no shares issued or outstanding.............. -- --
Additional paid-in capital................................ 30,711 76,292
Accumulated deficit....................................... (22,852) (63,901)
-------- --------
7,865 12,397
Less: stock subscription notes receivable................. (561) (584)
-------- --------
7,304 11,813
-------- --------
$113,724 $188,819
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-9
<PAGE>
ENTRAVISION COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 1997, 1998 and 1999
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Gross revenue (including network
compensation from Univision of 1997
$2,947, 1998 $4,922 and 1999 $2,748)... $ 33,419 $ 49,872 $ 66,204
Less agency commissions................. 2,963 5,052 7,205
----------- ----------- -----------
Net revenue........................... 30,456 44,820 58,999
----------- ----------- -----------
Expenses:
Direct operating (including Univision
national representation fees of 1997
$1,220, 1998 $2,379 and 1999 $3,149)
..................................... 9,184 15,794 24,441
Selling, general and administrative... 5,845 8,877 11,611
Corporate expenses (including related
parties of 1997 $321, 1998 $453 and
1999 $522)........................... 3,899 3,963 5,809
Non-cash stock-based compensation..... 900 500 29,143
Depreciation and amortization......... 8,847 9,565 14,613
----------- ----------- -----------
28,675 38,699 85,617
----------- ----------- -----------
Operating income (loss)............. 1,781 6,121 (26,618)
Interest expense (including amounts to
Univision of $701 in 1997, 1998 and
1999; ............................... (5,222) (8,386) (12,190)
Interest income....................... 115 142 99
----------- ----------- -----------
Loss before income taxes............ (3,326) (2,123) (38,709)
Income tax (expense) benefit............ (254) (210) 121
Effect of change in tax status.......... 7,785 -- --
----------- ----------- -----------
Net income (loss)................... $ 4,205 $ (2,333) $ (38,588)
=========== =========== ===========
Pro forma provision for income taxes
benefit................................ 654 327 3,499
----------- ----------- -----------
Pro forma net loss...................... $ (2,672) $ (1,796) $ (35,210)
=========== =========== ===========
Pro forma per-share data:
Net loss per share:
Basic and diluted.................... $ (0.04) $ (0.03) $ (0.54)
=========== =========== ===========
Weighted average common shares
outstanding:
Basic and diluted.................... 65,944,843 65,789,604 64,804,756
=========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-10
<PAGE>
ENTRAVISION COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1997, 1998 and 1999
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
Stock
Number of Common Shares Common Stock Additional Subscription
Preferred ------------------------------ ----------------------- Paid-in Accumulated Notes
Stock Class A Class B Class C Class A Class B Class C Capital (Deficit) Receivable Total
--------- ---------- ---------- ------- ------- ------- ------- ---------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31,
1996............ $ -- 5,848,237 30,670,160 -- $ 1 $ 3 $ -- $14,312 $ (4,054) $(519) $ 9,743
Issuance of
Class A common
stock in
connection with
employee stock
award........... -- 1,845,656 -- -- -- -- -- 900 -- -- 900
Issuance of
Class A and
Class B common
stock upon
merger with
entity under
common control.. -- 2,930,046 19,713,274 -- -- 2 -- 117 -- -- 119
Issuance of
Class A common
stock upon
conversion of
stockholder note
payable......... -- 469,778 -- -- -- -- -- 240 -- -- 240
Interest earned
on subscription
receivables..... -- -- -- -- -- -- -- 21 -- (21) --
Repurchase and
retirement of
Class A common
stock........... -- (387,209) -- -- -- -- -- -- (587) -- (587)
Net income...... -- -- -- -- -- -- -- -- 4,205 -- 4,205
Dividends ($0.02
per share) paid
to members for
income taxes.... -- -- -- -- -- -- -- -- (1,498) -- (1,498)
----- ---------- ---------- ----- ----- ----- ----- ------- -------- ----- --------
Balance,
December 31,
1997............ -- 10,706,508 50,383,434 -- 1 5 -- 15,590 (1,934) (540) 13,122
Issuance of
Class A and
Class B common
stock upon
merger with
entity under
common control.. -- 536,782 4,475,192 -- -- -- -- 14,600 (14,600) -- --
Interest earned
on subscription
receivables..... -- -- -- -- -- -- -- 21 -- (21) --
Repurchase and
retirement of
Class A common
stock........... -- (1,239,062) -- -- -- -- -- -- (1,000) -- (1,000)
Compensation
expense
attributable to
employee stock
award........... -- -- -- -- -- -- -- 500 -- -- 500
Net loss........ -- -- -- -- -- -- -- -- (2,333) -- (2,333)
Dividends ($0.04
per share) paid
to members for
income taxes.... -- -- -- -- -- -- -- -- (2,985) -- (2,985)
----- ---------- ---------- ----- ----- ----- ----- ------- -------- ----- --------
Balance,
December 31,
1998............ -- 10,004,228 54,858,626 -- 1 5 -- 30,711 (22,852) (561) 7,304
Increase in
conversion
option on
subordinated
note agreement
relating to
acquisition of
business........ -- -- -- -- -- -- -- 13,915 -- -- 13,915
Intrinsic value
of subordinated
note conversion
option.......... -- -- -- -- -- -- -- 2,500 -- -- 2,500
Interest earned
on subscription
receivables..... -- -- -- -- -- -- -- 23 -- (23) --
Repurchase and
retirement of
Class A common
stock........... -- (128,520) -- -- -- -- -- -- (61) -- (61)
Compensation
expense
attributable to
employee stock
award and stock
options......... -- -- -- -- -- -- -- 29,143 -- -- 29,143
Net loss........ -- -- -- -- -- -- -- -- (38,588) -- (38,588)
Dividends ($0.04
per share) paid
to members for
income taxes.... -- -- -- -- -- -- -- -- (2,400) -- (2,400)
----- ---------- ---------- ----- ----- ----- ----- ------- -------- ----- --------
Balance,
December 31,
1999............ $ -- 9,875,708 54,858,626 -- $ 1 $ 5 $ -- $76,292 $(63,901) $(584) $ 11,813
===== ========== ========== ===== ===== ===== ===== ======= ======== ===== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-11
<PAGE>
ENTRAVISION COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1997, 1998 and 1999
(In thousands)
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income (loss)............................... $ 4,205 $ (2,333) $(38,588)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization................... 8,847 9,565 14,354
Deferred tax expense (benefit).................. 149 (83) 406
Effect of change in tax status.................. (7,785) -- --
Amortization of debt issue costs................ 373 1,295 258
Intrinsic value of subordinated note exchange
option......................................... -- -- 2,500
Non-cash stock-based compensation............... 900 500 29,143
Loss on disposal of property and equipment...... 35 15 100
Changes in assets and liabilities, net of
effect of business combinations:
(Increase) in accounts receivable.............. (3,525) (2,446) (3,249)
(Increase) in prepaid expenses and other
assets........................................ (64) (119) (87)
Increase in accounts payable, accrued expenses
and other..................................... 3,374 1,264 1,291
-------- -------- --------
Net cash provided by operating activities..... 6,509 7,658 6,128
-------- -------- --------
Cash Flows from Investing Activities
Proceeds from sale of equipment................. 7 19 116
Purchases of property and equipment............. (2,366) (3,094) (12,825)
Cash deposits and purchase price on
acquisitions................................... (59,549) (22,511) (46,354)
-------- -------- --------
Net cash (used in) investing activities....... (61,908) (25,586) (59,063)
-------- -------- --------
Cash Flows from Financing Activities
Proceeds from issuance of common stock.......... 119 -- --
Principal payments on notes payable............. (1,227) (288) (352)
Proceeds from borrowings on notes payable....... 58,079 24,407 54,913
Dividends paid to members for income taxes...... (1,498) (2,985) (2,400)
Purchase and retirement of common stock......... (587) (500) (530)
Payments of deferred debt costs................. (123) (1,295) --
-------- -------- --------
Net cash provided by financing activities..... 54,763 19,339 51,631
-------- -------- --------
Net increase (decrease) in cash and cash
equivalents.................................. (636) 1,411 (1,304)
Cash and Cash Equivalents
Beginning....................................... 2,886 2,250 3,661
-------- -------- --------
Ending.......................................... $ 2,250 $ 3,661 $ 2,357
======== ======== ========
Supplemental Disclosures of Cash Flow Information
Cash payments for:
Interest........................................ $ 3,672 $ 6,744 $ 10,542
======== ======== ========
Income taxes (refunds), 1997 $88; 1998 $274;
1999 $308...................................... $ (36) $ 51 $ 96
======== ======== ========
Supplemental Disclosures of Non-cash Investing
and Financing Activities
Conversion of note payable for Class A common
stock.......................................... $ 240 $ -- $ --
======== ======== ========
Issuance of note payable in connection with
redemption of common stock..................... $ -- $ 500 $ 30
======== ======== ========
Assets Acquired and Debt Issued in Business
Combinations
Current assets.................................. $ 636 $ 99 $ 86
Broadcast equipment and furniture and
fixtures....................................... 12,001 1,343 4,477
Intangible assets............................... 55,991 16,733 67,533
Current liabilities............................. -- (164) --
Deferred taxes.................................. (7,974) -- (2,112)
Notes payable................................... (84) (350) (12,000)
Increase in subordinated debt exchange option... -- -- (13,915)
Less cash deposits from prior year.............. (1,521) (500) (5,533)
-------- -------- --------
Net cash paid................................. $ 59,049 $ 17,161 $ 38,536
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-12
<PAGE>
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS, REORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Nature of business
Entravision Communications Corporation (the Company or ECC), a Delaware
corporation, primarily owns and operates Spanish-language television stations
serving predominantly the Southwestern United States. Each of the Spanish-
language stations is a Univision Communications Inc. (Univision) affiliate.
Univision is the leading Spanish-language television broadcaster in the United
States and makes available to its affiliates 24-hour Spanish-language
programming. Additionally, the Company owns and operates an English-language
United Paramount Network (UPN) affiliate television station in San Diego. The
Company also operates a television station in Las Vegas under a local marketing
agreement (LMA).
The Company also owns and operates Spanish-language radio stations in the
Southwest United States. The television and radio stations are collectively
referred to as the "broadcast properties." The revenue associated with the
radio stations was $2.4 million, or approximately 4%, for the year ended
December 31, 1999. See Note 11 for a discussion of acquisitions of additional
broadcast properties subsequent to December 31, 1999.
Pursuant to Univision network affiliation agreements, Univision acts as the
Company's exclusive sales representative for the sale of all national
advertising aired on Univision television stations. National sales represent
time sold on behalf of the Company's stations by sales representatives employed
by Univision. Proceeds of national sales are remitted to the Company by
Univision, net of an agency commission and a network representative fee. The
affiliation agreements expire at various dates through December 2021.
Reorganization
On February 11, 2000, ECC was formed. The First Restated Certificate of
Incorporation authorizes both preferred and common stock. The common stock has
three classes identified as A, B and C which have similar rights and privileges
except the Class B common stock provides ten votes per share as compared to one
vote per share for all other classes of common stock. Additionally, Univision,
as the holder of all Class C common stock, is entitled to vote as a separate
class to elect two directors, and will have the right to vote as a separate
class on certain material transactions. Class B and C common stock is
convertible at the holder's option into one fully paid and nonassessable share
of Class A common stock and is required to be converted into one share of Class
A common stock upon certain events as defined in the First Restated Certificate
of Incorporation. The Series A mandatorily redeemable convertible preferred
stock has limited voting rights, and accrues an 8% dividend.
The purpose of the formation of ECC is to effect an exchange transaction
whereby direct and indirect ownership interests in Entravision Communications
Company, L.L.C. (ECC LLC) will be exchanged for Class A or Class B common stock
of ECC. The Class B common stock will be issued to Walter F. Ulloa, Philip C.
Wilkinson and Paul A. Zevnik (and their controlled entities). In addition, the
stockholders of Cabrillo Broadcasting Corporation (KBNT), Golden Hills
Broadcasting Corporation (KCEC), Las Tres Palmas Corporation (KVER), Tierra
Alta Broadcasting, Inc. (KINC), KSMS-TV, Inc. (KSMS), Valley Channel 48, Inc.
(KNVO) and Telecorpus, Inc. (KORO) (collectively, the Affiliates) will exchange
their common shares of the respective corporations for Class A common shares in
ECC. Additionally, Univision will exchange its subordinated note for Class C
common stock. The number of common shares of ECC to be issued to the members of
ECC LLC and the stockholders of the Affiliates will be determined in such a
manner that the ownership interest in ECC will equal the direct and indirect
ownership interest in ECC LLC immediately prior to the exchange.
F-13
<PAGE>
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
This exchange transaction will become effective immediately prior to the
effective date of the Initial Public Offering of ECC expected to be consummated
during 2000. ECC LLC and Affiliates are considered to be under common control
and as such, the exchange will be accounted for in a manner similar to a
pooling of interests. Accordingly, these consolidated financial statements,
including share data and the stock option exercise price, have been presented
as if ECC LLC was incorporated and the exchange transaction took place in the
earliest period presented.
Formation of Entravision Communications Company, L.L.C.
Entravision Communications Company, L.L.C., a Delaware limited liability
company, was formed on January 11, 1996. ECC LLC was established to own and
operate broadcast properties.
ECC LLC assumed the operations of television stations KVER, KINC, KBNT, KCEC
and KSMS on November 1, 1996 under local marketing agreements (LMAs) whereby
the operating revenue and expenses of these companies accrued to the benefit of
ECC LLC. Each of these companies received membership interests in ECC LLC in
exchange for the LMAs and asset contribution agreements. These LMAs were in
effect through May 31, 1997, at which time, upon Federal Communications
Commission (FCC) approval, each of these companies and KNVO transferred all of
their operating assets, liabilities and operations to ECC LLC in accordance
with the asset contribution agreements. The operating assets, liabilities and
operations of KORO were transferred to ECC LLC in exchange for membership
interests in ECC LLC on April 21, 1998.
KBNT, KCEC, KVER and KINC operated under common control prior to the
formation of ECC LLC. Accordingly, effective upon the execution of the LMAs and
asset contribution agreements, the assets and liabilities of these companies
were recorded at their fair value to the extent of the ownership interest of
each respective company owned by minority stockholders and at historical cost
for the ownership interest under common control.
KSMS, KNVO and KORO were each acquired subsequent to January 1996 through
newly formed acquisition companies owned directly by the member corporation's
stockholders in proportion to their direct and indirect membership interest in
ECC LLC prior to each acquisition. Each of these acquisitions was with
unrelated parties at fair value with nominal equity consideration. Subsequent
to the signing of the original ECC LLC Formation Agreement in January 1996,
each of the members of ECC LLC and all of the individual stockholders of the
corporations have been considered members of a control group. Accordingly,
effective upon the execution of the LMAs and asset contribution agreements, the
assets and liabilities of these companies were recorded at their historical
cost which approximated fair value at the time.
The actual exchange of ECC common stock for the common stock of KSMS, KNVO
and KORO will result in a distribution of shares to the individual stockholders
and has been presented in the statement of stockholders' equity as a stock
dividend, stock split, and stock dividend, respectively. In determining
weighted average common shares outstanding for earnings per share purposes, the
stock dividends and stock split have been accounted for as if they had occurred
as of the beginning of the earliest period presented.
Significant accounting policies
Basis of consolidation
The consolidated financial statements include the accounts of ECC and its
subsidiaries, substantially all of which are wholly owned. All significant
intercompany accounts and transactions have been eliminated in consolidation.
F-14
<PAGE>
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
The Company's operations are affected by numerous factors including changes
in audience acceptance (i.e., ratings), priorities of advertisers, new laws and
governmental regulations and policies, and technological advances. The Company
cannot predict if any of these factors might have a significant impact on the
television and radio industries in the future, nor can it predict what impact,
if any, the occurrence of these or other events might have on the Company's
operations. Significant estimates and assumptions made by management are used
for, but not limited to, the allowance for doubtful accounts, the carrying
value of long-lived and intangible assets and the fair value of the Company's
common stock used to determine interest and compensation expense.
Cash and cash equivalents
For purposes of reporting cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to be
cash equivalents.
Interest rate cap agreements
Interest rate cap agreements are principally used by the Company in the
management of interest rate exposure. The differential to be paid or received
is accrued as interest rates change and is recorded in the statement of
operations.
Property and equipment
Property and equipment are recorded at cost. Depreciation and amortization
are provided using accelerated and straight-line methods over the following
estimated useful lives:
<TABLE>
<CAPTION>
Years
-----------------
<S> <C>
Buildings and land improvements............................ 39
Transmission, studio and broadcast equipment............... 5-10
Office and computer equipment.............................. 5-7
Transportation equipment................................... 5
Leasehold improvements..................................... Lesser of the
life of the lease
or economic
life of the asset
</TABLE>
Intangible assets
Intangible assets consisting of the following items are amortized on a
straight-line method over the following estimated useful lives:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
FCC licenses........................................................... 15
Univision affiliation agreements....................................... 15
Goodwill............................................................... 15
Time brokerage agreements.............................................. 15
Noncompete agreements.................................................. 2-5
Construction rights and permits........................................ 15
Other.................................................................. 1-10
</TABLE>
F-15
<PAGE>
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Deferred debt costs related to the Company's credit facility are amortized
on a method that approximates the interest method over the respective life of
the credit facility.
Impairment of long-lived assets
The Company reviews its long-lived assets and intangibles related to those
assets periodically to determine potential impairment by comparing the carrying
value of the long-lived assets and identified goodwill with the estimated
future net undiscounted cash flows expected to result from the use of the
assets, including cash flows from disposition. Should the sum of the expected
future net cash flows be less than the carrying value, the Company would
recognize an impairment loss at that date. An impairment loss would be measured
by comparing the amount by which the carrying value exceeds the fair value
(estimated discounted future cash flows) of the long-lived assets and
identified goodwill.
Goodwill not identified with impaired assets is evaluated to determine
whether events or circumstances warrant a write-down or revised estimates of
useful lives. The Company determines impairment by comparing the carrying value
of goodwill with the estimated future net undiscounted cash flows expected to
result from the use of the assets, including cash flows from disposition.
Should the sum of the expected future net cash flows be less than the carrying
value, the Company would recognize an impairment loss at that date. Impairment
losses are measured by comparing the amount by which the carrying value exceeds
the fair value (estimated discounted future cash flows) of the goodwill.
To date, management has determined that no impairment of long-lived assets
and goodwill exists.
Concentrations of credit risk
The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash and cash equivalents and trade accounts
receivable. The Company from time to time may have bank deposits in excess of
the FDIC insurance limits. The Company has not experienced any losses in such
accounts and believes it is not exposed to any significant credit risk on cash
and cash equivalents.
The Company routinely assesses the financial strength of its customers and,
as a consequence, believes that their trade receivable credit risk exposure is
limited. Credit losses for bad debts are provided for in the financial
statements through a charge to the allowance, and aggregated $0.7 million, $0.6
million and $0.8 million for the years ended December 31, 1997, 1998 and 1999,
respectively. A valuation allowance is provided for known and anticipated
credit losses.
Disclosures about fair value of financial instruments
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
Cash and cash equivalents
The carrying amount approximates fair value because of the short maturity of
those instruments.
Long-term debt
The carrying amount approximates the fair value of the Company's long-term
debt based on the quoted market prices for the same or similar issues or on the
current rates offered to the Company for debt of the same remaining maturities
with similar collateral requirements.
F-16
<PAGE>
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Income taxes
Deferred taxes are provided on a liability method whereby deferred tax
assets are recognized for deductible temporary differences and deferred tax
liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets are reduced by a valuation
allowance when it is determined to be more likely than not that some portion or
all of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on
the date of enactment.
Prior to the reorganization of the Company, as discussed above, the
organization included various taxpaying and non-taxpaying entities as discussed
below. Each of the entities files separate federal and state tax returns.
Deferred taxes have not been provided for the difference between the book
and tax basis of intangible assets, broadcast equipment, and furniture and
fixtures for the non-taxpaying entities. As a result of the reorganization, the
Company will record a deferred tax liability with a corresponding charge to tax
expense of approximately $7.5 million. At December 31, 1999, the difference
between book and tax bases of assets is approximately $18.7 million.
Entravision Communications Company, L.L.C., Entravision Holdings, LLC,
Entravision, L.L.C.,Entravision-El Paso, L.L.C. and Entravision Communications
of Midland, LLC are limited liability companies and, as such, are taxed as
partnerships.
Cabrillo Broadcasting Corporation, Golden Hills Broadcasting Corporation,
Las Tres Palmas Corporation, Tierra Alta Broadcasting, Inc., KSMS-TV, Inc.,
Valley Channel 48, Inc. and Telecorpus, Inc. have elected to be taxed under
sections of federal and state income tax law which provide that, in lieu of
corporation income taxes, the stockholders separately account for their pro
rata share of the companies' items of income, deductions, losses and credits,
and the companies will pay state taxes at a reduced rate.
Los Cerezos Television Company is taxed as a C-corporation.
Prior to January 23, 1997 Valley Channel 48, Inc. was taxed as a C-
corporation and prior to January 1, 1996, Golden Hills Broadcasting Corporation
was a C-corporation. As a result of the Tax Reform Act of 1986, these companies
and Telecorpus, Inc. are subject to a tax on any unrecognized "built-in gains"
realized during the ten-year period after their respective conversion to S-
corporation status. The built-in gains tax is a corporate tax computed by
applying the corporate tax rate to any appreciation related to assets owned at
the date of conversion to S status. Upon the 1997 filing of the election by
Valley Channel 48, Inc. to be taxed as an S- corporation, the previously
recorded net deferred tax liability was reduced to an amount that represents
taxes that might be payable due to the built-in gains tax. As a result,
approximately $7.8 million was recorded as a tax benefit representing the
reversal of previously recorded deferred taxes. Each of these companies has
provided a deferred tax liability for built-in gains that represent the
estimated liability for built-in gains tax.
Pro forma income tax adjustments and pro forma earnings per share
The pro forma income tax information included in these financial statements
is to show what the significant effects might have been on the historical
statements of operations had the Company and its affiliates not been treated as
flow-through entities not subject to income taxes. The pro forma information
reflects a provision for income taxes at the assumed effective rate in the
years ended December 31, 1997, 1998 and 1999. The pro forma net income (loss)
per share is based on the weighted average number of shares of common stock
outstanding during the period.
F-17
<PAGE>
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Advertising costs
Advertising costs are expensed as incurred. Advertising expense totaled
approximately $0.2 million, $0.6 million and $0.9 million for the years ended
December 31, 1997, 1998 and 1999, respectively.
Revenue recognition
Revenue related to the sale of advertising is recognized at the time of
broadcast. Network compensation is recognized ratably over the period of the
agreement.
Segment information
In accordance with Statement of Financial Accounting Standards (SFAS) No.
131, Disclosures about Segments of an Enterprise and Related Information,
management has determined that the Company has one reportable segment.
Furthermore, management has determined that all of its broadcast properties are
subject to the same regulatory environment with their respective programs
directed toward similar classes of viewers and listeners through similar
distribution methods.
Local marketing and time brokerage agreements
The Company operates certain stations under LMAs and time brokerage
agreements whereby the Company sells and retains all advertising revenue. The
broadcast station licensee retains responsibility for ultimate control of the
station in accordance with all FCC rules and regulations. The Company pays a
fixed fee to the station owner, as well as all expenses of the station, and
performs other functions. The financial results of the LMA-operated stations
are included in the Company's statement of operations from the date of
commencement of the respective LMAs, and were not significant in any of the
years presented.
Trade transactions
The Company exchanges broadcast time for certain merchandise and services.
Trade revenue and the related receivables are recorded when spots air at the
fair value of the goods or services received or time aired, whichever is more
readily determinable. Trade expense and the related liability are recorded when
the goods or services are used or received. Trade revenue and costs were
approximately $0.4 million, $0.9 million and $1.3 million for the years ended
December 31, 1997, 1998 and 1999, respectively.
Stock-based compensation
The Company accounts for stock-based employee compensation under the
requirements of Accounting Principles Board (APB) Opinion No. 25, which does
not require compensation to be recorded if the consideration to be received is
at least equal to fair value of the shares to be received at the measurement
date. Nonemployee stock-based transactions are accounted for under the
requirements of SFAS No. 123, Accounting for Stock-Based Compensation, which
requires compensation to be recorded based on the fair value of the securities
issued or the services received, whichever is more reliably measurable.
Earnings per share
Basic earnings per share (EPS) is computed as net income (loss) divided by
the weighted-average number of common shares outstanding for the period.
Diluted EPS reflects the potential dilution that could occur from common stock
issuable through stock options and convertible securities.
F-18
<PAGE>
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
For the years ended December 31, 1997, 1998 and 1999, all dilutive
securities have been excluded as their inclusion would have had an antidilutive
effect on EPS. If stock options and convertible debt securities had not been
excluded, 23,001,533, 22,947,386 and 24,517,777 shares respectively of
additional common shares would have been included in the denominator, and the
loss would have been reduced by $0.7 million in the numerator for each of the
three years.
Comprehensive income
As of January 1, 1998, the Company adopted SFAS No. 130, Reporting
Comprehensive Income. SFAS No. 130 established the requirements for the
reporting and presentation of comprehensive income and its components. For the
years ended December 31, 1997, 1998 and 1999, the Company had no components of
comprehensive income and, therefore, net income is equal to comprehensive
income.
New pronouncement
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, which is required
to be adopted in all fiscal quarters of all fiscal years beginning after June
15, 2000. The Statement permits early adoption as of the beginning of any
fiscal quarter after its issuance. The Company will adopt the new Statement
effective January 1, 2001. The Statement will require the Company to recognize
all derivatives on the balance sheet at fair value. Derivatives that are not
hedges must be adjusted to fair value through income. If the derivative is a
hedge, depending on the nature of the hedge, changes in the fair value of
derivatives will either be offset against the change in fair value of the
hedged assets, liabilities or firm commitment through earnings or recognized in
other comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings. Because of the Company's minimal use of derivatives,
management does not anticipate that the adoption of the new Statement will have
a significant effect on the Company's earnings or financial position.
NOTE 2. BUSINESS COMBINATIONS
During the years ended December 31, 1997, 1998 and 1999, the Company
acquired the following companies, all of which were accounted for as purchase
business combinations with the operations of the businesses included subsequent
to their respective acquisition dates. The allocation of the respective
purchase prices are generally based upon independent appraisals of the
broadcast properties and as it relates to the 1999 acquisitions reflects
management's preliminary allocation of purchase price.
1997 acquisitions
Valley Channel 48, Inc. (KNVO)
On January 23, 1997, the Company acquired all of the issued and
outstanding common stock of Valley Channel 48, Inc. for approximately $24.6
million in cash plus the assumption of certain liabilities. Valley
Channel 48, Inc. operates a Univision affiliate in the McAllen,
Harlingen/Brownsville, Texas market.
The excess purchase price over tangible net assets acquired of $28.8
million was allocated to specifically identifiable intangibles consisting
of $1.1 million to presold commercial advertising contracts, $1.7 million
to the FCC license, $13.9 million to the Univision affiliation agreement,
$0.3 million to a noncompete agreement. The remaining excess purchase price
of $11.8 million was recorded as goodwill.
F-19
<PAGE>
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
KINT-TV
On June 4, 1997, the Company purchased substantially all of the assets
relating to television station KINT-TV which operates the El Paso, Texas
Univision affiliate and all of the stock of 26 de Mexico S.A. de C.V. (a
Mexican corporation) for approximately $25.2 million.
The excess of the purchase price over the tangible net assets of $19.0
million was allocated to specifically identifiable intangibles consisting
of $14.6 million to the Univision affiliation agreement, $3.0 million to
the FCC license, $1.1 million to presold commercial advertising contracts,
$0.2 million to the stock of the Mexican corporation and $0.1 million to
other identifiable intangibles.
KINT-FM and KSVE-AM
On September 24, 1997, the Company acquired substantially all of the
assets of KINT-FM and KSVE-AM, both Spanish-programmed radio stations
operating in El Paso, Texas, for $4.0 million. From June 4, 1997 through
September 24, 1997, ECC operated these stations under an LMA.
The excess purchase price over the tangible assets acquired of $3.4
million was allocated to specifically identified intangibles consisting of
$2.9 million to the FCC license, $0.2 million to presold commercial
advertising contracts and $0.2 million to other identifiable intangibles.
The remaining excess purchase price of $0.1 million was recorded as
goodwill.
KLDO
On August 14, 1997, the Company acquired substantially all of the assets
of Panorama Broadcasting Co., which owned and operated the Laredo, Texas,
Univision affiliate, for $6.3 million.
The excess purchase price over tangible assets of $4.5 million was
allocated to specifically identified intangibles consisting of $3.5 million
to the Univision affiliation agreement, $0.3 million to the FCC license and
$0.2 million to presold commercial advertising contracts. The remaining
excess purchase price of $0.5 million was recorded as goodwill.
1998 acquisitions
Entravision Communications of Midland, LLC
On January 22, 1998, the Company entered into an agreement with an
unrelated third party and formed Entravision Communications of Midland, LLC
(Midland). The purpose of this new entity is to construct a new UHF
television station in Midland, Texas. The Company acquired an 80% interest
in Midland for $0.3 million and advanced Midland $2.6 million to obtain the
rights to a construction permit under an auction and settlement agreement
pursuant to an FCC application. As of December 31, 1999, construction of
the station had not commenced.
The agreement also contains options whereby, commencing one year from
the date that the station begins program test operations, ECC may acquire
the remaining interest in Midland for a predetermined exercise price, as
defined in the agreement.
La Paz Wireless Corporation (KVYE)
On March 15, 1998, the Company acquired substantially all of the assets
of La Paz Wireless Corporation, which owned television station KVYE in El
Centro, California. The purchase price was $0.7 million, consisting of $0.1
million in cash, seller financing of $0.4 million and the assumption of
certain liabilities in the amount of $0.2 million. Prior to the
acquisition, the Company operated this station as a Univision affiliate
under an LMA.
F-20
<PAGE>
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The purchase price of $0.7 million was allocated to specifically
identifiable intangibles consisting of $0.5 million to the FCC license and
$0.2 million to goodwill.
Telecorpus, Inc. (KORO)
On April 21, 1998, the Company, acquired all of the outstanding capital
stock of Telecorpus, Inc. for approximately $14.6 million. Telecorpus, Inc.
operates a Univision affiliate in Corpus Christi, Texas.
The excess purchase price over tangible net assets acquired of $13.2
million was allocated to specifically identifiable intangibles consisting
of $0.4 million to presold advertising contracts, $1.9 million to the FCC
license, $4.5 million to the Univision affiliation agreement, $5.8 million
to noncompete agreements. The remaining purchase price of $0.6 million was
recorded as goodwill.
1999 acquisitions
Brawley Broadcasting Company and KAMP Radio, Inc.
On January 6, 1999, the Company acquired substantially all of the assets
of Brawley Broadcasting Company and KAMP Radio, Inc., which include the
radio stations KAMP (AM) El Centro, California; KWST (FM) Brawley,
California; and KMXX (FM) Imperial, California. The purchase price was $2.5
million of which $0.4 million was previously deposited in escrow with the
remainder being paid in cash at closing.
The excess purchase price over tangible net assets acquired of $2.0
million was allocated to specifically identifiable intangibles consisting
of $1.4 million to the FCC license, and $0.2 million to other identifiable
intangibles. The remaining excess purchase price of $0.4 million was
recorded as goodwill.
Latin Communications Group Television, Inc.
On February 4, 1999 the Company purchased all of the assets of Latin
Communications Group Television, Inc. relating to television station WVEN-
LP, in Orlando, Florida and WVEA-LP in Tampa Florida.
Additionally, the Company, through a newly formed acquisition
corporation, Los Cerezos Acquisition Co. with no other activities other
than to complete this purchase, purchased all of the outstanding capital
stock of Los Cerezos Television Company. Los Cerezos Television Company
operates television station WMDO-LP in Washington, D.C. The aggregate
purchase price paid in connection with these acquisitions was approximately
$14.3 million including the assumption of certain liabilities totaling $1.1
million.
The excess purchase price over tangible net assets acquired of $14.2
million was allocated to specifically identifiable intangible assets
consisting of $0.9 million to presold commercial advertising contracts,
$2.2 million to FCC licenses, $7.4 million to Univision affiliation
agreements, and $0.2 million to noncompete agreements. The remaining excess
purchase price of $3.5 million was recorded as goodwill.
The Company previously operated these stations under an LMA beginning in
November 1998.
KLUZ-TV
On April 1, 1999, the Company acquired substantially all of the assets
of Univision affiliate television stations KLUZ and K48AM in Albuquerque,
New Mexico from Univision. The purchase price was $14.9 million of which
$1.0 million was cash. As part of the acquisition consideration, the
Company provided
F-21
<PAGE>
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Univision a 2% increase in its conversion exchange option under the
subordinated note agreement (see Note 5). The incremental exchange option
has been assigned a value of $13.9 million and has been recorded as
additional paid-in capital as a result of this acquisition.
The excess purchase price over tangible net assets acquired of $13.5
million was allocated to specifically identifiable intangibles consisting
of $7.3 million to the FCC license, $0.6 million to presold commercial
advertising contracts, and $5.6 million to the Univision affiliation
agreement.
Televisora ALCO, S.A. de C.V. (XUPN)
On June 9, 1999, the Company acquired a 40% interest in Televisora ALCO
S.A. de C.V. (ALCO), a Mexican corporation which operates XHTEB-TV in
Tecate, Baja California, Mexico. The purchase price for the 40% interest
was $0.5 million in cash. The Company is accounting for this investment
under the equity method of accounting. This station began broadcasting in
November 1999 which resulted in insignificant revenue and expenses. ALCO's
assets and liabilities were not significant at December 31, 1999.
The Company also acquired all of the outstanding capital stock of
Comercializadora Frontera Norte S.A. de C.V. (CFN), a Mexican corporation,
which has a time brokerage agreement with ALCO in connection with
substantially all of the station's broadcast and advertising rights. The
aggregate consideration paid for this acquisition was approximately $19.5
million, of which $7.5 million was in cash with the remaining $12.0 million
due under a time brokerage contract payable. The entire purchase price was
allocated to the intangible asset, time brokerage agreements.
On August 10, 1999, CFN assigned all of its rights and obligations under
the time brokerage agreement to ECC. As a result, all of the operations of
this broadcast property are accounted for as a division of the Company. The
time brokerage agreement provides for a ten-year term with successive
automatic 30-year renewals.
DeSoto Broadcasting (WBSV)
On September 20, 1999, the Company acquired substantially all of assets
of DeSoto Broadcasting, Inc., DeSoto Channel 62 Associates, and Omni
Investments, Inc. These companies collectively owned the assets and
licenses to operate WBSV in Venice (Sarasota), Florida. The purchase price
was $17.0 million of which $0.9 million was previously deposited in escrow
with the reminder paid in cash at closing.
The excess purchase price over tangible net assets acquired of $15.8
million was allocated to the FCC license.
Paisano Communications (KBZO)
On December 20, 1999, the Company acquired substantially all of the
assets of Paisano Communications which includes low power television
stations KBZO-LP, Lubbock, Texas; K31DM, San Angelo, Texas: K48FR,
Amarillo, Texas and radio station KBZO (AM), Lubbock, Texas. The purchase
price, was $2.3 million in cash.
The excess purchase price over tangible net assets acquired of $2.1
million was allocated to specifically identifiable intangible assets
consisting of $0.3 million to the FCC license, $1.3 million to Univision
affiliation agreement and $0.3 million to noncompete agreements. The
remaining excess purchase price of $0.2 million was recorded as goodwill.
See Note 11 for acquisitions subsequent to year end.
F-22
<PAGE>
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Pro Forma results (unaudited)
The following pro forma results of continuing operations assume the 1998 and
1999 acquisitions discussed above occurred on January 1, 1998. The unaudited
pro forma results have been prepared using the historical financial statements
of the Company and each acquired entity. The unaudited pro forma results give
effect to certain adjustments including amortization of goodwill, depreciation
of property and equipment, interest expense and the related tax effects.
<TABLE>
<CAPTION>
1998 1999
(Unaudited) (Unaudited)
(In millions of dollars except per share) ----------- ----------
<S> <C> <C>
Net revenue.......................................... $ 61.2 $ 63.3
Net (loss)........................................... (4.4) (37.0)
Basic and diluted net (loss) per share............... $(0.07) $(0.57)
</TABLE>
The above pro forma financial information does not purport to be indicative
of the results of operations had the 1998 and 1999 acquisitions actually taken
place on January 1, 1998, nor is it intended to be a projection of future
results or trends.
NOTE 3. PROPERTY AND EQUIPMENT
Property and equipment at December 31 consists of:
<TABLE>
<CAPTION>
1998 1999
(In millions of dollars) ----- -----
<S> <C> <C>
Buildings....................................................... $ 3.6 $ 5.3
Construction in progress........................................ 0.2 --
Land improvements............................................... 0.3 0.3
Leasehold improvements.......................................... 0.7 1.6
Transmission studio and other broadcast equipment............... 15.9 25.4
Office and computer equipment................................... 1.8 3.1
Transportation equipment........................................ 0.9 1.0
----- -----
23.4 36.7
Less accumulated depreciation and amortization.................. 7.6 11.6
----- -----
15.8 25.1
Land............................................................ 1.0 2.1
----- -----
$16.8 $27.2
===== =====
</TABLE>
NOTE 4. INTANGIBLE ASSETS
At December 31, intangible assets consist of:
<TABLE>
<CAPTION>
1998 1999
(In millions of dollars) ----- ------
<S> <C> <C>
FCC licenses................................................... $17.0 $ 44.0
Univision affiliation agreements............................... 38.1 52.5
Goodwill....................................................... 22.4 27.1
Noncompete agreements.......................................... 6.3 6.8
Construction rights and permits................................ 3.7 4.0
Time brokerage agreement....................................... -- 19.5
Deferred debt costs............................................ 1.3 1.3
Other.......................................................... 1.2 3.3
----- ------
90.0 158.5
Less accumulated amortization.................................. 12.1 22.3
----- ------
$77.9 $136.2
===== ======
</TABLE>
F-23
<PAGE>
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
NOTE 5. LONG-TERM DEBT, NOTES PAYABLE AND SUBSEQUENT EVENT
Notes payable at December 31 are summarized as follows:
<TABLE>
<CAPTION>
1998 1999
(In millions of dollars) ----- ------
<S> <C> <C>
Subordinated note with interest at 7.01%....................... $10.0 $ 10.0
Credit facility with bank...................................... 88.0 142.9
Financing agreement with bank, due in monthly installments of
$20,000, bearing interest at the prime rate (8.5% at December
31, 1999) plus 0.25% through July 31, 2009, secured by
building with a depreciated cost of $1,620.................... 0.1 1.6
Time brokerage contract payable, due in annual installments of
$1,000, bearing interest at LIBOR (6.5% at December 31, 1999)
through June 2011............................................. -- 12.0
Other.......................................................... 1.6 0.8
----- ------
99.7 167.3
Less current maturities........................................ 0.9 1.4
----- ------
$98.8 $165.9
===== ======
</TABLE>
Subordinated note
On December 30, 1996, the Company issued a $10.0 million subordinated note
to Univision. This note is subordinated to all senior debt. The note is due
December 30, 2021 and bears interest at 7.01% per annum, for which Univision
has agreed to provide the Company with network compensation equal to the amount
of annual interest due. Under a separate option agreement, Univision may
exchange the note into Class C common stock, representing a 27.9% interest in
the Company, at the holder's option at any time prior to maturity. During 1999
certain conditions restricting the exchange of the note were eliminated and, as
such, the Company recorded interest expense of $2.5 million based on the
estimated intrinsic value of the option feature at the date the note was
entered into.
The note contains certain restrictions including the restriction on
dividends, acquisition of assets over a certain limit, the incurrence of debt
over certain leverage ratios, the merger or consolidation of the Company with a
third party or a sale of the Company's assets, the transfer or sale of any FCC
license for our Univision affiliate television stations, the issuance of
additional common stock and changes to the capital structure of the Company
without the consent of Univision.
Credit facility with bank
The Company has a revolving credit facility with a bank in the amount of
$158.0 million, of which $142.9 million was outstanding at December 31, 1999.
On January 14, 2000, the Company entered into an amendment to increase the
credit facility to $158 million. Additionally, the Company has a letter of
credit outstanding at December 31, 1999 in the amount of $0.4 million. The
credit facility bears interest at LIBOR (6.5% at December 31, 1999) plus 1.625%
and expires on November 10, 2006. The facility is collateralized by
substantially all the Company's assets, as well as a nonrecourse guarantee of
certain stockholders and a pledge of ECC LLC membership units and corporate
ownership interest. The credit facility contains quarterly scheduled reductions
in the amount that is available under the revolving loan commitment commencing
December 31, 2000 through November 10, 2006. These quarterly reductions range
from $1.5 million to $10.5 million. In addition, the Company pays loan
commitment fees of from 0.275% to 0.5% (per annum). The credit facility also
contains a mandatory prepayment clause in the event the Company should
liquidate any assets in excess of $5.0 million if the proceeds are not utilized
to acquire assets of the same type and use within one year, receive insurance
or condemnation proceeds which are not fully utilized toward the replacement of
such assets, or have excess cash flows (as defined in the credit facility) in
any fiscal year subsequent to December 31, 1999. However, no prepayment due to
excess cash flow is required provided that the Company's maximum total debt
ratio is less than 4.5 to 1.
F-24
<PAGE>
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The credit facility contains certain financial covenants relating to maximum
total debt ratio, total interest coverage ratio, a fixed charge coverage ratio
and a ceiling on annual capital expenditures. The covenants become increasingly
restrictive in the later years of the facility. The credit facility also
contains restrictions on the incurrence of additional debt, the payment of
dividends, acquisitions over a certain limit and management fees or bonuses to
certain executives. The credit facility also states that the Company may not
make any equity offering without giving the bank 30 days written notice.
The Company has entered into interest rate cap agreements to reduce the
impact of changes in interest rates on its revolving credit facility. At
December 31, 1999, the Company had outstanding an interest rate cap agreement
with a bank, having a total notional principal amount of $50.0 million. The
agreement effectively changes the Company's interest rate exposure on $50.0
million of its revolving credit facility to a fixed 7%. The interest rate cap
agreements mature July 16, 2000.
The Company is exposed to credit loss in the event of nonperformance by the
counterparty to the interest rate cap agreement. However, the Company does not
anticipate nonperformance by the counterparty.
Aggregate maturities of long-term debt and notes payable as of December 31,
1999 are as follows:
<TABLE>
<CAPTION>
Years Ending December 31, Amount
------------------------- ------
(In millions of dollars)
<S> <C>
2000................................................................. $ 1.4
2001................................................................. 9.2
2002................................................................. 16.2
2003................................................................. 22.2
2004................................................................. 28.2
Thereafter........................................................... 90.1
------
$167.3
======
</TABLE>
NOTE 6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses at December 31 consist of:
<TABLE>
<CAPTION>
1998 1999
(In millions of dollars) ---- ----
<S> <C> <C>
Accounts payable.................................................. $1.4 $2.4
Accrued payroll and payroll taxes................................. 1.0 1.1
Accrued interest.................................................. 0.9 0.1
Income taxes payable.............................................. 0.3 0.3
Executive employment agreement bonus.............................. 0.9 1.1
Professional fees................................................. 0.4 0.5
Syndication fees.................................................. -- 0.9
Other............................................................. 1.3 1.1
---- ----
$6.2 $7.5
==== ====
</TABLE>
F-25
<PAGE>
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
NOTE 7. INCOME TAXES
The provision for income taxes for the years ended December 31 is as
follows:
<TABLE>
<CAPTION>
1997 1998 1999
(In millions of dollars) ---- ---- -----
<S> <C> <C> <C>
Current:
Federal.................................................. $ -- $0.1 $ 0.2
State.................................................... 0.1 0.2 0.1
Deferred................................................... 0.2 (0.1) (0.4)
---- ---- -----
$0.3 $0.2 $(0.1)
==== ==== =====
</TABLE>
The income tax provision differs from the amount of income tax determined by
applying the federal statutory income tax rate because substantially all of the
Company's operations are generated by non-taxpaying entities.
The components of the deferred tax assets and liabilities at December 31
consist of the following:
<TABLE>
<CAPTION>
1998 1999
(In millions of dollars) ----- -----
<S> <C> <C>
Deferred tax assets:
Intangible assets........................................... $ 0.2 $ --
----- -----
Deferred tax liabilities:
Change in accounting method................................. (0.1) --
Intangible assets........................................... -- (1.8)
Property and equipment...................................... (0.4) (0.2)
----- -----
(0.5) (2.0)
----- -----
Net long-term deferred tax liability.......................... $(0.3) $(2.0)
===== =====
</TABLE>
NOTE 8. COMMITMENTS
The Company has agreements with Nielsen Media Research (Nielsen), expiring
at various dates through December 2004, to provide television audience
measurement services. Pursuant to these agreements, the Company is obligated to
pay Nielsen a total of $7.9 million in increasing annual amounts. The annual
commitments range from $1.4 million to $1.9 million.
Operating leases
The Company leases facilities and broadcast equipment under various
operating lease agreements with various terms and conditions, which expire at
various dates through May 2009.
The approximate future minimum lease payments under these operating leases
at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Years Ending December 31, Amount
------------------------- ------
(In millions of dollars)
<S> <C>
2000................................................................. $2.4
2001................................................................. 1.8
2002................................................................. 1.5
2003................................................................. 1.2
2004................................................................. 0.9
Thereafter........................................................... 2.1
----
$9.9
====
</TABLE>
F-26
<PAGE>
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Total rent expense under operating leases, including rent under month-to-
month arrangements, was approximately $1.0 million, $1.2 million and $2.0
million for the years ended December 31, 1997, 1998 and 1999, respectively.
Employment agreements
ECC LLC has entered into employment agreements (the Agreements) with two
executive officers and stockholders through October 2003. The Agreements
provide that a minimum annual base salary and a bonus of 1% of ECC LLC's annual
net revenue be paid to each of the executives, effective for years beginning
after January 1, 1997. ECC LLC accrued approximately $0.6 million, $0.9 million
and $1.1 million of bonuses payable to these executives for the years ended
December 31, 1997, 1998 and 1999, respectively.
Additionally, the Agreements provide for a continuation of each executive's
annual base salary and annual bonus through the end of the employment period if
the executive is terminated due to a permanent disability or without cause, as
defined in the Agreements. Management intends to modify these Agreements
subsequent to year end.
ECC LLC also has an employment agreement with its executive vice president
which provides for an annual base salary and bonus. Additionally, in 1997 the
employee was awarded 1,845,656 shares of Class A common stock in the Company,
which vested through January 2000.
At December 31, 1999, the estimated fair value associated with this award of
Class A common stock was $27.7 million. The Company has recorded $0.9 million,
$0.5 million and $26.3 million of compensation expense for the years ended
December 31, 1997, 1998 and 1999, respectively. This award originally provided
for a repurchase option which has been eliminated. As such, the award was
considered variable. Compensation expense for 1999 was determined using an
estimate by management based primarily on the estimated IPO price as the fair
market value.
In January 1999, the Company entered into an employment agreement with its
senior vice president which expires on January 4, 2002 and provides for an
annual base salary and bonus to be paid to the employee.
As part of this agreement, ECC LLC originally granted an option to the
employee to purchase Class D membership units. As amended in April 2000, ECC
LLC sold the employee 164,390 restricted shares of Class A common stock at
$0.01 per share. The Company may repurchase the restricted shares at $0.01 per
share. The number of shares subject to the Company's repurchase option is
eliminated proportionately over three years from the original grant date. The
intrinsic value of the original option at the grant date was determined by
management using the estimated IPO price as the fair value of the underlying
shares. In accordance with APB No. 25, the Company recorded $2.8 million in
compensation expense during 1999 attributable to the original option grant
which is reflected as non-cash stock-based compensation in the statement of
operations. This amount approximates the total intrinsic value of the amended
employee restricted stock purchase.
SFAS No. 123 requires the disclosure of pro forma net income and earnings
per share had the Company adopted the fair value method. Under SFAS No. 123,
the fair value of stock-based awards to employees is calculated through the use
of option-pricing models, even though such models were developed to estimate
the fair value of freely tradable, fully transferable options with vesting
restrictions which significantly differ from the Company's stock option award.
These models also require subjective assumptions, including future stock price
volatility and expected time to exercise, which greatly affect the calculated
value. The Company's fair value calculation was made using the Black-Scholes
option-pricing model with the following assumptions: expected life of three
years following complete vesting; stock volatility of 50%; risk-free interest
rate of 6.17% and no dividends during the expected life.
F-27
<PAGE>
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
If the computed fair value of the award had been amortized to expense over
the vesting period of the award, proforma net loss of the Company would have
been approximately $0.1 million higher in 1999.
NOTE 9. RELATED-PARTY TRANSACTIONS
Related-party transactions not discussed elsewhere consist of the following:
The Company has unsecured advances of $0.2 million payable to related
parties, which bear interest, and are due on demand at December 31, 1998 and
1999.
The Company has unsecured stock subscriptions due from officer/stockholders
of the Company amounting to $0.6 million at December 31, 1998 and 1999. The
advances are due on demand and have been recorded as a reduction of equity.
In addition, the Company has unsecured advance receivables from related
parties amounting to $0.3 million at December 31, 1998 and 1999.
The Company utilizes the services of a law firm, a partner of which is a
stockholder and director. Total legal fees incurred with this law firm
aggregated approximately $0.3 million, $0.5 million and $0.5 million for the
years ended December 31, 1997, 1998 and 1999, respectively.
NOTE 10. 401(K) SAVINGS PLAN
During 1999 the Company established a defined contribution 401(k) savings
plan covering substantially all its employees. The Company currently matches
25% of the amounts up to a maximum of $1,000 per year by each participant.
Employer matching contributions for the year ended December 31, 1999 aggregated
approximately $0.1 million.
NOTE 11. SUBSEQUENT EVENTS
Subordinated note
On March 2, 2000, the Company received $110 million from Univision pursuant
to the existing subordinated note and option agreement (see Note 5). The note
was also amended increasing the option exchange feature from 27.90% to 40%
based on ownership prior to the additional issuance of common shares
anticipated in the IPO, and other contemplated equity transactions.
Acquisitions
The following business and/or assets were or will be acquired after December
31, 1999:
Magic Media, Inc.
On July 19 1999, the Company entered into an asset purchase agreement
with Magic Media, Inc. to acquire substantially all of the assets relating
to the operations of radio stations KATH (FM) and KOFX (FM) in El Paso,
Texas for approximately $14 million. At December 31, 1999 the Company had
on deposit $0.5 million in an escrow relating to this acquisition. The
acquisition closed on January 14, 2000.
WHCT-TV
In February 2000, the Company entered into an agreement to acquire the
FCC license of television station WHCT in Hartford Connecticut, for $18
million. Management intends to close on this transaction upon receiving FCC
and bankruptcy court approval, which it anticipates receiving in the third
quarter of 2000.
F-28
<PAGE>
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Citicasters Co.
In March 2000, the Company entered into an asset purchase agreement with
Citicasters Co., a subsidiary of Clear Channel Communications, Inc., to
acquire the FCC licenses relating to the operations of radio stations KACD
(FM) Santa Monica, California and KBCD (FM) Newport Beach, California for
approximately $85 million. On March 3, 2000 the Company deposited $17
million in escrow relating to this acquisition. Management intends to close
this transaction upon receiving FCC approval, which it anticipates
receiving in the second quarter of 2000.
XHAS-TV
In March 2000, the Company and ALCO entered into a binding letter
agreement to acquire the stock of a Mexican corporation which holds the
necessary authorizations from the Mexican government to own and operate
television station XHAS, Channel 33, Tijuana, Mexico, and a 47.5% interest
in Vista Television, Inc., and Channel 57, Inc. Additionally, ECC has
entered into a time brokerage agreement in connection with this
acquisition. The aggregate consideration to be paid in connection with this
transaction is approximately $35.2 million of which $1 million was
deposited into escrow at December 31, 1999. This transaction closed on
March 16, 2000.
Latin Communications Group Inc. (LCG)
On April 20, 2000, the Company acquired all of the outstanding capital
stock of LCG for approximately $252 million. LCG operates radio stations in
California, Colorado, New Mexico, and Washington D.C. and also owns and
operates two Spanish-language publications. In connection with this
acquisition, the Company amended certain financial covenants related to its
credit facility to provide for this acquisition and the issuance of a $90
million convertible subordinated note. Additionally, the Company entered
into a $115 million term loan with its bank group, the proceeds from which
will be used to finance this acquisition. All amounts outstanding under
this term loan are due April 18, 2001 and bear interest at LIBOR plus 4%.
This term loan is secured by a pledge of the Company's stock and lien on
all of LCG's assets and a secondary pledge on all of the Company's assets.
Z-Spanish Media
On April 20, 2000, the Company agreed to acquire all of the outstanding
capital stock of Z-Spanish Media. Z-Spanish Media owns 33 radio stations
and an outdoor billboard business. The purchase price is approximately $475
million, including the assumption of approximately $109 million of debt.
The purchase price will be paid 70% in cash and the remaining 30% in newly-
issued Class A common stock of the Company after the reorganization as
discussed in Note 1. Management intends to close on this transaction
concurrently with the IPO.
F-29
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Latin Communications Group Inc.
We have audited the accompanying consolidated balance sheets of Latin
Communications Group Inc. and Subsidiaries as of December 26, 1999 and December
27, 1998, and the related consolidated statements of operations, cash flows and
stockholders' equity for each of the three years in the period ended December
26, 1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Latin
Communications Group Inc. and Subsidiaries at December 26, 1999 and December
27, 1998 and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 26, 1999, in
conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
San Jose, California
March 30, 2000
F-30
<PAGE>
LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
December December
27, 1998 26, 1999
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................ $ 3,010 $ 6,695
Accounts receivable, less allowance for doubtful accounts
of $1,965 in 1998 and $1,518 in 1999.................... 5,956 8,184
Prepaid expenses and other............................... 794 344
Deferred income taxes.................................... 1,278 1,288
-------- --------
Total current assets...................................... 11,038 16,511
Net assets of discontinued operations..................... 4,831 --
Land held for sale........................................ 4,000 --
Deferred finance costs, less accumulated amortization of
$1,316 in 1998 and $751 in 1999.......................... 2,097 1,265
Property and equipment, at cost, less accumulated
depreciation of $2,337 in 1998 and $3,618 in 1999........ 6,487 7,259
Broadcast licenses and other intangible assets, less
accumulated amortization of $8,054 in 1998 and $11,583 in
1999..................................................... 137,349 131,162
Other assets (including notes receivable of $366 in 1999
from a related party).................................... 220 1,289
-------- --------
Total assets.............................................. $166,022 $157,486
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses.................... $ 5,136 $ 5,366
Accrued interest......................................... 1,175 715
Current portion of long-term debt........................ 4,318 69
-------- --------
Total current liabilities................................. 10,629 6,150
Long-term liabilities:
Debt..................................................... 50,541 42,037
Deferred income taxes.................................... 17,471 18,889
Other.................................................... 1,492 1,442
-------- --------
Total liabilities......................................... 80,133 68,518
Commitments and contingencies
Stockholders' equity:
Common stock, $0.01 par value; 15,000,000 shares
authorized; 9,235,468 shares issued and outstanding..... 92 92
Additional paid-in capital............................... 94,485 94,485
Accumulated deficit...................................... (8,688) (5,609)
-------- --------
Total stockholders' equity................................ 85,889 88,968
-------- --------
Total liabilities and stockholders' equity................ $166,022 $157,486
======== ========
</TABLE>
See notes to consolidated financial statements.
F-31
<PAGE>
LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
Years Ended
--------------------------------------
December 28, December 27, December 26,
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Gross revenue:
Advertising............................ $ 33,710 $ 34,469 $ 41,814
Less agency commissions................ 3,472 3,692 4,623
---------- ---------- ----------
30,238 30,777 37,191
Circulation............................ 5,759 5,741 5,875
Other.................................. 998 1,378 1,179
---------- ---------- ----------
Net revenue............................ 36,995 37,896 44,245
---------- ---------- ----------
Expenses:
Direct operating....................... 15,131 15,196 15,560
Selling, general and administrative.... 17,535 17,677 18,910
Corporate.............................. 1,713 2,901 1,795
Depreciation and amortization.......... 3,762 4,593 4,907
---------- ---------- ----------
38,141 40,367 41,172
---------- ---------- ----------
Operating income (loss) (1,146) (2,471) 3,073
Interest expense (including amounts
associated with related parties of
$1,200 in 1997, $1,800 in 1998 and
$1,900 in 1999)....................... (4,176) (6,211) (4,895)
Interest income........................ -- 138 115
Other finance costs and related
amortization (including amounts
associated with related parties of
$250 in 1999)......................... (335) (376) (626)
Loss on sale of assets................. -- -- (121)
---------- ---------- ----------
Loss from continuing operations before
income taxes........................... (5,657) (8,920) (2,454)
Income tax benefits..................... 2,213 2,570 736
---------- ---------- ----------
Loss from continuing operations......... (3,444) (6,350) (1,718)
Income from discontinued operations, net
of income taxes of $595 in 1997, $974
in 1998 and $271 in 1999............... 1,161 1,312 418
Gain on sale of discontinued operations,
net of income taxes of $3,123 in 1999.. -- -- 5,006
---------- ---------- ----------
Net income (loss) before extraordinary
item................................... (2,283) (5,038) 3,706
Extraordinary loss from early
extinguishment of debt, net of income
tax benefits of $153 in 1997 and $415
in 1999................................ (222) -- (627)
---------- ---------- ----------
Net income (loss)....................... $ (2,505) $ (5,038) $ 3,079
========== ========== ==========
Net income (loss) per share:
Basic and diluted:
Loss from continuing operations........ $ (0.39) $ (0.69) $ (0.19)
Discontinued operations................ 0.13 0.14 0.59
Extraordinary loss..................... (0.03) -- (0.07)
---------- ---------- ----------
Net income (loss)...................... $ (0.29) $ (0.55) $ 0.33
========== ========== ==========
Weighted average common shares
outstanding:
Basic and diluted...................... 8,761,301 9,165,468 9,235,468
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
F-32
<PAGE>
LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share data)
<TABLE>
<CAPTION>
Additional
Common Paid-in Accumulated Total
Shares Stock Capital Deficit Stockholders' Equity
--------- ------ ---------- ----------- --------------------
<S> <C> <C> <C> <C> <C>
Balance at December 29,
1996................... 7,740,468 $78 $77,084 $(1,145) $76,017
Shares issued to
purchase a business... 700,000 7 8,743 -- 8,750
Shares issued with
senior subordinated
debt.................. 525,000 5 5,210 -- 5,215
Net loss............... -- -- -- (2,505) (2,505)
--------- --- ------- ------- -------
Balance at December 28,
1997................... 8,965,468 90 91,037 (3,650) 87,477
Shares issued with
senior subordinated
debt.................. 120,000 1 1,199 -- 1,200
Shares issued in
connection with
purchase of radio
station assets........ 150,000 1 2,249 -- 2,250
Net loss............... -- -- -- (5,038) (5,038)
--------- --- ------- ------- -------
Balance at December 27,
1998................... 9,235,468 92 94,485 (8,688) 85,889
Net income............. -- -- -- 3,079 3,079
--------- --- ------- ------- -------
Balance at December 26,
1999................... 9,235,468 $92 $94,485 $(5,609) $88,968
========= === ======= ======= =======
</TABLE>
See notes to consolidated financial statements.
F-33
<PAGE>
LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Years Ended
--------------------------------------
December 28, December 27, December 26,
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Operating activities
Net income (loss)....................... $ (2,505) $(5,038) $ 3,079
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization.......... 4,435 5,343 5,279
Provision for doubtful accounts........ 994 827 558
Provision for deferred taxes........... (1,847) (1,741) 1,732
Gain on sale of discontinued
operations............................ -- -- (8,128)
Extraordinary loss on early debt
extinguishments....................... 375 -- 1,042
Loss on sale of assets................. -- -- 121
Amortization of debt discount.......... 477 733 749
Changes in assets and liabilities, net
of amounts acquired and net of
disposals:
(Increase) decrease in accounts
receivable........................... (1,095) 434 (2,786)
(Increase) decrease in prepaid
expenses and other................... (921) 130 461
(Decrease) increase in accounts
payable and accrued expenses......... 2,372 (147) (554)
(Decrease) increase in other assets
and liabilities...................... 46 57 (446)
-------- ------- --------
Net cash provided by operating
activities............................. 2,331 598 1,107
-------- ------- --------
Investing activities
Capital expenditures.................... (1,010) (1,272) (2,291)
Proceeds from sale of discontinued
operations............................. -- -- 12,949
Proceeds from disposal of assets........ -- -- 6,608
Payments for businesses acquired, net of
cash received of, $404 in 1997 and for
purchase of intangibles in 1998........ (70,015) (1,218) --
Investments in companies to be
acquired............................... 4,470 -- (603)
-------- ------- --------
Net cash provided by (used in) investing
activities............................. (66,555) (2,490) 16,663
-------- ------- --------
Financing activities
Proceeds from debt...................... 58,285 2,800 26,200
Payments on debt........................ (23,078) (1,634) (39,703)
Debt issuance costs..................... (2,728) (344) (582)
Net proceeds from sale of common stock.. 5,215 1,200 --
-------- ------- --------
Net cash (used in) provided by financing
activities............................. 37,694 2,022 (14,085)
-------- ------- --------
Net increase in cash and cash
equivalents............................ (26,530) 130 3,685
Cash and cash equivalents at beginning
of year................................ 29,410 2,880 3,010
-------- ------- --------
Cash and cash equivalents at end of
year................................... $ 2,880 $ 3,010 $ 6,695
======== ======= ========
</TABLE>
See notes to consolidated financial statements.
F-34
<PAGE>
LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 27, 1998 and December 26, 1999
and for each of the three years in the period ended December 26, 1999
1. ORGANIZATION
Latin Communications Group Inc. (the "Company") is a Spanish language media
company that provides advertisers with radio broadcasting and newspaper
publishing for the Hispanic community. The Company operates 17 radio stations
in California, Colorado, New Mexico and Washington, D.C. Operations also
include a Spanish language newspaper in New York City. In February 1999, the
Company disposed of its Spanish language television operations (see Note 8).
On December 21, 1999, the Company entered into a plan of merger agreement
with Entravision Communications Company, L.L.C. ("ECC"), a Delaware limited
liability company engaged in the ownership and operation of television and
radio stations. The merger is expected to close by the second quarter of 2000.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the Company and its wholly-
owned subsidiaries. Significant intercompany accounts and transactions have
been eliminated in consolidation.
Fiscal Year
The Company closes its year on the last Sunday in December.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
Fair Value of Financial Instruments
The Company's financial instruments, including cash and cash equivalents,
accounts receivable and accounts payable, are carried at cost which
approximates fair value due to the short maturity of these instruments. Senior
and subordinated debt bear interest at what is estimated to be current market
rates of interest. Accordingly, book values approximate fair value for these
instruments.
Original Issue Discount and Debt Issuance Costs
Original issue discounts on debt are recorded as discounts against the face
value of the debt issued and are amortized on the effective interest method
over the life of the related debt. Debt issuance costs are recorded as finance
costs and are amortized over the life of the related debt.
Property and Equipment
Property and equipment are reported at cost. Depreciation of property and
equipment is calculated on the straight-line basis over the estimated useful
lives of the assets.
F-35
<PAGE>
LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
As of December 27, 1998 and December 26, 1999
and for each of the three years in the period ended December 26, 1999
Broadcast Licenses and Other Intangible Assets
Intangible assets, which include broadcast licenses, goodwill, network
affiliation agreements and other intangibles arising from the Company's
acquisitions, are carried at cost, less accumulated amortization. These assets
are amortized on a straight-line basis, generally over 40 years.
In accordance with Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long Lived Assets and Changes in Long Lived
Assets to be Disposed Of, the carrying value of intangible assets is reviewed
when events or changes in circumstances suggest that the recoverability of an
asset may be impaired. If this review indicates these intangible assets will
not be recoverable, as determined based on the undiscounted cash flows over the
remaining life, the carrying value of these assets will be reduced to their
respective fair values. The cash flow estimates that will be used will contain
management's best estimates, using appropriate and customary projections at the
time. No intangible assets were considered impaired at December 26, 1999.
Revenue Recognition
Advertising, publishing and other revenue is recognized as services are
provided. Uncollectible amounts are charged to expense in the period that
determination becomes reasonably estimable.
Trade and Barter Agreements
Trade and barter agreements are recorded as revenue at the fair value of the
goods or services to be received when advertising space or time is provided.
Barter expenses are recorded when merchandise or services are received. Barter
revenue and costs were approximately $1.5 million in 1999, $1.5 million in 1998
and $1.6 million in 1997.
Advertising Costs
These costs are expensed as incurred and amounted to $0.4 million in 1999,
$0.6 million in 1998 and $0.2 million in 1997.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Concentration of Credit Risk
The Company provides advertising space and airtime to national, regional and
local advertisers within the geographic areas in which the Company operates. In
addition, the Company provides newspapers to wholesalers for distribution to
retail outlets, as well as directly to vendors. Credit is extended based on an
evaluation of the customer's financial condition and generally advance payment
or collateral is not required of creditworthy customers. Credit losses are
provided for in the financial statements and have been within management's
expectations.
F-36
<PAGE>
LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
As of December 27, 1998 and December 26, 1999
and for each of the three years in the period ended December 26, 1999
Risks and Uncertainties
The Company is party to two collective bargaining agreements in connection
with its newspaper operations. The Company is due to renegotiate a labor
agreement with one of the unions whose agreement expired on March 30, 2000. The
Company intends to continue negotiations to reach a new labor agreement.
Accounting for Stock-Based Compensation
The Company accounts for employee stock options and stock appreciation
rights in accordance with Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees ("APB No. 25"), and has adopted the
"disclosure only" alternative described in Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation ("SFAS No. 123").
Earnings Per Share
Basic earnings per share is computed by dividing net income (loss) by the
weighted average number of common shares outstanding. Diluted earnings per
share is computed by dividing net income (loss) by the weighted average number
of common shares and dilutive securities outstanding (none for all years
presented). Antidilutive securities relating to stock options totaled 83,178 in
1999 and 73,045 in 1998 and 1997.
Reclassifications
Certain prior years' balances have been reclassified to conform to the
current year's presentation.
New Accounting Pronouncements
In December of 1999, the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin (SAB) 101, Revenue Recognition in Financial
Statements. SAB 101 provides guidance on the recognition, presentation and
disclosure of revenue in financial statements filed with the SEC. This SAB, as
amended in March 2000, is effective for us beginning in the second quarter of
our fiscal year beginning December 27, 1999. The adoption of SAB 101 will not
have a material impact on our financial statements.
3. DETAIL OF BALANCE SHEET ACCOUNTS AND SUPPLEMENTARY CASH FLOW INFORMATION
Property and equipment consists of the following:
<TABLE>
<CAPTION>
Estimated
Useful
Life in December 27, December 26,
Years 1998 1999
(in millions of dollars) ---------- ------------ ------------
<S> <C> <C> <C>
Land....................................... $0.2 $0.2
Building................................... 25 0.1 0.1
Broadcast equipment........................ 5 5.4 4.8
Machinery and equipment.................... 3-5 1.9 3.1
Leasehold improvements..................... Lease-term 1.2 1.1
Construction in progress................... -- 1.6
---- ----
8.8 10.9
Less accumulated depreciation.............. 2.3 3.6
---- ----
$6.5 $7.3
==== ====
</TABLE>
F-37
<PAGE>
LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
As of December 27, 1998 and December 26, 1999
and for each of the three years in the period ended December 26, 1999
Broadcast licenses and other intangible assets consist of the following:
<TABLE>
<CAPTION>
December 27, December 26,
1998 1999
(in millions of dollars) ------------ ------------
<S> <C> <C>
Broadcasting licenses and other intangible assets.... $104.4 $101.7
Goodwill............................................. 41.0 41.0
------ ------
145.4 142.7
Less accumulated amortization........................ 8.1 11.5
------ ------
$137.3 $131.2
====== ======
</TABLE>
In 1997, the Company acquired 100% of the stock of Embarcadero Media Inc.
(EMI), the owners and operators of eight radio stations. The acquisition was
accounted for under the purchase method. The total purchase price was allocated
to the fair market value of the net assets acquired. Included in those assets
were broadcast licenses and other intangibles totaling $83.5 million, which are
generally being amortized over forty years. Below is a summary of the
allocation of the purchase price relating to this acquisition, along with a
summary of intangible assets purchased in 1998.
<TABLE>
<CAPTION>
Years Ended
-------------------------
December 28, December 27,
1997 1998
------------ ------------
<S> <C> <C>
Purchase of businesses, net of cash acquired:
Working capital, other than cash and current portion
of long-term debt.................................. $ (0.7) $ --
Land held for sale.................................. (4.0) --
Property and equipment.............................. (3.2) --
Broadcast licenses and other intangible assets...... (83.5) (5.4)
Deferred income taxes............................... 13.1 --
Stock and notes payable issued for assets........... 8.3 4.2
------ -----
Net cash used to acquire businesses................. $(70.0) $(1.2)
====== =====
</TABLE>
4. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
December 27, December 26,
1998 1999
(in millions of dollars) ------------ ------------
<S> <C> <C>
Senior bank debt under a term loan agreement that was
extinguished in October 1999........................ $36.5 $ --
Senior bank debt under a revolving line of credit
totaling $35 million, maturing in October 2002 and
bearing interest at 8.34% at December 26, 1999...... -- 25.0
Senior subordinated debt maturing in February 2005
and bearing interest at 5%.......................... 16.2 17.0
Other................................................ 2.1 0.1
----- -----
Total debt........................................... 54.8 42.1
Less current portion of long-term debt............... 4.3 0.1
----- -----
Long-term debt....................................... $50.5 $42.0
===== =====
</TABLE>
F-38
<PAGE>
LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
As of December 27, 1998 and December 26, 1999
and for each of the three years in the period ended December 26, 1999
On October 22, 1999, the Company entered into a $35 million revolving bank
credit facility (the "Facility") for the purpose of refinancing its senior bank
debt. The Facility is secured by a first priority lien on the capital stock of
the Company's subsidiaries and bears interest at rates of either the London
Interbank Offered Rate (LIBOR) plus a margin ranging from 1.75% to 3.00%, or
the Prime Rate plus a margin ranging from 0.25% to 1.50% per annum depending on
the Company's total leverage ratio, as defined. The Facility contains
affirmative and negative covenants relating to the business and operations of
the Company. These include various financial and performance covenants with
respect to indebtedness, investments, liens, sale of assets, mergers,
consolidation and dividend payments, as well as leverage, cash flow and
interest coverage ratios. In connection with the refinancing, the Company also
re-paid the note payable plus accrued interest, paid current amounts due for
interest on the senior subordinated debt and began accruing interest at stated
rates.
In October 1999, debt issuance costs totaling $1.0 million were recognized
as an extraordinary loss due to the early extinguishment of the term loan.
The previously outstanding senior bank debt under a term loan agreement was
secured and incurred interest at rates of either LIBOR plus a margin ranging
from 1.5% to 3.75%, or the Prime Rate plus a margin ranging from 0.50% to 4.75%
per annum depending on the Company's total leverage ratio. The rate on the
senior bank debt at December 27, 1998 was Prime plus 4.75% or approximately
12.5%. As a result of senior bank debt covenant violations beginning on July
15, 1998, the Company was restricted from paying interest and principal on any
other outstanding debt. The Company also began accruing penalty interest on its
senior bank loans and subordinated debt.
Senior subordinated debt consists of borrowings from certain stockholders
and officers of the Company (see Note 10). It is comprised of two issuances,
Tier I and Tier II (collectively, the "senior subordinated debt"). Tier 1, was
issued in February 1997, in the amount of $17.5 million. Tier II, in the amount
of $4.0 million, was issued in February 1998. Unamortized original issue
discount on the senior subordinated debt was approximately $4.5 million at
December 26, 1999 and $5.3 million at December 27, 1998.
At December 26, 1999, scheduled maturities of long-term debt were as
follows:
<TABLE>
<CAPTION>
(in millions of dollars)
<S> <C>
Year ending:
2002............................................................. $25.0
2005............................................................. 17.0
-----
$42.0
=====
</TABLE>
For the years ended December 26, 1999, December 27, 1998 and December 28,
1997, interest paid was approximately $5.4 million, $5.5 million and $2.9
million, respectively.
5. STOCK OPTION AND EQUITY APPRECIATION INCENTIVE PLANS
The Company has adopted two stock option plans, which provide for the
issuance of options for the purchase of up to 835,000 shares of the Company's
common stock as incentive to key officers and employees. The term of the
options granted under the plans is generally ten years. Vesting generally
occurs on a prorated basis over a three year period.
Generally, all options become immediately exercisable in full should any of
the following events occur: termination of the optionee's employment by the
optionee for good reason, termination of the optionee's employment by the
Company without cause, death or permanent disability or the consummation of a
sale of all
F-39
<PAGE>
LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
As of December 27, 1998 and December 26, 1999
and for each of the three years in the period ended December 26, 1999
or substantially all of the assets of the Company. No compensation cost has
been recognized in connection with stock option grants because options are
issued with an exercise price equal to fair value on the date of grant.
Under SFAS No. 123, had grants been measured based on the fair market value
at the grant date for awards in 1999, 1998 and 1997, the Company's pro forma
net income in 1999 would have decreased by approximately $0.1 million, to $2.8
million, and the pro forma loss in 1998 and 1997 would have increased by
$0.1 million and $0.2 million, to $5.1 million and $2.7 million, respectively.
These pro forma amounts may not be representative of future disclosures
since the estimated fair value of stock options is amortized to expense over
the vesting period, and additional options may be granted or forfeited in
future years. The fair value of these options was estimated at the date of
grant using the Black- Scholes minimum value method. The minimum value method
calculates the excess of the fair value of the stock at the date of grant over
the present value of both the exercise price and the expected dividend
payments, each discounted at the risk free interest rate, over the life of the
options. The following assumptions were used in the calculation:
<TABLE>
<CAPTION>
1997 1998 1999
------- ------- ---------
<S> <C> <C> <C>
Expected dividend yield......................... 0% 0% 0%
Risk free interest rate......................... 6.31% 6.31% 7.00%
Expected life of options........................ 5 years 5 years 4-5 years
</TABLE>
The weighted average fair value of options granted during 1999, 1998 and
1997 was $1.71, $1.41 and $1.58, respectively.
Stock option activity is summarized as follows:
<TABLE>
<CAPTION>
Available Stock Weighted
for Options Average
Grant Outstanding Exercise Price
--------- ----------- --------------
<S> <C> <C> <C>
Outstanding at December 29, 1996.......... 605,000 230,000 $10.75
Granted.................................. (300,000) 300,000 15.42
Forfeited................................ 10,000 (10,000) 10.00
-------- -------- ------
Outstanding at December 28, 1997.......... 315,000 520,000 13.46
Granted.................................. -- -- --
Forfeited................................ 133,332 (133,332) 16.25
-------- -------- ------
Outstanding at December 27, 1998.......... 448,332 386,668 12.49
Granted.................................. (133,332) 133,332 13.19
Forfeited................................ 48,332 (48,332) 13.15
-------- -------- ------
Outstanding at December 26, 1999.......... 363,332 471,668 $12.62
======== ======== ======
</TABLE>
Options for 347,446, 281,667 and 108,000 shares were exercisable at December
26, 1999, December 27, 1998 and December 28, 1997, respectively.
F-40
<PAGE>
LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
As of December 27, 1998 and December 26, 1999
and for each of the three years in the period ended December 26, 1999
Following is a summary of the weighted-average exercise price and weighted-
average remaining contractual life for options outstanding at December 26,
1999:
<TABLE>
<CAPTION>
Weighted-
Weighted- # of Average
Average Options Contractual
Exercise Price Outstanding Life Remaining
-------------- ----------- --------------
<S> <C> <C>
$10.00--$15.00 438,334 4.6 years
$15.01--$20.00 33,334 1 year
</TABLE>
In January 1998, the Company approved an Equity Appreciation Incentive Plan
(the "EAI Plan") for its key employees. Under the EAI Plan, key employees have
the opportunity to receive stock appreciation rights, which provide for cash
payments upon vesting amounting to the difference between the Company's common
stock value per share at the vesting date and $15.00 per share. Vesting is
automatically triggered by an initial public offering, merger of the Company,
sale of the Company or four years of continuous service by the employee. In
conjunction with the approval of the EAI Plan, the Company has 130,000
outstanding stock appreciation rights as of December 26, 1999. In 1999, the
Company recorded approximately $0.3 million of compensation expense associated
with this plan. All awards under this plan will be accelerated upon
consummation of the merger with ECC.
6. INCOME TAXES
The Company accounts for income taxes using the liability method pursuant to
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes. Under the liability method, deferred income taxes consist of the net tax
effects of temporary differences between the carrying amounts of assets and
liabilities for financial statement and income tax purposes, as determined
under enacted tax laws and rates.
Federal, state and local income taxes (benefits) consist of the following:
<TABLE>
<CAPTION>
Years Ended
--------------------------------------------------
December 28, December 27, December 26,
1997 1998 1999
---------------- ---------------- ----------------
Current Deferred Current Deferred Current Deferred
(in millions of dollars) ------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Federal (benefit).......... $0.1 $(1.4) $-- $(1.8) $0.2 $ 1.7
State and local (benefit).. 0.1 (0.6) 0.1 0.1 0.6 (0.3)
---- ----- ---- ----- ---- -----
Total...................... $0.2 $(2.0) $0.1 $(1.7) $0.8 $ 1.4
==== ===== ==== ===== ==== =====
Provisions for:
Continuing operations...... $0.2 $(2.4) $0.1 $(2.7) $0.3 $(1.0)
Discontinued operations.... -- 0.5 -- 1.0 0.1 0.2
Gain on sale of
discontinued operations... -- -- -- -- 0.4 2.6
Extraordinary loss from
early debt payment........ -- (0.1) -- -- -- (0.4)
---- ----- ---- ----- ---- -----
Total...................... $0.2 $(2.0) $0.1 $(1.7) $0.8 $ 1.4
==== ===== ==== ===== ==== =====
</TABLE>
F-41
<PAGE>
LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
As of December 27, 1998 and December 26, 1999
and for each of the three years in the period ended December 26, 1999
The differences between income tax expense for continuing operations shown
in the statements of operations and the amounts determined by applying the
federal statutory rate of 34% in each year are as follows:
<TABLE>
<CAPTION>
1997 1998 1999
----- ----- -----
<S> <C> <C> <C>
Federal statutory income tax (benefit)............. (34.0)% (34.0)% (34.0)%
State and local income taxes, net of federal
benefit........................................... (8.6) 0.9 (6.0)
Nondeductible goodwill............................. 4.2 2.6 8.9
Others, net........................................ (0.8) 1.7 1.1
----- ----- -----
Total.............................................. (39.2)% (28.8)% (30.0)%
===== ===== =====
</TABLE>
The deferred tax asset and liability at the fiscal year end consist of the
following components:
<TABLE>
<CAPTION>
1998 1999
(in millions of dollars) ------ ------
<S> <C> <C>
Deferred tax assets:
Accounts receivable....................................... $ 1.0 $ 0.9
Accrued compensation...................................... 1.1 1.3
Net operating loss carry forwards......................... 5.0 1.9
Other..................................................... -- 0.2
------ ------
Gross deferred tax asset.................................... 7.1 4.3
Deferred tax liability:
Depreciation and amortization............................. (23.3) (21.9)
------ ------
Net deferred tax liability.................................. $(16.2) $(17.6)
====== ======
</TABLE>
Tax loss carryforwards totaling $5.4 million will expire by 2010 if not
utilized.
The components of deferred taxes included in the consolidated balance sheet
are as follows:
<TABLE>
<CAPTION>
1998 1999
------ ------
<S> <C> <C>
Current asset............................................... $ 1.3 $ 1.3
Noncurrent liability........................................ (17.5) (18.9)
------ ------
Net deferred tax liability.................................. $(16.2) $(17.6)
====== ======
</TABLE>
For the years ended December 26, 1999, December 27, 1998 and December 28,
1997, income taxes paid were approximately $0.3 million, $0.2 million and $0.3
million, respectively.
7. EXCHANGE OF BROADCASTING ASSETS
On May 27, 1998, the Company, exchanged radio broadcasting licenses, radio
broadcasting equipment and facilities in Portland and San Jose along with a
$2.0 million short term note payable and 150,000 shares of common stock valued
at $2.25 million for similar productive assets in Sacramento and San Francisco.
Acquired assets were not self-sustaining. Integrated sets of support activities
were not transferred in the exchange, nor were programming formats, or
broadcast personalities. Acquired assets were redeployed and integrated into
broadcasting and support activities originating from the San Jose area
headquarters. The exchange was accounted for as a non-monetary exchange of
similar productive assets. Acquired assets were recorded at the value of the
assets surrendered, plus the value of the note payable and the common stock.
F-42
<PAGE>
LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
As of December 27, 1998 and December 26, 1999
and for each of the three years in the period ended December 26, 1999
8. DISCONTINUED OPERATIONS
In February 1999, the Company sold to ECC substantially all of its assets
relating to television stations WVEA, in Tampa, Florida, and WVEN, Orlando,
Florida. It also sold to ECC all of its capital stock in Los Cerezos Television
Company which operated television station WMDO in Washington, D.C. The net
proceeds in connection with these transactions was approximately $12.9 million.
9. BENEFIT PLANS
The Company sponsors two qualified 401(k) defined contribution plans, one
for the radio division and one for the print division. For all eligible
employees, the Company matches employee contributions within certain limits,
and for the print division plan, the Company also contributes a fixed minimum
annual contribution. Plan participants may make pretax contributions from their
salaries up to the maximum allowed by the Internal Revenue Code. The Company's
expense for both defined contribution plans for the years ended December 26,
1999 and December 27, 1998 was approximately $0.1 million.
The Company is obligated, through its agreement with the union that
represents employees who deliver El Diario/La Prensa, the Company's Spanish
language daily newspaper, to contribute amounts to the defined benefit pension,
welfare and 401(k) plans administered by the Publishers' Association of New
York City. The pension and welfare plans provide pension benefits and medical
insurance. The Company contributes approximately 9% and 11% of gross
compensation for each eligible employee per year to the pension plan and
welfare plan, respectively. The Company contributes $23 per shift per eligible
employee to the union's 401(k) plan. For the years ended December 26, 1999,
December 27, 1998 and December 28, 1997, the Company's expense for these multi-
employer plans was approximately $0.3 million, $0.2 million and $0.2 million,
respectively.
The Company is obligated under a union contract to make severance payments
to its union employees under certain circumstances. Non-union print division
severance pay is calculated in a similar manner. The Company does not fund
these commitments. The balance sheet accrual for severance is based on the net
present values of the projected vested benefit obligation and, accordingly,
provides for both vested and non-vested employees. The balance at December 26,
1999 and December 27, 1998 was approximately $1.4 million and $1.5 million,
respectively, and is included in other liabilities. The Company's severance
expense for the three years in the period ended December 26, 1999 was
approximately $0.2 million in each year.
10. RELATED PARTY TRANSACTIONS
During 1999, the Company paid other finance costs in the amount of $0.3
million to one of its stockholders and is committed to pay an additional $0.1
million in the year 2000.
Interest expense on senior subordinated debt held by certain stockholders
and officers of the Company amounted to $1.9 million in 1999, $1.8 million in
1998 and $1.2 million in 1997, see note 4 for a description of the terms of
this indebtedness.
During 1999, the Company assisted an officer with relocation costs by
advancing cash in exchange for two notes receivable of $0.2 million each. One
note specifies that no repayment is required if related employment continues
for four years. Both notes specify that no repayment is required if the company
is acquired. (See second paragraph of Note 1.) At December 26, 1999, the
balance due on these notes totaled $0.4 million.
F-43
<PAGE>
LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
As of December 27, 1998 and December 26, 1999
and for each of the three years in the period ended December 26, 1999
11. COMMITMENTS AND CONTINGENCIES
The Company has entered into various leases for office space and broadcast
towers. Future minimum lease payments required at December 26, 1999 are:
<TABLE>
<CAPTION>
(in millions of dollars)
<S> <C>
2000............................................................. $ 1.8
2001............................................................. 1.6
2002............................................................. 1.4
2003............................................................. 1.2
2004............................................................. 1.0
Thereafter....................................................... 3.9
-----
$10.9
=====
</TABLE>
Rental expense relating to these leases totaled $1.9 million, $2.0 million
and $1.6 million for the years ended December 26, 1999, December 27, 1998 and
December 28, 1997, respectively.
During 1999, the Company purchased an option to acquire the land and
buildings housing its corporate operations for an option price of $0.1 million.
On January 12, 2000, the Company signed a letter of intent to exercise the
option for $5.3 million.
In September of 1999, the Company entered a ten-year lease commitment for
facilities currently under construction in San Jose, California. The Company's
corporate headquarters will be relocated to the new facility upon its
completion and the lease is expected to begin in April 2000. Minimum monthly
rentals are subject to annual consumer price index adjustments beginning in
year three of the lease. The lease contains two five-year renewal options.
On November 21, 1999, the Company entered into agreements to acquire the
assets and licenses to operate two radio stations in Las Vegas and Reno, Nevada
for aggregate purchase consideration of $17.5 million. The sale is expected to
close by the second quarter of 2000 and is contingent upon receipt of FCC
approval. As of December 26, 1999, the Company had deposited $0.5 million in
escrow in connection with these acquisitions.
In February 2000, the Company signed a letter of intent to sell its AM radio
station in Washington, D.C. for proceeds of $2.5 million. The sale is expected
to be completed by the second quarter of 2000 and the Company expects to record
a gain in connection to the sale of approximately $1.5 million.
The Company and its subsidiaries are parties to various legal proceedings
and claims incident to the normal conduct of its business. The Company believes
that it is unlikely that the outcome of all pending litigation in the aggregate
will have a material adverse effect on its consolidated financial condition or
results of operations.
12. SEGMENT INFORMATION
The Company operates in two reportable segments, radio broadcasting and
newspaper publishing. The radio broadcasting segment has operations in the San
Francisco/San Jose bay area of California, the Salinas/ Monterey area of
California, Riverside, California, Sacramento, California, Albuquerque, New
Mexico, Denver, Colorado and Washington, DC. The newspaper publishing segment
publishes a daily newspaper in New York, New York. Each segment is managed
separately. Management evaluates performance based on several factors, of which
the primary financial measure is segment operating profit. Total revenue of
each segment represents sales to unaffiliated customers. There are no inter-
segment sales. No single customer provides more than 10% of the Company's
revenue. The accounting policies of the segments are the same as those
described in Note 2. Corporate includes general and administrative costs that
are not directly related to the reportable segments.
F-44
<PAGE>
LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
As of December 27, 1998 and December 26, 1999
and for each of the three years in the period ended December 26, 1999
Financial information for these business segments includes:
<TABLE>
<CAPTION>
Years Ended
--------------------------------------
December 28, December 27, December 26,
1997 1998 1999
(in millions of dollars) ------------ ------------ ------------
<S> <C> <C> <C>
Revenue:
Radio Broadcasting...................... $ 19.2 $ 19.3 $ 25.1
Newspaper Publishing.................... 17.8 18.6 19.1
------ ------ ------
$ 37.0 $ 37.9 $ 44.2
====== ====== ======
Operating Profit (loss):
Radio Broadcasting...................... $ (0.1) $ (1.0) $ 3.7
Newspaper Publishing.................... 0.7 1.4 1.2
------ ------ ------
Total Reportable Segments.............. 0.6 0.4 4.9
Corporate............................... (1.7) (2.9) (1.8)
------ ------ ------
$ (1.1) $ (2.5) $ 3.1
====== ====== ======
Identifiable Assets:
Radio Broadcasting...................... $130.9 $131.9 $131.0
Newspaper Publishing.................... 23.3 23.8 24.5
------ ------ ------
Total Reportable Segments.............. 154.2 155.7 155.5
Corporate............................... 4.3 5.5 1.9
Discontinued operations................. 4.5 4.8 --
------ ------ ------
$163.0 $166.0 $157.4
====== ====== ======
Depreciation and Amortization:
Radio Broadcasting...................... $ 3.0 $ 3.8 $ 3.9
Newspaper Publishing.................... 0.7 0.8 1.0
------ ------ ------
$ 3.7 $ 4.6 $ 4.9
====== ====== ======
Capital Expenditures:
Radio Broadcasting...................... $ 0.7 $ 0.2 $ 1.1
Newspaper Publishing.................... 0.2 0.9 1.2
------ ------ ------
Total Reportable Segments.............. 0.9 1.1 2.3
Discontinued Operations.................. 0.1 0.2 --
------ ------ ------
$ 1.0 $ 1.3 $ 2.3
====== ====== ======
</TABLE>
F-45
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Z-Spanish Media Corporation:
We have audited the accompanying combined balance sheets of Z-Spanish Media
Corporation and its Predecessor as of December 31, 1998 and 1999, and the
related combined statements of operations, stockholders' equity and cash flows
for each of the years in the three-year period ended December 31, 1999. The
combined financial statements include the accounts of Z-Spanish Media
Corporation and three related companies, Achievement Radio Holdings, Inc., PAR
Communications, Inc. and PAR Holdings, Inc., which collectively represent the
Predecessor to Z-Spanish Media Corporation. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such combined financial statements present fairly, in all
material respects, the financial position of the Z-Spanish Media Corporation
and its Predecessor as of December 31, 1998 and 1999, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1999 in conformity with generally accepted accounting
principles.
/s/ Deloitte & Touche LLP
Sacramento, California
March 24, 2000
F-46
<PAGE>
Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR
COMBINED BALANCE SHEETS
December 31, 1998 and 1999
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................... $ 3,602 $ 4,493
Accounts receivable, net of allowance for doubtful accounts
of $869 and $1,233 at December 31, 1998 and 1999,
respectively............................................... 5,717 8,471
Notes receivable............................................ -- 7,500
Other current assets........................................ 752 1,983
-------- --------
Total current assets...................................... 10,071 22,447
Property and equipment, net.................................. 27,049 34,267
Investments.................................................. -- 2,501
Intangible assets, net....................................... 155,243 225,408
Other assets................................................. 4,911 4,420
-------- --------
Total assets................................................. $197,274 $289,043
======== ========
LIABILITIES, REDEEMABLE PREFERRED STOCK, COMMON STOCK PUT
OPTIONS AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................ $ 1,090 $ 810
Current portion of long-term debt........................... 4,056 22,779
Accrued expenses............................................ 3,854 4,636
Accrued interest............................................ 1,163 1,160
Other liabilities........................................... 2,732 5,020
Income taxes payable........................................ 521 628
-------- --------
Total current liabilities................................. 13,416 35,033
Long-term debt............................................... 62,251 89,066
Other long-term liabilities.................................. 1,003 1,101
Deferred income taxes........................................ 26,563 27,442
Minority interest............................................ 225 11
Commitments and contingencies (note 9)
Redeemable preferred stock................................... 3,870 --
Common stock put options..................................... 24,984 37,591
Stockholders' equity:
Preferred stock--$0.01 par value, 105,000 shares authorized
and 10,079 shares issued and outstanding at December 31,
1998 ($11,837 liquidation value at December 31, 1998) and
10,000 shares authorized and no shares issued and
outstanding at December 31, 1999........................... 10,523 --
Common stock--$0.01 par value; 62,000,000 shares
authorized; 15,435,157 and 25,090,000 issued and
outstanding at December 31, 1998 and 1999, respectively.... 154 251
Additional paid-in capital.................................. 59,813 115,751
Loans to stockholders....................................... (570) (1,010)
Deferred stock compensation................................. -- (4,187)
Accumulated deficit......................................... (4,958) (12,006)
-------- --------
Total stockholders' equity................................ 64,962 98,799
-------- --------
Total liabilities, redeemable preferred stock, common stock
put options and stockholders' equity........................ $197,274 $289,043
======== ========
</TABLE>
See notes to combined financial statements.
F-47
<PAGE>
Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR
COMBINED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1997, 1998 and 1999
(In thousands)
<TABLE>
<CAPTION>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Revenue:
Revenue.......................................... $13,339 $27,598 $38,561
Less agency and broker commissions............... 297 1,740 2,523
------- ------- -------
Net revenue.................................... 13,042 25,858 36,038
------- ------- -------
Operating expenses:
Direct operating expenses........................ 4,391 10,108 14,183
Selling, general and administrative.............. 5,105 6,459 8,382
Depreciation and amortization.................... 2,747 6,736 8,670
Corporate expenses............................... 2,975 3,669 4,773
------- ------- -------
Total operating expenses....................... 15,218 26,972 36,008
------- ------- -------
Gain on sale of assets, net........................ 2,671 5,685 4,442
------- ------- -------
Operating income................................... 495 4,571 4,472
Interest expense................................... (2,425) (5,664) (7,485)
Interest and other income.......................... 356 340 1,014
------- ------- -------
Income (loss) before minority interest, income
taxes and extraordinary item...................... (1,574) (753) (1,999)
Minority interest in (loss) income of
subsidiaries...................................... (31) (86) 182
Income taxes benefit (provision)................... 538 (394) 102
------- ------- -------
Loss before extraordinary loss..................... (1,067) (1,233) (1,715)
Extraordinary loss on debt extinguishment
(Net of income tax benefit of $378 in 1997 and $699
in 1999).......................................... (568) -- (1,047)
------- ------- -------
Net loss....................................... $(1,635) $(1,233) $(2,762)
======= ======= =======
</TABLE>
See notes to combined financial statements.
F-48
<PAGE>
Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
For the years ended December 31, 1997, 1998 and 1999
(In thousands except share data)
<TABLE>
<CAPTION>
Preferred Stock Common Stock
----------------- -----------------------------
Additional Deferred
Paid-in Loans to Stock Accumulated
Shares Amount Shares Amount Capital Stockholders Compensation Deficit Total
------- -------- ---------- ------ ---------- ------------ ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1997................... -- -- 5,876,490 $ 59 $ 25,441 -- -- $ (1,824) $ 23,676
Issuance of common
stock.................. -- -- 4,723,814 47 20,453 -- -- -- 20,500
Issuance of stock--
Vista acquisition...... 10,079 $ 10,523 1,714,105 17 191 $ (504) -- -- 10,227
Net loss............... -- -- -- -- -- -- -- (1,635) (1,635)
------- -------- ---------- ---- -------- ------- ------- -------- --------
Balance at December 31,
1997................... 10,079 10,523 12,314,409 123 46,085 (504) -- (3,459) 52,768
Formation of Z-Spanish
Media Corporation and
acquisition of
subsidiaries........... -- -- 3,720,874 37 16,773 -- -- -- 16,810
Redeemable preferred
stock dividends........ -- -- -- -- -- -- -- (266) (266)
Purchase of common
stock.................. -- -- (600,126) (6) (3,045) -- -- -- (3,051)
Increase in loans to
stockholders........... -- -- -- -- -- (66) -- -- (66)
Net loss............... -- -- -- -- -- -- -- (1,233) (1,233)
------- -------- ---------- ---- -------- ------- ------- -------- --------
Balance at December 31,
1998................... 10,079 10,523 15,435,157 154 59,813 (570) -- (4,958) 64,962
Purchase of common
stock.................. -- -- (228,550) (2) (1,141) -- -- -- (1,143)
Issuance of common
stock.................. -- -- 5,212,120 52 29,448 -- -- -- 29,500
Stockholder common
stock purchase......... -- -- 103,618 1 517 (518) -- -- --
Issuance of stock--JB
Broadcasting
acquisition............ -- -- 681,264 7 3,350 -- -- -- 3,357
Issuance of preferred
stock.................. 11,400 11,456 -- -- -- -- -- -- 11,456
Deferred stock
compensation........... -- -- -- -- 4,333 -- (4,333) -- --
Amortization of
deferred stock
compensation........... -- -- -- -- -- -- 146 -- 146
Acquisition of minority
interests in
subsidiaries and
exchange of preferred
for common stock....... (21,479) (21,979) 3,886,391 39 32,038 -- -- (4,462) 5,636
Redeemable preferred
stock dividend
settlement............. -- -- -- -- -- -- -- 176 176
Increase in fair value
of common stock put
options................ -- -- -- -- (12,607) -- -- -- (12,607)
Decrease in loans to
stockholders........... -- -- -- -- -- 78 -- -- 78
Net loss............... -- -- -- -- -- -- -- (2,762) (2,762)
------- -------- ---------- ---- -------- ------- ------- -------- --------
Balance at December 31,
1999................... -- $ -- 25,090,000 $251 $115,751 $(1,010) $(4,187) $(12,006) $ 98,799
======= ======== ========== ==== ======== ======= ======= ======== ========
</TABLE>
See notes to combined financial statements.
F-49
<PAGE>
Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR
COMBINED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1997, 1998 and 1999
(In thousands)
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss....................................... $ (1,635) $ (1,233) $ (2,762)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization.................. 2,747 6,736 8,670
Deferred income taxes.......................... (1,223) (11,946) 879
Minority interest.............................. 31 86 (182)
Loss on debt extinguishment.................... 568 -- 1,047
Gain on sale of assets......................... (2,671) (5,685) (4,442)
Loss on write-off of advertising displays...... -- -- 1,664
Changes in operating assets and liabilities,
net of effects of acquisitions:
Accounts receivable........................... (455) 567 (2,754)
Other current assets.......................... (531) 1,144 (1,539)
Receivable from affiliate..................... (12,929) 4,637 --
Other assets.................................. (6) 180 (29)
Accounts payable and accrued liabilities...... 741 (1,109) (717)
Other liabilities............................. (1,077) 2,227 (115)
-------- -------- ---------
Net cash used in operating activities........ (16,440) (4,396) (280)
-------- -------- ---------
Cash flows from investing activities:
Proceeds from sale of assets................... 19,396 43,600 23,710
Escrow deposits on pending acquisitions........ -- (4,335) 520
Purchase of property and equipment and
intangible assets............................. (40,042) (7,003) (103,305)
-------- -------- ---------
Net cash (used in) from investing
activities.................................. (20,646) 32,262 (79,075)
-------- -------- ---------
Cash flows from financing activities:
Repayment of notes payable..................... (2,354) -- --
Issuance of notes payable...................... 482 -- 7,100
Proceeds from long-term debt................... 26,983 -- 109,100
Repayment of long-term debt.................... (15,000) (19,018) (70,662)
Debt issuance costs............................ (857) -- (1,313)
Issuance of common and preferred stock......... 30,727 24,984 40,956
Repurchase of common stock..................... -- (3,051) (1,143)
Redemption of redeemable preferred stock....... -- -- (3,870)
Purchase of Z-Spanish Radio Network net of cash
acquired...................................... -- (30,683) --
Loans to stockholders.......................... -- (66) 78
Minority interest in subsidiary................ -- 56 --
-------- -------- ---------
Net cash from (used in) financing
activities.................................. 39,981 (27,778) 80,246
-------- -------- ---------
Net increase in cash and cash equivalents....... 2,895 88 891
Cash and cash equivalents, beginning of year.... 619 3,514 3,602
-------- -------- ---------
Cash and cash equivalents, end of year.......... $ 3,514 $ 3,602 $ 4,493
======== ======== =========
Supplemental disclosure of cash flow
information:
Interest paid.................................. $ 2,128 $ 6,221 $ 7,480
Income taxes paid.............................. 806 268 298
Non-cash investing and financing activities:
Radio station property and equipment financed
through seller notes payable.................. $ 120 -- --
FCC license and other intangibles acquired
financed through seller notes payable......... 6,150 -- --
Write off of programming library and offsetting
liability..................................... 575 -- --
Write off of network costs..................... 116 -- --
Reduction of debt obligation................... 165 -- --
Outdoor advertising assets and liabilities
assumed through seller notes payable.......... 2,176 -- --
Acquisition of net assets of Z-Spanish Radio,
net of cash acquired through issuance of
common stock.................................. -- $ 16,810 --
Acquisition of radio station assets acquired
through the cancellation of debt from seller,
and issuance of debt.......................... -- 13,292 --
Accrued dividends on redeemable preferred
stock......................................... -- 266 --
Sale of radio station assets for a note
receivable.................................... -- -- $ 7,500
Purchase of land through seller notes payable.. -- -- 2,250
Barter transaction............................. -- -- 2,501
Reversal of accrued dividends on redeemable
preferred stock............................... -- -- 176
Acquisition of radio station assets through
issuance of common stock, cancellation of debt
from seller and cancellation of LMA payable... -- -- 3,357
</TABLE>
See notes to combined financial statements.
F-50
<PAGE>
Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR
NOTES TO COMBINED FINANCIAL STATEMENTS
For the years ended December 31, 1997, 1998 and 1999
1. DESCRIPTION OF BUSINESS
Basis of Presentation
The accompanying combined financial statements reflect the combined accounts
of Z-Spanish Media Corporation ("Z-Media") and its predecessor of Z-Media,
referred to as PAR, which was comprised of three companies under common
control, Achievement Radio Holdings, Inc. ("ARH"), PAR Communications, Inc.
("PARCOM") and PAR Holdings, Inc. ("Holdings").
Z-Media was incorporated on January 23, 1998 as a holding company and
subsequently obtained sole ownership of Z-Spanish Radio Network, Inc. ("Z-
Spanish") and ARH, pursuant to certain agreements entered into in May 1998.
On December 31, 1999, Z-Media acquired all the outstanding capital stock of
Vista Media Group, Inc. ("Vista"), whereby Vista became a wholly owned
subsidiary of Z-Media. Z-Media and Vista have shared a common controlling
stockholder group since August 29, 1997. As such, the business combination has
been accounted for as a common control business combination, and the accounts
of Vista are included in the accompanying combined financial statements from
August 29, 1997.
The Z-Spanish, ARH and Vista business combinations and related financial
accounting treatment are described in Note 3--Business Acquisitions and
Dispositions.
Z-Media, Vista and PAR are collectively referred to as the Company except
where otherwise noted.
Operations
Z-Media and ARH own and operate radio stations and distribute programming to
affiliates throughout the United States. Vista is engaged in operating outdoor
advertising displays and owns 10,060 billboards concentrated in the Los Angeles
and New York metropolitan areas. Vista formed Vista Joliet LLC ("Joliet"), a
80% owned subsidiary of Vista, in the state of Delaware on June 12, 1998 to
manage operations in the Chicago area.
As of December 31, 1999, the Company owned and operated 32 radio stations
including one station under a Local Marketing Agreement ("LMA"). Under an LMA,
the Company pays a fee to operate another company's radio station. The results
of operations of LMA stations are accounted for in the same manner that the
Company accounts for the operations of its owned and operated stations.
The Company's radio broadcasting operations cover five major geographic
areas: the West Coast (California), Midwest (Chicago), lower Midwest (Dallas),
Southeast (Miami) and Southwest (Phoenix). Owned and operated stations are
located in San Jose, Sacramento, Salinas/Monterey, Fresno, Stockton, Modesto,
and Chico, California; Houston and Dallas/Ft Worth, Texas; Chicago, Illinois;
Phoenix, Tucson, and Nogales, Arizona; and Miami, Florida.
As part of its radio broadcasting operations, the Company produces, controls
and distributes its own radio programs. Programming is distributed to owned and
operated stations via satellite transmission. The Company also transmits via
satellite its programming to 42 other stations ("affiliate stations")
throughout the U.S. and charges these stations network fees under affiliation
agreements. Revenue of the Company's broadcasting operations is principally
generated from the sale of advertising associated with its programming to
national accounts, local and regional retail advertisers. The Company's radio
stations are licensed by the Federal Communications Commission ("FCC").
Outdoor advertising revenue consists mainly of fees earned by selling
billboard space to advertisers.
F-51
<PAGE>
Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
For the years ended December 31, 1997, 1998 and 1999
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Combination
The accompanying combined financial statements include the accounts of
companies controlled by a common stockholder group ("Controlling
Stockholders"). All intercompany balances and transactions have been eliminated
in the combined financial statements.
Cash and Cash Equivalents
The Company considers cash investments with maturities of three months or
less at the time of purchase to be cash equivalents.
Property and Equipment, Net
The Company's property and equipment is recorded at cost less accumulated
depreciation. The Company depreciates property and equipment using the
straight-line method over their estimated useful lives. The Company amortizes
leasehold improvements using the straight-line method over the lesser of the
life of the lease or the estimated useful life of the leased asset. Estimated
useful lives are as follows:
<TABLE>
<S> <C>
Buildings and improvements......................................... 30 years
Advertising displays............................................... 15 years
Station transmitter, towers and antennas........................... 7 years
Furniture, fittings and fixtures................................... 5 years
Motor vehicles..................................................... 5 years
Computer hardware and software..................................... 3-5 years
</TABLE>
Investments
Investments are comprised of equity securities. These securities are
classified as available-for-sale and carried at historical value as market
prices are unavailable. There were no unrealized gains or losses on these
investments recorded for the year ended December 31, 1999.
Intangible Assets, Net
Intangible assets consist primarily of FCC licenses, goodwill, deferred
charges and non-compete agreements recorded at cost. Goodwill represents the
excess of the purchase price over the fair value of the net assets at the date
of acquisition. Amortization of intangible assets and other assets is provided
in amounts sufficient to allocate the asset cost to operations over the
estimated useful lives on a straight-line basis. The estimated useful lives are
as follows:
<TABLE>
<S> <C>
FCC licenses..................................................... 40 years
Goodwill......................................................... 15-40 years
Deferred charges................................................. 7 years
Non-competition agreements....................................... 3-5 years
</TABLE>
Revenue Recognition
Revenue from the sale of radio advertising time and from network operations
is recognized when the advertisement or network programming is broadcast.
Outdoor advertising revenue is recognized over the life of advertising
contracts and is recorded net of discounts.
F-52
<PAGE>
Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
For the years ended December 31, 1997, 1998 and 1999
Barter
The Company trades commercial airtime and outdoor advertising space for
goods and services used principally for promotional, sales and other business
activities. An asset and liability is recorded at the fair market value of the
goods and services received. Barter revenue is recorded and the liability
relieved when commercials are broadcast or outdoor advertising space is
utilized. Barter expense is recorded and the asset relieved when goods or
services are received or used.
Advertising Costs
The Company incurs various marketing and promotional costs to add and
maintain listenership. Advertising production costs are expensed at the first
use of the related advertising and costs of communicating an advertisement are
expensed as the communication occurs.
Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Credit Risk
In the opinion of management, credit risk with respect to trade receivables
is limited due to the large number of diversified customers and the geographic
diversification of the Company's customer base. The Company performs credit
evaluations on new customers and believes adequate allowances for any
uncollectible trade receivables are maintained. During the years ended December
31, 1997, 1998 and 1999, no customer accounted for more than 10% of net
revenue.
Stock-Based Compensation
The Company accounts for stock-based awards to employees using the intrinsic
value method in accordance with Accounting Principles Board No. 25, Accounting
for Stock Issued to Employees ("APB 25"). During 1999, the Company recognized
$0.1 million of compensation expense related to stock options.
Income Taxes
The Company accounts for income taxes using the asset and liability method
under which deferred tax assets and liabilities are recognized for future tax
consequences attributable to differences between the financial statement basis
of assets and liabilities and their respective tax basis. Deferred tax assets
and liabilities are measured using enacted tax laws and statutory rates
applicable to the periods in which the differences are expected to affect
taxable earnings. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income during the period that includes the
enactment date.
Comprehensive Income
Statement of Financial Accounting Standard ("SFAS") No. 130, Reporting
Comprehensive Income, became effective in 1998. This statement requires that
all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. During 1997,
1998, and 1999 the Company had no items of other comprehensive income.
Accordingly, comprehensive income equals net income.
F-53
<PAGE>
Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
For the years ended December 31, 1997, 1998 and 1999
Impairment of Long-Lived Assets
The Company accounts for the impairment of long-lived assets in accordance
with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of. As required by the statement, the Company
evaluates its long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of such assets or intangibles
may not be recoverable. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
costs to sell.
The Company periodically evaluates the propriety of the carrying amount of
property and equipment, investments, intangible assets and other assets as well
as the depreciation or amortization period to determine whether current events
or circumstances warrant adjustments to the carrying value and/or revised
estimates of useful lives. This evaluation involves an assessment of the
recoverability of the asset by determining whether the depreciation or
amortization of the asset balance can be recovered through undiscounted future
operating cash flows over its remaining useful life. The assessment of the
recoverability of the intangible assets will be impacted if estimated future
operating cash flows are not achieved.
Derivative Financial Instruments
The Company does not use derivative financial instruments for trading
purposes. They are used to manage interest rate risks related to interest on
the Company's outstanding debt. As interest rates change, the differential to
be paid or received under interest rate swap agreements is recognized as an
adjustment to interest expense. The Company had interest rate swap agreements
with banks as of December 31, 1998 and 1999 (see Note 7--Long-Term Debt).
Fair Value of Financial Instruments
The Company's financial instruments include cash and cash equivalents,
receivables, accounts payable and certain other accrued liabilities. The
carrying amounts of these items approximate their fair values because of their
short duration to maturity.
The fair value of the interest rate swap contracts is estimated by obtaining
quotations from the counterparties. The fair value is an estimate of the
amounts that the Company would (receive) pay at the reporting date if the
contracts were transferred to other parties or cancelled by the counterparties.
Recently Issued Accounting Standards
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities,
was issued in June 1998. The Standard defines derivatives, requires that all
derivatives be carried at fair value, and provides for hedge accounting when
certain conditions are met. The requirements of SFAS No. 133 will be effective
for the Company in the first quarter of the fiscal year ending December 31,
2001. The Company is currently evaluating the impact SFAS No. 133 will have on
its financial statements.
Presentation of Common Shares and Per Share Amounts
On February 12, 1999, the Company authorized a 10,000-to-1 reverse stock
split for all its classes of common stock.
On December 23, 1999, the Company effected a 20,000-for-1 split of its
common stock.
F-54
<PAGE>
Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
For the years ended December 31, 1997, 1998 and 1999
3. BUSINESS ACQUISITIONS AND DISPOSITIONS
The Company has accounted for acquisitions using the purchase method of
accounting, except where disclosed otherwise, recording assets acquired and
liabilities assumed at their fair values at the acquisition date. The excess of
purchase prices over the fair values of net tangible and intangible assets
acquired has been recorded as goodwill. The results of operations of acquired
businesses are included in the combined statements of operations from the date
of each respective acquisition.
1997 Radio Station Transactions
On February 7, 1997, PAR acquired all of the outstanding stock of KAMT, Inc.
which operated radio station KKMO in Seattle, Washington, for $0.9 million. PAR
paid cash of $0.3 million, issued a note payable to the seller of $0.6 million,
and assumed a $0.3 million capital lease obligation. The note was paid off in
December 1997.
On May 29, 1997, PAR acquired the assets of KTNO in Dallas, Texas, for $2.4
million. The Company paid $0.5 million in cash and issued two notes payable for
$0.1 million and $1.8 million. The two notes were paid off in December 1997.
On August 7, 1997, PAR sold the assets of radio station WVVX in Chicago,
Illinois, resulting in a gain of $0.8 million. The $9.5 million proceeds of
this sale, plus $1.2 million of cash, were used to purchase the assets of two
other stations in separate transactions; WEJM, in Chicago, Illinois, for $7.5
million and KKSJ, in San Jose, California, for $3.2 million.
In December 1997, PAR sold the assets of radio station WEJM in Chicago,
Illinois for $9.9 million. PAR's gain on the sale of WEJM was $1.9 million.
A summary of the gains from sales transactions recorded in 1997 is as
follows (in millions):
<TABLE>
<S> <C>
Gain on sale of WEJM.................................................... $1.9
Gain on sale of WVVX.................................................... 0.8
----
Total................................................................... $2.7
====
</TABLE>
The allocation of purchase price to net assets of radio stations acquired in
1997 was as follows (in millions):
<TABLE>
<CAPTION>
KKMO KTNO WEJM KKSJ Total
---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C>
Land, property and equipment..................... $0.2 $0.1 $1.2 $0.3 $ 1.8
Goodwill and FCC licenses........................ 1.0 2.3 6.3 2.9 12.5
Liabilities...................................... (0.3) -- -- -- (0.3)
---- ---- ---- ---- -----
Total............................................ $0.9 $2.4 $7.5 $3.2 $14.0
==== ==== ==== ==== =====
</TABLE>
F-55
<PAGE>
Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
For the years ended December 31, 1997, 1998 and 1999
1998--PAR Dispositions and Reorganization
Pursuant to an agreement dated May 22, 1998, PAR sold the assets of radio
stations WNJR in New Jersey, KYPA in Los Angeles, KWPA in Pomona, California,
KXPA in Bellevue, Washington, KOBO in Yuba City, KEST in San Francisco and KSJX
in San Jose, California for $41.0 million consisting of $10.0 millon in cash
and a note receivable of $31.0 million. In addition, pursuant to an agreement
dated April 7, 1998, PAR sold the assets of radio station KKMO and other assets
and liabilities remaining in Holdings, including the $31.0 million note
receivable and its investment in Douglas Broadcasting, Inc. ("DBI") through the
sale of the stock of Holdings for $34.5 million in cash. The aggregate net gain
on these dispositions was $5.7 million.
Subsequent to the PAR dispositions referred to above, and as a result of the
reorganization of certain operations within PAR earlier in 1998, the remaining
assets and liabilities and operations of PAR resided solely in ARH.
1998--Z-Spanish and ARH Business Combinations
Z-Media's ownership of Z-Spanish and ARH resulted from certain simultaneous
transactions between the former stockholders and warrant holders of Z-Spanish
and stockholders of ARH pursuant to the agreements dated May 29, 1998, the
Warrant Purchase and Contribution agreements. Under the Warrant Purchase
agreement, ARH acquired warrants ("Z-Spanish Warrants") to purchase Z-Spanish
common stock directly from Z-Spanish stockholders, for cash consideration of
$33.6 million. The Z-Spanish Warrants represented the majority of all such
warrants outstanding, except for a small number of warrants held by a lender to
Z-Spanish ("Lender"). Under the Contribution agreement, Z-Spanish and ARH
stockholders and the Lender contributed the operations of Z-Spanish and ARH to
Z-Media. The parties contributed their respective interests in ARH common
stock, Z-Spanish warrants and Z-Spanish common stock to Z-Media in exchange for
common stock of Z-Media.
For financial accounting purposes, these transactions resulted in a change
of control in Z-Spanish. As a result, the acquisition of Z-Spanish was recorded
using the purchase method of accounting. The accompanying combined financial
statements include the operations of Z-Spanish for the period from May 29, 1998
through December 31, 1999 and reflect the new basis of accounting for Z-Spanish
assets and liabilities based on their estimated fair values as of May 29, 1998.
The cost of acquiring Z-Spanish based on the purchase price was allocated to
estimated fair values of the assets and liabilities of Z-Spanish as follows (in
millions):
<TABLE>
<S> <C>
Cash................................................................. $ 2.9
Other current assets................................................. 4.6
Property and equipment............................................... 1.6
Intangibles and other................................................ 133.0
Current liabilities.................................................. (3.3)
Long-term debt....................................................... (51.0)
Deferred income taxes................................................ (29.9)
Redeemable Preferred Stock........................................... (3.9)
------
Total costs.......................................................... $ 54.0
======
</TABLE>
There was no change in control in ARH for financial accounting purposes as a
result of the transaction discussed above. Accordingly, Z-Media recorded ARH on
an "as pooled" basis because the contribution of ARH to Z-Media was a business
contribution between companies under common control (a "common control business
combination").
F-56
<PAGE>
Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
For the years ended December 31, 1997, 1998 and 1999
1998 Radio Station Transactions
On June 9, 1998, ARH acquired radio station WYPA-AM in Chicago, Illinois by
purchasing all of the outstanding stock of PAR of Illinois, Inc. (owner of
WYPA) from a stockholder by canceling $8.3 million of debt the affiliate had
borrowed from ARH to finance the original acquisition of WYPA-AM.
On July 31, 1998, Z-Media sold assets of Z-Spanish station KZWC-FM in Walnut
Creek, California for $4.5 million in cash. There was no significant gain or
loss on the sale since the assets sold had been recorded at fair value by Z-
Media on May 28, 1998.
On December 22, 1998, Z-Media acquired all of the assets of radio station
KHZZ-FM (formerly KQBR-FM) in Sacramento, California for $5.5 million,
consisting of $0.5 million in cash and notes payable totaling $5.0 million.
On December 31, 1998, Z-Media acquired the assets of two radio stations,
KZSL-FM and KTGE-AM, in Salinas, California for $1.6 million in cash.
The allocation of purchase price to net assets of radio stations acquired in
1998 was as follows (in millions):
<TABLE>
<CAPTION>
KTGE-AM
WYPA-AM KHZZ-FM KZSL-FM Total
------- ------- ------- -----
<S> <C> <C> <C> <C>
Land, property and equipment.................. $0.3 $0.2 $0.1 $ 0.5
Goodwill and FCC licenses..................... 8.0 5.3 1.5 14.9
---- ---- ---- -----
Total......................................... $8.3 $5.5 $1.6 $15.4
==== ==== ==== =====
</TABLE>
1999 Radio Station Transactions with Third Parties
On January 8, 1999, the Company sold the assets of stations KZSF-FM and
KZSF-FM1 for $16.5 million in cash. There was no significant gain or loss on
the sale since the assets sold had been recorded at fair value by Z-Media.
On January 25, 1999, the Company purchased the assets of radio station WLQY-
AM in Miami, Florida for $5.7 million in cash.
On January 29, 1999, the Company sold the assets of station WBPS-AM,
licensed in Dedham, Massachusetts, for $4.0 million in cash. The gain on sale
of the related assets was $2.2 million.
On February 26, 1999, the Company purchased the assets of station KLNZ-FM in
Phoenix, Arizona for $22.0 million in cash.
On May 18, 1999, the Company purchased the assets of station KZMP-FM in
Dallas, Texas for $26.5 million in cash.
On May 24, 1999, the Company purchased the assets of three radio stations,
KCTY-AM, KRAY-FM and KLXM-FM, in Salinas, California for $4.5 million in cash.
On August 27, 1999, the Company sold the assets of station KZNO-AM, licensed
in Nogales, Arizona, for $0.2 million in cash. The loss on sale of the related
assets was recognized of $0.1 million.
F-57
<PAGE>
Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
For the years ended December 31, 1997, 1998 and 1999
On September 23, 1999, the Company sold the assets of station WYPA-AM,
licensed in Chicago, Illinois, for $10.5 million with $3.0 million in cash and
$7.5 million in notes receivable due on September 23, 2000. The gain on sale of
the related assets was $2.3 million.
A summary of the gains (loss) from sales transactions recorded in 1999 is as
follows (in millions):
<TABLE>
<S> <C>
Gain on sale of WBPS-AM............................................... $ 2.2
Loss on sale of KZNO-AM............................................... (0.1)
Gain on sale of WYPA-AM............................................... 2.3
-----
Total................................................................. $ 4.4
=====
</TABLE>
The allocation of purchase price to net assets of the radio stations
acquired in 1999 was as follows (in millions):
<TABLE>
<CAPTION>
KCTY-AM
KRAY-FM
and
WLQY-AM KLNZ-FM KZMP-FM KLXM-FM Total
------- ------- ------- ------- -----
<S> <C> <C> <C> <C> <C>
Land, property and equipment......... $0.7 $ 0.9 $ 0.5 $0.3 $ 2.4
Goodwill and FCC licenses............ 5.0 21.1 26.0 4.2 56.3
---- ----- ----- ---- -----
Total................................ $5.7 $22.0 $26.5 $4.5 $58.7
==== ===== ===== ==== =====
</TABLE>
1999 Radio Station Acquisition from Related Parties
On October 18, 1999, Z-Media acquired JB Broadcasting, Inc. ("JB"),
previously owned by two officers of the Company, for $3.4 million through the
issuance of 681,264 shares of Z-Media's Class B Common Stock pursuant to its
rights under an Option Agreement. The acquisition was accounted for using the
purchase method and the purchase price was allocated primarily to FCC licenses
and goodwill. As part of the transaction, the Company's note receivable and
accrued interest totaling $0.3 million was offset against the Company's note
payable for LMA fees and accrued interest totaling $0.7 million. The Company
had operated KZMS during 1998 and 1999 for a fee of $12,000 a month, under an
LMA. JB was owned by two officers of the Company. The Company also had $0.2
million in notes receivable with an interest rate of 12% compounded annually
from JB at December 31, 1998.
1999 Acquisitions of Outdoor Advertising Businesses
On September 30, 1999, Vista acquired all of the outstanding capital stock
of Seaboard Outdoor Advertising Co., Inc. ("Seaboard"), for $33.4 million. The
acquisition of Seaboard was recorded using the purchase method of accounting.
The accompanying combined financial statements include the operations of
Seaboard for the period from October 1, 1999 through December 31, 1999 and
reflect the new basis of accounting for Seaboard assets and liabilities based
on their estimated fair values as of September 30, 1999.
F-58
<PAGE>
Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
For the years ended December 31, 1997, 1998 and 1999
The purchase price was allocated to estimated fair values of the assets and
liabilities of Seaboard as follows (in millions):
<TABLE>
<S> <C>
Cash................................................................. $ 0.5
Other current assets................................................. 1.3
Property and equipment............................................... 4.1
Intangibles and other................................................ 30.2
Current liabilities.................................................. (0.8)
Deferred income taxes................................................ (1.9)
-----
Total costs.......................................................... $33.4
=====
</TABLE>
On December 21, 1999, Vista acquired 18 billboards of Heywood Outdoor
Advertising, Inc. for $2.0 million cash and 180 signs having a net book value
of $0.3 million. Of the purchase price, $1.6 million was allocated to goodwill
and $0.7 million was allocated to the assets acquired.
1999--Merger of Vista into Z-Media
On December 31, 1999, Vista was combined with Z-Media pursuant to a
statutory merger agreement whereby Vista stockholders exchanged their common
shares of Vista for common shares of Z-Media. The merger of Vista into Z-Media
has been accounted for as a pooling of interests with Vista's net assets
carried over at historical cost to the extent Vista was previously under common
ownership with Z-Media. The portion of Vista's net assets acquired by Z-Media
that were previously owned by minority stockholders has been accounted for as a
purchase and recorded at fair value. Furthermore, the accompanying combined
financial statements include the accounts of Vista on the basis described
above, from the date such common control existed, August 29, 1997.
Pursuant to the merger agreement, Vista preferred stockholders, who were
also the previous holders of Vista common stock, exchanged their preferred
stockholdings for additional Z-Media common stock. The difference between the
fair value of Z-Media common stock received by the preferred stockholders and
the historical cost carrying amount of the preferred stock was approximately
$4.5 million and was recorded as an increase in the Company's accumulated
deficit as of December 31, 1999.
4. NOTES RECEIVABLE
The Company received two promissory notes as partial settlement of its sale
of the assets of one of its radio stations, WYPA-AM, during 1999 (see Note 3).
The notes in the amount of $7.0 million and $0.5 million are secured and mature
on September 20, 2000, with an interest rate of 9% paid quarterly.
F-59
<PAGE>
Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
For the years ended December 31, 1997, 1998 and 1999
5. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31 (in
millions):
<TABLE>
<CAPTION>
1998 1999
----- -----
<S> <C> <C>
Land........................................................... $ 0.2 $ 0.3
Buildings and improvements..................................... 0.6 1.1
Furniture, fittings and fixtures............................... 0.9 0.4
Station, transmitters and antennas............................. 1.4 0.9
Advertising displays........................................... 24.5 27.6
Machinery and equipment........................................ 2.3 5.3
Motor vehicles................................................. 0.1 0.2
Computer hardware and software................................. 0.2 0.4
Construction-in-progress....................................... 0.3 3.8
----- -----
Total........................................................ 30.5 40.0
Less accumulated depreciation and amortization................. (3.5) (5.7)
----- -----
Property and equipment, net.................................... $27.0 $34.3
===== =====
</TABLE>
6. INTANGIBLE ASSETS
Intangible assets consist of the following at December 31 (in millions):
<TABLE>
<CAPTION>
1998 1999
------ ------
<S> <C> <C>
FCC licenses................................................. $125.7 $158.5
Goodwill..................................................... 31.2 69.2
Deferred charges............................................. 2.8 4.0
Non-competition agreements................................... 0.4 0.4
Other........................................................ 1.0 2.6
------ ------
Total...................................................... 161.1 234.7
Less accumulated amortization................................ (5.9) (9.3)
------ ------
Intangible assets, net....................................... $155.2 $225.4
====== ======
</TABLE>
F-60
<PAGE>
Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
For the years ended December 31, 1997, 1998 and 1999
7. LONG-TERM DEBT
Borrowing arrangements consist of the following at December 31 (in
millions):
<TABLE>
<CAPTION>
1998 1999
----- ------
<S> <C> <C>
1999 Credit Agreement
Revolving credit facility of $30.0 million, interest payable
quarterly at LIBOR plus Applicable Margin, as defined
(9.075% at December 31, 1999), available through January
20, 2006................................................... -- $ 7.1
Term facility of $45.0 million, interest payable quarterly
at LIBOR plus Applicable Margin, as defined (9.075% at
December 31, 1999), quarterly principal repayments
beginning March 31, 2000 at $1.1 million, increasing to
$1.7 million on March 31, 2002 and $2.8 million on March
31, 2004 until maturity on January 20, 2006................ -- 45.0
1997 Credit Agreement
Revolving credit facility of $15.0 million, with quarterly
reductions of availability beginning March 31, 2001, as
defined, through maturity on September 30, 2006, interest
payable quarterly at LIBOR plus Applicable Margin, as
defined (8.69% at December 31, 1999), secured by
substantially all of the Company's assets.................. $ 1.2 4.0
Term facility of $35.0 million, interest payable quarterly
at LIBOR plus Applicable Margin, as defined (9.625% at
December 31, 1999), principal repayment in quarterly
installments of $0.8 million beginning June 30, 2001
increasing to $1.1 million on March 31, 2002, $1.3 million
on March 31, 2003, $1.5 million on March 31, 2004, $1.8
million on March 31, 2005 and $3.2 million on March 31,
2006 until maturity on September 30, 2006, secured by
substantially all of the Company's assets.................. 14.3 35.0
Other Borrowings
Credit line of $20.0 million, interest payable quarterly at
LIBOR plus Applicable Margin, as defined (9.5% at December
31, 1999), principal due December 31, 2000................. -- 18.1
Note payable, interest payable monthly at 9%, monthly
installments of principal and interest of $0.03 million
beginning December 1, 2004 and ending November 1, 2014,
secured by a deed of trust................................. -- 2.3
Other....................................................... 1.1 0.4
----- ------
Total....................................................... 66.3 111.9
Less current portion........................................ (4.0) (22.8)
----- ------
Long-term debt.............................................. $62.3 $ 89.1
===== ======
</TABLE>
Senior notes at 8.34%, repaid in 1999....................... 29.9 --
Subordinated notes for $10.9 million, due to a former
stockholder of the Company, $2.9 million due to a
stockholder of the Company and $6.0 million, at rates
ranging from 12% to 13%, repaid in 1999.................... 19.8 --
F-61
<PAGE>
Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
For the years ended December 31, 1997, 1998 and 1999
The 1999 and 1997 credit agreements require the maintenance of specific
financial covenants, including leverage, fixed charge and interest expense
coverage ratios and certain limitations on indebtedness levels and overhead
expenses. The $20.0 million credit line also includes restrictive covenants,
which, among other things, require that the Company not incur additional debt.
The 1999 credit agreement requires under certain circumstances that the
Company enter into interest rate protection agreements to fix the Company's
floating rate debt on no less than 50% of the principal amount of total term
debt outstanding. At December 31, 1999, the Company had outstanding two
interest rate swap agreements with commercial banks, having a total notional
principal amount of $24.1 million. These outstanding swap agreements mature
August 7, 2000 and September 18, 2000, and require the Company to pay fixed
rates of 6.63% and 5.33%, respectively, while the counterparty pays floating
rate based on the three-month LIBOR. During the years ended December 31, 1997,
1998 and 1999, the Company recognized additional interest expense under its
interest rate swap agreements of $0.1 million, $0.1 million, and $0.1 million,
respectively. The aggregate fair value of the interest rate swap agreements at
December 31, 1999 was $18,000. The Company is exposed to credit loss in the
event of nonperformance by the counterparties to the interest rate swap
agreements. However, the Company does not anticipate nonperformance by the
counterparties.
As required by the 1997 credit agreement, at December 31, 1997 and 1998, the
Company had outstanding one interest rate swap agreement with a commercial
bank, having a total notional principal amount of $10.0 million. The
outstanding swap agreement matured on August 31, 1999, and required the Company
to pay a fixed rate of 6.08%, while the counterparty paid a floating rate based
on adjusted LIBOR. During the years ended December 31, 1997, 1998 and 1999, the
Company recognized additional interest expense under the interest rate swap
agreement of $7,000, $41,000, and $67,000, respectively.
Future minimum principal payments on long-term debt based on the credit
agreements and notes in place as of December 31, 1999 were as follows (in
millions):
<TABLE>
<S> <C>
2000.................................................................. $ 22.8
2001.................................................................. 7.0
2002.................................................................. 11.0
2003.................................................................. 12.0
2004.................................................................. 17.4
Thereafter............................................................ 41.6
------
Total................................................................. $111.8
======
</TABLE>
Company management believes that the fair value of its principal short and
long term borrowings are equal to the book value since the terms were recently
negotiated with the lenders.
F-62
<PAGE>
Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
For the years ended December 31, 1997, 1998 and 1999
8. INCOME TAXES
The Company's combined income tax (benefit) provision or the years ended
December 31, included the following (in millions):
<TABLE>
<CAPTION>
1997 1998 1999
----- ----- -----
<S> <C> <C> <C>
Current taxes:
Federal.................................................. $ 0.1 $ 4.6 $ 0.1
State.................................................... 0.2 1.3 0.1
----- ----- -----
Total................................................. 0.3 5.9 0.2
----- ----- -----
Deferred income taxes:
Federal.................................................. (1.0) (4.5) (0.9)
State.................................................... (0.2) (1.0) (0.1)
----- ----- -----
Total................................................. (1.2) (5.5) (1.0)
----- ----- -----
Total income taxes....................................... (0.9) 0.4 (0.8)
Less income taxes related to extraordinary items......... 0.4 -- 0.7
----- ----- -----
Total.................................................... $(0.5) $ 0.4 $(0.1)
===== ===== =====
</TABLE>
Deferred income tax assets (liabilities) resulting from tax effects of
temporary differences at December 31 are as follows (in millions):
<TABLE>
<CAPTION>
1998 1999
------ ------
<S> <C> <C>
Deferred income tax assets:
Net operating loss and tax credit carryforwards............... $ 5.5 $ 7.5
Allowance for doubtful accounts............................... 0.8 0.5
Other......................................................... 2.4 2.2
------ ------
Total...................................................... 8.7 10.2
------ ------
Deferred income tax liabilities:
Property, equipment and intangible assets..................... (35.3) (37.6)
------ ------
Total...................................................... (35.3) (37.6)
------ ------
Net deferred income tax liability............................. $(26.6) $(27.4)
====== ======
</TABLE>
A reconciliation of the statutory federal income tax rate to the Company's
effective income tax rate is as follows:
<TABLE>
<CAPTION>
1997 1998 1999
----- ----- -----
<S> <C> <C> <C>
Federal tax at statutory
rate................... (35.0)% (35.0)% (35.0)%
State income taxes, net
of federal benefit..... (4.2) (3.2) (3.5)
Non-deductible goodwill
amortization........... 1.3 25.5 10.6
Non-deductible meals and
entertainment.......... 1.0 2.4 1.5
Other accruals.......... -- 57.3 --
Other................... 1.0 -- 3.9
----- ----- -----
Total................... (35.9)% 47.0 % (22.5)%
===== ===== =====
</TABLE>
F-63
<PAGE>
Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
For the years ended December 31, 1997, 1998 and 1999
Z-Media and its subsidiaries file their federal and state tax returns on a
consolidated basis. As of December 31, 1999, the Company has federal net
operating loss carryforward of $18.3 million which will begin to expire in
2009. The Company's state net operating loss carryforward is $11.2 million at
December 31, 1999 and will begin to expire in 2001. A portion of the Company's
net operating loss carryforward may be subject to annual limitations due to
ownership changes of the Company. In addition, the Company has federal and
state tax credits of $0.1 million and $23,000, respectively.
9. COMMITMENTS AND CONTINGENCIES
The Company leases various facilities and equipment under noncancelable
operating leases expiring through 2031. Certain operating leases are renewable
at the end of the contract term. Future minimum rental commitments for
operating leases with noncancelable terms in excess of one year are as follows
(in millions):
<TABLE>
<S> <C>
Year ending December 31:
2000................................................................. $ 1.6
2001................................................................. 1.3
2002................................................................. 1.1
2003................................................................. 0.9
2004................................................................. 0.8
Thereafter........................................................... 5.0
-----
Total................................................................. $10.7
=====
</TABLE>
Rent expense charged to operations in 1997, 1998, and 1999 was $1.2 million,
$1.9 million, and $1.6 million, respectively.
The Company is subject to routine claims and litigation incidental to its
business operations. It is the Company's policy to accrue for amounts related
to these legal matters if it is probable that a liability has been incurred and
an amount is reasonably estimable. The management of the Company believes that
the ultimate resolutions of these matters will not have a material adverse
effect on the Company's financial statements.
10. REDEEMABLE PREFERRED STOCK
In March 1998, Z-Spanish acquired radio stations KMIX and KCVR located in
Stockton, California for $4.0 million by issuing 1,000 shares of Series A 9%
redeemable non-voting preferred stock with a fair value of $3.9 million and a
note payable with a face amount of $0.1 million. The terms of the stock
required that the Company redeem the stock by February 2001. The stock and note
were redeemed and paid by the Company at face amounts plus accrued dividends
and interest on January 20, 1999.
11. STOCKHOLDERS' EQUITY
Common Stock
As of December 31, 1999, the Company had authorized the issuance of
62,000,000 shares of Common Stock, consisting of 31,000,000 shares of Class A
Common Stock ("Class A Common"), 20,000,000 shares of Class B Common Stock
("Class B Common") 5,000,000 shares of Class C Common Stock ("Class C Common")
and 6,000,000 shares of Class D Common Stock ("Class D Common").
As of December 31, 1999, the Company had issued and outstanding 25,090,000
shares of Common Stock, consisting of 1,068 shares of Class A Common,
19,488,436 shares of Class B Common and 5,600,496 shares of Class D Common.
F-64
<PAGE>
Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
For the years ended December 31, 1997, 1998 and 1999
In accordance with the Company's Amended and Restated Certificate of
Incorporation in the State of Delaware, each of the classes of Common Stock
have a par value of $0.01 and have identical rights and privileges, except as
discussed below.
Voting Rights--Class A Common stockholders are entitled to vote on matters
submitted to a vote of the stockholders, with each share of Class A Common
entitled to one vote, Class D Common has 4.45 votes for every 100,000 shares.
Class B and C Common stockholders have no voting rights.
Conversion Rights--The shares of Class B Common and Class C Common are
convertible into Class A Common on a one for one basis at any time at the
option of the stockholder.
The shares of Class A Common and Class D Common are also convertible into
either Class B Common or Class C Common on a one for one basis at any time at
the option of the stockholder.
Each share of Class C Common will convert automatically on a one for one
basis into Class A Common upon the sale, gift or other transfer to a person or
entity other than the Class C Common stockholder.
Dividends may be declared and paid at the discretion of the Company's Board
of Directors in cash, property, securities or rights or otherwise. If dividends
are declared, Common Stock stockholders of record will be entitled to
participate ratably, on a share for share basis as if all shares were of a
single class in determining the amount of the dividend payable to each
stockholder, except that any dividends payable in shares of Common Stock shall
be paid with the same class of Common stock as are held by the Class A, B, C
and D Common stockholders.
Put Options--At December 31, 1998 and 1999, the Company had 4,545,454 shares
of Class C Common put options outstanding, which were issued on October 9, 1998
for $25 million. The options are exercisable by notice to the Company at a
purchase price equal to the fair market value of the Company. These options are
recorded at fair value as of December 31, 1998 and 1999. The options may be
exercised at any time after February 9, 2005 and prior to the consummation of a
public offering.
Preferred Stock
The Company has authorized the issuance of 10,000 shares of $0.01 par value
per share Preferred Stock that may be issued in one or more series subject to
the provisions of the Company's Amended and Restated Certificate of
Incorporation. At December 31, 1999, no shares of Preferred Stock had been
issued.
Stock Option Plan
At December 31, 1999, the Company has reserved an aggregate of 3,292,828
shares of Class B Common stock for issuance, at the discretion of the Board of
Directors, to officers, employees, directors and consultants pursuant to its
1999 Stock Incentive Plan (the "Plan"). The option price is determined by the
Board of Directors. Options granted under the Plan generally vest ratably over
four years, and expire ten years from the date of grant.
F- 65
<PAGE>
Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
For the years ended December 31, 1997, 1998 and 1999
Stock option activity under the plan is summarized as follows:
<TABLE>
<CAPTION>
Weighted Weighted
Average Average
Exercise Options Exercise
Options Price Exercisable Price
--------- -------- ----------- --------
<S> <C> <C> <C> <C>
Outstanding, January 1, 1999....... -- -- -- --
Granted (weighted average fair
value of $5.78)................... 1,696,806 $5.78 -- --
---------
Outstanding, December 31, 1999..... 1,696,806 $5.78 -- $5.78
=========
</TABLE>
Additional information regarding options outstanding as of December 31, 1999
is as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Vested
------------------------------------- --------------------
Weighted
Average
Remaining Weighted Weighted
Contractual Average Average
Range of Number Life Exercise Number Exercise
Exercise Price Outstanding (Years) Price Vested Price
-------------- ----------- ----------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$5.00 to $10.00 1,696,806 9.9 $5.78 -- --
</TABLE>
Deferred Stock Compensation
The Company recorded deferred compensation of $4.3 million to reflect the
difference between the grant price and the estimated fair value of the related
stock. This amount is being amortized over the vesting period of the individual
options, generally four years. Amortization of this compensation expense was
$0.1 million for the year ended December 31, 1999.
Additional Stock Plan Information--Since the Company continues to account
for its stock-based awards to employees using the intrinsic value method in
accordance with APB No. 25, SFAS No. 123, Accounting for Stock-Based
Compensation, requires the disclosure of pro forma net income (loss) had the
Company adopted the fair value method. The Company's calculations were made
using the minimum value pricing model which requires subjective assumptions,
including expected time to exercise, which affects the calculated values. The
following weighted average assumptions were used for 1999: expected life, four
years; no volatility; risk free interest rate of 6.5%; and no dividends during
the expected term. The Company's calculations are based on a single option
award valuation approach and forfeitures are recognized as they occur. If the
computed fair values of the 1999 awards had been amortized to expense over the
vesting period of the awards, the Company's pro forma net loss would have been
approximately $2.7 million in 1999.
12. EMPLOYEE BENEFIT PLANS
Z-Media initiated an employee 401(k) plan on September 1, 1999. Employees
can contribute 2% to 15% of their annual compensation, subject to IRC/ERISA
limitations. Eligibility requirements include three months of service and a
minimum of 1,000 hours of service per year, and the employee must be at least
21 years old. Matching is 50% of the amount of the compensation with a maximum
match of 3% of compensation with employer contributions vesting over a six-year
period. Z-Media's contributions to the plan totaled $47,000 for the year ended
December 31, 1999.
Vista has an employee 401(k) plan. Employees can contribute 2% to 15% of
their annual compensation, subject to IRC/ERISA limitations. Eligibility
requirements include one year of service and a minimum of 1,000 hours of
service per year, and the employee must be at least 21 years old. Matching is
discretionary with employer contributions vesting over a six-year period.
Vista's contributions to the plan totaled $39,000 for the year ended
December 31, 1998. There were no employer contributions in the years ended
December 31, 1997 and 1999.
F-66
<PAGE>
Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
For the years ended December 31, 1997, 1998 and 1999
13. SEGMENT DATA
The Company adopted SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information," in 1999. SFAS No. 131 establishes
standards for reporting information about operating segments and related
disclosures about products, geographic information and major customers.
Operating segment information for 1997 and 1998 is also presented in accordance
with SFAS No. 131.
Management has determined that there are two reportable segments consisting
of radio broadcasting and outdoor advertising. Such determination was based on
the level at which executive management reviews the results of operations in
order to make decisions regarding performance assessment and resource
allocation. Information about each of the operating segments follows:
Radio Group--The Company's Radio Group portfolio consisted of 32 radio
stations (19 FM and 13 AM) at December 31, 1999, including one station operated
under LMA.
Outdoor Advertising--The Company's Outdoor Advertising Group owned and
operated 10,060 outdoor advertising billboards and display faces in four states
at December 31, 1999.
Separate financial data for each of the Company's business segments is
provided below. The Company evaluates the performance of its segments based on
the following (in millions):
<TABLE>
<CAPTION>
1997 1998 1999
---- ----- -----
<S> <C> <C> <C>
Radio broadcasting:
Net revenue................................................. $9.8 $15.4 $23.8
Operating expenses.......................................... 7.9 10.9 13.9
Depreciation and amortization............................... 2.1 4.8 6.0
Operating (loss) income..................................... (0.3) 2.2 4.1
Total assets................................................ 68.1 169.7 218.2
Outdoor advertising:
Net revenue................................................. $3.2 $10.5 $12.2
Operating expenses.......................................... 1.6 5.7 8.7
Depreciation and amortization............................... 0.6 1.9 2.7
Operating income............................................ 0.8 2.4 0.4
Total assets................................................ 28.3 27.6 70.8
</TABLE>
14. OTHER RELATED PARTY TRANSACTIONS
During 1998 the Company operated station KZSJ-AM under an LMA with an
officer of the Company, and paid the officer $10,000 per month. The Company
also had an option to purchase KZSJ-AM from the officer pursuant to a purchase
option. The LMA and Option agreements were terminated on December 31, 1998 by
mutual consent of the parties. As of December 31, 1999, there was a payable due
to an officer of $0.1 million related to the LMA.
The Company's long-term debt at December 31, 1998 included $10.9 million of
notes payable to a former stockholder of the Company and $2.9 million to a
stockholder of the Company.
At December 31, 1999, the Company had a payable to a stockholder for $0.2
million.
Under leases that expire in 2019 and 2009, the Company rents its corporate
office building and a studio building from an officer of the Company for
$63,000 and $42,000 per year, respectively. Annual rents increase annually by
5% per year for the term of both leases.
F-67
<PAGE>
Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
For the years ended December 31, 1997, 1998 and 1999
15. SUBSEQUENT EVENTS
On February 14, 2000, the Company purchased the assets of a radio station in
Soledad, California for $0.3 million in cash.
On February 24, 2000, the Company entered into a letter of intent with
Entravision Communications Corporation ("ECC") whereby ECC will acquire
directly or thorough a merger of all of the outstanding stock of the Company.
******
F-68
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Partners
DeSoto -- Channel 62 Associates, Ltd.
(a Florida limited partnership)
Sarasota, Florida
We have audited the accompanying statements of operations, partners'
(deficit) and cash flows of DeSoto-- Channel 62 Associates, Ltd. (a Florida
limited partnership) for the period from January 1, 1999 to September 20, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of DeSoto --
Channel 62 Associates, Ltd. for the period from January 1, 1999 to September
20, 1999 in conformity with generally accepted accounting principles.
As explained in Note 6 to the financial statements, on September 20, 1999,
the Company sold substantially all assets of the Company to Entravision
Communications Company, L.L.C. No adjustments as a result of this transaction
are reflected in these financial statements.
/s/ McGladrey & Pullen, LLP
Pasadena, California
February 25, 2000
F-69
<PAGE>
DESOTO -- CHANNEL 62 ASSOCIATES, LTD.
(A FLORIDA LIMITED PARTNERSHIP)
STATEMENT OF OPERATIONS AND PARTNERS' DEFICIT
Period From January 1, 1999 through September 20, 1999
(In thousands)
<TABLE>
<S> <C>
Gross revenue......................................................... $ 879
Less agency commissions............................................... (79)
-------
Net revenue.......................................................... 800
-------
Expenses:
Direct operating..................................................... 405
Selling, general and administrative (including related-party
management fee of $130)............................................. 934
Professional fees.................................................... 410
Depreciation and amortization........................................ 366
-------
2,115
-------
Operating (loss).................................................... (1,315)
-------
Interest (income)..................................................... (230)
Interest expense (including amounts to related parties of $106)....... 1,366
-------
Net (loss).......................................................... $(2,451)
=======
</TABLE>
PARTNERS' DEFICIT
Period From January 1, 1999 through September 20, 1999
(In thousands)
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
------- -------- -------
<S> <C> <C> <C>
Balance, December 31, 1998......................... $(1,505) $(5,101) $(6,606)
Net (loss)........................................ $(1,348) (1,103) (2,451)
------- ------- -------
Balance, September 20, 1999........................ $(2,853) $(6,204) $(9,057)
======= ======= =======
</TABLE>
See Notes to Financial Statements.
F-70
<PAGE>
DESOTO -- CHANNEL 62 ASSOCIATES, LTD.
(A FLORIDA LIMITED PARTNERSHIP)
STATEMENT OF CASH FLOWS
Period From January 1, 1999 through September 20, 1999
(In thousands)
<TABLE>
<S> <C>
Cash Flows from Operating Activities
Net (loss)........................................................... $(2,451)
Adjustments to reconcile net (loss) to net cash provided by operating
activities:
Depreciation and amortization....................................... 366
Changes in assets and liabilities:
Decrease in accounts receivable.................................... (221)
(Increase) in prepaid expenses and other assets.................... (134)
Increase in accounts payable, accrued expenses and other
liabilities....................................................... 1,123
-------
Net cash (used in) operating activities............................ (1,317)
-------
Cash Flows from Financing Activities
Net proceeds from borrowings on notes payable........................ 303
Due to affiliates.................................................... 932
-------
Net cash provided by financing activities........................... 1,235
-------
Net (decrease) in cash and cash equivalents......................... (82)
Cash and Cash Equivalents
Beginning............................................................ 93
-------
Ending............................................................... $ 11
=======
Supplemental Disclosures for Cash Flow Information
Cash payments for interest........................................... $ 125
=======
</TABLE>
See Notes to Financial Statements.
F-71
<PAGE>
DESOTO -- CHANNEL 62 ASSOCIATES, LTD.
(A FLORIDA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of business
DeSoto -- Channel 62 Associates, Ltd. (the Company), a Florida limited
partnership, was formed in 1989. The Company was formed to purchase the
construction permit for and operate Channel 62, a commercial five million-watt
television station located in Venice (Sarasota), Florida. Funding for the
Company's acquisition and development of Channel 62 was obtained from DeSoto
Broadcasting, Inc. (DBI), the Company's general partner, and a $4.0 million
offering of limited partnership interests. The partnership is set to dissolve
December 31, 2025.
Significant accounting policies
Personal assets and liabilities and partners' salaries
In accordance with the generally accepted method of presenting partnership
financial statements, the financial statements do not include the personal
assets and liabilities of the partners, including their rights to refunds on
its net (loss). In addition, the expenses shown in the income statements do not
include any salaries to the partners.
Allocation of partnership income and loss
The partnership agreement requires operating cash flow available for
distribution to first be applied to the payment of any loans by the general
partner to the partnership. The remainder, if any, is then allocated and
distributed 55% to the general partner and 45% to the limited partners.
Allocation to the limited partners is based upon the number of units held
relative to the total units held by all limited partners.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
The Company's operations are affected by numerous factors including changes
in audience acceptance (i.e., ratings), priorities of advertisers, new laws and
governmental regulations and policies, and technological advances. The Company
cannot predict if any of these factors might have a significant impact on the
television and radio industries in the future, nor can it predict what impact,
if any, the occurrence of these or other events might have on the Company's
operations.
Cash and cash equivalents
For purposes of reporting cash flows, the Company considers all highly
liquid debt instruments purchased with an original maturity of three months or
less to be cash equivalents.
Revenue recognition
Revenue related to the sale of advertising is recognized at the time of
broadcast.
F-72
<PAGE>
DESOTO -- CHANNEL 62 ASSOCIATES, LTD.
(A FLORIDA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS--(Continued)
Trade transactions
The Company enters into agreements in which advertising time is traded for
various products or services. Trade transactions are reported at the normal
advertising rates in effect. Revenue or expense and a corresponding asset or
liability are reported when advertisements are aired or when goods and services
are received. Trade revenue and costs were not significant for the period from
January 1 through September 20, 1999.
Depreciation and amortization of property and equipment
Property and equipment is stated at cost. Depreciation is computed
principally by the straight-line method over the estimated lives of the assets
which range from 5 to 31 years. Improvements to leased property are amortized
over the lesser of the term of the lease or the estimated life of the
improvements.
Intangible assets
Intangible assets are amortized on a straight-line basis as follows:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Licenses, permits and associated costs................................. 40
Other intangible assets................................................ 1-5
</TABLE>
Deferred debt costs related to the credit facility are amortized on a
straight-line basis over the respective life of the credit facility.
Television Programming
The Company has various contracts granting the Company the right to
broadcast television programs over a period of time for a specified fee. Each
contract is recorded as an asset and liability at an amount equal to the gross
contractual commitment. The capitalized costs of each contract are amortized on
a straight-line basis, based on the estimated number of future showings over
the length of the agreement for agreements with unlimited showings. The
capitalized costs of rights to program materials are recorded at the lower of
unamortized cost or estimated realized value.
Rent expense
The Company leases its office and studio space, the tower and various
equipment under various operating lease agreements with various terms and
conditions. Total rent expense was approximately $0.2 million for the period
ended September 20, 1999.
Income taxes
The Company is a partnership, and accordingly, is not a tax paying entity.
Instead, the partners are responsible for any tax liability or benefit, based
on their respective percentages of the Company's taxable income or loss.
Impairment of long-lived assets
The Company reviews its long-lived assets and intangibles related to those
assets periodically to determine potential impairment by comparing the carrying
value of the long-lived assets and identified goodwill with the estimated
future net undiscounted cash flows expected to result from the use of the
assets, including cash flows from disposition. Should the sum of the expected
future net cash flows be less than the carrying value, the
F-73
<PAGE>
DESOTO -- CHANNEL 62 ASSOCIATES, LTD.
(A FLORIDA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS--(Continued)
Company would recognize an impairment loss at that date. An impairment loss
would be measured by comparing the amount by which the carrying value exceeds
the fair value (estimated discounted future cash flows) of the long-lived
assets. To date, management has determined that no impairment of its long-lived
assets exists.
Segment information
In accordance with Statement of Financial Accounting Standards (SFAS) No.
131, Disclosures about Segments of an Enterprise and Related Information,
management has determined that the Company has one reportable segment.
Comprehensive income
SFAS No. 130, Reporting Comprehensive Income, established the requirements
for the reporting and presentation of comprehensive income and its components.
For the period ended September 20, 1999, the Company had no components of
comprehensive income and, therefore, net income is equal to comprehensive
income.
Advertising
Advertising costs, which are principally included in sales expenses, are
expensed as incurred.
NOTE 2. LONG-TERM DEBT
The Company has a 12% credit agreement (Agreement) with a financial
institution which provides for a maximum extension of credit of $5.0 million.
At September 20, 1999 the outstanding balance was $4.3 million. The Agreement
expires September 30, 2000 and is collateralized by all of the Company's and
DBI's assets and is guaranteed by DBI and Omni Investments International, Inc.
(OMNI) (the parent company of DBI).
The Agreement provides for monthly interest only payments of 12% and
provides for additional deferred interest at the option of the Lender equal to
either (a) 10% or (b) an amount equal to 15% of the combined net equity value
of the Company and DBI as defined by the Agreement, which option may be
exercised upon certain events including sale of the borrowers. Subsequent to
September 20, 1999, the Lender exercised the net equity proceeds option in
connection with the sale of assets as described in Note 5 to these financial
statements.
The Company also has an advance from DBI in the amount of approximately $0.6
million and bears interest at the rate of approximately 5% as of September 20,
1999. There is no stated maturity on this advance. Approximately $23,000 of
interest expense has been included in the accompanying statement of operations
in connection with this debt.
NOTE 3. RELATED-PARTY TRANSACTIONS
The Company recorded advertising revenue and incurred advertising, promotion
and certain administration expenses with vendors who are also subsidiaries of
Omni. For the period ended September 20, 1999, such income and expenses totaled
approximately $7,000.
DBI manages and administers the business and affairs of the Company.
Compensation to DBI as an annual management fee is $0.2 million plus 5% of
operating cash flows calculated monthly after deductions for interest and
depreciation. The management fee for the period ended September 20, 1999
totaled $0.1 million.
As of and during the period ended September 20, 1999, the Company had
amounts due to certain organizations related through common ownership. Interest
paid on these borrowings for the period from January 1, 1999 through September
20, 1999 was approximately $0.1 million.
F-74
<PAGE>
DESOTO -- CHANNEL 62 ASSOCIATES, LTD.
(A FLORIDA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS--(Continued)
NOTE 4. EMPLOYEE BENEFIT PLAN
The Company has a defined contribution plan for all employees. Under the
terms of the plan, employees must be 21 years of age with one year of eligible
service to participate. The Company may make matching contributions equal to a
discretionary percentage, to be determined by the Company, of the participant's
salary reductions. There have been no matching contributions made by the
Company. The plan is currently in the process of being terminated in connection
with the sale of assets as described in Note 5.
NOTE 5. SALE LEASEBACK TRANSACTION
During 1998, the Company entered into a sale-leaseback transaction with an
unrelated entity. The gain from this transaction was approximately $0.9
million, recorded as deferred income and is being amortized over the subsequent
lease term of three years. Income of $0.2 million has been included in the
accompanying statement of operations during the period ended September 30,
1999.
NOTE 6. SUBSEQUENT EVENT AND SALES OF ASSETS
On September 20, 1999, the Company and DBI sold substantially all assets of
the Company and the FCC license held by DBI to Entravision Communications
Company, L.L.C. for $17.0 million in cash. Entravision did not assume any
liabilities with the exception of certain prorated expenses, leases material to
operations of the Company and liabilities associated with certain program
rights. The accompanying financial statements have been prepared without giving
effect to the transaction except for the payment or accrual of certain costs
totaling approximately $0.4 million.
F-75
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[ENTRAVISION LOGO]
ENTRAVISION COMMUNICATIONS CORPORATION
Class A Common Stock
---------------------
PROSPECTUS
---------------------
, 2000
Donaldson, Lufkin & Jenrette
Book Running Manager
Credit Suisse First Boston
Co-Lead Manager
Merrill Lynch & Co.
Co-Lead Manager
----------------
Salomon Smith Barney
Bear, Stearns & Co. Inc.
DLJdirect Inc.
- --------------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor
any sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of Entravision
have not changed since the date hereof.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Until , 2000 (25 days after the date of this prospectus), all dealers
that effect transactions in these shares of common stock may be required to
deliver a prospectus. This is in addition to the dealer's obligation to deliver
a prospectus when acting as an underwriter and with respect to their unsold
allotments or subscriptions.
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses to be paid by us in connection
with the sale and distribution of the securities being registered. All of the
amounts shown are estimated except the registration fee of the Securities and
Exchange Commission, the NASD filing fee and the New York Stock Exchange
listing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................ $162,360
NASD filing fee.................................................... 30,500
New York Stock Exchange listing fee................................ *
Legal fees and expenses............................................ *
Accounting fees and expenses....................................... *
Printing expenses.................................................. *
Blue sky fees and expenses......................................... *
Transfer agent and registrar fees and expenses..................... *
Miscellaneous...................................................... *
--------
Total.............................................................. $ *
========
</TABLE>
- --------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
We are incorporated under the laws of the State of Delaware. Section 145 of
the Delaware General Corporation Law, as the same exists or may hereafter be
amended, provides that a Delaware corporation may indemnify any persons who
were, are or are threatened to be made, parties 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 such corporation),
by reason of the fact that such person is or was an officer, director, employee
or agent of such corporation, or is or was serving at the request of such
corporation as a director, officer, employee or agent of another corporation or
enterprise. The indemnity may include expenses (including attorney's fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding,
provided such person acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the corporation's best interests and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe that his or her conduct was illegal. A Delaware corporation may
indemnify any persons who are, were or are threatened to be made, a party to
any threatened, pending or completed action or suit by or in the right of the
corporation by reasons of the fact that such person was a director, officer,
employee or agent of such corporation, or is or was serving at the request of
such corporation as a director, officer, employee or agent of another
corporation or enterprise. The indemnity may include expenses (including
attorney's fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit, provided such person
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the corporation's best interests, provided that no
indemnification is permitted without judicial approval if the officer,
director, employee or agent is adjudged to be liable to the corporation. Where
an officer, director, employee or agent is successful on the merits or
otherwise in the defense of any action referred to above, the corporation must
indemnify him or her against the expenses which such officer or director has
actually and reasonably incurred.
Section 145 of the Delaware General Corporation Law further authorizes a
corporation to purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or enterprise, against any liability asserted
against him or her and incurred by him or her in any such capacity, arising out
of his or her status as such, whether or not the corporation would otherwise
have the power to indemnify him or her under Section 145.
II-1
<PAGE>
Our first restated certificate of incorporation provides that, to the
fullest extent permitted by Delaware law, as it may be amended from time to
time, none of our directors will be personally liable to us or our stockholders
for monetary damages resulting from a breach of fiduciary duty as a director,
except for (i) liability resulting from a breach of the director's duty of
loyalty to us or our stockholders, (ii) acts or omissions which are not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) unlawful payment of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General Corporation Law
or (iv) a transaction from which the director derived an improper personal
benefit.
Our first restated certificate of incorporation also provides mandatory
indemnification for the benefit of our directors and officers and discretionary
indemnification for the benefit of our employees and agents, in each instance
to the fullest extent permitted by Delaware law, as it may be amended from time
to time. In addition, we will enter into individual indemnification agreements
with each of our directors and officers providing additional indemnification
benefits. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our directors or officers or persons
controlling us pursuant to the foregoing provisions, we have been informed that
in the opinion of the Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Securities Act and is therefore
unenforceable. We will also provide directors' and officers' liability
insurance coverage for our directors and officers.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since our incorporation on February 11, 2000, we have issued unregistered
securities as follows:
On February 12, 2000, we issued 1,000 shares of our common stock to
Entravision Communications Company, L.L.C. for an aggregate purchase price of
$1,000, such shares to be held until and cancelled concurrently with the
reorganization described in the following paragraph. These shares were issued
pursuant to the exemption from registration provided by Section 4(2) of the
Securities Act.
Before the closing of this offering, we will complete a reorganization in
which direct and indirect ownership interests in our predecessor and
Univision's subordinated vote and option will be exchanged for newly-issued
shares of our common stock. As part of this reorganization and our acquisition
of Z-Spanish Media, we will also issue newly-issued shares of our common stock
to the stockholders of Z-Spanish Media. All of these shares will be issued
pursuant to the exemption from registration provided by Section 4(2) of the
Securities Act.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
The following exhibits are attached hereto and incorporated herein by
reference.
<TABLE>
<CAPTION>
Exhibit Exhibit Description
Number -------------------
-------
<C> <S>
1.1(2) Form of Underwriting Agreement.
2.1(1) Asset Purchase Agreement dated as of October 30, 1998 by and among
Univision Television Group, Inc., KLUZ License Partnership, G.P. and
Entravision Communications Company, L.L.C.
2.2(1) Agreement and Plan of Merger dated December 21, 1999 by and among
Entravision Communications Company, L.L.C., LCG Acquisition
Corporation, Latin Communications Group Inc. and certain of its
representatives.
2.3(1) Asset Purchase Agreement dated as of February 29, 2000 by and between
Citicasters Co. and the registrant.
2.4(2) Acquisition Agreement and Plan of Merger dated April 20, 2000 by and
among the registrant, Entravision Communications Company, L.L.C., ZSPN
Acquisition Corporation, Z-Spanish Media Corporation and certain of
its stockholders.
2.5(2) Form of Exchange Agreement by and among the registrant, Entravision
Communications Company, L.L.C., certain exchanging members and
stockholders and Univision Communications Inc.
3.1(1) Certificate of Incorporation of the registrant as currently in effect.
3.2(1) Form of First Restated Certificate of Incorporation of registrant as
in effect immediately prior to the closing of the offering.
3.3(1) Form of First Amended and Restated Bylaws of the registrant as in
effect immediately prior to the closing of the offering.
4.1(2) Form of specimen Class A common stock certificate of the registrant.
5.1(2) Opinion of Zevnik Horton Guibord McGovern Palmer & Fognani, L.L.P.
10.1(2) 2000 Omnibus Equity Incentive Plan of the registrant.
10.2(2) Form of Voting Agreement by and among Walter F. Ulloa, Philip C.
Wilkinson, Paul A. Zevnik and certain entities controlled by such
individuals.
10.3(1) Amended and Restated Credit Agreement dated November 10, 1998 by and
among KSMS-TV, Inc., Tierra Alta Broadcasting, Inc. Cabrillo
Broadcasting Corporation, Golden Hills Broadcasting Corporation, Las
Tres Palmas Corporation, Valley Channel 48, Inc., Telecorpus, Inc.,
Entravision Communications Company, L.L.C., the lender parties thereto
and Union Bank of California, N.A., as agent.
10.4(1) First Amendment to Amended and Restated Credit Agreement dated as of
December 29, 1999 by and among KSMS-TV, Inc., Tierra Alta
Broadcasting, Inc., Cabrillo Broadcasting Corporation, Golden Hills
Broadcasting Corporation, Las Tres Palmas Corporation, Valley Channel
48, Inc., Entravision Communications Company, L.L.C., the lender
parties thereto and Union Bank of California, N.A., as agent.
10.5(1) Second Amendment to Amended and Restated Credit Agreement dated as of
January 14, 2000 by and among KSMS-TV, Inc., Tierra Alta Broadcasting,
Inc., Cabrillo Broadcasting Corporation, Golden Hills Broadcasting
Corporation, Las Tres Palmas Corporation, Valley Channel 48, Inc.,
Telecorpus, Inc., Entravision Communications Company, L.L.C., the
lender parties thereto and Union Bank of California, N.A., as agent.
10.6(2) Third Amendment to Amended and Restated Credit Agreement dated April
18, 2000 by and among KSMS-TV, Inc., Tierra Alta Broadcasting, Inc.,
Cabrillo Broadcasting Corporation, Golden Hills Broadcasting
Corporation, Las Tres Palmas Corporation, Valley Channel 48, Inc.,
Telecorpus, Inc., Entravision Communications Company, L.L.C., the
lender parties thereto and Union Bank of California, N.A., as agent.
10.7(1) Amended and Restated Security Agreement dated as of November 10, 1998
by and among KSMS-TV, Inc., Tierra Alta Broadcasting, Inc., Cabrillo
Broadcasting Corporation, Golden Hills Broadcasting Corporation, Las
Tres Palmas Corporation, Valley Channel 48, Inc., Telecorpus, Inc.,
Entravision Communications Company, L.L.C., the lender parties thereto
and Union Bank of California, N.A., as agent.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit Exhibit Description
Number -------------------
-------
<C> <S>
10.8(1) Amended and Restated Pledge Agreement dated as of November 10, 1998
by certain pledgors in favor of Union Bank of California, N.A., as
agent.
10.9(2) Term Loan Agreement dated April 19, 2000 by and among LCG Acquisition
Corporation, the lender parties thereto and Union Bank of California,
N.A.
10.10(2) Security Agreement dated April 19, 2000 by and between LCG
Acquisition Corporation and Union Bank of California, N.A.
10.11(2) Pledge Agreement dated April 19, 2000 by Walter F. Ulloa and Philip
C. Wilkinson in favor of Union Bank of California, N.A.
10.12(1) Univision Roll-Up Agreement dated March 2, 2000 by and between
Univision Communications Inc. and Entravision Communications Company,
L.L.C.
10.13(1) First Amended and Restated Non-Negotiable Subordinated Note dated
March 2, 2000 in the principal amount of $120 million from
Entravision Communications Company, L.L.C. in favor of Univision
Communications Inc.
10.14(1) Amended and Restated Subordinated Note Purchase and Option Agreement
dated as of December 30, 1996 by and among Univision Communications
Inc., Entravision Communications Company, L.L.C., its member
entities, Walter F. Ulloa and Philip C. Wilkinson.
10.15(1) First Amendment to Amended and Restated Subordinated Note Purchase
and Option Agreement dated as of March 31, 1999 by and among
Univision Communications Inc., Entravision Communications Company,
L.L.C., its member entities, Walter F. Ulloa and Philip C. Wilkinson.
10.16(1) Second Amendment to Amended and Restated Subordinated Note Purchase
and Option Agreement dated March 2, 2000 by and among Univision
Communications Inc., Entravision Communications Company, L.L.C., its
member entities, Walter F. Ulloa and Philip C. Wilkinson.
10.17(1) Secured Promissory Note and Pledge Agreement dated October 16, 1996
in the principal amount of $360,366.38 from Paul A. Zevnik in favor
of Entravision Communications L.L.C.
10.18(2) Form of Indemnification Agreement for officers and directors of the
registrant.
10.19(2) Convertible Subordinated Note Purchase Agreement dated as of April
20, 2000 by and among Entravision Communications Company, L.L.C., the
registrant and certain investors.
10.20(2) Subordinated Convertible Promissory Note dated April 20, 2000 in the
principal amount of $90 million from Entravision Communications
Company, L.L.C. in favor of TSG Capital Fund III, L.P.
10.21(2) Investor Rights Agreement dated April 20, 2000 by and among
Entravision Communications Company, L.L.C., the registrant and TSG
Capital Fund III, L.P.
10.22(2) Form of Certificate of Designations, Preferences and Rights of Series
A Convertible Preferred Stock of the registrant.
10.23(2) Form of Investor Rights Agreement by and among the registrant and
certain of its stockholders.
10.24(1) Form of Network Affiliation Agreement by and between Univision
Television Network and Entravision Communications Company, L.L.C.
10.25(2) Office Lease dated August 19, 1999 by and between Water Garden
Company, L.L.C. and Entravision Communications Company, L.L.C.
21.1(2) Schedule of subsidiaries of the registrant.
23.1(2) Consent of Zevnik Horton Guibord McGovern Palmer & Fognani, L.L.P.
(included in Exhibit 5.1).
23.2(2) Consent of McGladrey & Pullen, LLP.
23.3(2) Consent of Ernst & Young LLP.
23.4(2) Consent of Deloitte & Touche LLP.
24.1(1) Power of Attorney (included on the signature page to this
registration statement).
</TABLE>
- --------
(1) Filed herewith.
(2) To be filed by amendment.
(b) Financial Statement Schedules--None.
II-4
<PAGE>
ITEM 17. UNDERTAKINGS.
The registrant hereby undertakes to provide to the underwriters at the
closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
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 foregoing provisions, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Santa Monica, State of
California, on April 20, 2000.
ENTRAVISION COMMUNICATIONS CORPORATION
/s/ Walter F. Ulloa
By: ______________________________________
Walter F. Ulloa, Chairman and Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below does hereby constitute and appoint Walter F. Ulloa and Jeanette Tully,
and each of them, with full power of substitution and full power to act without
the other, his or her true and lawful attorney-in-fact and agent to act for him
or her in his or her name, place and stead, in any and all capacities, to sign
any and all amendments (including post-effective amendments) to this
registration statement, any and all registration statements filed pursuant to
Rule 462(b) of the Securities Act (including post-effective amendments) and to
file this registration statement, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said 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 order to effectuate the same as fully, to all intents
and purposes, as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Walter F. Ulloa Chairman and Chief Executive April 20, 2000
____________________________________ Officer (principal
Walter F. Ulloa executive officer)
/s/ Philip C. Wilkinson President, Chief Operating April 20, 2000
____________________________________ Officer and Director
Philip C. Wilkinson
/s/ Jeanette Tully Executive Vice President, April 20, 2000
____________________________________ Treasurer and Chief
Jeanette Tully Financial Officer
(principal financial
officer and principal
accounting officer)
/s/ Paul A. Zevnik Secretary and Director April 20, 2000
____________________________________
Paul A. Zevnik
/s/ Amador S. Bustos President of Radio Division April 20, 2000
____________________________________ and Director
Amador S. Bustos
/s/ Darryl B. Thompson Director April 20, 2000
____________________________________
Darryl B. Thompson
/s/ Andrew W. Hobson Director April 20, 2000
____________________________________
Andrew W. Hobson
/s/ Michael D. Wortsman Director April 20, 2000
____________________________________
Michael D. Wortsman
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<C> <S>
1.1(2) Form of Underwriting Agreement.
2.1(1) Asset Purchase Agreement dated as of October 30, 1998 by and among
Univision Television Group, Inc., KLUZ License Partnership, G.P. and
Entravision Communications Company, L.L.C.
2.2(1) Agreement and Plan of Merger dated December 21, 1999 by and among
Entravision Communications Company, L.L.C., LCG Acquisition
Corporation, Latin Communications Group Inc. and certain of its
representatives.
2.3(1) Asset Purchase Agreement dated as of February 29, 2000 by and between
Citicasters Co. and the registrant.
2.4(2) Acquisition Agreement and Plan of Merger dated April 19, 2000 by and
among the registrant, Entravision Communications Company, L.L.C., ZSPN
Acquisition Corporation, Z-Spanish Media Corporation and certain of
its stockholders.
2.5(2) Form of Exchange Agreement by and among the registrant, Entravision
Communications Company, L.L.C., certain exchanging members and
stockholders and Univision Communications Inc.
3.1(1) Certificate of Incorporation of the registrant as currently in effect.
3.2(1) Form of First Restated Certificate of Incorporation of registrant as
in effect immediately prior to the closing of the offering.
3.3(1) Form of First Amended and Restated Bylaws of the registrant as in
effect immediately prior to the closing of the offering.
4.1(2) Form of specimen Class A common stock certificate of the registrant.
5.1(2) Opinion of Zevnik Horton Guibord McGovern Palmer & Fognani, L.L.P.
10.1(2) 2000 Omnibus Equity Incentive Plan of the registrant.
10.2(2) Form of Voting Agreement by and among Walter F. Ulloa, Philip C.
Wilkinson, Paul A. Zevnik and certain entities controlled by such
individuals.
10.3(1) Amended and Restated Credit Agreement dated November 10, 1998 by and
among KSMS-TV, Inc., Tierra Alta Broadcasting, Inc. Cabrillo
Broadcasting Corporation, Golden Hills Broadcasting Corporation, Las
Tres Palmas Corporation, Valley Channel 48, Inc., Telecorpus, Inc.,
Entravision Communications Company, L.L.C., the lender parties thereto
and Union Bank of California, N.A., as agent.
10.4(1) First Amendment to Amended and Restated Credit Agreement dated as of
December 29, 1999 by and among KSMS-TV, Inc., Tierra Alta
Broadcasting, Inc., Cabrillo Broadcasting Corporation, Golden Hills
Broadcasting Corporation, Las Tres Palmas Corporation, Valley Channel
48, Inc., Entravision Communications Company, L.L.C., the lender
parties thereto and Union Bank of California, N.A., as agent.
10.5(1) Second Amendment to Amended and Restated Credit Agreement dated as of
January 14, 2000 by and among KSMS-TV, Inc., Tierra Alta Broadcasting,
Inc., Cabrillo Broadcasting Corporation, Golden Hills Broadcasting
Corporation, Las Tres Palmas Corporation, Valley Channel 48, Inc.,
Telecorpus, Inc., Entravision Communications Company, L.L.C., the
lender parties thereto and Union Bank of California, N.A., as agent.
10.6(2) Third Amendment to Amended and Restated Credit Agreement dated April
18, 2000 by and among KSMS-TV, Inc., Tierra Alta Broadcasting, Inc.,
Cabrillo Broadcasting Corporation, Golden Hills Broadcasting
Corporation, Las Tres Palmas Corporation, Valley Channel 48, Inc.,
Telecorpus, Inc., Entravision Communications Company, L.L.C., the
lender parties thereto and Union Bank of California, N.A., as agent.
10.7(1) Amended and Restated Security Agreement dated as of November 10, 1998
by and among KSMS-TV, Inc., Tierra Alta Broadcasting, Inc., Cabrillo
Broadcasting Corporation, Golden Hills Broadcasting Corporation, Las
Tres Palmas Corporation, Valley Channel 48, Inc., Telecorpus, Inc.,
Entravision Communications Company, L.L.C., the lender parties thereto
and Union Bank of California, N.A., as agent.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<C> <S>
10.8(1) Amended and Restated Pledge Agreement dated as of November 10, 1998
by certain pledgors in favor of Union Bank of California, N.A., as
agent.
10.9(2) Term Loan Agreement dated April 19, 2000 by and among LCG Acquisition
Corporation, the lender parties thereto and Union Bank of California,
N.A.
10.10(2) Security Agreement dated April 19, 2000 by and between LCG
Acquisition Corporation and Union Bank of California, N.A.
10.11(2) Pledge Agreement dated April 19, 2000 by Walter F. Ulloa and Philip
C. Wilkinson in favor of Union Bank of California, N.A.
10.12(1) Univision Roll-Up Agreement dated March 2, 2000 by and between
Univision Communications Inc. and Entravision Communications Company,
L.L.C.
10.13(1) First Amended and Restated Non-Negotiable Subordinated Note dated
March 2, 2000 in the principal amount of $120 million from
Entravision Communications Company, L.L.C. in favor of Univision
Communications Inc.
10.14(1) Amended and Restated Subordinated Note Purchase and Option Agreement
dated as of December 30, 1996 by and among Univision Communications
Inc., Entravision Communications Company, L.L.C., its member
entities, Walter F. Ulloa and Philip C. Wilkinson.
10.15(1) First Amendment to Amended and Restated Subordinated Note Purchase
and Option Agreement dated as of March 31, 1999 by and among
Univision Communications Inc., Entravision Communications Company,
L.L.C., its member entities, Walter F. Ulloa and Philip C. Wilkinson.
10.16(1) Second Amendment to Amended and Restated Subordinated Note Purchase
and Option Agreement dated March 2, 2000 by and among Univision
Communications Inc., Entravision Communications Company, L.L.C., its
member entities, Walter F. Ulloa and Philip C. Wilkinson.
10.17(1) Secured Promissory Note and Pledge Agreement dated October 16, 1996
in the principal amount of $360,366.38 from Paul A. Zevnik in favor
of Entravision Communications L.L.C.
10.18(2) Form of Indemnification Agreement for officers and directors of the
registrant.
10.19(2) Convertible Subordinated Note Purchase Agreement dated as of April
19, 2000 by and among Entravision Communications Company, L.L.C., the
registrant and certain investors.
10.20(2) Subordinated Convertible Promissory Note dated April 19, 2000 in the
principal amount of $90 million from Entravision Communications
Company, L.L.C. in favor of TSG Capital Fund III, L.P.
10.21(2) Investor Rights Agreement dated April 19, 2000 by and among
Entravision Communications Company, L.L.C., the registrant and TSG
Capital Fund III, L.P.
10.22(2) Form of Certificate of Designations, Preferences and Rights of Series
A Convertible Preferred Stock of the registrant.
10.23(2) Form of Investor Rights Agreement by and among the registrant and
certain of its stockholders.
10.24(1) Form of Network Affiliation Agreement with Univision Network Limited
Partnership.
10.25(2) Office Lease dated August 19, 1999 by and between Water Garden
Company, L.L.C. and Entravision Communications Company, L.L.C.
21.1(2) Schedule of subsidiaries of the registrant.
23.1(2) Consent of Zevnik Horton Guibord McGovern Palmer & Fognani, L.L.P.
(included in Exhibit 5.1).
23.2(2) Consent of McGladrey & Pullen, LLP.
23.3(2) Consent of Ernst & Young LLP.
23.4(2) Consent of Deloitte & Touche LLP.
24.1(1) Power of Attorney (included on the signature page to this
registration statement).
</TABLE>
- --------
(1) Filed herewith.
(2) To be filed by amendment.
(b) Financial Statement Schedules--None.
<PAGE>
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is entered into as of
this 30th day of October, 1998, by and between UNIVISION TELEVISION GROUP, INC.,
a Delaware corporation ("Seller"), KLUZ LICENSE PARTNERSHIP, G.P., a California
general partnership (the "License Partnership"), and ENTRAVISION COMMUNICATIONS
COMPANY, L.L.C., a Delaware limited liability company ("Buyer").
R E C I T A L S
Seller owns certain assets used or held for use exclusively in
connection with the operation of the television broadcast station KLUZ (TV),
Channel 41 in Albuquerque, New Mexico (the "Station") and License Partnership
holds the rights to the FCC Licenses (as defined below).
Seller and License Partnership desire to sell, assign and transfer to
Buyer, and Buyer desires to purchase from Seller and License Partnership such
assets, as more specifically described below, and the rights associated with the
FCC Licenses, on the terms and subject to the conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the foregoing, and of the mutual
covenants, warranties and agreements contained herein, and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties agree as
follows:
ARTICLE I
PURCHASE AND SALE
-----------------
1.1 Assets. Upon the terms and subject to the representations,
------
warranties, covenants and conditions set forth in this Agreement, at the Closing
Seller and License Partnership shall grant, convey, sell, assign, transfer and
deliver to Buyer, and Buyer shall purchase, acquire, and accept all right, title
and interest of: (i) License Partnership in and to the FCC Licenses, and (ii)
Seller in and to all of the real property, furniture, fixtures, equipment and
other tangible assets owned, leased or held by Seller on the Closing Date that
are used or held for use exclusively in connection with the business and
operation of the Station without regard to where located (collectively, the
"Assets") for the Purchase Price (as defined below). The Assets include (to the
extent not an Excluded Asset, as such term is defined below), without
limitation, all:
(a) fee simple ownership, leaseholds, easements and other
interests of every kind and description in and to all of the real property,
buildings, towers, antennae and improvements owned or leased by Seller as of the
date hereof and used or held for use exclusively in connection with the
Business, without regard to where located, all as set forth on Schedule 1.1(i)
---------------
(the "Real Property");
1
<PAGE>
(b) equipment, software, machinery, vehicles, office furniture
and fixtures, transmitting tuners, transmitters, antennae, office materials and
supplies, spare parts and other tangible personal property of every kind and
description, owned, leased by Seller as of the date of this Agreement and used
or held for use exclusively in connection with the Business, without regard to
where located, including any replacements thereof and those acquired by Seller
between the date of this Agreement and the Closing Date, all as set forth on
Schedule 1.1(ii), and any additions, improvements, replacements and alterations
- ----------------
thereto made between the date of this Agreement and the Closing Date
(collectively, the "Tangible Personal Property"), but excluding any Consumed
Property (as defined below);
(c) Contracts (which shall include all program Contracts for the
Station) listed on Schedule 1.1(iii) (the "Assigned Contracts"), together with
-----------------
all Contracts that will have been entered into by Seller in the ordinary course
of business of the Station between the date of this Agreement and the Closing
Date (which, to be included within the Assigned Contracts must be approved in
advance in writing by Buyer , unless such Contract would not be required to be
listed on Schedule 1.1(iii) in accordance with Section 3.6, and those Contracts
-----------------
which Buyer consents to pursuant to Section 5.2.
(d) technical materials and guidelines, brochures, sales
literature, promotional material and other selling material of the Station,
wherever situated, except such items that relate to the business and operations
of Seller or License Partnership other than with respect to the Station;
(e) papers, documents, instruments, books and records, files
(including, without limitation, the files required to be kept by the Station
pursuant to the rules and regulations of the FCC), agreements, books of account
and other records by which any of the Assets might be identified or enforced or
otherwise pertaining to the Assets that are located at the offices or other
locations used in connection with the Assets (including, without limitation,
customer invoices, customer lists, vendor and supplier lists, drafts and other
documents and materials relating to customer transactions, blueprints,
specifications, designs, drawings, operating and marketing plans and all other
documents, tapes, discs, programs or other embodiments of information related
thereto), except such items that refer to the business and operations of Seller
or License Partnership other than with respect to the Station; and
(f) all right, title and interest in and to the trade names and
trademarks of Seller and License Partnership, including, without limitation, the
marks "KLUZ", "KLUZ-TV", "KLUZ-TV 41" or "K48AM" and any and all variations
thereof.
1.2 Excluded Assets. There shall be excluded from the Assets and
---------------
retained by Seller, to the extent in existence on the Closing Date, all of
right, title, and interest of Seller and License Partnership in and to
(collectively, the "Excluded Assets"):
(a) cash on hand or in bank accounts, and any other cash
equivalents, including without limitation certificates of deposit, commercial
paper, treasury bills, asset or money market accounts and all such similar
accounts or investments;
(b) accounts receivable and any notes or written obligations
reflecting accounts receivable ("Seller's Receivables");
(c) prepaid items such as deposits, reserves and prepaid
expenses and prepaid ad valorem taxes;
2
<PAGE>
(d) securities;
(e) Tangible Personal Property consumed in the ordinary course
of the business of the Station between the date hereof and the Closing Date
(collectively, "Consumed Property");
(f) contracts of insurance;
(g) pension, profit sharing or savings plans and trusts and any
assets thereof or other Employee Benefit Plan or program;
(h) duplicate files and records relating to the Business;
(i) rights to or claims for refunds of taxes and other
governmental charges for periods ending on or prior to the Closing Date and the
benefit of net operating loss carry-forwards or other tax credits;
(j) rights of indemnification, contribution or reimbursement
that may exist under the Assigned Contracts in respect of liabilities or
obligations retained by Seller;
(k) "Univision" marks, including any and all trademarks or
service marks, trade names, slogans or other like property which includes the
name "Univision", the mark Univision or any derivative thereof and Univision's
logo or any derivative thereof;
(l) assets used by Seller or any Affiliate in any other business
of Seller or any Affiliate, all nontransferable Permits and assets relating to
corporate and partnership functions of Seller and License Partnership
(including, but not limited to, the corporate and partnership records, corporate
charter, taxpayer and other identification numbers, income tax records, seals,
minute books, the partnership agreement and stock transfer books); and
(m) rights of Seller and License Partnership under this
Agreement and the Ancillary Documents.
1.3 Liabilities. The Assets shall be sold and conveyed to Buyer free
-----------
and clear of all Liabilities and Encumbrances except for (i) Permitted
Encumbrances, (ii) the Liabilities arising out of the Assigned Contracts, and
(iii) the Liabilities prorated to Buyer in accordance with Section 1.4
(collectively the "Assumed Liabilities"). On and after the Closing Date Buyer
-------------------
will assume and discharge, and indemnify and hold Seller and License Partnership
harmless from the Assumed Liabilities. Except for the Assumed Liabilities, Buyer
will not assume or be obligated to pay or discharge any Liabilities of any kind,
whether known or unknown, contingent or otherwise, accrued by Seller or License
Partnership and relating to the time period prior to the Closing Date in
connection with the Assets and the Business. Buyer does not assume or undertake
to discharge any obligation or Liability of Seller or License Partnership other
than the Assumed Liabilities.
1.4 Prorations.
----------
(a) All income, expenses and deposits for services or
advertising to be rendered arising from the conduct of the Business shall be
prorated between Buyer and Seller as of 12:01 a.m. (pacific standard time) on
the date immediately after the Closing (the "Adjustment Date"). Such prorations
shall be based upon the principle that Seller shall be entitled to all income
earned and shall be responsible for all Liabilities incurred or accruing in
connection with the Business to the Adjustment Date and Buyer shall be
3
<PAGE>
entitled to all such income earned and shall be responsible for all such
Liabilities in connection with the Business from and after the Adjustment Date.
All program Contracts shall be prorated in accordance with the rules of the
Financial Accounting Standards Board.
(b) Such prorations shall include, without limitation, all
expenses for goods or services received both before and after the Adjustment
Date, prepaid cash time sales agreements, ad valorem, real estate and other
property taxes, regulatory, business and license fees, music and other license
fees, commissions, wages, payroll taxes, and other fringe benefits of employees
of Seller who enter the employment of Buyer (including accrued vacation pay),
power and utility expenses, commissions, rents and similar prepaid and deferred
items deposits, reserves and all other expenses attributable to the Business.
All special assessments and similar charges or liens imposed against the Real
Property and Tangible Personal Property in respect of any period of time through
the Adjustment Date, whether payable in installments or otherwise, shall be the
responsibility of Seller, and amounts payable with respect to such special
assessments, charges or liens in respect of any period of time after the
Adjustment Date shall be the responsibility of Buyer, and such charges shall be
adjusted as required hereunder. Schedule 1.4 contains a full and complete list
------------
of all known Liabilities to be prorated in accordance with the provisions of
this Section 1.4.
(c) To the extent that any of the foregoing prorations and
adjustments cannot be determined as of the Adjustment Date, Buyer and Seller
shall conduct a final accounting and make any further payments, as required,
within 60 days after the Closing. The prorations shall be made in accordance
with generally accepted accounting principles or, if no such principles exist
with respect to the proration of any item, the proration shall be made in
accordance with industry practice.
1.5 Purchase Price. The aggregate consideration paid by Buyer (the
--------------
"Purchase Price") shall be (i) One Million Dollars ($1,000,000), for the Assets
other than the FCC Licenses, payable in cash in immediately available funds on
the Closing Date, and (ii) for the FCC Licenses, the right to acquire an
additional two percent (2%) fully diluted ownership interest in Buyer pursuant
to the Note Purchase Option Agreement Amendment to be executed and delivered to
Seller on the Closing Date.
1.6 Allocation of Purchase Price. Buyer, Seller and License
----------------------------
Partnership shall allocate the Purchase Price in accordance with the respective
fair market values of the Assets and the FCC Licenses in accordance with the
requirements of Section 1060 of the Code. The allocation shall be determined by
mutual agreement of the parties prior to the Closing and set forth on Schedule
--------
1.6. Buyer, Seller and License Partnership each further agrees to file its
- ---
federal income tax returns and its other tax returns reflecting such allocation
in accordance with the determination made by them.
1.7 Contribution of FCC Licenses. Seller hereby acknowledges and
----------------------------
agrees that concurrently with the Closing, Buyer intends to convey all of its
right, title and interest in and to the FCC Licenses to Entravision Holdings,
LLC, a California limited liability company and wholly-owned subsidiary of Buyer
and its managing members
1.8 FCC Filing Fees. Each of Buyer and Seller shall pay an equal
---------------
portion of all filling fees in connection with the FCC Application.
4
<PAGE>
ARTICLE II
CLOSING
-------
2.1 Closing. The consummation of the transactions provided for in
-------
this Agreement ("Closing") shall take place at (i) the offices of Zevnik Horton
-------
Guibord McGovern Palmer & Fognani, L.L.P., Los Angeles, California at 10:00 a.m.
(pacific daylight time) on the date, not later than ten (10) business days after
the FCC Transfer Approval (subject to the right of Buyer to waive Final FCC
Transfer Approval, in which case the Closing shall occur at such time and place
as the parties may mutually agree), or (ii) such other place, time or date as
the parties may agree upon in writing.
2.2 Closing Obligations of Seller. At the Closing, Seller or License
-----------------------------
Partnership, as the case may be, will deliver to Buyer:
(a) such bills of sale and assignments, and such other good and
sufficient instruments and documents of conveyance and transfer, in form and
substance satisfactory to Buyer and its counsel, as shall be necessary and
effective, as determined by Buyer and its counsel, to transfer and assign to,
and vest in, Buyer all right, title and interest in and to the Assets and the
FCC Licenses;
(b) the closing certificate required by Section 7.2(a);
(c) resolutions of the Board of Directors of Seller and a
written consent of the general partner of License Partnership authorizing the
execution, delivery and performance of this Agreement, certified by the
Secretary of Seller and the general partner of License Partnership,
respectively;
(d) an affidavit to the effect that Seller is not a "foreign
person" within the meaning of Section 1445 of the IRC;
(e) a certificate of good standing for Seller issued by the
Delaware Secretary of State not more than 10 days prior to the Closing Date;
(f) an executed Univision Network Affiliation Agreement with
respect to the Station, substantially in the form attached hereto as Exhibit
-------
"C"; and
- ---
(g) such other documents as may be reasonably requested by
counsel for Buyer as necessary to consummate the transactions contemplated
hereby.
2.3 Closing Obligations of Buyer. At the Closing, Buyer will deliver
----------------------------
or cause to be delivered to Seller and License Partnership:
(a) the cash portion of the Purchase Price in immediately
available funds pursuant to instructions of License Partnership delivered to
Buyer at least 3 days prior to the Closing; and the Note Purchase Option
Agreement Amendment, duly executed by Buyer, evidencing the non-cash portion of
the Purchase Price;
(b) the closing certificate required by Section 7.3(a);
5
<PAGE>
(c) resolutions of the managing members of Buyer authorizing the
execution, delivery and performance of this Agreement, certified by the
Secretary of Buyer;
(d) a good standing certificate for Buyer issued by the Delaware
Secretary of State not more than 10 days prior to the Closing Date;
(e) an executed Univision Network Affiliation Agreement with
respect to the Station, substantially in the form attached hereto as Exhibit
-------
"C"; and
- ---
(f) the Assignment and Assumption Agreement, duly executed by
Buyer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Seller represents and warrants to Buyer as follows:
3.1 Organization and Related Matters. Seller is a corporation duly
--------------------------------
organized, validly existing and in good standing under the laws of the state of
Delaware and is duly qualified to do business as a foreign corporation in the
jurisdictions in which Seller operates the Station, except where the failure so
to qualify will not have a Material Adverse Effect on the Business. Seller has
all requisite corporate power and authority to own, operate and lease the
Assets, to operate the Station, to execute and deliver the Ancillary Documents
and to perform its obligations thereunder. License Partnership is a general
partnership duly formed and validly existing under the laws of the state of
California. License Partnership has all requisite partnership power and
authority to hold the FCC Licenses and to execute and deliver the Ancillary
Documents and to perform its obligations thereunder.
3.2 Authority. The execution, delivery and performance by Seller and
---------
License Partnership of this Agreement and each of the Ancillary Documents to
which it is a party have been duly and validly authorized by all corporate
action necessary on the part of Seller and all partnership action necessary on
the part of License Partnership. This Agreement and any Ancillary Documents to
which Seller and License Partnership is a party, have been duly and validly
executed and delivered by such party and, assuming the due authorization hereof
and thereof by Buyer, constitute the legal, valid and binding obligation of such
party, enforceable against such party in accordance with its terms except as
such enforceability may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar Laws now or hereafter in effect
relating to or affecting creditors' rights generally and (ii) general principles
of equity (regardless of whether enforcement is sought in a proceeding in equity
or at law).
3.3 No Conflicts. Neither the execution nor delivery by Seller or
------------
License Partnership of this Agreement or the Ancillary Documents, if any, to
which it is a party, nor the consummation by Seller or License Partnership of
the transactions contemplated hereby and thereby, nor the performance by Seller
or License Partnership, its obligations hereunder or thereunder will violate, or
constitute a breach or default (whether upon lapse of time and/or the occurrence
of any act or event or otherwise), under the charter documents of Seller or
License Partnership or any Material Contract, or result in the imposition of any
material Encumbrance (other than Permitted Encumbrances) against any of the
Assets, provided that the appropriate Permits and Approvals listed on Schedule
--------
3.3 are secured. Schedule 3.3 lists all Permits and Approvals required to be
- --- ------------
obtained by the Seller or License Partnership or filings or registrations
6
<PAGE>
with any third party or Governmental Entity required by Seller or License
Partnership to consummate the transactions contemplated by this Agreement and
the Ancillary Documents. The execution and delivery by Seller or License
Partnership of this Agreement and the Ancillary Documents to which it is a
party, the consummation by Seller and License Partnership of the transactions
contemplated hereby and thereby, and the performance by Seller and License
Partnership of their respective obligations hereunder or thereunder will not
violate any Law, the violation of which would have a Material Adverse Effect on
the Business or the ability of Seller or License Partnership to consummate the
transactions contemplated hereby.
3.4 Financial Statements. Seller has delivered to Buyer copies of the
--------------------
Station Financial Statements. The Station Financial Statements fairly present in
all material respects the financial condition and the results of operations of
the Station as at the respective dates of and for the periods referred to in
such financial statements, all in accordance with GAAP. The Station Financial
Statements reflect the consistent application of such accounting principles
throughout the periods involved, except as disclosed in the notes thereto.
3.5 Absence of Certain Changes or Events. Since December 31, 1997,
------------------------------------
the operation of the Station has been conducted only in the ordinary course, and
there has not occurred or arisen any event, individually or together with any
other event or events, having or, insofar as reasonably can be foreseen, that in
the future is likely to have, a Material Adverse Effect on the Business. For
purposes of this Section 3.5, no change shall be considered to have a "Material
Adverse Effect" if such change is consistent with circumstances affecting the
television broadcasting industry generally or the markets generally where the
Station competes.
3.6 Material Contracts. Schedule 3.6 lists each Contract relating to
------------------ ------------
the Station to which Seller or License Partnership is a party or to which it or
any of its properties is subject or by which it is bound that is deemed a
Material Contract under this Agreement. The following Contracts shall be deemed
to be Material Contracts: any Contract relating to the Station that (i)
obligates Seller or License Partnership to pay after the date hereof an amount
of $10,000 or more, (ii) the Station substantially depends upon, (iii) contains
a covenant not to compete or other covenant that restricts the ability of Seller
to conduct the business of the Station, (iv) grants a power of attorney, agency
or similar authority to another Person, (v) grants to a third party a right of
first refusal, (vi) grants a right to, or obligates, any Affiliate of Seller,
(vii) is an employment or consulting agreement, (viii) grants any Person a
license or other right to broadcast, televise or otherwise air taped, filmed or
live television programs, shows, motion pictures sports, commercials or
infomercials, or (ix) was not made in the ordinary course of business. Seller
and License Partnership have duly performed all of its material obligations
under each Material Contract to the extent that such obligations have accrued,
and no material breach or default, alleged material breach or default, or event
that would (whether upon lapse of time and/or the occurrence of any act or event
or otherwise) constitute a material breach or default thereunder by Seller or
License Partnership, or, to the knowledge of Seller or License Partnership any
other party or obligor with respect thereto, has occurred or as a result of this
Agreement will occur.
3.7 Property. Seller has good and marketable title to all items of
--------
Real Property and Tangible Personal Property listed on Schedules 1.1(i) and
--------------------
1.1(ii) respectively. Neither the Real Property nor the Tangible Personal
- --------------------
Property is subject to any Encumbrance except for Permitted Encumbrances and
those set forth on Schedule 3.7. Seller has not received any notice of proposed
------------
special assessments or a material change in property tax or land use laws
affecting any real or personal property used in the Business. All material
leasehold properties relative to the Business held by Seller as lessee are held
under valid, binding and enforceable
7
<PAGE>
leases. All Real Property and Tangible Personal Property of Seller necessary to
the Business is in good operating condition and repair in all material respects,
ordinary wear and tear excepted.
3.8 Legal Proceedings and Claims. There is no Order or Action
----------------------------
pending, or, to the knowledge of Seller, threatened against or affecting the
Station, or any of properties or assets used in its operations, that
individually or when aggregated with any other Order or Action has or would
reasonably be expected to have a Material Adverse Effect on the Business.
3.9 Taxes. Seller has timely filed all Tax Returns required of it and
-----
has either paid all Taxes due for all periods or portions of periods ending on
or before the Closing Date, or, to the extent not paid, adequately reserved for
such Taxes, to the extent required by GAAP, whether or not due and payable and
whether or not disputed, such that there will be no Encumbrances on any of the
Assets as of the Closing relating to Taxes.
3.10 Insurance. Schedule 3.10 lists all material insurance policies
--------- -------------
maintained by Seller that afford coverage to the Station or the Assets. All
such policies are in full force and effect and, except as disclosed on Schedule
--------
3.10, all premiums with respect thereto covering all periods up to and including
- ----
the date hereof have been paid to the extent due, and no notice of cancellation
or termination has been received with respect to any such policy.
3.11 Compliance with Laws. Seller and the License Partnership are in
--------------------
compliance in all material respects with all applicable Laws (including, but not
limited to, the receipt of all Permits and Approvals) relating to the Station,
the FCC Licenses and the Assets. No suspension, cancellation or termination of
any Permits or Approvals required by any Governmental Entity to permit the
operation of the Station is, to the knowledge of Seller, threatened or imminent.
3.12 Certain Interests. No Affiliate of Seller has any material
-----------------
interest in any property used in or pertaining to the Station or in any customer
or supplier doing business with the Station.
3.13 No Brokers or Finders. No agent, broker, finder, or investment or
---------------------
commercial banker, or other Person or firm engaged by or acting on behalf of
Seller, License Partnership or any of their Affiliates in connection with the
negotiation, execution or performance of this Agreement or the transactions
contemplated by this Agreement, is or will be entitled to any brokerage or
finder's or similar fee or other commission as a result of this Agreement or
such transactions.
3.14 FCC Matters; Operation and Condition of the Station.
---------------------------------------------------
(a) The License Partnership has all requisite power and
authority and holds all FCC Licenses required under the Communications Act or
the current rules, regulations, and policies of the FCC (the "FCC Rules") to own
and operate the Station.
(b) Set forth on Schedule 3.14(b) is a complete list of all FCC
----------------
Licenses of the License Partnership relating to or used in connection with the
Station, with the expiration date thereof. Each such FCC License is validly
issued and is in full force and effect. Collectively, the FCC Licenses
constitute all authorizations from each Communications Regulatory Authority
necessary for the operation of the Station in the same manner presently
conducted. Each of the Seller and License Partnership, to its respective
knowledge, has taken all actions and performed all of its obligations that are
necessary to maintain the FCC Licenses
8
<PAGE>
without adverse modification or impairment. Complete and correct copies of the
FCC Licenses have been delivered to Buyer. Except as set forth on Schedule
--------
3.14(b), none of the FCC Licenses requires that any assignment thereof must be
- -------
approved by any Governmental Entity other than the FCC.
(c) Neither Seller nor License Partnership is not a party to,
nor to the knowledge of either is there threatened, any investigation, notice of
apparent liability, violation, forfeiture or other notice, order or complaint
issued by or before any court or regulatory body, including the FCC, or of any
other proceeding (other than proceedings to amend FCC Rules of general
applicability) that could in any manner threaten or adversely affect the
validity or continued effectiveness of the FCC Licenses. Neither Seller nor
License Partnership has reason to believe that each of the FCC Licenses listed
on Schedule 3.14(b) will not be renewed in the ordinary course. Each of Seller
----------------
and License Partnership has filed in a substantially timely manner all material
reports, applications, documents, instruments and information relating to the
Station required to be filed by it pursuant to the Communications Act or the FCC
Rules or the request of any Communications Regulatory Authority, including equal
employment opportunity reports. All such filings are accurate and complete in
all material respects.
(d) To the knowledge of Seller, none of the facilities used in
connection with the television broadcasting operations of the Station
(including, but not limited to, the transmitter and tower sites owned or used by
Seller in connection with the operation of the Station) violates in any material
respect the provisions of any applicable building code, fire regulation,
building restriction or zoning ordinance, and each such facility is zoned so as
to permit the commercial uses intended by the owner or occupier thereof, and
there are no outstanding variances or special use permits materially affecting
any of the Station facilities or the uses thereof.
(e) The Station, its physical facilities, electrical and
mechanical systems and transmitting and studio equipment (i) are being operated
in all material respects in accordance with the specifications of the applicable
FCC License, (ii) are being operated in all material respects in compliance with
all applicable requirements of the FCC Rules and the Communications Act and
(iii) to the knowledge of Seller, are in good operating condition customary in
the broadcast industry.
(f) The Station is in compliance in all material respects with
the FCC Licenses, the Communications Act, and the FCC Rules.
(g) Neither Seller nor License Partnership is aware of any
facts, and neither has received any notice or other communication, indicating
that Seller or License Partnership, in connection with the ownership and
operation of the Station, is not in compliance in all material respects with all
requirements of (i) the FCC Rules or the Communications Act, or (ii) applicable
state and local statutes, regulations and ordinances. Neither Seller nor License
Partnership is aware of any facts, and neither has received any notice or
communication, formal or informal, indicating that the FCC is considering
modifying, revoking, suspending, canceling, rescinding or terminating any FCC
License.
3.15 Intellectual Property. Schedule 3.15 lists each Mark owned or
--------------------- -------------
licensed by relating to the Station or the operations of the Station and the
nature of Seller's interest in such Mark. Except as set forth on Schedule 3.15,
-------------
Seller has no knowledge of nor has Seller received any notice of any claim that
has been asserted by any Person (i) to the effect that the conduct of the
Business by Seller infringes on any Marks owned or licensed by Seller, (ii)
against
9
<PAGE>
the use by Seller of any Mark, technology or know-how necessary to the
operations of the Station or (iii) challenging the ownership, validity or
effectiveness of any of the Marks listed on Schedule 3.15. No item listed on
-------------
Schedule 3.15 would, individually or in the aggregate, have a Material Adverse
- -------------
Effect on the Business.
3.16 Labor Matters.
-------------
(a) No employee of the Station is represented pursuant to any
collective bargaining agreements with a labor union. No work stoppage against
the Station is pending or, to the knowledge of Seller, threatened. Except as set
forth on Schedule 3.16, Seller is not involved in or, to the knowledge of
-------------
Seller, threatened with any labor dispute, arbitration, lawsuit, internal
investigation or administrative proceeding relating to labor matters relating to
the employees of the Station.
(b) Schedule 3.16 sets forth a list of each employee of the
-------------
Station, the date each such employee was hired by such Station, whether such
employee is involved in the business of such Station full-time or part-time, the
date of the last compensation increase of such employee, the title or category
of each such employee and the present compensation of each such employee,
including a description of the basis for determining any deferred compensation,
accrued bonuses or other bonuses payable on or after the Closing Date. Except as
set forth on Schedule 3.16, as of the Closing Date, each employee of the Station
-------------
will be an at-will employee.
3.17 Employee Benefit Plans. Schedule 3.17 lists all employee
---------------------- -------------
benefit, compensation and fringe benefit plans and arrangements, including
without limitation, any "employee benefit plan" (within the meaning of Section
3(3) of ERISA) to which Seller is bound, legally or otherwise and which may
cover employees of the Station. Buyer will not assume any such plan or
arrangement.
3.18 Environmental Matters.
---------------------
(a) Seller, to its knowledge, has operated the Station in all
material respects in compliance with all applicable Environmental Laws. Except
as set forth on Schedule 3.18 Seller has obtained and presently maintains all
-------------
permits or other governmental authorizations required to operate the Station in
compliance with all applicable Environmental Laws.
(b) To the knowledge of Seller, no Environmental Condition
exists upon the Real Property, and no investigation, inquiry or other proceeding
relating to any actual or alleged Environmental Condition or failure to comply
with any applicable Environmental Law is pending or to the knowledge of Seller
threatened by any Governmental Entity with respect to the Real Property or the
Station.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to Seller and License Partnership as
follows:
4.1 Authority. The execution, delivery and performance by Buyer of
---------
this Agreement and each of the Ancillary Documents to which it is a party have
been duly and validly authorized by all limited liability company action
necessary on the part of Buyer. This Agreement and any Ancillary Documents to
which Buyer is a party, have been duly and validly
10
<PAGE>
executed and delivered by Buyer and, assuming the due authorization hereof and
thereof by the other parties hereto and thereto, constitute the legal, valid and
binding obligation of Buyer, enforceable against Buyer in accordance with its
terms except as such enforceability may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar Laws now or hereafter in
effect relating to or affecting creditors' rights generally and (ii) general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
4.2 Organization and Related Matters. Buyer is a limited liability
--------------------------------
company duly organized, validly existing and in good standing under the laws of
Delaware. Buyer has all necessary limited liability company power and authority
to carry on its business as now being conducted. Buyer has the necessary
corporate power and authority to execute, deliver and perform this Agreement and
each of the Ancillary Documents to which it is a party. Buyer is or will be
prior to the Closing Date qualified to do business and is in good standing in
New Mexico.
4.3 No Conflicts. Neither the execution nor delivery by Buyer of
------------
this Agreement or the Ancillary Documents to which it is a party, nor the
consummation by Buyer of the transactions contemplated hereby and thereby, nor
the performance by Buyer of its obligations hereunder or thereunder will
violate, or constitute a breach or default (whether upon lapse of time and/or
the occurrence of any act or event or otherwise) under the limited liability
company agreement of Buyer or any material Contract of Buyer, provided that the
appropriate Permits and Approvals listed on Schedule 4.3 are secured. Schedule
------------ --------
4.3 contains a list of all Permits and Approvals or filings or registrations
- ---
with any third party or Governmental Entity required by Buyer to consummate the
transactions contemplated by this Agreement and the Ancillary Documents. The
execution and delivery of this Agreement and the Ancillary Documents by Buyer
will not violate any Law the violation of which would have a Material Adverse
Effect on Buyer or Buyer's ability to consummate the transactions contemplated
hereby.
4.4 No Brokers or Finders. No agent, broker, finder or investment or
---------------------
commercial banker, or other Person or firm engaged by or acting on behalf of
Buyer or any of its Affiliates in connection with the negotiation, execution or
performance of this Agreement or the transactions contemplated by this
Agreement, is or will be entitled to any broker's or finder's or similar fee or
other commission as a result of this Agreement or such transactions.
4.5 Buyer's Qualifications. Buyer is legally and financially
----------------------
qualified to acquire the Assets and operate the Station. To the knowledge of
Buyer, there are no facts that would disqualify Buyer under the Communications
Act from acquiring or operating the Station or would cause the FCC not to
approve the assignment of the FCC Licenses to Buyer as contemplated in this
Agreement and the Ancillary Documents.
ARTICLE V
COVENANTS OF SELLER PENDING THE CLOSING
---------------------------------------
5.1 Operation of the Station.
------------------------
(a) Prior to the Closing Date, Seller will: (i) conduct the
business of the Station in the usual and ordinary manner in which conducted in
the past; (ii) operate the Station in accordance with the terms of the FCC
Licenses and in compliance in all material respects with all applicable laws,
rules and regulations, including applicable FCC Rules; and (iii) use all
reasonable efforts to preserve the business of the Station intact, retain
substantially as at
11
<PAGE>
present the Station's employees, consultants and agents, and preserve the
goodwill of the Station's suppliers, advertisers, customers and others having
business relations with it.
(b) Notwithstanding the foregoing, nothing contained in this
Agreement shall give Buyer any right to control the programming, operations,
finances or any other matter relating to the Station prior to the Closing Date,
and Seller shall have complete control of such matters up to the Closing Date.
5.2 Negative Covenants. Prior to the Closing Date, Seller shall not,
------------------
without the prior written consent of Buyer, except in the ordinary course of
business:
(a) sell, lease, transfer, or agree to sell, lease or transfer,
any Assets or any other assets of the Station except for sales or leases, except
as may be required by applicable law, or engage in any similar transaction; or
grant any raises to employees of the Station, pay any substantial bonuses or
enter into any contract of employment with any employee of the Station, except
pursuant to any agreement in existence on the date hereof;
(b) renew, renegotiate, modify, amend or terminate any existing
time sales contracts with respect to the Station;
(c) enter into, renew or amend any other Material Contract with
respect to the Station;
(d) apply to the FCC for any construction permit that would
restrict any of the present operations of the Station, or make any change in any
of the buildings, leasehold improvements or fixtures of the Station; or
(e) enter into any barter or trade contract or contracts that
are prepaid, or contracts with any Affiliate of Seller.
5.3 Access to Station, Files and Records. At the reasonable request
------------------------------------
of Buyer and upon reasonable advance notice, Seller shall from time to time give
or cause to be given to the officers, employees, accountants, counsel, agents,
consultants and representatives of Buyer: (i) full access during normal business
hours upon reasonable notice to all facilities, properties, accounts, books,
financial statements, deeds, title papers, insurance policies, licenses,
agreements, contracts, leases, commitments, records and files of every
character, program libraries, equipment, machinery, fixtures, furniture,
vehicles, notes and accounts payable and receivable of Seller with respect to
the Station; (ii) all such other information concerning the affairs of the
Station as Buyer may reasonably request; and (iii) access to the Real Property
and such information as Buyer may require to conduct a Phase I environmental
study of the Real Property.
5.4 Confidentiality. All non-public information disclosed by any
---------------
party (or its representatives), in connection the transactions contemplated
by, or the discussions and negotiations preceding, this Agreement to any other
party (or its representatives) shall be kept confidential by such other party
and its representatives and shall not be used by any such Persons other than as
contemplated by this Agreement, except to the extent that such information may
otherwise be required by Law or to the extent such duty as to confidentiality is
waived in writing by the other party. If this Agreement is terminated, each
party shall use all reasonable efforts to return upon written request from the
other party all documents (and reproductions thereof) received by it or its
representatives from such other party (and, in the case of reproductions, all
12
<PAGE>
such reproductions made by the receiving party) that include information not
within the exceptions contained in the first sentence of this Section 5.4,
unless the recipients provide assurances reasonably satisfactory to the
requesting party that such documents have been destroyed.
5.5 Representations and Warranties. Prior to the Closing Date Seller
------------------------------
shall promptly notify Buyer in writing if Seller becomes aware of any fact or
condition that causes or constitutes a breach of any of the representations or
warranties of Seller in this Agreement, or if Seller becomes aware of the
occurrence after the date of this Agreement of any fact or condition that would
(except as expressly contemplated by this Agreement) cause or constitute a
breach of any such representations or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition.
5.6 Transfer Approval.
-----------------
(a) Seller will cooperate and use its commercially reasonable
best efforts to obtain, and will, as soon as reasonably practicable, prepare all
registrations, filings and applications, requests and notices preliminary to,
all Approvals and Permits that may be necessary or that may be reasonably
requested by Buyer to consummate the transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, Seller covenants
and agrees to use its commercially reasonable best efforts to prepare and file
with the FCC, within five (5) business days after the date hereof, the FCC
Applications. Subsequent to filing the FCC Applications, Seller will prosecute
such FCC Applications with due diligence and shall use its reasonable efforts to
obtain FCC Transfer Approval.
(b) Seller will inform Buyer promptly of any material non-
confidential communication from any Communications Regulatory Authority, or any
other Governmental Entity regarding any of the transactions contemplated hereby.
If Seller or any of its Affiliates receives a request for additional information
or documentary material from any such Governmental Entity with respect to the
transactions contemplated hereby, then such party will endeavor in good faith to
make or cause to be made, as soon as reasonably practicable and after
consultation with the other parties, an appropriate response in compliance with
such request. Seller shall notify Buyer in the event it becomes aware of any
facts, actions, communications or occurrences that would directly or indirectly
materially affect FCC Transfer Approval.
5.7 Consents. Seller will use all reasonable efforts to obtain all
--------
of the consents noted on Schedule 5.7, which shall not include the payment of
------------
consideration to the consenting party, other than the payment of usual and
customary charges incurred in the preparation of consent or assignment
documents. If any such consent or approval is not obtained, then Seller will use
all reasonable efforts to secure an arrangement reasonably satisfactory to Buyer
intended to provide for Buyer after the Closing the material benefits under such
Contract. In the event that Seller is denied any required consent and is
otherwise unable to provide for Buyer to receive the benefits of such Contract,
Buyer shall not be required to assume performance under said Contract. Marked
with two asterisks on Schedule 1.1(iii) are those consents the receipt of which
-----------------
is a condition precedent to Buyer's obligation to close under this Agreement
(the "Seller's Required Consents").
--------------------------
13
<PAGE>
ARTICLE VI
COVENANTS OF BUYER PENDING THE CLOSING
--------------------------------------
Buyer covenants and agrees that from the date hereof until the Closing
Date Buyer will:
(a) promptly notify Seller in writing if Buyer becomes aware of
any fact or condition that causes or constitutes a breach of any of the
representations or warranties of Buyer in this Agreement, or if Buyer becomes
aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly contemplated by this Agreement) cause
or constitute a breach of any such representations or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition.
(b) cooperate and use its reasonable best efforts to obtain, and
will as soon as reasonably practicable prepare all registrations, filings and
applications, requests and notices preliminary to, all Approvals and Permits
that may be necessary or that may be reasonably requested by Seller to
consummate the transactions contemplated by this Agreement. Without limiting the
generality of the foregoing, Buyer covenants and agrees to use its commercially
reasonable best efforts to prepare and file with the FCC, within five (5)
business days after the date hereof, the FCC Applications. Subsequent to filing
the FCC Applications, Buyer shall prosecute said FCC Applications with due
diligence and shall use its reasonable efforts to obtain FCC Transfer Approval.
(c) promptly inform Seller of any material non-confidential
communication from any Communications Regulatory Authority, or any other
Governmental Entity regarding any of the transactions contemplated hereby. If
Buyer or any of its Affiliates receives a request for additional information or
documentary material from any such Governmental Entity with respect to the
transactions contemplated hereby, then such party will endeavor in good faith to
make or cause to be made, as soon as reasonably practicable and after
consultation with the other parties, an appropriate response in compliance with
such request. Buyer shall notify Seller in the event it becomes aware of any
facts, actions, communications or occurrences that would directly or indirectly
materially affect FCC Transfer Approval.
ARTICLE VII
CONDITIONS TO CLOSING
---------------------
7.1 General Conditions. The obligations of the parties to effect the
------------------
Closing are subject to the following conditions unless waived in writing by all
parties:
(a) no Law or Order shall have been enacted, entered, issued,
promulgated or enforced by any Governmental Entity, nor shall any Action have
been instituted and remain pending or, to the knowledge of Seller or Buyer, have
been threatened and remain so by any Governmental Entity at what would otherwise
be the Closing Date, that prohibits or restricts or would (if successful)
prohibit or restrict the transactions contemplated by this Agreement; and
(b) the Final FCC Transfer Approval shall have occurred.
14
<PAGE>
7.2 Conditions to Obligations of Buyer. The obligations of Buyer to
----------------------------------
effect the Closing shall be subject to the following conditions except to the
extent waived in writing by Buyer:
(a) The representations and warranties of Seller and License
Partnership contained herein, including in any schedule, document or instrument
delivered in connection herewith, shall be true and correct in all material
respects from the date hereof to and including the Closing Date with the same
effect as though made at such time. Each of Seller and License Partnership shall
have in all material respects performed all obligations and complied with all
covenants and agreements required by this Agreement to be performed or complied
with by it on or prior to the Closing Date and Seller shall have delivered to
Buyer a certificate of Seller in form and substance reasonably satisfactory to
Buyer, dated the Closing Date to such effect.
(b) Buyer shall have received evidence reasonably satisfactory
to it and its counsel that:
(i) the Permits and Approvals listed on Schedule 3.3 have
------------
been obtained; and
(ii) Seller's Required Consents shall have been obtained.
(c) The deliveries set forth in Section 2.2 shall have been
made.
(d) Seller has terminated all of the employees of the Station
listed on Schedule 3.16 effective as of the Closing Date.
-------------
7.3 Conditions to Obligations of Seller. The obligations of Seller
-----------------------------------
and License Partnership to effect the Closing shall be subject to the following
conditions, except to the extent waived in writing by the Seller and License
Partnership:
(a) The representations and warranties of Buyer herein
contained, including in any schedule, document or instrument delivered in
connection herewith, shall be true and correct in all material respects on the
Closing Date with the same effect as though made at such time; Buyer shall have
in all material respects performed all obligations and complied with all
covenants and conditions required by this Agreement to be performed or complied
with by it on or prior to the Closing Date, and Buyer shall have delivered to
the Seller a certificate of Buyer in form and substance reasonably satisfactory
to the Seller, dated the Closing Date, to such effect.
(b) The deliveries set forth in Section 2.3 shall have been
made.
(c) Seller shall have received evidence reasonably satisfactory
to it and its counsel that Buyer shall have obtained the Permits and Approvals
specified in Schedule 4.3.
-------------
(d) Buyer has employed all employees of the Station listed on
Schedule 3.16 in accordance with the following terms: (i) such employment is
- -------------
effective as of the Closing Date; (ii) each such employee shall commence his/her
employment with Buyer with vacation accrual equal to the vacation accrual for
such employee with Seller as of the Closing Date; and (iii) each such employee's
vacation accrual as an employee of Buyer will equal or exceed the accrual rate
to which such employee was entitled as an employee of Seller.
15
<PAGE>
ARTICLE VIII
POST-CLOSING OBLIGATIONS
------------------------
8.1 Indemnification by Seller. Seller shall indemnify and hold
-------------------------
harmless Buyer each of Buyer's managers, officers, members, partners, employees,
Affiliates, agents, representatives, attorneys, licensees and assigns from and
against all Losses of any such Person as a result of, arising from, or otherwise
in respect of (a) any material breach of any representation or warranty made by
Seller in this Agreement or any Ancillary Document, (b) any material failure to
perform any covenant or agreement of Seller in this Agreement or any Ancillary
Document, (c) any and all claims, Liabilities, and obligations of any kind or
nature, contingent or otherwise, other than the Assumed Liabilities, arising
from or relating to the Assets or the operation of the Station prior to the
Closing Date.
8.2 Indemnification by Buyer. Buyer shall indemnify and hold
------------------------
harmless Seller, License Partnership and each of its respective directors,
officers, shareholders, partners, employees, Affiliates, agents,
representatives, attorneys, licensees and assigns from and against all Losses of
any such Person as a result of, arising from, or otherwise in respect of (i) any
material breach of any representation or warranty made by Buyer in this
Agreement or any Ancillary Document, (ii) any material failure to perform any
covenant or agreement of Buyer in this Agreement or any Ancillary Document,
(iii) any and all claims, Liabilities and obligations arising from or relating
to the Assets or the operation of the Station from and after the Closing Date,
and (iv) the Assumed Liabilities.
8.3 Procedure.
---------
(a) If any Person (an "Indemnified Party") has a claim for Loss
-----------------
under Section 8.1 or Section 8.2, such Indemnified Party shall give notice of
such claim (a "Claim Notice") to the party from whom such Person is seeking
------------
indemnification (the "Indemnifying Party") within 30 days after the Indemnified
------------------
Party has knowledge of the circumstances giving rise to the claim; provided,
--------
however, that the Indemnified Party shall not be liable for any failure to give
- -------
such notice unless the Indemnifying Party is materially adversely affected by
such failure. The Claim Notice shall state the total dollar amount of the claim
and set forth in reasonable detail why the Indemnified Party is entitled to
indemnification. Within 30 days after receipt of any Claim Notice from the
Indemnified Party, the Indemnifying Party shall send a notice of dispute of all
or a portion of such claim (a "Dispute Notice"). If the Indemnifying Party has
--------------
not delivered a Dispute Notice within 30 days after delivery of a Claim Notice,
the amount of the Loss set forth in the Claim Notice for a Loss under Section
8.1 or Section 8.2 shall, except as provided in this Section 8.3(a), be paid
within 10 days of the expiration of such 30-day period by the Indemnifying
Party. If a Dispute Notice is timely delivered and the Indemnified Party and
Indemnifying Party have not resolved the disputed matters of a claim (the
"Disputed Matters") within 30 days of such delivery, (x) the Indemnified Party
----------------
and Indemnifying Party shall submit only the Disputed Matters to arbitration
pursuant to Section 8.3(c) for resolution and (y) the amount of any Loss not
disputed in the Dispute Notice shall, except as provided in this Section 8.3(a),
be paid within 10 days of delivery of the Dispute Notice by the Indemnifying
Party. The amount of any Loss relating to a Disputed Matter resolved in favor of
the Indemnified Party shall be paid within 10 days of such resolution by the
Indemnifying Party.
(b) If any claim against an Indemnified Party shall arise by
reason of any claim made by third parties against it (a "Pending Claim"), the
-------------
Indemnified Party shall give
16
<PAGE>
notice to the Indemnifying Party setting forth the basis of such claim and the
amount being claimed. Such notice shall be given within 30 days after the
Indemnified Party receives notice of the Pending Claim; provided, however, that
-------- -------
if the Pending Claim relates to the initiation of an Action or other matter that
requires that an answer or other response be made, the Indemnified Party shall
give notice to the Indemnifying Party at least 10 days prior to the due date for
such answer or response or, if the time for such 10-day prior notice already has
passed, within 24 hours after the Indemnified Party receives notice of the
Pending Claim; and provided, further, that the Indemnified Party shall not be
-------- -------
liable for any failure to give such notice unless the Indemnifying Party is
materially adversely affected by such failure. Such notice shall constitute a
Claim Notice for purposes of this Section 8.3. The Indemnifying Party shall have
the right to assume the defense of the Pending Claim through counsel of its
selection reasonably acceptable to the Indemnified Party at the Indemnifying
Party's expense, and the Indemnified Party shall have the right, at its own
expense, to employ counsel to represent it, which counsel shall act in an
advisory capacity only. The Indemnified Party shall cooperate fully to make
available to the Indemnifying Party all pertinent information under the
Indemnified Party's control as to the Pending Claim and shall make its
appropriate personnel, if any, available for any discovery, trial or appeal. If
the Indemnifying Party fails or refuses to undertake the defense within 30 days
of receiving the notice of the Pending Claim, the Indemnified Party shall have
the right to assume the defense of such matter on behalf of and for the account
of the Indemnifying Party. Unless the Indemnifying Party has failed or refused
to undertake the defense, the Indemnified Party shall not settle or compromise
any Pending Claim without the prior written consent of the Indemnifying Party,
which consent shall not be unreasonably withheld or delayed. The Indemnifying
Party may settle without the consent of the Indemnified Party any claim for
money at any time, at its sole expense if the Indemnified Party is
unconditionally released from all further potential liability in connection
therewith.
(c) Any Disputed Matter submitted in accordance with Section
8.3(a) shall be settled by arbitration conducted in accordance with the
Commercial Arbitration Rules or then existing rules for commercial arbitration
of the American Arbitration Association before the arbitrator. The arbitration
shall be governed by the Federal Arbitration Act (9 U.S.C. (S)(S) 1-16). The
arbitration of such Disputed Matters, including the determination of any amount
of damages suffered by any party hereto by reason of the acts or omissions of
any party, shall be final and binding upon the parties, except that the
arbitrator shall not be authorized to award punitive damages with respect to any
such Disputed Matter. No party shall seek punitive damages relating to any
matter under, arising out of, in connection with or relating to this Agreement
in any other forum. The parties intend that this Article 8 shall be valid,
---------
binding, enforceable and irrevocable and shall survive the termination of this
Agreement. Any arbitration proceedings hereunder shall be held in Los Angeles,
California.
8.4 Maximum Losses. Notwithstanding anything to the contrary
--------------
contained herein, Seller shall not be liable to indemnify any Person pursuant to
Section 8.1 until the total amount of all Indemnifiable Claims pursuant to
Section 8.1 exceeds $50,000 and then only for such excess; provided that
Seller's liability for Indemnifiable Claims pursuant to Section 8.1 shall not
exceed $1,000,000 in the aggregate.
8.5 Measure of Liability of Seller in Respect of Deficiencies. The
---------------------------------------------------------
amount of Seller's liability for any Losses for which indemnification
obligations exist shall be measured taking into account any net income tax or
other savings (whether realized with respect to the year in which such Losses
occurs or with respect to an earlier or later year) that reduce the overall
impact of the Losses upon Buyer or the Station. If any Loss is covered by
insurance Buyer shall
17
<PAGE>
first exhaust claims against such policies prior to being entitled to
indemnification by Seller hereunder with respect to such Loss.
8.6 Effect of Closing Over Known Unsatisfied Conditions. If Buyer
---------------------------------------------------
elects to proceed with the Closing knowing of any failure of any condition or
breach of any representation and warranty of Seller, such condition or breach
shall be deemed to be waived, and as a result Buyer shall be deemed to fully
release and forever discharge Seller on account of all claims, demands or
charges (known or unknown) with respect to the such condition or breach and any
facts or circumstances giving rise to or in respect thereof.
8.7 Limit on Survival of Representations and Warranties. The
---------------------------------------------------
representations and warranties contained in this Agreement (except for any
representations and warranties with respect to which a Claim Notice has
theretofore been given pursuant to Section 8.3 which shall survive to the extent
of the Disputed Matters relating thereto until such Disputed Matters are
resolved pursuant to Article 8) shall expire on the date 180 days after the
Closing Date, or if such date is not a business day on the next succeeding
business day; provided, however, that (i) the representations and warranties
-------- -------
contained in Section 3.18 shall survive until the third anniversary of the
Closing Date, (ii) the representations and warranties contained in Section 3.7
and Section 3.9 shall survive until the expiration of the statutory period of
limitations applicable to the matters referred to in such section, respectively.
8.8 Absolute Indemnity. The indemnification provided in this Article
-------
8 shall constitute the exclusive remedy of the parties hereto and their
- -
respective directors, officers, partners, employees, Affiliates, agents and
assigns from and against any and all Losses asserted against, resulting to,
imposed upon or incurred or suffered by, any of them, directly or indirectly, as
a result of, or based upon or arising from the breach of any representation or
warranty or the non-fulfillment of any agreement or covenant in or pursuant to
this Agreement or any other agreement, document, or instrument required
hereunder.
ARTICLE IX
TERMINATION AND POSTPONEMENT
----------------------------
9.1 Termination; Postponement.
-------------------------
(a) This Agreement shall terminate if the Closing has not
occurred by the earlier of:
(i) May 15, 1999 ; or
(ii) if the FCC has denied the FCC Transfer Approval in an
order that has become Final, or the FCC designates the FCC
Applications for hearing, the date on which either Buyer or
Seller gives notice to the other party that such party
elects to terminate this Agreement.
(b) If, no later than 90 days after the date of this Agreement,
Buyer has provided the Seller with a written report by an approved consultant
indicating, on the basis of a "Phase I" environmental study of the Real
Property, that it is likely that a material Environmental Condition exists upon
the Real Property, then Buyer shall have the right, by giving written notice to
Seller, to terminate this Agreement.
18
<PAGE>
9.2 Effect of Termination. If this Agreement shall be terminated
---------------------
pursuant to Section 9.1, all further obligations of the parties under this
Agreement shall terminate without further liability of any party to another;
provided, however, that the obligations of the parties contained in Section
- -------- -------
11.11 shall survive any such termination.
ARTICLE X
POST CLOSING AGREEMENTS
-----------------------
10.1 Collection of Seller's Accounts Receivables. At the Closing,
-------------------------------------------
Seller will designate Buyer as its agent solely for the purposes of collecting
Seller's Receivables.
(a) Buyer will use reasonable efforts, in accordance with
Buyer's customary business practices, to collect Seller's Receivables during the
"Collection Period," which shall be the period beginning on the Closing Date and
ending on the last day of the sixth calendar month beginning after the Closing
Date. At the end of such time period, Buyer will provide Seller with copies of
all information collected by Buyer regarding the Receivables collected by Buyer
on behalf of Seller. Buyer shall not be obligated to use any efforts to collect
any of Seller's Receivables that are more extensive than the efforts that Buyer
uses to collect its own accounts receivable. Buyer shall not make any referral
or compromise of any of Seller's Receivables to a collection agency or attorney
for collection and shall not settle or adjust the amount of any of Seller's
Receivables without the written approval of Seller. If Buyer receives monies
from an account debtor of Buyer that is also an account debtor of Seller with
respect to any of Seller's Receivables, Buyer shall credit the sums received to
the oldest account due, unless such account debtor makes a written request to
the contrary.
(b) Buyer shall pay the amounts received by Buyer from the
collection of Seller's Receivables to the Seller on the first and fifteenth of
every month.
(c) Within 10 days after the end of each month through the
seventh calendar month beginning after the Closing Date, Buyer will provide
Seller with a written accounting, showing on both a monthly and a cumulative
basis (i) the Seller's Receivables that have been collected on behalf of Seller,
and (ii) that amount that has been paid to Seller on account of the collection
of the Seller's Receivables.
(d) The parties acknowledge and agree that all Seller's
Receivables collected by Buyer as agent of Seller shall be Seller's property and
shall be deemed to be held in trust for the benefit of Seller to be applied in
accordance with Section 10.1(c). Buyer agrees that it shall receive an
acknowledgment from any party providing financing for the transactions
contemplated by this Agreement (or for working capital) to such effect. Buyer
further agrees not to place or permit to be placed any Encumbrance on the
Seller's Receivables or the proceeds therefrom.
10.2 Preservation of Records. Buyer covenants that it will preserve
-----------------------
and make available (including the right to inspect and copy) to Seller, its
attorneys and accountants, for the three year period after the Closing Date and
during normal business hours, such of the books, records, files, correspondence,
memoranda and other documents transferred pursuant to this Agreement as Seller
may reasonably require in connection with any legitimate purpose, including, but
not limited to, the preparation of tax reports and returns and the preparation
of financial statements.
19
<PAGE>
10.3 Non-Assignable Contracts. Nothing contained in this Agreement
------------------------
shall be construed as an assignment or an attempted assignment of any contract
which is by law non-assignable without the consent of the other party or parties
thereto, unless such consent shall be given.
10.4 Further Assurances. From time to time prior to, on and after the
------------------
Closing Date, each party hereto will execute all such instruments and take all
such actions as any other party, being advised by counsel, shall reasonably
request, without payment of further consideration, in connection with carrying
out and effectuating the intent and purpose hereof and all transactions and
things contemplated by this Agreement, including without limitation the
execution and delivery of any and all confirmatory and other instruments in
addition to those to be delivered on the Closing Date, and any and all actions
which may reasonably be necessary or desirable to complete the transactions
contemplated hereby. The parties shall cooperate fully with each other and with
their respective counsel and accountants in connection with any steps required
to be taken as part of their respective obligations under this Agreement.
ARTICLE XI
MISCELLANEOUS
-------------
11.1 Publicity and Reports. Buyer and Seller shall coordinate all
---------------------
publicity relating to the transactions contemplated by this Agreement, and no
party shall issue any press release, publicity statement or other public notice
relating to this Agreement, the Ancillary Documents or the transactions
contemplated by them without obtaining the prior consent of both Buyer and
Seller except to the extent that a party is advised by its legal counsel that a
particular action is required by applicable law.
11.2 Amendments;Waivers. This Agreement and any schedule attached
------------------
hereto may be amended only by agreement in writing of all of the parties. No
waiver of any provision nor consent to any exception to the terms of this
Agreement shall be effective unless in writing and signed by the party to be
bound and then only to the specific purpose, extent and instance so provided.
11.3 Schedules; Exhibits; Integration. Each schedule delivered
--------------------------------
pursuant to the terms of this Agreement shall be in writing and shall constitute
a part of this Agreement, although schedules and exhibits need not be attached
to each copy of this Agreement. This Agreement, together with such schedules,
constitutes the entire agreement among the parties pertaining to the subject
matter hereof and supersedes all prior agreements and understandings of the
parties in connection therewith, including, without limitation, that certain
Letter of Intent dated June 15, 1998, as amended from time to time.
11.4 Best Efforts; Further Assurances. Each party shall use its best
--------------------------------
efforts to cause all conditions to its obligations hereunder to be timely
satisfied and to perform and fulfill all obligations on its part to be performed
and fulfilled under this Agreement, to the end that the transactions
contemplated by this Agreement shall be effected substantially in accordance
with its terms as soon as reasonably practicable. Each party shall execute and
deliver both before and after the Closing Date such further certificates,
agreements and other documents and take such other actions as may be necessary
or appropriate to consummate or implement the transactions contemplated hereby
or to evidence such events or matters.
20
<PAGE>
11.5 Governing Law. This Agreement and the legal relations between
-------------
the parties shall be governed by and construed in accordance with the laws of
the State of California applicable to contracts made and performed in such State
and without regard to conflicts of law doctrines except to the extent that
certain matters are preempted by federal law.
11.6 Jurisdiction; Service of Process. Any action or proceeding
--------------------------------
seeking to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties in the courts of the State
of California, County of Los Angeles, or, if it has or can require jurisdiction,
in the United States District Court in Los Angeles, California, and each of the
parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the world.
11.7 Headings. The descriptive headings of the Articles, Sections
--------
and subsections of this Agreement are for convenience only and do not constitute
a part of this Agreement.
11.8 Counterparts. This Agreement and any amendment hereto or any
------------
other agreement (or document) delivered pursuant hereto may be executed in one
or more counterparts and by different parties in separate counterparts. All of
such counterparts shall constitute one and the same agreement (or other
document) and shall become effective (unless otherwise provided therein) when
one or more counterparts have been signed by each party and delivered to the
other parties.
11.9 Parties in Interest. This Agreement shall be binding upon and
-------------------
inure to the benefit of each party, and 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. Nothing in this
Agreement is intended to relieve or discharge the obligation of any third Person
to (or to confer any right of subrogation or action against) any party to this
Agreement.
11.10 Notices. Any notice or other communication hereunder must be
-------
given in writing and (i) delivered in person, (ii) transmitted by
telecommunications mechanism, provided that any notice so given is also mailed
as provided in clause (iv), (iii) delivered by a recognized air express company,
or (iv) mailed by certified or registered mail, postage prepaid, receipt
requested as follows:
If to Buyer:
Entravision Communications Company, L.L.C.
Attention: Walter F. Ulloa and Philip C. Wilkinson
11900 Olympic Boulevard, Suite 590
Los Angeles, California 90064
Telephone: (310) 820-5355
Facsimile: (310) 820-2445
21
<PAGE>
With a copy to:
Zevnik Horton Guibord McGovern
Palmer & Fognani, L.L.P.
Attention: Kenneth D. Polin, Esq.
101 West Broadway, Seventeenth Floor
San Diego, California 92101
Telephone: (619) 515-9600
Facsimile: (619) 515-9628
If to Seller:
Univision Communications Inc.
Attention: Andrew W. Hobson
1999 Avenue of the Stars, Suite 3050
Century City CA 90067
Telephone: (310) 556-7690
Facsimile: (310) 556-7615
With a copy to:
Univision Legal Department
6701 Center Drive West, 15th Floor
Los Angeles, CA 90045-5073
Attention: General Counsel
Telephone: (310) 348-3675
Facsimile: (310) 348-3679
or to such other address or to such other person as any party shall have last
designated by such notice to the other parties. Each such notice or other
communication shall be effective (i) if given by telecommunication, when
transmitted to the applicable number so specified in (or pursuant to) this
Section 11.10 and an appropriate answer back or confirmation of transmission is
received, (ii) if given by mail, 3 days after such communication is deposited in
the mails by certified or registered mail, postage prepaid, addressed as
aforesaid, (iii) if given via a recognized overnight air express company, upon
delivery or refusal of delivery as evidenced by the records of the air express
company, or (iv)if given by any other means, when actually delivered at such
address.
11.11 Expenses and Attorneys' Fees. Each party shall pay its own
expenses incident to the negotiation, preparation and performance of this
Agreement, including, but not limited to, the fees, expenses and disbursements
of its respective accountants, advisers and counsel; provided, however, that the
-------- -------
filing fees for the FCC Application shall be paid one-half by Buyer and one-half
by Seller. In the event of any arbitration relating to a claim for Loss pursuant
to Article 8, the prevailing party as determined by the arbitrator arbitrating
---------
the claim for Loss shall be entitled to recover from the other party reasonable
attorneys' fees, expenses and costs incurred in bringing and prosecuting such
action or proceeding and/or enforcing any judgment, order, ruling or award
issued in favor of such prevailing party therein. In determining the prevailing
party, the arbitrator shall consider the last offer, if any, made by each party
immediately preceding the commencement of arbitration.
11.12 Bulk Transfer Laws. Seller and Buyer hereby waive compliance
------------------
with any applicable bulk transfer laws, including, but not limited to, the bulk
transfer provisions of the Uniform Commercial Code of any state, or any similar
statute, with respect to the transactions contemplated hereby.
22
<PAGE>
11.13 Participation in Drafting; Interpretation. The provisions
-----------------------------------------
hereof have been thoroughly reviewed by all parties and have been the subject of
negotiations. Accordingly, no party (or its counsel) shall be considered to have
been the exclusive preparer or draftsman of this Agreement, nor shall the
provisions hereof be construed strictly against any such party on that account.
Without limiting the generality of the foregoing, the parties waive the
provisions of Section 1654 of the California Civil Code and any legal decision
that would require interpretation of any claimed ambiguities against the party
that drafted it. The provisions of this Agreement are to be interpreted in a
reasonable manner to give effect to the intent of the parties reflected herein.
11.14 Severability. If any clause or provision of this Agreement is
------------
illegal, invalid, or unenforceable under present or future laws effective during
the term hereof, it is the intention of the parties hereto that the remainder of
this Agreement shall not be affected thereby so long as such remainder continues
to have the economic effect intended by this Agreement.
ARTICLE XII
DEFINITIONS
-----------
12.1 General. For all purposes of this Agreement, except as
-------
otherwise expressly provided:
(a) the terms defined in this Article 12 have the meanings
assigned to them in this Article 12 and include the plural as well as the
singular,
(b) all accounting terms not otherwise defined herein have the
meanings assigned under generally accepted accounting principles,
(c) all references in this Agreement to designated "Articles,"
"Sections" and other subdivisions are to the designated Articles, Sections and
other subdivisions of the body of this Agreement,
(d) pronouns of either gender or neuter shall include, as
appropriate, the other pronoun forms, and
(e) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision.
12.2 Defined Terms. As used in this Agreement and the Exhibits and
--------------
Schedules delivered pursuant to this Agreement, the following definitions shall
apply:
"Accrued Liabilities" has the meaning set forth in Section 1.4.
"Action" means any action, claim, complaint, petition, investigation, suit
or other proceeding, whether civil or criminal, in law or in equity.
"Adjustment Date" has the meaning set forth in Section 1.4.
"Affiliate" means a Person that directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control
with, a specified Person.
23
<PAGE>
"Ancillary Documents" means the Assignment and Assumption Agreement and the
Note Purchase Option Agreement Amendment.
"Approval" means any approval, authorization, consent, qualification or
registration, or any waiver of any of the foregoing, required to be
obtained from, or any notice, statement or other communication required to
be filed with or delivered to, any Governmental Entity or any other Person.
"Assets" has the meaning set forth in Section 1.1.
"Assignment and Assumption Agreement" means an assignment and assumption
agreement substantially in the form of Exhibit "A" pursuant to which Buyer
-----------
shall assume and agree to pay, perform and discharge when due the Assumed
Liabilities.
"Assigned Contracts" has the meaning set forth in Section 1.1.
"Assumed Liabilities" has the meaning set forth in Section 1.3.
"Business" means the business and operations of the Station.
"Buyer" has the meaning set forth in first paragraph of this Agreement.
"Claim Notice" has the meaning set forth in Section 8.3(a).
"Closing" has the meaning set forth in Section 2.1.
"Closing Date" means the date on which the Closing occurs.
"Code" means the Internal Revenue Code of 1986, as amended, or as hereafter
amended.
"Communications Act" means the Communications Act of 1934, as amended, or
any successor statute or statutes thereto, and all rules, regulations,
policies, orders and decisions of the FCC thereunder, in each case as from
time to time in effect.
"Communications Regulatory Authority" means each communications regulatory
commission, agency, department, board or authority (including, but not
limited to, the FCC) having jurisdiction over the Station.
"Consumed Property" has the meaning set forth in Section 1.2.
"Contract" means any agreement, arrangement, bond, commitment, contract,
franchise, indemnity, indenture, instrument, lease, license or
understanding, whether or not in writing.
"Dispute Notice" has the meaning set forth in Section 8.3(a).
"Disputed Matter" has the meaning set forth in Section 8.3(a).
"Employee Benefit Plan" means any "employee welfare benefit plan" and any
"employee pension benefit plan" within the meaning of Sections 3(1) or 3(2)
of ERISA covering any employees of the Seller.
24
<PAGE>
"Encumbrance" means any liability, charge, claim, community property
interest, condition, equitable interest, lien, option, pledge, security
interest, right of first refusal or restriction of any kind, including any
restriction on use, voting, transfer, receipt of income or exercise of any
other attribute of ownership.
"Environmental Condition" means the presence on, in, under or about the
Real Property of any Regulated Material that, if the presence of such
Regulated Material were known, would be reportable under any Environmental
Law or that could reasonably be anticipated to require investigation or re-
mediation pursuant to any Environmental Law.
"Environmental Laws" means any federal, state or local statute, law, rule,
regulation, ordinance, judgment, decree, license, permit, franchise,
certificate or authority or order, or any waiver of any of the foregoing,
concerning, relating to or controlling (i)the handling, transportation,
sale, offering for sale, storage, treatment, discharge, disposal, release,
use, processing or manufacture of any Regulated Material; or (ii)the
introduction of any Regulated Material into the environment or workplace,
including, but not limited to, the Comprehensive Environmental Response,
Compensation and Liability Act, the Solid Waste Disposal Act as amended by
the Resource Conservation and Recovery Act, the Clean Air Act, the Clean
Water Act, the Toxic Substances Control Act, the Occupational Safety and
Health Act and any similar state or local statute.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the related regulations and published interpretations.
"Excluded Assets" has the meaning set forth in Section 1.2.
"FCC" means the Federal Communications Commission or any successor
Governmental Entity.
"FCC Applications" means all requisite applications and other instruments
or documents necessary to request the FCC Transfer Approval.
"FCC Licenses" Any license (whether for NTSC or DTV operation of the
Station), waiver, consent, permit or other authorization issued or granted
by the FCC in connection with K48AM and the ownership and operation of the
Station, including without limitation all rights in and to the call letters
"KLUZ" and "KLUZ -TV," and any variations thereof, and all applications
therefor, together with any renewals, extensions or modifications thereof
and additions thereto.
"FCC Rules" has the meaning set forth in Section 3.14(a).
"FCC Transfer Approval" means the FCC's written approval of the assignment
of the FCC Licenses from License Partnership to Buyer as contemplated
hereby, including, but not limited to, its approval of any waivers of FCC
Rules requested by Buyer with respect to such transfer, which approvals
shall have been granted on terms (i) not in any material respect more
onerous to Buyer than are the terms applicable to Seller under the existing
FCC Licenses and (ii) that otherwise would not be materially adverse to
Buyer or would not in any material adverse respect diminish the value of
the Station or of any of Buyer's other television stations.
25
<PAGE>
"Final" means that action shall have been taken by the FCC (including
action duly taken by the FCC's staff, pursuant to delegated authority)
which shall not have been reversed, stayed, enjoined, set aside, annulled
or suspended; with respect to which no timely request by a party in
interest for stay, petition for rehearing, appeal or certiorari or sua
---
sponte action of the FCC with comparable effect shall be pending; and as to
------
which the time for filing any such request, petition, appeal or certiorari
or for the taking of any such sua sponte action by the FCC shall have
--- ------
expired or otherwise terminated with no such action having been timely
taken.
"GAAP" means generally accepted accounting principles consistently applied
in the United States, as in effect from time to time.
"Governmental Entity" means any government or any agency, district, bureau,
board, commission, court, department, official, political subdivision,
tribunal or other instrumentality of any government, whether federal, state
or local, domestic or foreign.
"Indemnified Party" has the meaning set forth in Section 8.3(a).
"Indemnifying Party" has the meaning set forth in Section 8.3(a).
"Law" means any constitutional provision, statute or other law, rule,
regulation, or interpretation of any Governmental Entity, including, but
not limited to, any Environmental Law, and any
"Liability" means as to any Person, all debts, adverse claims, liabilities
and obligations, direct, indirect, absolute, contingent or otherwise, of
such Person, whether accrued, vested or otherwise, whether in contract,
tort, strict liability or otherwise and whether or not actually reflected
or required to be reflected in the balance sheets or other books and
records of such Person.
"License Partnership" has the meaning set forth in the first paragraph of
this Agreement.
"Loss" means any cost, damage, disbursement, expense, liability, loss,
deficiency, diminution in value, obligation, penalty or settlement of any
kind or nature, whether foreseeable or unforeseeable, including but not
limited to, interest or other carrying costs, penalties, legal, accounting
and other professional fees and expenses incurred in the investigation,
collection, prosecution and defense of claims and amounts paid in
settlement, that may be imposed on or otherwise incurred or suffered by the
specified Person, net of any insurance proceeds actually recovered by an
Indemnified Party minus all costs and expenses incurred in collecting such
insurance proceeds (including, but not limited to, reasonable attorneys'
fees).
"Mark" means any brand name, copyright, patent, service mark, trademark,
trade name, and all registrations and applications for registration of any
of the foregoing.
"Material Adverse Effect" means, with respect to any party, a material
adverse effect (or any development which, insofar as can reasonably be
foreseen, in the future is likely to have a material adverse effect) on the
business, assets, financial or other condition, results of operations or
prospects of such party and to the extent applicable, its subsidiaries,
taken as a whole.
26
<PAGE>
"Material Contract" means any Contract deemed material in accordance with
Section 3.6.
"Note Purchase Option Agreement Amendment" means an amendment
(substantially in the form attached hereto as Exhibit "B") to that certain
-----------
Amended and Restated Subordinated Note Purchase and Option Agreement dated
December 30, 1996 by and among Univision Communications Inc. ("UCI"),
Buyer, KSMS-TV, Inc., Tierra Alta Broadcasting, Inc., Cabrillo Broadcasting
Corporation, Golden Hills Broadcasting Corporation, Las Tres Palmas
Corporation, Entravision Merger Corp., and Walter Ulloa and Philip
Wilkinson, pursuant to which UCI acquired an option to purchase Class A
Membership units in Buyer (which right will be assignable by UCI to any of
its Affiliates).
"Order" means any decree, injunction, judgment, order, ruling, assessment
or writ.
"Pending Claim" has the meaning set forth in Section 8.3(b).
"Permit" means any license, permit, franchise, certificate of authority, or
order, or any waiver of the foregoing, required to be issued by any
Governmental Entity.
"Permitted Encumbrances" means (a) statutory Encumbrances not yet
delinquent; (b) Encumbrances, with respect to the properties and assets of
Seller and License Partnership, taken as a whole, that do not individually
or in the aggregate, materially impair or materially interfere with the
present use of the properties or assets or otherwise materially impair
present business operations at such properties; (c) Encumbrances for Taxes
not yet delinquent or the validity of which are being contested in good
faith by appropriate actions; and (d) Encumbrances reflected on the
financial statements or on the disclosure schedules attached hereto.
"Person" means an association, a corporation, an individual, a partnership,
a trust or any other entity or organization, including a Governmental
Entity.
"Programming Contracts" means all contracts, agreements or other
arrangements pursuant to which there has been granted a license or other
right to broadcast, televise or otherwise air taped, filmed or live
television programs, shows, motion pictures, sports, commercials or
infomercials.
"Purchase Price" has the meaning set forth in Section 1.5.
"Real Property" has the meaning set forth in Section 1.1.
"Regulated Material" means any substance that is defined or listed in, or
otherwise classified pursuant to, any applicable law as a "hazardous
substance," "hazardous material," "hazardous waste" or toxic substance," or
any other formulation intended to define, list or classify materials or
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, radioactivity, carcinogenicity, reproductive
toxicity or "EP toxicity," and petroleum and drilling fluids, produced
waters and other wastes associated with the exploration, development, or
production of crude oil, natural gas or geothermal energy.
"Seller" has the meaning set forth in the first paragraph of this
Agreement.
27
<PAGE>
"Seller's Receivables" has the meaning set forth Section 1.2(b).
"Seller's Required Consents" has the meaning set forth in Section 5.6.
"Station" has the meaning set forth in the Recitals.
"Station Financial Statements" means the balance sheets of the Station as
of December 31, 1997 and September 30, 1998 for the twelve (12) month and
nine (9) month periods respectively then ended and the related statements
of income.
"Tangible Personal Property" has the meaning set forth in Section 1.1.
"Tax" means any federal, state, county or local income, sales, use, excise,
franchise, ad valorem, real and personal property, transfer, gross receipt,
stamp, premium, profits, customs, duties, windfall profits, capital stock,
production, business and occupation, disability, employment, payroll,
severance or withholding taxes, fees, assessments or charges of any kind
whatsoever imposed by any Governmental Entity, any interest and penalties
(civil or criminal), additions to tax, payments in lieu of taxes or
additional amounts related thereto or to the nonpayment thereof, and any
Loss in connection with the determination, settlement or litigation of any
Tax Liability.
"Tax Return" means a declaration, statement, report, return or other
document or information required to be filed or supplied with respect to
Taxes.
28
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
ENTRAVISION COMMUNICATIONS
COMPANY, L.L.C.,
a Delaware limited liability company
By:/s/ Walter F. Ulloa
Walter F. Ulloa, Chairman, Chief Executive Officer
and Managing Member
By:/s/ Philip C. Wilkinson
Philip C. Wilkinson, President,
Chief Operating Officer and Managing Member
UNIVISION TELEVISION GROUP, INC.,
a Delaware corporation
By:/s/ Robert Cahill
KLUZ LICENSE PARTNERSHIP,
a California general partnership
By: /s/ Robert Cahill
[Signature Page to Asset Purchase Agreement]
S-1
<PAGE>
Exhibit A Assignment and Assumption
Exhibit B First Amendment to Amended and Restated Subordinated Note
Purchase And Option Agreement
Exhibit C Network Affiliation Agreement
Schedule 1.1(i) Real Property
Schedule 1.1(ii) Tangible Personal Property
Schedule 1.1(iii) Assigned Contracts
Schedule 1.4 Prorated Liabilities
Schedule 1.6 Purchase Price Allocation
Schedule 3.3 Permits and Approvals
Schedule 3.6 Material Contracts
Schedule 3.7 Encumbrances
Schedule 3.10 Insurance
Schedule 3.14(b) FCC Licenses
Schedule 3.15 Marks
Schedule 3.16 Employee Matters
Schedule 3.17 Employee Benefit Plans
Schedule 3.18 Environmental Matters
Schedule 4.3 Permits and Approvals (Buyer)
Schedule 5.7 Consents
The registrant hereby agrees to furnish a copy of any omitted schedule or
exhibit upon request.
S-2
<PAGE>
EXHIBIT 2.2
================================================================================
AGREEMENT AND PLAN OF MERGER
by and among
Entravision Communications Company, L.L.C., LCG Acquisition Corporation,
Latin Communications Group Inc. and Certain of its Representatives
dated
December 21, 1999
================================================================================
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
This Agreement and Plan of Merger (the "Agreement") is entered into this
21st of December, 1999 by and among Entravision Communications Company, L.L.C.,
a Delaware limited liability company ("Entravision"), and LCG Acquisition
Corporation, a Delaware corporation ("Acquisition Co."), on the one hand, and
Latin Communications Group Inc., a Delaware corporation ("LCG"), and the LCG
Representatives (as defined below), on the other hand, with respect to the
following facts:
WHEREAS, Entravision is a duly formed Delaware limited liability company
engaged in the ownership and operation of television and radio stations.
WHEREAS, Acquisition Co. is a duly incorporated Delaware corporation formed
by Entravision for the purpose of effecting the Merger (as defined below)
contemplated by this Agreement, with authorized capital stock consisting of
1,000 shares of Common Stock, $0.001 par value per share, of which 1,000 shares
are duly and validly issued and outstanding, and all of which shares are held by
Entravision as of the date hereof.
WHEREAS, LCG is a duly incorporated Delaware corporation that owns and
operates (i) the radio stations (the "Radio Stations") listed on Schedule "A"
------------
attached hereto and incorporated herein by this reference and (ii) the newspaper
and other publication (the "Newspapers") listed on Schedule "A," with authorized
-------------
capital stock consisting of fifteen million (15,000,000) shares of Common Stock,
$0.01 par value per share, of which 9,235,468 shares are duly authorized, issued
and outstanding (the "Shares"), and all of which are held of record by the
individuals and entities set forth on Schedule "B" attached hereto and
------------
incorporated herein by this reference (the "Stockholders"), as of the date
hereof.
WHEREAS, the managing members of Entravision, the stockholders of
Acquisition Co. and the respective Boards of Directors of Acquisition Co. and
LCG have approved and declared the advisability of the acquisition of the Shares
by Acquisition Co. via merger (the "Merger") of Acquisition Co. with and into
LCG pursuant to applicable Delaware law and the terms and conditions of this
Agreement.
WHEREAS, promptly following the execution and delivery of this Agreement
(and in no event later than January 6, 2000), LCG will notice a meeting of its
Stockholders (the "Meeting") to vote on the Merger and this Agreement and,
subject to Section 6.13 below, the Board of Directors of LCG will recommend that
such Stockholders vote in favor of the Merger and this Agreement.
WHEREAS, as of the date hereof, Stockholders holding Shares representing
over fifty percent (50%) of the issued and outstanding Shares entitled to vote
at the Meeting have entered into Voting Agreements, in the form attached hereto
as Exhibit "A" and incorporated herein by this reference (the "Voting
-----------
Agreements"), agreeing to vote in favor of the Merger.
<PAGE>
WHEREAS, the parties hereto desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
certain conditions with respect thereto.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged by each signatory hereto, the parties hereto
covenant and agree as follows:
ARTICLE 1.
DEFINITIONS
For purposes of this Agreement, the following terms shall have the
following meanings:
1.1 "Applicable Contract" means any Contract (as defined below) under
which LCG or any of the LCG Subsidiaries (as defined below) is a party or by
which LCG or any of the LCG Subsidiaries is bound which: (i) provides for future
payments thereunder of more than $250,000 in a twelve (12) month period; (ii)
restricts the kinds of business in which LCG or any of the LCG Subsidiaries may
engage or the geographical area in which any of them may conduct their business;
(iii) is an indenture, mortgage, loan agreement or other Contract for the
borrowing of money or a line of credit; (iv) is a collective bargaining
agreement or union Contract; (v) is a material license (whether as licensor or
licensee) or similar agreement permitting the use of any Intellectual Property
Assets (as defined below); (vi) is a brokerage or finder's agreement; (vii) is a
joint venture, partnership or similar agreement; (viii) is a stock purchase
agreement, asset purchase agreement or other acquisition or divestiture
agreement which has not been fully performed; (ix) is an employment, consulting,
severance termination or management agreement (either written or, if oral,
providing for over $250,000 in payments annually); (x) is with any director,
officer, employee or stockholder of LCG or any Related Person (as defined
below); (xi) is a Real Property Lease (as defined below); or (xii) is not of the
foregoing type and is material to the business or financial condition of LCG and
the LCG Subsidiaries, taken as a whole.
1.2 "Breach" means a breach of a representation, warranty, covenant,
obligation or other provision of this Agreement or any instrument delivered
pursuant to this Agreement and will be deemed to have occurred if there is or
has been any inaccuracy in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation or other provision.
1.3 "Cash on Hand" means the aggregate amount of any cash and cash
equivalents on hand at LCG or any of the LCG Subsidiaries (including the amount
of any uncashed checks payable to LCG or any of the LCG Subsidiaries) or in bank
accounts or lockboxes of LCG or any of the LCG Subsidiaries as of 11:59 p.m. New
York City time on the day immediately preceding the Closing Date (as defined
below).
-2-
<PAGE>
1.4 "Certificate of Merger" means the Certificate of Merger to be filed
with the Delaware Secretary of State to perfect the Merger, substantially in the
form attached hereto as Exhibit "B" and incorporated herein by this reference.
-----------
1.5 "Closing Date" means the date and time as of which the Closing (as
defined below) actually takes place.
1.6 "Commercially Reasonable Efforts" means the efforts that a prudent
business Person (as defined below) desirous of achieving a result would use in
similar circumstances to achieve promptly such result; provided, however, that
"Commercially Reasonable Efforts" shall not require the expenditure of funds,
except for any filing fees for third-party consents or approvals to be paid by
any party as contemplated by this Agreement.
1.7 "Consent" means any approval, consent, ratification, waiver or other
authorization (including the FCC Consent, the consent required under the HSR Act
(as defined below) and any other necessary Governmental Authorization, each as
defined below).
1.8 "Contemplated Transactions" means all of the transactions contemplated
by this Agreement, including, without limitation, the Merger and the performance
by the parties hereto of their respective covenants and obligations under this
Agreement.
1.9 "Contract" means any agreement, contract, obligation, promise or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
1.10 "Delaware Code" means the Delaware General Corporation Law, as
amended.
1.11 "Escrows and Deposits" means the aggregate outstanding amount as of
the Closing Date of (i) the escrow deposit made by Portland Radio, Inc. pursuant
to that certain Purchase and Sale Agreement dated June 30, 1999 by and between
Portland Radio, Inc. and the Port of Portland (the "Portland Land Sale") and
(ii) the notes receivable in the aggregate amount of $358,500 in favor of EMI
Sacramento Radio, Inc. (the "Huth Notes") pursuant to that certain Asset
Purchase Agreement dated April 8, 1999 by and between EMI Sacramento, Inc. and
Tom Huth d/b/a Huth Broadcasting, as amended (the "Huth Asset Purchase
Agreement").
1.12 "Employee Benefit Plan" means any material "employee benefit plan" as
defined in Section 3(3) of ERISA (as defined below) of LCG or the LCG
Subsidiaries and any other material plan, policy, program, practice or
arrangement providing compensation or other benefits to any current or former
officer or employee of LCG or the LCG Subsidiaries or any beneficiary or
dependent thereof that is maintained by LCG or the LCG Subsidiaries.
1.13 "Encumbrances" means any and all encumbrances, charges, claims,
penalties, community property interests, conditions, equitable interests, liens,
options, pledges, security interests or rights of first refusal, other than
Permitted Encumbrances (as defined below).
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1.14 "Environmental Law(s)" means all federal, state and local laws,
statutes, common law duties, rules, regulations, ordinances and codes, together
with all administrative orders, directives, licenses, authorizations, permits
and agreements issued or signed by any federal, state or local government
authority, relating to environmental, health or safety matters, including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Clean Water Act of 1977, the Clean Air Act, the
Resource Conservation and Recovery Act of 1976, the Federal Insecticide,
Fungicide and Rodenticide Act, the Toxic Substances Control Act, the Emergency
Planning and Community Right-to-Know Act of 1986, the Occupational Safety and
Health Act of 1970 and the Safe Drinking Water Act, and state and local
counterparts to such acts, in each case, as amended and in effect on the date
hereof.
1.15 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor law, and the rules and regulations issued pursuant to
that act or any successor law.
1.16 "FCC" means the Federal Communications Commission, or any successor
agency.
1.17 "Final Order" means an order, action or decision of the FCC that has
not been reversed, stayed, enjoined, annulled or suspended and as to which (i)
no timely request for stay, appeal, petition for reconsideration, application
for review or reconsideration by the FCC on its own motion is pending and (ii)
the time for filing any such request, appeal, petition or application or for
reconsideration by the FCC on its own motion, has expired.
1.18 "Financial Statements" means (i) the audited balance sheets of LCG as
of December 31, 1998, and the related statements of income and cash flows for
the period then ended (including notes thereto), as compiled by Ernst & Young
LLP, certified public accountants, and the unaudited balance sheets of LCG as of
October 31, 1999, and the related statements of income and cash flows for the
period then ended.
1.19 "GAAP" means generally accepted accounting principles.
1.20 "Governmental Authorization" means any approval, consent, license,
permit, waiver or other authorization issued, granted, given or otherwise made
available by or under the authority of the FCC, any Governmental Body or
pursuant to any Legal Requirement, each as defined below.
1.21 "Governmental Body" means (i) any nation or state, (ii) any federal,
state or foreign government, (iii) any federal, state or foreign governmental or
quasi-governmental authority of any nature (including any federal, state or
foreign governmental agency, branch, department or entity and any court or other
tribunal of such entity), (iv) any federal, state or foreign body exercising, or
entitled to exercise, any administrative, executive, judicial, legislative,
regulatory or taxing authority or (v) the FCC.
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1.22 "Hazardous Substance(s)" means (i) any substance, the presence of
which requires investigation or remediation under any Environmental Law, (ii)
any dangerous, toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic or otherwise hazardous substance which is regulated by
any Environmental Law and (iii) radon, ureaformaldehyde, polychlorinated
biphenyls, asbestos or asbestos-containing materials, petroleum and petroleum
products.
1.23 "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
1.24 "Income Tax(es)" means any net income Tax (as defined below), any
franchise Tax based on net income or any Tax measured by or calculated with
respect to net income or net receipts, proceeds of profits or based upon or
measured by or calculated with respect to multiple bases (including, without
limitation, corporate franchise or occupation taxes) if such Tax may be based
upon, measured by, or calculated with respect to one or more of the bases
described above.
1.25 "IRC" means the Internal Revenue Code of 1986, as amended, or any
successor law, and the rules and regulations issued by the IRS (as defined
below) pursuant to the IRC or any successor law.
1.26 "IRS" means the United States Internal Revenue Service, or any
successor agency, and, to the extent relevant, the United States Department of
the Treasury.
1.27 "Knowledge" of LCG means the actual knowledge of any of Athena S.
Marks, Martin Gausvik, Martin D. Payson, Stephen D. Royer or Rossana Rosado
after a reasonable inquiry.
1.28 "LCG Material Adverse Effect" means one or more events, occurrences,
facts, conditions, changes or effects which cumulatively have a material adverse
effect on the assets, liabilities or properties of LCG and the LCG Subsidiaries
collectively, excluding matters affecting the broadcasting or print industries
generally and excluding general economic conditions.
1.29 "Legal Requirement" means any FCC, federal, state or foreign
administrative order, law, regulation or statute.
1.30 "Liabilities" means, as to any Person, all liabilities, debts and
obligations to pay money, direct, indirect, absolute, contingent or otherwise,
of such Person, whether accrued, vested or otherwise, whether in Contract, tort,
strict liability or otherwise and whether or not actually reflected, or required
by the federal income tax method of accounting to be reflected, in such Person's
balance sheets or other books and records.
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1.31 "Material Adverse Effect" means one or more events, occurrences,
facts, conditions, changes or effects which cumulatively have a material adverse
effect on the assets, liabilities or properties of any entity, its ultimate
parent and their respective Subsidiaries (as defined below) collectively,
excluding matters affecting the broadcasting or print industries generally and
excluding general economic conditions.
1.32 "Order" means any award, decision, injunction, judgment, order, ruling
or verdict entered, issued, made or rendered by any court, administrative agency
or other Governmental Body.
1.33 "Organizational Documents" means (i) the articles or certificate of
incorporation and the bylaws of a corporation, (ii) the partnership agreement
and any statement of partnership of a general partnership, (iii) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership, (iv) the articles of organization or certificate of formation and
the operating agreement of a limited liability company, (v) any charter or
similar document adopted or filed in connection with the creation, formation or
organization of a Person or (vi) any amendment to any of the foregoing.
1.34 "Other Tax(es)" means any Tax that is not an Income Tax.
1.35 "Permitted Encumbrances" means Encumbrances (i) set forth on Schedule
--------
4.9, (ii) liens for Taxes, assessments and other governmental charges not yet
- ---
due and payable or being contested in good faith by appropriate proceedings and
(iii) Encumbrances created by FCC licenses or other Governmental Authorizations.
1.36 "Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union or other entity
or Governmental Body.
1.37 "Proceeding" means any action, litigation, formal arbitration, formal
mediation, bankruptcy or suit (whether civil, criminal or administrative)
commenced, brought, conducted or heard by or before, or otherwise involving, any
Governmental Body or arbitrator.
1.38 "Real Property" means all of the land, buildings, plants, facilities,
installations, fixtures and other structures and improvements owned by LCG.
1.39 "Real Property Leases" shall mean, collectively, any written real
property leases to which LCG or any of the LCG Subsidiaries is a party.
1.40 "Related Person" means an "affiliate" (as such term is defined in the
rules promulgated under the Securities Exchange Act of 1934, as amended) of a
Person.
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1.41 "Representative" means with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor or other representative
of such Person, including legal counsel, accountants and financial advisors.
1.42 "Schedules" means the schedules attached hereto and incorporated
herein by this reference relating to the representations and warranties of the
parties hereto.
1.43 "Securities Act" means the Securities Act of 1933, as amended, or any
successor law, and the rules and regulations issued pursuant to that act or any
successor law.
1.44 "Subsidiary(ies)" means any corporation, limited liability company or
other entity with respect to which a specified Person (or a Subsidiary thereof)
owns a majority of the Common Stock or other equity ownership interest or has
the power to vote or direct the voting of sufficient securities to elect a
majority of the directors or managers.
1.45 "Surviving Corporation" means LCG as the surviving corporation
following the Merger.
1.46 "Tax(es)" means taxes of any kind, accrued or accruing, including any
and all federal, state or local taxes, charges, fees, levies or other
assessments of any nature whatsoever (including, without limitation, all net
income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment, excise,
estimated, severance, stamp, occupation, property or other taxes, customs,
duties, fees, assessments or charges of any kind whatsoever) together with any
interest and any penalties, additions to tax or additional amounts imposed by
any taxing authority (domestic or foreign) upon the entity to which reference is
being made, including any such Taxes imposed by reason of such entity being or
having been a member of a consolidated, combined or unitary group.
1.47 "Tax Return" means any return (including any information return),
report, statement, schedule, notice, form or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
"Income Tax Returns" and "Other Tax Returns" shall have correlative meanings.
1.48 "Threatened" means a claim, Proceeding, dispute or other matter will
be deemed to have been "Threatened" if any demand or statement has been made in
writing or any notice has been given in writing.
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ARTICLE 2.
MERGER
2.1 Merger. Subject to the terms and conditions hereof, the Merger shall
------
be consummated in accordance with the Delaware Code. Effective as of Closing,
subject to the terms and conditions of this Agreement and in accordance with the
applicable laws of the State of Delaware, Acquisition Co. shall be merged with
and into LCG, which shall be the Surviving Corporation.
2.2 Execution of Certificate of Merger. At the Closing, LCG shall execute
----------------------------------
the Certificate of Merger, and counsel for Entravision shall cause the
Certificate of Merger to be delivered to the Delaware Secretary of State for
filing.
2.3 Effect of the Merger. The Merger shall have the effects set forth in
--------------------
Section 259 of the Delaware Code.
2.4 Certificate of Incorporation; Bylaws. Except as otherwise provided
------------------------------------
herein, following the effectiveness of the Merger, the Certificate of
Incorporation of LCG, as amended by the Certificate of Merger, shall be the
Certificate of Incorporation of the Surviving Corporation and the Bylaws of
Acquisition Co. shall be the Bylaws of the Surviving Corporation.
2.5 Directors. The directors of Acquisition Co. as of the Closing Date
---------
shall be the directors of the Surviving Corporation and the existing directors
of LCG shall resign effective as of the Closing Date.
2.6 Officers. The officers of the Surviving Corporation as of the Closing
--------
Date shall be as follows, and the existing officers of LCG shall resign
effective as of the Closing Date:
Name Title
---- -----
Walter F. Ulloa Chairman and Chief Executive Officer
Philip C. Wilkinson President and Chief Operating Officer
Jeanette L. Tully Chief Financial Officer and Treasurer
Paul A. Zevnik Secretary
2.7 Conversion of Shares. On the Closing Date, by virtue of the Merger
--------------------
and without any action on the part of any party:
(a) each share of Common Stock, $0.001 par value per share, of
Acquisition Co. issued and outstanding immediately prior to the Closing Date
shall remain outstanding and shall represent one share of Common Stock, $0.0001
par value per share, of the Surviving
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Corporation, so that from and after the Closing Date, Entravision shall be the
holder of all of the issued and outstanding shares of the Common Stock of the
Surviving Corporation;
(b) each of the Shares (except for Dissenting Shares (as defined in
Section 2.10(a) below), if any) shall be converted into the right to receive
only the Adjusted Merger Consideration (as defined in Section 2.8(a) below)
divided by the total number of Shares (the "Per Share Merger Consideration"),
and the pro rata portion of any Escrow Payment (as defined in Section 2.9(e)
below), each without interest, and shall otherwise cease to be outstanding,
shall be cancelled and retired and cease to exist.
2.8 Aggregate Merger Consideration.
------------------------------
(a) The aggregate consideration to be paid in the Merger for the
Outstanding Shares (the "Aggregate Merger Consideration") shall be an amount in
cash equal to Two Hundred Thirty-Five Million Dollars ($235,000,000) plus Cash
on Hand plus any amounts paid pursuant to Section 2.8(b), 2.8(c) or 2.8(d)
below, less the sum of (i) the Indebtedness Payment plus (ii) the 1997 Debenture
Payment plus (iii) the 1998 Debenture Payment plus (iv) the Option Payments plus
(v) the LCG Transaction Expenses (each of the foregoing terms as defined in
Section 2.8(e) below). The "Adjusted Merger Consideration" shall be an amount
equal to the Aggregate Merger Consideration less the Escrow Payment.
(b) Notwithstanding the foregoing, the amount of the Aggregate Merger
Consideration shall be subject to the following terms and conditions:
(i) If, prior to the Closing, LCG or the LCG Subsidiaries have
consummated the transactions contemplated by that certain Asset Purchase
Agreement - KVBC-FM and KRNV-FM dated November 21, 1999 by and among EXCL
Communications, Inc., Sunbelt Communications Company, Sierra Radio Company and
Radio News Company (the "Nevada Asset Acquisition"), the Aggregate Merger
Consideration shall be increased by Fourteen Million Two Hundred Fifty Thousand
Dollars ($14,250,000), less any amounts paid pursuant to clause (v) of this
Section 2.8(b).
(ii) If, prior to the Closing, LCG or the LCG Subsidiaries have
consummated the transactions contemplated by that certain Stock Purchase
Agreement dated November 21, 1999 by and among EXCL Communications, Inc.,
Suzanne E. Rogers, Kimberly Rogers Cell and Perry C. Rogers (the "Nevada Stock
Acquisition" and collectively with the Nevada Asset Acquisition, the "Nevada
Acquisitions"), the Aggregate Merger Consideration shall be increased by Three
Million Two Hundred Fifty Thousand Dollars ($3,250,000).
(iii) If, prior to the Closing, the transactions contemplated by
the Nevada Acquisitions have not been consummated and the aggregate amount which
has been deposited by LCG or any LCG Subsidiary as an earnest money deposit
pursuant to the Nevada
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Acquisitions has not been returned to LCG or any LCG Subsidiary, the Aggregate
Merger Consideration shall be increased by such amount.
(iv) The Aggregate Merger Consideration shall be increased by
(a) the actual aggregate amount of out-of-pocket costs and expenses incurred by
LCG or any LCG Subsidiary in connection with the Nevada Acquisitions and (b) the
actual direct operating losses incurred by LCG or any LCG Subsidiary in
connection with its ownership and operation of the facilities subject to the
Nevada Acquisitions, up to a maximum of Five Hundred Thousand Dollars ($500,000)
for clauses (a) and (b) above combined.
(v) If the transactions contemplated by the Nevada Acquisitions
are being consummated prior to the Closing, Entravision shall pay to LCG or any
LCG Subsidiary, immediately prior to the closing of the Nevada Acquisitions,
Seven Million Five Hundred Thousand Dollars ($7,500,000) to be used by LCG or
any LCG Subsidiary to partially pay the consideration for the Nevada
Acquisitions, in exchange for a forty-two and eighty-six one hundredths percent
(42.86%) ownership interest in a single-purpose entity formed for purposes of
the Nevada Acquisitions. If the Closing of the Contemplated Transactions does
not occur, LCG would be obligated to repurchase Entravision's interest in such
single-purpose entity for the amount paid plus interest thereon at a rate of
LIBOR plus two and seventy-five hundredths percent (2.75%) per annum. If LCG
failed to fulfill this obligation, then Entravision will have the right to
purchase the interest of LCG and the LCG Subsidiaries in the Nevada Acquisitions
on the same basis.
(vi) If, prior to the Closing, LCG or the LCG Subsidiaries have
consummated the transactions contemplated by the Nevada Acquisitions, the
Aggregate Merger Consideration shall be increased by the aggregate amount of
interest actually incurred by LCG for borrowed money used by LCG or any LCG
Subsidiary as partial consideration for the Nevada Acquisitions.
(c) Notwithstanding the foregoing, the amount of the Aggregate Merger
Consideration shall be increased by the aggregate amount paid prior to the
Closing Date by LCG and the LCG Subsidiaries in connection with the build-out of
the property leased by EXCL Communications, Inc. at 665 Campbell Technology
Parkway, Campbell, California (the "Campbell Build-Out Amount"), which amount
shall not exceed, in the aggregate, $1,699,773.30; provided, however, that the
parties acknowledge and agree that LCG and the LCG Subsidiaries have expended
$500,414.30 toward the Campbell build-out as of the date hereof, and that such
sum will not be included within the Campbell Build-Out Amount. Accordingly, the
parties acknowledge and agree that Entravision's reimbursement obligation to LCG
for the Campbell Build-Out shall in no event exceed $1,199,359.00. LCG shall
deliver to Entravision, no later than the close of business on the business day
immediately preceding the Closing Date, a certificate setting forth the Campbell
Build-Out Amount.
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(d) Notwithstanding the foregoing, the amount of the Aggregate Merger
Consideration shall be increased by the aggregate amounts of any Escrows and
Deposits which are returned to LCG after the Closing. Upon receipt of any such
amounts, Entravision and the Surviving Corporation shall promptly pay any
amounts so received to the LCG Representatives' respective Custodial Accounts
for distribution to each LCG Representatives' respective Stockholders and Option
Holders; provided, however, that the parties acknowledge and agree that on April
1, 2002, Entravision or the Surviving Corporation shall purchase the outstanding
balance of principal and interest owing on the Huth Notes for their then-present
value, to be calculated by mutual agreement of the parties. The LCG
Representatives shall distribute such amounts to the Stockholders and Option
Holders pursuant to Section 2.8(g) below.
(e) For purposes of this Agreement, the following terms shall have
the following meanings:
(i) "Indebtedness Payment" means an amount equal to, as of the
close of business on the Closing Date, the then outstanding principal of,
accrued and unpaid interest on, any prepayment penalties or premiums on, and any
other amounts payable with respect to, all indebtedness of LCG under that
certain Credit Agreement (the "Credit Agreement") dated October 22, 1999 by and
among Latin Communications Inc., a Delaware corporation and LCG Subsidiary,
Suntrust Bank, Central Florida, N.A. (the "Bank") and certain lenders, but not
including any undrawn amounts under outstanding letters of credit.
(ii) "1997 Debenture Payment" means an amount equal to, as of
the close of business on the Closing Date, the then outstanding principal of,
accrued and unpaid interest on, any penalties or premiums on, and any other
amounts payable with respect to, all indebtedness of LCG evidenced by the
debentures (the "1997 Debentures") issued pursuant to that certain Securities
Purchase Agreement dated as of February 28, 1997, as amended through the date
hereof, by and between LCG and the purchasers party thereto.
(iii) "1998 Debenture Payment" means an amount equal to, as of
the close of business on the Closing Date, the then outstanding principal of,
accrued and unpaid interest on, any penalties or premiums on, and any other
amounts payable with respect to, all indebtedness of LCG evidenced by the
debentures (the "1998 Debentures") issued pursuant to that certain Securities
Purchase Agreement dated as of February 4, 1998, as amended through the date
hereof, by and between LCG and the purchasers party thereto, as amended.
(iv) "Option Payments" means the aggregate amount equal to (1)
(i) the product of (x) the number of shares of Common Stock that would be
issuable upon exercise of Options (as defined in Section 4.5 below) outstanding
on the Closing Date if all such Options were exercisable in full on such date,
multiplied by (y) the Per Share Merger Consideration, minus (ii) the aggregate
exercise price to be paid upon exercise of all Options that would be paid if all
such Options where exercised in full on such date and (2) the product of (x) the
number of Stock Appreciation Rights (as defined in Section 4.5 below)
outstanding on the Closing Date
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multiplied by (y) the excess of the Per Share Merger Consideration over Fifteen
Dollars ($15.00). No option payments shall be made with respect to any Option
which has an exercise price equal to or greater than the Per Share Merger
Consideration ("Out of the Money Options").
(v) "LCG Transaction Expenses" means the aggregate amount of
transaction expenses and fees incurred by LCG and its agents, representatives,
counsel and accountants solely in connection with the Contemplated Transactions,
including, without limitation, the fees payable to Shamrock Capital Advisors,
Inc. ("Shamrock") pursuant to that certain Letter Agreement dated December 17,
1999 by and between LCG and Shamrock.
(f) Each holder of a Certificate (as defined in Section 2.8(g) below)
which immediately prior to the Closing Date represented Shares will be entitled
to receive, upon surrender to its appointed LCG Representative of such
Certificate for cancellation, and in accordance with the terms of this
Agreement, cash in an amount equal to the product of the number of Shares
previously represented by such Certificate multiplied by the Per Share Merger
Consideration less an amount necessary to satisfy existing and future expenses
of the LCG Representatives pursuant to Section 12.2 or Section 12.5(a) below.
All payments to holders of Certificates shall be subject to any required
withholding of taxes. No interest shall accrue or be paid on the cash payable
upon the surrender of Certificates. Neither the LCG Representatives nor any
party hereto shall be liable to a holder of Shares for any cash or interest
thereon delivered to a public official pursuant to any applicable abandoned
property, escheat or similar laws.
(g) At the Closing, Entravision shall pay to the LCG Representatives
the Adjusted Merger Consideration as follows: (i) Latin Investors (as defined
below) shall receive, by wire transfer of immediately available funds to an
account designated by Latin Investors (the "Latin Investors Custodial Account"),
cash in an amount equal to Latin Investors' allocable portion of the Adjusted
Merger Consideration (calculated pursuant to Section 2.7(b) above); (ii) the
Trefoil Designee (as defined below) shall receive, by wire transfer of
immediately available funds to an account or accounts designated by the Trefoil
Designee (collectively, the "Trefoil Custodial Accounts"), cash in an amount
equal to the Trefoil Entities' (as defined below) allocable portion of the
Adjusted Merger Consideration (calculated pursuant to Section 2.7(b) above); and
(iii) the Other Holders Designee (as defined below) shall receive, by wire
transfer of immediately available funds to an account designated by the Other
Holders Designee (the "Other Holders Custodial Account," and together with the
Latin Investors Custodial Account and the Trefoil Custodial Accounts, the
"Custodial Accounts"), cash in an amount equal to the Other Stockholders' (as
defined below) allocable portion of the Adjusted Merger Consideration
(calculated pursuant to Section 2.7(b) above). Each LCG Representative shall
pay to each of the Stockholders it has been appointed to represent, if any, such
Stockholder's allocable portion of the Adjusted Merger Consideration in
accordance with Section 2.7(b) above upon receipt by such LCG Representative of
the stock certificate(s) (a "Certificate(s)"), which immediately prior to the
Closing Date represented the number of Shares held by such Stockholder, and a
completed and duly executed Letter of Transmittal (a "Letter of Transmittal").
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(h) Within three (3) business days after the Closing Date, the
Surviving Corporation shall mail a Letter of Transmittal to all holders of
Certificates which were not previously surrendered to the LCG Representatives,
to be completed by such holder and delivered to the holder's appointed LCG
Representative together with such holder's Certificates. The LCG Representatives
shall be (i) Latin Investors Limited Partnership, a Delaware limited partnership
("Latin Investors"), (ii) Stephen D. Royer (the "Trefoil Designee"), who shall
be the representative of Trefoil Latin Investors, L.P., a Delaware limited
partnership, Trefoil Latin II, L.L.C., a Delaware limited liability company, and
Shamrock Holdings of California, Inc., a California corporation (collectively,
the "Trefoil Entities"), and (iii) Martin D. Payson (the "Other Holders
Designee"), who shall be the representative of all Stockholders except for Latin
Investors and the Trefoil Entities (the "Other Stockholders") and Option Holders
(as defined below) (collectively, with the Other Stockholders, the "Other
Holders"). The LCG Representatives will, promptly upon receipt thereof, deliver
surrendered Certificates and Letters of Transmittal received by them to the
Surviving Corporation, and on the second (2nd) anniversary of the Closing Date,
return to the Surviving Corporation any portion of the Adjusted Merger
Consideration remaining to be paid to holders who have not yet surrendered their
Certificates and Letters of Transmittal and any other funds in the Custodial
Accounts which are to be distributed to Stockholders and holders of Options and
Stock Appreciation Rights on the Closing Date (each, an "Option Holder," and
collectively, the "Option Holders"). Any Stockholders and Option Holders will
thereafter be entitled to look only to the Surviving Corporation for payment of
their claim for the consideration set forth in this Section 2.8, without
interest thereon, but will have no greater rights against the Surviving
Corporation than may be accorded to general creditors thereof under applicable
law.
(i) Any distributions to be made from the Custodial Accounts of
amounts deposited therein after the Closing Date from the Escrow Account (as
defined in Section 2.9(e) below) or pursuant to the disbursement of an Escrow or
Deposit or pursuant to an indemnification claim in accordance with Article 11
below for which any amounts have been deposited in the Custodial Accounts
("Subsequent Distributions") shall be made by the LCG Representatives to the
Stockholders (other than with respect to Dissenting Shares) and the Option
Holders, after deduction of costs, expenses and holdbacks as described in
Sections 12.2 and 12.5 below, as follows: (i) Latin Investors shall disburse to
Latin Investors its allocable share of such distribution, (ii) the Trefoil
Designee shall disburse to each Trefoil Entity its allocable share of such
distribution and (iii) the Other Holders Designee shall disburse to each of the
Other Holders such Other Holder's allocable share of such distribution. The
amount to be distributed to each Stockholder and Option Holder shall be equal to
the product of (i) the number of Pro Forma Outstanding Shares (as defined below)
(other than Dissenting Shares) held by such holder and (ii) the amount equal to
(A) the applicable Subsequent Distribution divided by (B) the total number of
Pro Forma Outstanding Shares (other than Dissenting Shares). "Pro Forma
Outstanding Shares" means, as of the Closing Date, the number of Shares as of
such time plus the number of shares of Common Stock of LCG that would be
outstanding assuming all Options were exercised for cash pursuant to the terms
of the applicable option agreement (each, an "Option Agreement," and
collectively, the "Option Agreements") plus the number of Stock
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Appreciation Rights. No Option Holder shall receive a Subsequent Distribution
with respect to an Option held immediately prior to the Closing Date unless the
sum of (x) the Per Share Merger Consideration plus (y) the per Pro Forma
Outstanding Share amount of the Subsequent Distribution (calculated pursuant to
the preceding two sentences) exceeds the exercise price of such Option.
(j) LCG shall deliver to Entravision, no later than the close of
business on the business day immediately preceding the Closing Date, a
certificate setting forth (i) the Per Share Merger Consideration, (ii) the
portion of the Adjusted Merger Consideration to be delivered to each of the
Latin Investors Custodial Account, the Trefoil Custodial Accounts and the Other
Holders Custodial Account, (iii) the Cash on Hand, (iv) the Indebtedness
Payment, (v) the 1997 Debenture Payment, (vi) the 1998 Debenture Payment, (vii)
the Option Payments and (viii) the LCG Transaction Expenses.
2.9 Closing Date Indebtedness Payment and Certain Closing Deliveries.
----------------------------------------------------------------
(a) At or prior to the Closing, (i) Entravision shall contribute to
LCG, by wire transfer of immediately available funds, cash in an amount equal to
the Option Payments (excluding any payments for Out of the Money Options), (ii)
LCG shall process the Option Payments through its payroll system and (iii) LCG
shall deliver the Option Payments less the withholding tax payable in respect
thereof to the Other Holders Custodial Account, from which account the Other
Holders Designee shall deliver the amount thereof to the persons entitled to
Option Payments as a result of the Contemplated Transactions. LCG shall be
responsible for and shall pay when due any withholding taxes payable in respect
of the Option Payments.
(b) At the Closing, Entravision shall contribute to LCG, by wire
transfer of immediately available funds, cash in an amount equal to the
Indebtedness Payment, and LCG (or an LCG Subsidiary) shall pay to the Bank (for
the benefit of the lenders party to the Credit Agreement), by wire transfer of
immediately available funds, an amount in cash equal to the Indebtedness
Payment.
(c) At the Closing, Entravision shall contribute to LCG, by wire
transfer of immediately available funds, cash in an amount equal to the 1997
Debenture Payment, and LCG (or an LCG Subsidiary) shall pay to the LCG
Representatives' respective Custodial Accounts (for the benefit of the holders
of the 1997 Debentures), by wire transfer of immediately available funds, an
amount in cash equal to the 1997 Debenture Payment as follows: (i) LCG shall
deposit in the Latin Investors Custodial Account the Latin Investors' allocable
share of such payment; (ii) LCG shall deposit in the Trefoil Custodial Accounts
the Trefoil Entities' allocable share of such payment; and (iii) LCG shall
deposit in the Other Holders Custodial Account the Other Stockholders' allocable
share of such payment.
(d) At the Closing, Entravision shall contribute to LCG, by wire
transfer of immediately available funds, cash in an amount equal to the 1998
Debenture Payment, and LCG
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<PAGE>
(or an LCG Subsidiary) shall pay to the LCG Representatives' respective
Custodial Accounts (for the benefit of the holders of the 1998 Debentures), by
wire transfer of immediately available funds, an amount in cash equal to the
1998 Debenture Payment as follows: (i) LCG shall deposit in the Latin Investors
Custodial Account the Latin Investors' allocable share of such payment; (ii) LCG
shall deposit in the Trefoil Custodial Accounts the Trefoil Entities' allocable
share of such payment; and (iii) LCG shall deposit in the Other Holders
Custodial Account the Other Stockholders' allocable share of such payment.
(e) At the Closing, Entravision shall pay to Union Bank of California,
N.A., as the escrow agent (the "Escrow Agent"), the amount of Seven Million
Dollars ($7,000,000) (the "Escrow Payment") by wire transfer of immediately
available funds to an escrow account (the "Escrow Account") to be held in escrow
through April 1, 2002 (Three Million Five Hundred Thousand Dollars ($3,500,000)
of which may be released on the date that is eighteen (18) months after the
Closing Date pursuant to the terms of the Indemnity Escrow Agreement described
herein) in connection with the indemnification obligations of the Stockholders
and the Option Holders pursuant to Article 11 below and established pursuant to
the terms and conditions of that certain Indemnity Escrow Agreement,
substantially in the form attached hereto as Exhibit "C" and incorporated herein
-----------
by this reference (the "Indemnity Escrow Agreement"), to be entered into at the
Closing by and among Entravision and the LCG Representatives.
(f) At the Closing, Entravision shall pay such amounts to the obligees
of LCG Transaction Expenses as are set forth on the certificate to be delivered
by LCG to Entravision pursuant to Section 2.8(j) above.
2.10 Appraisal Rights.
----------------
(a) Notwithstanding any provision of this Agreement to the contrary,
any Shares that are held immediately prior to the Closing Date by a holder who
has neither voted in favor of the Merger nor consented thereto in writing and
who has demanded and perfected the right, if any, for appraisal of such Shares
within twenty (20) days after the date of mailing of notice to such holder of
the effective date of the Merger (the "Stockholder Notice") in accordance with
the provisions of Section 262 of the Delaware Code and has not withdrawn or lost
such right to such appraisal ("Dissenting Shares") shall not be converted into
or represent a right to receive an allocable portion of the Adjusted Merger
Consideration represented thereby, but the holder of such Shares shall only be
entitled to such appraisal rights as are granted by the Delaware Code. If a
holder of Shares who demands appraisal of such Shares under the Delaware Code
shall thereafter effectively withdraw or lose (through failure to perfect or
otherwise) the right to appraisal with respect to such Shares, then, as of the
occurrence of such event, such Shares shall be deemed to have been converted
into and represent only the right to receive such Shares' allocable portion of
the Adjusted Merger Consideration, without interest, upon the surrender of the
Certificate or Certificates representing such Shares and upon delivery of a duly
executed Letter of Transmittal. In accordance with the provisions of Sections
228(d) and 262(d)(2) of the Delaware Code, not later than the third (3rd)
business day following the Closing
-15-
<PAGE>
Date, the Surviving Corporation shall mail the Stockholder Notice to all holders
of Certificates which were not previously surrendered to the LCG
Representatives.
(b) At their sole expense, the LCG Representatives shall direct and
control any Proceedings relating to Dissenting Shares. The LCG Representatives
shall keep Entravision and the Surviving Corporation reasonably informed of the
status of such Proceedings. Subject to the Confidentiality Agreement (as
defined below), and at the expense of the LCG Representatives (solely out of the
Escrow Account), each of Entravision and the Surviving Corporation shall provide
the LCG Representatives with such information and records and make such of their
respective officers, directors, employees and agents available as may reasonably
be requested by the LCG Representatives in connection with any Proceedings
relating to Dissenting Shares.
2.11 Closing of Transfer Books. From and after the Closing Date, the stock
-------------------------
transfer books of LCG shall be closed and no transfer of Common Stock of LCG
shall thereafter be made.
2.12 Earnest Money Escrow Deposit.
----------------------------
(a) Upon full execution of this Agreement and the Voting Agreements
(and in no event later than the end of business on December 27, 1999),
Entravision shall deliver to the Escrow Agent, either via cashier's check or
wire transfer of immediately available funds or an original, irrevocable stand-
by letter of credit from the Escrow Agent in favor of LCG, the amount of Seven
Million Dollars ($7,000,000) (the "Escrow Deposit"), to be held by the Escrow
Agent in an interest bearing account pursuant to the terms and conditions of
that certain Earnest Money Escrow Agreement of even date herewith by and among
Entravision, LCG, the LCG Representatives and the Escrow Agent, substantially in
the form attached hereto as Exhibit "D" and incorporated herein by this
-----------
reference (the "Earnest Money Escrow Agreement"). The Escrow Deposit represents
an earnest money deposit by Entravision for the Contemplated Transactions.
(b) If the Escrow Deposit is in the form of immediately available
funds, it shall be held by the Escrow Agent in accordance with the Earnest Money
Escrow Agreement and shall be applied toward the Aggregate Merger Consideration
at the Closing. Provided that this Agreement is not terminated by LCG pursuant
to Section 9.1(b)(ii) or 9.1(b)(iv) below, it is expressly acknowledged and
agreed by the parties hereto that Entravision is entitled to all interest earned
on the Escrow Deposit in this form, and that such interest shall not be part of
the Aggregate Merger Consideration.
(c) If the Escrow Deposit is in the form of an original, irrevocable
stand-by letter of credit in favor of LCG (the "Earnest Money Letter of
Credit"), the Earnest Money Letter of Credit shall be held by the Escrow Agent
in accordance with the terms of the Earnest Money Escrow Agreement. Unless this
Agreement is terminated by LCG pursuant to Section 9.1(b)(ii)
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<PAGE>
or 9.1(b)(iv) below, at the Closing, Entravision and LCG shall instruct the
Escrow Agent to release and return the Earnest Money Letter of Credit to
Entravision for cancellation.
(d) If this Agreement is terminated by LCG pursuant to Section
9.1(b)(ii) or 9.1(b)(iv) below, the Escrow Deposit, including all interest
thereon, shall be disbursed to LCG as liquidated damages in accordance with
Section 9.2(b) below.
2.13 FCC Licenses, Permits and Authorizations. The parties hereto
----------------------------------------
acknowledge and agree that, in connection with the FCC Consent, Entravision
shall assign all of its right, title and interest in and to all FCC licenses,
permits and authorizations (and the call letters with respect thereto) held by
LCG and the LCG Subsidiaries to Entravision Holdings, LLC, a California limited
liability company and wholly-owned subsidiary of Entravision and its managing
members ("Holdings"), and that the applications for the FCC Consent will reflect
Holdings as the assignee of the FCC licenses held by LCG and the LCG
Subsidiaries.
ARTICLE 3.
CLOSING
3.1 Closing. The closing of the Merger provided for in this Agreement
-------
(the "Closing") will take place at the offices of Zevnik Horton Guibord McGovern
Palmer & Fognani, L.L.P. in Los Angeles, California at 10:00 a.m. (pacific time)
on the fifth (5th) business day following the day on which each of the following
has occurred (i) the FCC Consent to the Merger becomes a Final Order and (ii)
the applicable waiting period under the HSR Act has expired or been terminated,
or such date as the parties may mutually agree, or at such other time and place
as the parties may mutually agree, and the parties agree to cooperate and use
their Commercially Reasonable Efforts to close the Contemplated Transactions as
soon as practicable after the FCC Consent becomes a Final Order; provided,
however, that Entravision, in its sole and absolute discretion, may waive the
condition to Closing that the FCC Consent be a Final Order and, in such case,
the Closing shall occur at such time and place as the parties may mutually
agree; provided, further, that, subject to the approval of Entravision's senior
secured lender in its sole and absolute discretion, Entravision agrees to waive
said condition and close immediately upon receipt by the parties of the
preliminary FCC Consent (which for purposes of this Section 3.1 shall be deemed
to occur when the FCC has approved the assignment of the last of the FCC
licenses of LCG or any of the LCG Subsidiaries to Holdings as evidenced by a
Public Notice released to the public by the FCC). Subject to the provisions of
Article 9 below, failure to consummate the Merger on the date and time and at
the place determined pursuant to this section will not result in the termination
of this Agreement and will not relieve any party of any obligation under this
Agreement.
3.2 Closing Obligations of LCG. At the Closing, LCG will deliver or cause
--------------------------
to be delivered to Entravision:
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<PAGE>
(a) the original Certificates representing the Shares owned by the
Stockholders, duly endorsed in blank (or accompanied by duly executed stock
powers), to the extent delivered to the LCG Representatives prior to the Closing
Date;
(b) the Indemnity Escrow Agreement, executed by LCG and each of the
LCG Representatives;
(c) any and all required third-party Consents listed on Schedule
--------
3.2(c);
- ------
(d) the Certificate of Merger, executed by LCG;
(e) the closing certificate required by Section 8.1(c) below;
(f) a certificate of the Secretary of LCG attesting to (i) the
incumbency of the officers executing the Agreement and the other agreements and
certificates delivered by LCG at the Closing and (ii) the authenticity of the
Organizational Documents of LCG;
(g) minutes of the Stockholders and written resolutions or minutes of
the Board of Directors of LCG authorizing the execution, delivery and
performance of this Agreement, certified by the Secretary of LCG;
(h) a certificate of good standing for LCG issued by the Delaware
Secretary of State not more than ten (10) days prior to the Closing Date; and
(i) the written legal opinions of Fried, Frank, Harris, Shriver &
Jacobson, corporate counsel for LCG, and Leventhal, Senter & Lerman, P.L.L.C.,
FCC counsel for LCG, substantially in the forms attached hereto as Exhibits "E-
-----------
1" and "E-2" and incorporated herein by this reference.
- ------------
3.3 Closing Obligations of Entravision and Acquisition Co. At the
------------------------------------------------------
Closing, Entravision and Acquisition Co. will deliver or cause to be delivered
to LCG and the LCG Representatives (or, in the case of item (g) of this Section
3.3, to the Escrow Agent):
(a) the Aggregate Merger Consideration, less the Escrow Deposit, which
shall be delivered to the LCG Representatives pursuant to this Agreement;
(b) the Indemnity Escrow Agreement, executed by Entravision;
(c) the closing certificate required by Section 8.2(c) below;
(d) a certificate of the Secretary of each of Entravision and
Acquisition Co. attesting to (i) the incumbency of the managing members and
officers, as the case may be, executing the Agreement and the other agreements
and certificates delivered by Entravision and
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<PAGE>
Acquisition Co. at the closing and (ii) the authenticity of the Organizational
Documents of each of Entravision and Acquisition Co.;
(e) written resolutions or minutes of the managing members of
Entravision and written resolutions or minutes of the sole stockholder and Board
of Directors of Acquisition Co. authorizing the execution, delivery and
performance of this Agreement, each certified by the Secretary of Entravision
and Acquisition Co., as the case may be;
(f) a certificate of good standing for each of Entravision and
Acquisition Co. issued by the Delaware Secretary of State not more than ten (10)
days prior to the Closing Date;
(g) subject to Section 2.12 above, the Escrow Deposit to the Escrow
Agent; and
(h) the written legal opinion of Zevnik Horton Guibord McGovern Palmer
& Fognani, L.L.P., counsel for Entravision and Acquisition Co., substantially in
the form attached hereto as Exhibit "F" and incorporated herein by this
-----------
reference.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF LCG
LCG hereby represents and warrants to Entravision and Acquisition Co. as
follows:
4.1 Organization and Good Standing. LCG is a corporation duly organized,
------------------------------
validly existing and in good standing under the laws of the State of Delaware,
and has full corporate power and authority to own, lease and operate its assets
and properties and to carry on its businesses existing as of the date hereof.
Each direct or indirect Subsidiary of LCG set forth on Schedule 4.1
------------
(collectively, the "LCG Subsidiaries") is a corporation (or limited liability
company) duly organized, validly existing and in good standing under the laws of
the state of its incorporation (or formation) as set forth on Schedule 4.1, and
------------
has full corporate or limited liability, as the case may be, power and authority
to own, lease and operate its assets and properties and to carry on its
businesses existing as of the date hereof.
4.2 Authority; No Conflict; Consents.
--------------------------------
(a) Assuming due authorization, execution and delivery of this
Agreement by Entravision and Acquisition Co., this Agreement constitutes the
legal, valid and binding obligation of LCG, enforceable against LCG in
accordance with its terms, except to the extent that such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to creditors' rights generally or is subject to general principles
of equity. LCG has the corporate right, power, authority and capacity to
execute and deliver this Agreement and to perform its obligations thereunder.
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<PAGE>
(b) Neither the execution and delivery of this Agreement by LCG nor
the consummation or performance of any of the Contemplated Transactions by LCG
will, subject to receipt of any required approval of the Stockholders to the
Merger and this Agreement, violate, Breach or conflict with: (i) any provision
of the Organizational Documents of LCG or the LCG Subsidiaries; (ii) any
resolution related to the Contemplated Transactions adopted by the stockholders
or the Board of Directors of LCG or the LCG Subsidiaries; (iii) any material
Legal Requirement or material Order to which LCG or the LCG Subsidiaries may be
subject; or (iv) any material Contract to which LCG or the LCG Subsidiaries are
a party or by which LCG or the LCG Subsidiaries may be bound.
(c) Except for the filing of the FCC Consent, the filing of the
Certificate of Merger with the Delaware Secretary of State, the filing required
by the HSR Act, obtaining any necessary third-party consents set forth on
Schedule 4.2, and the approval by the Stockholders of the Merger and this
- ------------
Agreement, neither LCG nor the LCG Subsidiaries will be required to give any
notice to or obtain any material third-party Consents from any Person in
connection with the execution and delivery of this Agreement or the consummation
or performance of any of the Contemplated Transactions, including, without
limitation, the Merger and the transfer of the ownership and operation of the
Radio Stations to Entravision.
4.3 Broker's or Finder's Fees. Except as set forth on Schedule 4.3, none
------------------------- ------------
of LCG, the LCG Subsidiaries or their agents have incurred any Liabilities for
broker's or finder's fees or agents commissions or other similar payment in
connection with this Agreement.
4.4 Qualifications To Do Business. LCG and the LCG Subsidiaries are
-----------------------------
qualified to do business and are in good standing in each jurisdiction (listed
on Schedule 4.4 to this Agreement) where the character or location of property
------------
owned and leased, the employment of personnel or the nature of the business and
activities conducted by LCG and the LCG Subsidiaries require such qualification,
licensing or domestication, except in such jurisdictions where the failure to be
so qualified, licensed or domesticated and to be in good standing, individually
or in the aggregate, would not have an LCG Material Adverse Effect. Except as
set forth on Schedule 4.4, LCG and the LCG Subsidiaries do not file franchise,
------------
income or other tax returns in any jurisdiction based upon the ownership or use
of property therein or the derivation of income therefrom.
4.5 Capitalization.
--------------
(a) The authorized capital stock of LCG consists of fifteen million
(15,000,000) shares of Common Stock, $0.01 par value per share, of which
9,235,468 shares are duly authorized, issued and outstanding. The Stockholders
are the record holders of all of the Shares. All of the Shares have been duly
authorized and validly issued and are fully paid and nonassessable.
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<PAGE>
(b) As fully set forth on Schedule 4.5, there are outstanding options
------------
to acquire 471,668 shares of Common Stock of LCG (the "Options") and outstanding
130,000 stock appreciation rights pursuant to the Equity Appreciation Incentive
Plan of LCG described in Schedule 4.5 (the "Stock Appreciation Rights"). Except
------------
as set forth on Schedule 4.5, (i) there are no other options, warrants, stock
------------
appreciation rights, subscriptions, convertible debentures, registration rights
agreements or other rights, commitments or any other similar agreements for the
purchase of any securities of LCG to which LCG is a party, (ii) there are no
stockholders' agreements or other Contracts to which LCG is a party relating to
the issuance, sale or transfer of any equity securities or other securities of
LCG and (iii) there are no voting trust agreements or other Contracts,
agreements or arrangements restricting voting rights or transferability with
respect to LCG to which it is a party. Upon the consummation of the
Contemplated Transactions, and provided that Entravision makes the payment set
forth in Section 2.9(a) above, all of the outstanding Options and Stock
Appreciation Rights will terminate and the Surviving Corporation will have no
further obligations to the holders thereof with respect thereto.
4.6 LCG Subsidiaries.
----------------
(a) Schedule 4.6 sets forth a list of all direct or indirect
------------
Subsidiaries of LCG (the "LCG Subsidiaries"). Except as set forth on Schedule
--------
4.6, LCG owns, either directly or indirectly through one or more of the LCG
- ---
Subsidiaries, all of the capital stock or membership interests of each of the
LCG Subsidiaries free and clear of any Encumbrances.
(b) The authorized capital stock and number of outstanding shares or
membership interests of each of the LCG Subsidiaries is set forth on Schedule
--------
4.6 (the "Subsidiary Shares"). LCG is and will be on the Closing Date the
- ---
record and beneficial owner and holder of all of the Subsidiary Shares, which
will be at Closing free and clear of all Encumbrances, other than Encumbrances
created by Entravision or Acquisition Co. All of the Subsidiary Shares have
been duly authorized and validly issued and are fully paid and nonassessable.
(c) Except as set forth on Schedule 4.6, (i) there are no options,
------------
warrants, stock appreciation rights, subscriptions, convertible debentures,
registration rights agreements or other rights, commitments or any other similar
agreements for the purchase of any securities of any of the LCG Subsidiaries,
(ii) there are no stockholders' agreement or other Contracts relating to the
issuance, sale or transfer of any equity securities or other securities of any
of the LCG Subsidiaries and (iii) there are no voting trust agreements or other
Contracts, agreements or arrangements restricting voting rights or
transferability with respect to any of the LCG Subsidiaries.
4.7 Financial Statements. LCG has delivered to Entravision true, complete
--------------------
and correct copies of the Financial Statements. Except as set forth on Schedule
--------
4.7, the Financial Statements fairly present in all material respects the
- ---
consolidated financial condition of LCG and the LCG Subsidiaries and the assets
and liabilities of LCG and the LCG Subsidiaries as of the
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<PAGE>
respective dates thereof and the results of operations, changes in stockholders'
equity and cash flows for the periods therein specified, and have been prepared
from the books and records of LCG and the LCG Subsidiaries in accordance with
GAAP in all material respects except for the following sentence. The Financial
Statements reflect the consistent application of such accounting principles
throughout the periods involved, except as disclosed in the notes to such
financial statements, and except that the unaudited Financial Statements were
prepared on an interim basis, are subject to normal year-end adjustments and do
not contain all of the footnote disclosures required by GAAP.
4.8 Books and Records. To the Knowledge of LCG, the minute books of LCG
-----------------
and the LCG Subsidiaries contain, in all material respects, accurate and
complete records of all meetings held of, and corporate action taken by, the
stockholders and Board of Directors of LCG and the LCG Subsidiaries.
4.9 Ownership, Condition and Sufficiency of Assets. Except as set forth
----------------------------------------------
on Schedule 4.9, LCG or the LCG Subsidiaries, as the case may be, own all of
------------
their material tangible assets free and clear of all Encumbrances. The assets
of LCG and the LCG Subsidiaries are, in all material respects, in good operating
condition and repair (reasonable wear and tear in normal use excepted), and none
of such assets is in need of maintenance or repairs except for ordinary, routine
maintenance and repairs that are not material in nature or cost.
4.10 No Undisclosed Liabilities. Except as set forth on Schedule 4.10, LCG
-------------------------- -------------
and the LCG Subsidiaries have no material Liabilities of any nature which would
be required to be disclosed under GAAP as of the date hereof (whether absolute,
accrued, contingent or otherwise), except for (i) Liabilities reflected or
reserved against in the Financial Statements, (ii) current Liabilities incurred
in the ordinary course of business since October 31, 1999 which would not have
an LCG Material Adverse Effect or (iii) Liabilities that will not be Liabilities
of Entravision or Acquisition Co. after the Closing.
4.11 Taxes.
-----
(a) LCG and the LCG Subsidiaries have filed or caused to be filed on a
timely basis (taking into account all extensions) all material Tax Returns that
are or were required to be filed by them pursuant to applicable Legal
Requirements, and all such Tax Returns are true, correct and complete in all
material respects. LCG has delivered or made available to Entravision copies of
all such Tax Returns filed in the past five (5) years, and Schedule 4.11
-------------
contains a complete and accurate list of all material income Tax Returns filed
by LCG and the LCG Subsidiaries in the past five (5) years. With respect to
taxable periods ending on or before December 31, 1999, LCG has paid, or made
provision for the payment of, all income Taxes that have become due pursuant to
those Tax Returns or otherwise, or pursuant to any written assessment received
by LCG or any of the LCG Subsidiaries. Except as set forth on Schedule 4.11,
-------------
the Tax Returns of LCG and the LCG Subsidiaries have not been examined (nor are
they
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<PAGE>
currently in the process of being examined) by the IRS or any other tax
authority for any of the past five (5) years.
(b) The charges, accruals and reserves with respect to Taxes on the
Financial Statements are adequate (determined in accordance with GAAP) to cover
Taxes through the date of the Financial Statements. To the Knowledge of LCG,
there exists no proposed Tax assessment against LCG or the LCG Subsidiaries
except as disclosed in the Financial Statements or on Schedule 4.11. No consent
-------------
to the application of Section 341(f)(2) of the IRC has been filed with respect
to any property or assets held, acquired or to be acquired by LCG or the LCG
Subsidiaries. All material Taxes that LCG and the LCG Subsidiaries are or were
required by Legal Requirements to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper Governmental
Body or other Person. There is no Tax sharing agreement that will require any
payment by LCG or any of the LCG Subsidiaries after the date of this Agreement.
LCG and the LCG Subsidiaries have timely paid all material Income Taxes for the
periods ending on December 31, 1999 and all Other Taxes that are due and
payable, nonpayment of which would (i) result in an Encumbrance on any of the
assets of LCG or the LCG Subsidiaries or (ii) result in Entravision becoming
liable therefor.
4.12 Employee Benefits.
-----------------
(a) Schedule 4.12 lists each Employee Benefit Plan of LCG and the LCG
-------------
Subsidiaries. Each Employee Benefit Plan is in substantial compliance with
applicable law and has been administered and operated in all material respects
in accordance with its terms. Each Employee Benefit Plan which is intended to
be "qualified" within the meaning of Section 401(a) of the IRC has received a
favorable determination letter from the IRS and no event has occurred and no
condition exists which could reasonably be expected to result in the revocation
of any such determination.
(b) No event which constitutes a "reportable event" (as defined in
Section 4043(c) of ERISA) for which the thirty (30) day notice requirement has
not been waived by the Pension Benefit Guaranty Corporation (the "PBGC") has
occurred with respect to any Employee Benefit Plan. No Employee Benefit Plan
subject to Title IV of ERISA has been terminated or is or has been the subject
of termination proceedings pursuant to Title IV of ERISA. Full payment has been
made of all amounts which LCG or the LCG Subsidiaries were required under the
terms of each Employee Benefit Plan to have paid as contributions to such
Employee Benefit Plan on or prior to the date hereof (excluding any amounts not
yet due) and no Employee Benefit Plan which is subject to Part 3 of Subtitle B
of Title 1 of ERISA has incurred any "accumulated funding deficiency" (within
the meaning of Section 302 of ERISA or Section 412 of the IRC), whether or not
waived.
(c) Neither LCG, the LCG Subsidiaries nor any other "disqualified
person" or "party in interest" (as defined in Section 4975(e)(2) of the IRC and
Section 3(14) of ERISA, respectively) has engaged in any transactions in
connection with any Employee Benefit Plan that
-23-
<PAGE>
could reasonably be expected to result in the imposition of a material penalty
pursuant to Section 502(i) of ERISA, damages pursuant to Section 409 of ERISA or
a Tax pursuant to Section 4975(a) of the IRC. No material liability, claim,
action or litigation has been made, commenced or, to the Knowledge of LCG,
Threatened with respect to any Employee Benefit Plan (other than for benefits
payable in the ordinary course of business and PBGC insurance premiums). No
Employee Benefit Plan or related trust owns any securities in violation of
Section 407 of ERISA. With respect to any Employee Benefit Plan subject to Title
IV of ERISA, as of the most recent actuarial valuation prepared for each such
Employee Benefit Plan, the aggregate present value of the accrued liabilities
thereof did not exceed the aggregate fair market value of the assets allocable
thereto (determined on the bases set forth therein). LCG and the LCG
Subsidiaries do not presently and have not at any time in the past maintained a
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA).
(d) To the Knowledge of LCG, except as set forth on Schedule 4.12,
-------------
there are no Proceedings (other than routine claims for benefits) pending or
Threatened against any Employee Benefit Plan or its assets, or arising out of
such Employee Benefit Plan and, to the Knowledge of LCG, no facts exist which
could give rise to any such Proceedings that might have a material adverse
effect on such Employee Benefit Plan. To the Knowledge of LCG, there has been
no act or omission by LCG or the LCG Subsidiaries that has given rise or may
give rise to any fines, penalties, Taxes or late charges under Section 502(c),
(i) or (l), Section 407(1) of ERISA or Chapter 43 of the IRC.
4.13 Compliance with Legal Requirements. Except as set forth on Schedule
---------------------------------- --------
4.13 or as previously disclosed in writing to Entravision: (i) LCG and the LCG
- ----
Subsidiaries are in compliance in all material respects with each material Legal
Requirement that is applicable to them; (ii) to the Knowledge of LCG, no event
has occurred or circumstance exists that (with or without notice or lapse of
time) constitutes or results in a material violation by LCG or the LCG
Subsidiaries of, or a failure on the part of LCG or the LCG Subsidiaries to
comply in all material respects with, any material Legal Requirement or gives
rise to any material obligation on the part of LCG or the LCG Subsidiaries to
undertake, or to bear all or any portion of the cost of, any remedial action of
any nature; and (iii) neither LCG nor any of the LCG Subsidiaries has received
any written notice or other written communication from any Governmental Body
regarding any actual, alleged, possible or potential material violation of, or
material failure to comply with, any material Legal Requirement, any actual,
alleged, possible or potential material obligation on the part of LCG or any of
the LCG Subsidiaries to undertake, or to bear all or any portion of the cost of,
any remedial action of any nature.
4.14 Governmental Authorizations. Schedule 4.14 contains a complete and
--------------------------- -------------
accurate list of each material Governmental Authorization that is held by LCG or
the LCG Subsidiaries, except for authorizations of the FCC under Part 74 of its
rules. Each Governmental Authorization listed or required to be listed on
Schedule 4.14 is valid and in full force and effect in all material respects.
- -------------
Except as set forth on Schedule 4.14 or as previously disclosed in writing to
-------------
Entravision, LCG and each of the LCG Subsidiaries is and at all times has been
in
-24-
<PAGE>
compliance in all material respects with all of the terms and requirements of
each Governmental Authorization identified or required to be identified on
schedule 4.14, and, to the Knowledge of LCG, no event has occurred or
- -------------
circumstance exists that (with or without notice or lapse of time) constitutes
or results directly or indirectly in a violation of or a failure to comply with
any material term or material requirement of any Governmental Authorization
listed or required to be listed on Schedule 4.14 or may result directly or
-------------
indirectly in a material revocation, withdrawal, suspension, cancellation,
termination of or any modification to, any Governmental Authorization listed or
required to be listed on Schedule 4.14. The Governmental Authorizations listed
-------------
on Schedule 4.14 collectively constitute all of the material Governmental
-------------
Authorizations necessary to permit LCG and the LCG Subsidiaries to lawfully
conduct and operate the Radio Stations and the Newspapers in the manner
currently conducted in all material respects.
4.15 Legal Proceedings. Except as set forth on Schedule 4.15, there is no
----------------- -------------
pending Proceeding (i) that is material and has been commenced by or against LCG
or any of the LCG Subsidiaries or (ii) that challenges, or that may have the
effect of preventing, delaying, making illegal or otherwise interfering with,
any of the Contemplated Transactions. To the Knowledge of LCG and except as set
forth on Schedule 4.15, no such Proceeding described in clauses (i) and (ii) of
-------------
this section has been Threatened and no event has occurred or circumstance
exists that may give rise to or serve as a basis for the commencement of any
such Proceeding. LCG has delivered or made available to Entravision copies of
all material pleadings relating to each Proceeding listed on Schedule 4.15.
-------------
None of such Proceedings listed or required to be listed on Schedule 4.15
-------------
currently has or, to the Knowledge of LCG, is reasonably expected to have an LCG
Material Adverse Effect.
4.16 Absence of Certain Changes and Events. Except as contemplated by this
-------------------------------------
Agreement and as set forth on Schedule 4.16, since October 31, 1999, LCG and the
-------------
LCG Subsidiaries have conducted the businesses of the Radio Stations and the
Newspapers only in the ordinary course of business and there has not been any:
(i) change in the authorized or issued capital stock of LCG or any of the LCG
Subsidiaries (other than issuances pursuant to the exercise of Options), grant
of any stock option or right to purchase shares of capital stock of LCG or any
of the LCG Subsidiaries, issuance of any security convertible into such capital
stock, grant of any registration rights, purchase, redemption, retirement or
other acquisition by LCG or any of the LCG Subsidiaries of any shares of any
such capital stock or declaration or payment of any dividend or other
distribution or payment in respect of shares of capital stock; (ii) payment or
increase by LCG or any of the LCG Subsidiaries of any bonuses, salaries or other
compensation to any employee (except in the ordinary course of business) or
entry into any employment, severance or similar Contract with any employee;
(iii) adoption of, or increase in the payments to or benefits under, any
Employee Benefit Plan for or with any employees except in the ordinary course of
business; (iv) damage to or destruction or loss of any of the assets of LCG or
the LCG Subsidiaries, whether or not covered by insurance, which would have an
LCG Material Adverse Effect; (v) entry into, termination of or written receipt
of notice of termination of any material Contract, other than the expiration of
Contracts pursuant to their terms; (vi) except as set forth on Schedule 4.16,
-------------
sale (other than sales of inventory in the ordinary course of business), lease
or
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<PAGE>
other disposition of any material assets or material properties or mortgage,
pledge or imposition of any Encumbrance on any material asset or material
property; (vii) material change in the accounting methods used by LCG or the LCG
Subsidiaries, except as required by changes in GAAP; or (viii) any agreement,
whether oral or written, to do any of the foregoing.
4.17 Applicable Contracts; No Defaults.
---------------------------------
(a) Schedule 4.17 contains a complete and accurate list, and LCG has
-------------
delivered or made available to Entravision, true, complete and correct copies of
each Applicable Contract. Each Applicable Contract identified or required to be
identified on Schedule 4.17 is in full force and effect and is valid and
-------------
enforceable against LCG and to the Knowledge of LCG, against the other party or
parties thereto, in accordance with its terms, except to the extent that such
enforceability (i) may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights generally or (ii)
is subject to general principles of equity.
(b) Except as set forth on Schedule 4.17: (i) LCG or the LCG
-------------
Subsidiaries, as the case may be, are in material compliance with all applicable
terms and requirements of each Applicable Contract; (ii) to the Knowledge of
LCG, except for this Agreement and the Contemplated Transactions, no event has
occurred or circumstance exists that (with or without notice or lapse of time)
may contravene, conflict with or result in a violation or Breach of, or give LCG
or the LCG Subsidiaries, as the case may be, or other Person the right to
declare a default under, or to accelerate the maturity or performance of, or to
cancel, terminate or modify, any material Applicable Contract; and (iii) LCG and
the LCG Subsidiaries, as the case may be, have not given to or received from any
other Person any written notice or other written communication regarding any
actual, alleged, possible or potential material violation or material Breach of,
or material default under, any Applicable Contract.
4.18 Insurance.
---------
(a) LCG has delivered or made available to Entravision true, complete
and correct copies of all material policies of insurance relating to LCG and the
LCG Subsidiaries to which LCG or the LCG Subsidiaries are a party.
(b) Except as set forth on Schedule 4.18, (i) all such material
-------------
policies of insurance are valid and outstanding, (ii) LCG and the LCG
Subsidiaries have not received any written notice of cancellation or any other
written indication that any insurance policy is no longer in full force or
effect or will not be renewed or that the issuer of any policy is not able to
perform its obligations thereunder and (iii) LCG and the LCG Subsidiaries have
paid all premiums due, and have otherwise performed all of their material
respective obligations, under each such policy.
-26-
<PAGE>
4.19 Real Property Matters.
---------------------
(a) Schedule 4.19 contains a complete and accurate list of all Real
-------------
Property and a complete and accurate list of all material Real Property Leases
(which for purposes of this section shall be deemed to include all Real Property
Leases for tower sites and studio facilities leased by LCG or any of the LCG
Subsidiaries). LCG or the LCG Subsidiaries, as the case may be, own and have
sufficient title to all of the Real Property. The Real Property and the real
property leased pursuant to the Real Property Leases include all material land
used for the conduct of the business and operations of LCG and the LCG
Subsidiaries as they are currently conducted as of the date hereof. LCG has
delivered or made available to Entravision true, complete and copies of the
deeds and other instruments (as recorded) by which either LCG or the LCG
Subsidiaries, as the case may be, acquired such real property interests, and
true, complete and copies of all title insurance policies, opinions, abstracts
and surveys in the possession of LCG relating to such properties or interests.
(b) LCG has delivered or made available to Entravision copies of all
material Real Property Leases (which for purposes of this section shall be
deemed to include all Real Property Leases for tower sites and studio facilities
leased by LCG or any of the LCG Subsidiaries) and copies of all material reports
of any engineers, environmental consultants or other consultants in its
possession relating to any of the Real Property or any of the Real Property
leased pursuant to the Real Property Leases. To the Knowledge of LCG, none of
the Real Property is subject to any material Encumbrance, easement, right-of-
way, building or use restriction, exception, variance, reservation or
limitation.
4.20 Compliance with Environmental Laws. Except as set forth on Schedule
---------------------------------- --------
4.20 or as would not have an LCG Material Adverse Effect, (i) all of the
- ----
operations of LCG and the LCG Subsidiaries are in material compliance with all
Environmental Laws as currently in effect, (ii) neither LCG, the LCG
Subsidiaries nor, to the Knowledge of LCG, any of their predecessors used,
released or disposed of any Hazardous Substance in any manner that could
reasonably be expected to result in material liability to LCG or any of the LCG
Subsidiaries, (iii) to the Knowledge of LCG, none of the property owned, leased
or operated by LCG or the LCG Subsidiaries is contaminated by any Hazardous
Substance, (iv) to the Knowledge of LCG, none of the property owned, leased or
operated by LCG or the LCG Subsidiaries is affected by any condition that could
reasonably be expected to result in liability under any Environmental Law as
currently in effect and (v) to the Knowledge of LCG, there is and has been no
condition, activity or event respecting LCG or the LCG Subsidiaries that could
reasonably be expected to subject Entravision or the Surviving Corporation to
any liability under any Environmental Law as currently in effect.
4.21 Employees. LCG has delivered or made available to Entravision copies
---------
of any and all material employee handbooks and policy manuals applicable to any
of the employees of LCG or any of the LCG Subsidiaries, as well as any and all
material written or oral severance policies applicable to such employees.
-27-
<PAGE>
4.22 Labor Relations; Compliance.
---------------------------
(a) As of the date hereof, except as set forth on Schedule 4.22,
-------------
neither LCG nor any of the LCG Subsidiaries is party to any collective
bargaining or other labor Contract. With respect to LCG and the LCG
Subsidiaries, in the past two (2) years, except as set forth on Schedule 4.22,
-------------
there has not been, there is not presently pending or existing, and to the
Knowledge of LCG, there is not Threatened, (i) any material strike, slowdown,
picketing, work stoppage or employee grievance process, (ii) any material
Proceeding against LCG or any of the LCG Subsidiaries relating to the alleged
violation of any Legal Requirement pertaining to labor relations or employment
matters, including any charge or complaint filed by an employee or union with
the National Labor Relations Board, the Equal Employment Opportunity Commission
or any comparable Governmental Body, organizational activity or other labor or
employment dispute against or affecting the Radio Stations or (iii) any material
application for certification of a collective bargaining agent.
(b) As of the date hereof, to the Knowledge of LCG, no event has
occurred or circumstance exists that could provide the basis for any material
work stoppage or other material labor dispute for the employees of LCG or the
LCG Subsidiaries. To the Knowledge of LCG, there is no material lockout of any
employees of LCG or the LCG Subsidiaries, and no such action is contemplated.
LCG and the LCG Subsidiaries have complied in all material respects with all
material Legal Requirements relating to employment, equal employment
opportunity, nondiscrimination, immigration, wages, hours, benefits, collective
bargaining, the payment of social security and similar taxes, occupational
safety and health and plant closings. Neither LCG nor any of the LCG
Subsidiaries are liable in any material respect for the payment of compensation,
damages, Taxes, fines, penalties or other amounts, however designated, for
failure to comply with any of the foregoing Legal Requirements.
4.23 Intellectual Property.
---------------------
(a) The term "Intellectual Property Assets" means the following
proprietary items used or licensed by LCG or the LCG Subsidiaries as licensee or
licensor in connection with their business: (i) the name and FCC call letters
listed on Schedule 4.23, all fictional business names, trade names, registered
-------------
trademarks and service marks and applications; (ii) patents and patent
applications; (iii) copyrights; (iv) rights in mask works; and (v) confidential
information.
(b) Schedule 4.23 sets forth a complete and accurate list of all
-------------
Applicable Contracts granting rights in material Intellectual Property Assets,
except for any license implied by the sale of a product and perpetual, paid-up
licenses for commonly available software programs under which LCG or the LCG
Subsidiaries are the licensees. There are no outstanding and, to the Knowledge
of LCG, no material Threatened disputes with respect to any Applicable Contract
listed on Schedule 4.23. The Intellectual Property Assets are those used in the
-------------
operation of the businesses of the Radio Stations and the Newspapers as they are
currently
-28-
<PAGE>
conducted. LCG and the LCG Subsidiaries are the owners of or have the right to
use all of the material Intellectual Property Assets.
4.24 Relationships with Related Persons. Except as set forth on Schedule
---------------------------------- --------
4.24, each Contract to which LCG or any of the LCG Subsidiaries, on the one
- ----
hand, and a Related Person, on the other hand, are a party contains terms no
less favorable to LCG or the LCG Subsidiaries, as the case may be, than could
have been obtained by LCG or the LCG Subsidiaries, as the case may be, in an
arm's length transaction between independent parties.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES
OF ENTRAVISION AND ACQUISITION CO.
Entravision and Acquisition Co., jointly and severally, hereby represent
and warrant to LCG as follows:
5.1 Organization and Good Standing. Entravision is a limited liability
------------------------------
company duly organized, validly existing and in good standing under the laws of
the State of Delaware. Acquisition Co. is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
5.2 Authority; No Conflict; Consents.
--------------------------------
(a) Assuming due authorization, execution and delivery of this
Agreement by LCG, this Agreement constitutes the legal, valid and binding
obligation of Entravision and Acquisition Co., enforceable against Entravision
and Acquisition Co. in accordance with its terms, except to the extent that such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights generally or is
subject to general principles of equity. Entravision and Acquisition Co. have
the corporate or limited liability company, as the case may be, right, power,
authority and capacity to execute and deliver this Agreement and to perform
their respective obligations thereunder.
(b) Neither the execution and delivery of this Agreement by
Entravision or Acquisition Co. nor the consummation or performance of any of the
Contemplated Transactions by Entravision or Acquisition Co. will violate, Breach
or conflict with: (i) any provision of the respective Organizational Documents
of Entravision and Acquisition Co.; (ii) any resolution related to the
Contemplated Transactions adopted by the members, stockholders or the Board of
Directors of Entravision or Acquisition Co., as the case may be; (iii) any
material Legal Requirement or material Order to which Entravision or Acquisition
Co. may be subject; or (iv) any material Contract to which Entravision or
Acquisition Co. is a party or by which Entravision or Acquisition Co. may be
bound.
-29-
<PAGE>
(c) Except for the FCC Consent and the Filing required by the HSR Act,
Entravision and Acquisition Co. are not and will not be required to give any
notice to or obtain any material third-party Consents from any Person in
connection with the execution and delivery of this Agreement or the consummation
or performance of any of the Contemplated Transactions, including, without
limitation, the Merger and the transfer of the ownership and operation of the
Radio Stations and the Newspapers to Entravision.
5.3 Broker's or Finder's Fees. Neither Entravision, Acquisition Co. nor
-------------------------
their agents have incurred any Liabilities for broker's or finder's fees or
agents commissions or other similar payment in connection with this Agreement.
5.4 Availability of Funds. As of the date hereof, Entravision has
---------------------
sufficient available funds and/or a banker's commitment for sufficient funds to
consummate the Contemplated Transactions, and on the Closing Date Entravision
will have sufficient funds to enable Entravision and Acquisition Co. to
consummate the Contemplated Transactions. Upon consummation of the Contemplated
Transactions, Entravision and the Surviving Corporation will be solvent.
5.5 No Prior Activities. Except for obligations incurred in connection
-------------------
with its incorporation or organization or the negotiation and consummation of
this Agreement and the Contemplated Transactions, Acquisition Co. has neither
incurred any obligation or liability nor engaged in any business or activity of
any type or kind whatsoever or entered into any agreement or arrangement with
any Person or entity.
5.6 FCC Matters. There are no facts which, under the Communications Act
-----------
of 1934, as amended, or the published rules, regulations or policies of the FCC,
would disqualify Entravision or Acquisition Co. as assignee of the FCC licenses
related to LCG and the LCG Subsidiaries. Entravision and Acquisition Co. are
qualified to consummate the Contemplated Transactions and to certify to their
financial qualifications on FCC Form 314, and they shall so certify in the
applications as originally filed with the FCC.
5.7 Litigation. There is no litigation pending or, to the actual
----------
knowledge, after reasonable inquiry, of Entravision, Threatened against
Entravision or Acquisition Co. or any of their respective Subsidiaries or
Affiliates (i) with respect to which there is a reasonable likelihood of a
determination which would, individually or in the aggregate, have a Material
Adverse Effect on the ability of Entravision or Acquisition Co. to perform their
obligations under this Agreement, or (ii) which seeks to enjoin or obtain
damages in respect of the consummation of the Contemplated Transactions. None
of Entravision, Acquisition Co. or any of their Subsidiaries is subject to any
outstanding Orders which, individually or in the aggregate, would have a
Material Adverse Effect on the ability of Entravision or Acquisition Co. to
perform their obligations under this Agreement.
-30-
<PAGE>
5.8 Limitations of LCG and LCG Subsidiary Representations and Warranties.
--------------------------------------------------------------------
Entravision and Acquisition Co. acknowledge and agree that the representations
and warranties in this Agreement of LCG and the LCG Subsidiaries (and the
related Schedules) do not require disclosure of any matters related to (i) the
Nevada Acquisitions or (ii) the Huth Asset Purchase Agreement.
5.9 Disclaimer. ENTRAVISION AND ACQUISITION CO. EACH ACKNOWLEDGE THAT LCG
----------
HAS NOT MADE AND SHALL NOT BE DEEMED TO HAVE MADE TO ENTRAVISION OR ACQUISITION
CO. ANY REPRESENTATION OR WARRANTY OTHER THAN THOSE EXPRESSLY MADE BY LCG IN
SECTIONS 4.1 THROUGH 4.24 OF THIS AGREEMENT. ADDITIONALLY, ENTRAVISION AND
ACQUISITION CO. EACH ACKNOWLEDGE THAT LCG MAKES NO REPRESENTATION OR WARRANTY TO
ENTRAVISION OR ACQUISITION CO. (1) AS TO MERCHANTABILITY, SUITABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OR QUALITY, WITH RESPECT TO ANY OF THE TANGIBLE ASSETS
BEING SO TRANSFERRED, OR AS TO THE CONDITION OR WORKMANSHIP THEREOF OR THE
ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT (OR ANY OTHER
REPRESENTATION OR WARRANTY REFERRED TO IN SECTION 2-312 OF THE DELAWARE UNIFORM
COMMERCIAL CODE OR THE UNIFORM COMMERCIAL CODE OF ANY OTHER APPLICABLE
JURISDICTION OR IN ANY STATUTE APPLICABLE TO REAL PROPERTY) OR (2) WITH RESPECT
TO ANY PROJECTIONS, ESTIMATES OR BUDGETS HERETOFORE DELIVERED TO OR MADE
AVAILABLE TO ENTRAVISION OR ACQUISITION CO.
ARTICLE 6.
COVENANTS OF LCG
6.1 Access and Investigation. Between the date of this Agreement and the
------------------------
Closing Date, LCG will, and will use Commercially Reasonable Efforts to cause
its Representatives to, (i) afford Entravision and its Representatives
reasonable access during normal business hours to the personnel, properties
(including subsurface testing), Contracts, books and records and other documents
and data of LCG, (ii) furnish Entravision and its Representatives with true,
complete and correct copies of all such Contracts, books and records and other
existing documents and data as they may reasonably request and (iii) furnish
Entravision and its Representatives with such additional financial, operating
and other data and information as they may reasonably request; provided,
however, that LCG obtains any necessary landlord consents thereto, which
consents LCG shall use Commercially Reasonable Efforts to obtain. LCG agrees
that prior to consummation of the Contemplated Transactions, to the extent
available, Entravision will be furnished with such accounting information and
reports to the extent Entravision deems necessary to enable Entravision to
satisfy the disclosure or exemption requirements of any lender providing
financing for the Contemplated Transactions, or state or federal securities
regulators. Nothing in this Section 6.1 or elsewhere in this Agreement shall
require LCG to compile accounting information or prepare reports that it would
not otherwise compile or prepare. All
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<PAGE>
such information is delivered subject to that certain Confidentiality Agreement
dated September 17, 1999 (the "Confidentiality Agreement") by and between
Entravision and LCG.
6.2 Operation of Business. Without the prior written consent of
---------------------
Entravision (which shall not be unreasonably withheld), LCG will not and will
cause each of the LCG Subsidiaries not to engage in any material practice, take
any material action or enter into any material transaction outside the Ordinary
Course of Business (as defined below); provided, however, that nothing herein
shall be deemed to prohibit LCG and the LCG Subsidiaries from consummating in
the Ordinary Course of Business the transactions contemplated by (i) the Nevada
Acquisitions, (ii) the Huth Asset Purchase Agreement and (iii) that certain Work
Letter Agreement dated as of August 26, 1999 by and between EXCL Communications,
Inc. and WTA Campbell Technology Park LLC. Without limiting the generality of
the foregoing, prior to the Closing, LCG will not and will cause each of the LCG
Subsidiaries not to incur trade payables other than in the Ordinary Course of
Business and not to accelerate collection of accounts receivable other than in
the Ordinary Course of Business. For purposes of this Section 6.2 only,
"Ordinary Course of Business" means an action taken by LCG or any of the LCG
Subsidiaries that is consistent with their respective past practices and is
taken in the ordinary course of their respective normal day-to-day operations.
6.3 Negative Covenant. Except as otherwise expressly permitted by this
-----------------
Agreement, between the date of this Agreement and the Closing Date, LCG will
not, without the prior written consent of Entravision, which consent shall not
be unreasonably withheld, take any affirmative action as a result of which any
of the changes or events listed in Section 4.16 above occurs; provided, however,
that nothing contained herein shall be construed to prohibit LCG from taking any
of the actions set forth on Schedule 4.16.
-------------
6.4 Notification. Between the date of this Agreement and the Closing
------------
Date, LCG will promptly notify Entravision in writing if it becomes aware of any
fact or condition that causes or constitutes a material Breach of any of its
representations and warranties in this Agreement, or if it becomes aware of the
occurrence after the date of this Agreement of any fact or condition that would
(except as expressly contemplated by this Agreement) cause or constitute a
material 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. Should any such fact or condition be disclosed to Entravision by LCG
as set forth above, or any fact or condition that is discovered by Entravision
independently prior to the Closing Date, require any change in the Schedules if
the Schedules were dated the date of the occurrence or discovery of any such
fact or condition between the date of this Agreement and the Closing Date, LCG
will promptly deliver to Entravision a supplement to the Schedules specifying
such change.
6.5 No Negotiation. Until the Closing Date, or such time, if any, as this
--------------
Agreement is terminated pursuant to Article 9 below, LCG will not, and will
cause its Representatives not to, directly or indirectly solicit, initiate or
encourage any inquiries or proposals from, discuss or negotiate with, provide
any non-public information to or consider the merits of any unsolicited
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<PAGE>
inquiries or proposals (except with respect to any unsolicited inquiry or
proposal received after the date hereof only to the extent necessary for the
Board of Directors of LCG to discharge its fiduciary duties under applicable
provisions of the Delaware Code based upon the good faith belief of the Board of
Directors of LCG that the terms of such unsolicited inquiry or proposal are
superior to the terms of this Agreement) from, any Person (other than
Entravision, Acquisition Co. or their Related Persons) relating to any
transaction involving the sale of the business or assets (other than in the
ordinary course of business or as set forth on Schedule 4.16) of LCG, or any
-------------
merger, consolidation, business combination, sale of ownership interests or
similar transaction involving LCG or the Shares.
6.6 Commercially Reasonable Efforts. Between the date of this Agreement
-------------------------------
and the Closing Date, LCG will use its Commercially Reasonable Efforts to cause
the conditions in Section 8.1 below to be satisfied.
6.7 Applications for FCC Consent. Within ten (10) days after the full
----------------------------
execution of this Agreement, LCG will file (or cooperate with Entravision to
file) such applications as are required with the FCC requesting its written
consent to the assignment of the FCC licenses held by LCG (or any of the LCG
Subsidiaries, as the case may be) from LCG (or any of the LCG Subsidiaries, as
the case may be) to Holdings (the "FCC Consent"), which applications shall be in
form and substance acceptable for filing with the FCC. LCG will diligently
take, or cooperate in the taking of, all steps that are necessary, proper or
desirable to expedite the preparation of such applications and their prosecution
to a favorable conclusion. LCG will promptly provide Entravision with a true,
complete and correct copy of any pleading or other document served on it
relating to such applications. If the FCC Consent imposes any condition on LCG,
LCG shall use its Commercially Reasonable Efforts to comply with such condition
prior to the Closing. If reconsideration or judicial review is sought with
respect to the FCC Consent, and such reconsideration or review relates to LCG or
the operations of the Radio Stations, LCG shall vigorously oppose such
reconsideration or judicial review at its own expense.
6.8 Filing Under HSR Act. Promptly after full execution of this
--------------------
Agreement, LCG agrees to make a separate filing of the Notification and Report
Form pursuant to the HSR Act with respect to the Contemplated Transactions as
promptly as practicable and supply any additional information or documentary
material that may be required under the HSR Act and to take all other actions as
reasonably necessary to cause the expiration or termination of the applicable
waiting period under the HSR Act as soon as possible. LCG will use its
Commercially Reasonable Efforts to cooperate in all respects with Entravision in
conjunction with any such filing submission or other inquiry and to promptly
notify Entravision of any communication received from or given to the Antitrust
Division of the Department of Justice or the Federal Trade Commission and to
permit the other party to review such communication.
6.9 Third-Party Consents. LCG shall use its Commercially Reasonable
--------------------
Efforts to obtain, or cause to be obtained prior to the Closing Date, any and
all required third-party Consents listed on Schedule 4.2 to the extent
------------
reasonably requested by Entravision.
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<PAGE>
6.10 No Inconsistent Action. Between the date of this Agreement and the
----------------------
Closing Date, LCG will not take any action which is materially inconsistent with
their obligations under this Agreement, or that would hinder or delay the
consummation of the Contemplated Transactions. LCG will not take any action
that would disqualify or impair LCG as the assignor of the Radio Stations or as
owners and operators of the Radio Stations.
6.11 Environmental Audit/Engineering/Soils Investigation. Provided that
---------------------------------------------------
LCG has obtained any necessary landlord consents thereto, which consents LCG
shall use Commercially Reasonable Efforts to obtain, at its sole option, within
forty-five (45) days of the execution of this Agreement, Entravision may conduct
and complete a Phase I (or Phase II, if necessary) environmental audit and an
engineering and soils and geotechnical investigation of any of the Real Property
(the "Environmental Audit") to be conducted by a company selected by Entravision
(and reasonably satisfactory to LCG) and at Entravision's sole expense. If the
Environmental Audit discloses the presence of any Hazardous Substances on any
Real Property in violation of any Environmental Laws, Entravision may in its
sole and absolute discretion and at its own expense, promptly comply with the
applicable Environmental Laws to bring such property into compliance. If
Entravision does not properly and timely exercise its termination rights
pursuant to Section 9.1(e) below, the results of such Environmental Audit shall
be deemed, without further action by any of the parties hereto, to be disclosed
on the Schedules to this Agreement.
6.12 Option Notices. Prior to the Closing, LCG shall comply with the
--------------
procedural provisions (including notice provisions) of each Option Agreement
applicable to the Options in connection with the Contemplated Transactions. At
the Closing Date, each outstanding Option shall be cancelled and the holder
thereof shall only be entitled to receive at the Closing Date from LCG in
consideration for such cancellation a cash payment of an amount equal to (i) the
excess, if any, of the Per Share Merger Consideration minus (ii) the exercise
price to be paid upon exercise of such Option pursuant to such Option Agreement
(the "Option Amount") (subject to withholding required under all applicable
laws). Prior to the Closing Date, the Board of Directors of LCG will take any
corporate action necessary to effectuate the provisions of this Section 6.12.
6.13 Board Recommendation. LCG shall take all action necessary in
--------------------
accordance with the Delaware Code and its Certificate of Incorporation and
Bylaws to convene the Meeting on the date set forth in the notice of such
Meeting (and in no event later than twenty-five (25) days after the date of the
notice of the Meeting) in order to consider and vote upon the Merger, and the
Board of Directors of LCG shall not adjourn, postpone or in any way prevent the
Meeting from occurring on the date set forth in such notice. At the Meeting,
the Board of Directors of LCG shall recommend that the Stockholders vote to
approve the Merger and this Agreement; provided, however, that if, after the
date hereof, LCG has received an unsolicited inquiry or proposal, then such
recommendation may be withdrawn, modified or amended, after the Board of
Directors has considered such unsolicited inquiry or proposal, solely to the
extent that the Board of Directors of LCG concludes, in good faith after
consultation with its outside financial advisor,
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and upon advice of outside legal counsel, that it is inconsistent with such
Board's fiduciary duties under applicable law not to do so; provided, further,
that if the events set forth in the preceding clause do occur, the Board of
Directors of LCG shall nonetheless put the approval of the Merger and this
Agreement to a vote of the Stockholders.
ARTICLE 7.
COVENANTS OF ENTRAVISION AND ACQUISITION CO.
7.1 Notification. Between the date of this Agreement and the Closing
------------
Date, Entravision will promptly notify LCG in writing if Entravision become
aware of any fact or condition that causes or constitutes a Breach of any of the
representations and warranties of Entravision or Acquisition Co. in this
Agreement, or if Entravision becomes aware of the occurrence after the date of
this Agreement of any fact or condition that 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.
7.2 Commercially Reasonable Efforts. Between the date of this Agreement
-------------------------------
and the Closing Date, Entravision and Acquisition Co. will use their
Commercially Reasonable Efforts to cause the conditions in Section 8.2 below to
be satisfied.
7.3 Applications for FCC Consent. Within ten (10) days after the full
----------------------------
execution of this Agreement, Entravision will file (or cooperate with LCG to
file) such applications as are required in connection with the FCC Consent.
Entravision will diligently take, or cooperate in the taking of, all steps that
are necessary, proper or desirable to expedite the preparation of such
applications and their prosecution to a favorable conclusion. Entravision will
promptly provide LCG with a true, complete and correct copy of any pleading or
other document served on it relating to such applications. If the FCC Consent
imposes any condition on Entravision, Acquisition Co. or Holdings, Entravision,
Acquisition Co. or Holdings shall use their Commercially Reasonable Efforts to
comply with such condition prior to the Closing. If reconsideration or judicial
review is sought with respect to the FCC Consent, and such reconsideration or
review relates to Entravision or Acquisition Co. or Holdings, Entravision or
Acquisition Co. or Holdings, as the case may be, shall vigorously oppose such
reconsideration or judicial review at their own expense.
7.4 Filing Under HSR Act. Promptly after full execution of this
--------------------
Agreement, Entravision agrees to make a separate filing of the Notification and
Report Form pursuant to the HSR Act with respect to the Contemplated
Transactions as promptly as practicable and supply any additional information or
documentary material that may be required under the HSR Act and to take all
other actions as reasonably necessary to cause the expiration or termination of
the applicable waiting period under the HSR Act as soon as possible.
Entravision will use its Commercially Reasonable Efforts to cooperate in all
respects with LCG in conjunction with any such filing submission or other
inquiry and to promptly notify LCG of any communication
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received from or given to the Antitrust Division of the Department of Justice or
the Federal Trade Commission and to permit the other party to review such
communication.
7.5 No Inconsistent Action. Entravision and Acquisition Co. will not take
----------------------
any action which is materially inconsistent with their obligations under this
Agreement, or that would hinder or delay the consummation of the Contemplated
Transactions. Entravision and Acquisition Co. will not take any action that
would disqualify or impair Entravision or Holdings as the assignees of the Radio
Stations or as the owner and operator of the Radio Stations.
7.6 Certificate of Incorporation.
----------------------------
(a) At the Closing, the Certificate of Incorporation and Bylaws of the
Surviving Corporation shall contain provisions providing for exculpation of
director and officer liability and indemnification to the fullest extent
permitted by the Delaware Code. Such provisions in the Certificate of
Incorporation of the Surviving Corporation shall not be amended, repealed or
otherwise modified until April 1, 2002 in any manner that would in any material
respect adversely affect the rights thereunder of individuals who at or prior to
the Closing Date were directors, officers, employees or agents of LCG, unless
such modification is required by law.
(b) This Section 7.6 shall survive the Closing Date, is intended to
benefit LCG, the Surviving Corporation and each of the persons referred to in
paragraph (a) of this Section and shall be binding on all successors and assigns
of the Surviving Corporation.
7.7 Escrows and Deposits. Entravision and the Surviving Corporation agree
--------------------
to keep the LCG Representatives reasonably informed as to the status of any
outstanding portion of the Escrows and Deposits and to promptly provide the LCG
Representatives with any disbursements, notices or other materials Entravision
or the Surviving Corporation receive with respect thereto. Entravision and the
Surviving Corporation acknowledge and agree that the LCG Representatives shall
direct and control any Proceedings relating to the Escrows and Deposits.
Subject to the Confidentiality Agreement, and at the expense of the LCG
Representatives (solely from the Escrow Account), each of Entravision and the
Surviving Corporation shall provide the LCG Representatives with such
information and records and make such of its respective officers, directors,
employees and agents available as may reasonably be requested by the LCG
Representatives in connection with any Proceedings relating to the Escrows and
Deposits.
ARTICLE 8.
CONDITIONS PRECEDENT TO PARTIES' OBLIGATIONS TO CLOSE
8.1 Conditions Precedent to the Obligation of Entravision and Acquisition
---------------------------------------------------------------------
Co. to Close. The obligation of Entravision and Acquisition Co. to effect the
- ------------
Contemplated Transactions and to take the other actions required to be taken by
Entravision and Acquisition
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Co. at the Closing is subject to the satisfaction, at or prior to the Closing,
of each of the following conditions (any of which may be waived by Entravision,
in whole or in part, where permissible):
(a) Accuracy of Representations and Warranties. All of the
------------------------------------------
representations and warranties of LCG in this Agreement must be accurate in all
respects as of the date of this Agreement, except for such inaccuracies as would
not have an LCG Material Adverse Effect. Each of the following representations
and warranties of LCG in this Agreement must be accurate when made, and as of
the Closing Date as if made on the Closing Date, except for such inaccuracies as
would not have an LCG Material Adverse Effect: Sections 4.1, 4.2(a), the first
sentence through clause (i) of 4.2(b), 4.3, 4.4 (except for the last sentence),
4.5 (except that if any Options are exercised between the date of execution of
this Agreement and the Closing Date, the number of outstanding Options and the
number of outstanding Shares set forth in this Agreement and the Schedules
hereto shall be deemed to be adjusted accordingly), 4.8, 4.11, 4.14, 4.16 and
4.24.
(b) Performance. All of the material covenants and obligations that
-----------
LCG is required to perform or to comply with pursuant to this Agreement at or
prior to the Closing must have been duly performed and complied with in all
material respects, including, without limitation, the obligations of LCG
pursuant to Section 3.2 above.
(c) Closing Certificate. Entravision shall have received from a duly-
-------------------
authorized officer of LCG a certificate, dated as of the Closing, certifying
that the conditions specified in Sections 8.1(a) and 8.1(b) above have been
fulfilled.
(d) No Order. There shall not be in effect any Order of a
--------
Governmental Body which prevents, makes illegal or otherwise prohibits any of
the Contemplated Transactions.
(e) No Prohibition. There shall not be in effect any Legal
--------------
Requirement that prevents, makes illegal or otherwise prohibits any of the
Contemplated Transactions.
(f) Consents. Subject to Section 3.1 above, the FCC Consent shall
--------
have become a Final Order. The applicable waiting period under the HSR Act
shall have expired or been terminated.
(g) Stockholder Approval. The Stockholders shall have approved the
--------------------
Merger and this Agreement at the Meeting in accordance with the Delaware Code
and the Certificate of Incorporation and Bylaws of LCG.
(h) Other Documents. Entravision shall have received such other
---------------
agreements, receipts, pay-off letters and other instruments as it may reasonably
require to evidence payment and satisfaction in full of, or release from, all
obligations of LCG and the LCG Subsidiaries in respect of indebtedness for
borrowed money set forth on Schedule 4.10, including, without limitation, the
-------------
obligations of LCG with respect to the Credit Agreement, the 1997 Debentures
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and the 1998 Debentures, and LCG shall have delivered or caused to be delivered
to Entravision the original promissory note(s) or other instruments evidencing
such indebtedness marked "cancelled," the release and termination of any and all
security interests and liens on the assets of LCG or any of the LCG Subsidiaries
issued in connection with such indebtedness and such other documentation
reasonably requested by Entravision's counsel as necessary to evidence full
repayment of such indebtedness and release of all legal rights and remedies in
connection therewith.
8.2 Conditions Precedent to the Obligation of LCG to Close. The
------------------------------------------------------
obligation of LCG to effect the Contemplated Transactions and to take the other
actions required to be taken by LCG at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by LCG, in whole or in part, where permissible):
(a) Accuracy of Representations and Warranties. All of the
------------------------------------------
representations and warranties of Entravision and Acquisition Co. in this
Agreement must be accurate in all respects when made, and as of the Closing Date
as if made on the Closing Date, except for such inaccuracies as would not have a
Material Adverse Effect on Entravision or Acquisition Co.
(b) Performance. All of the material covenants and obligations that
-----------
Entravision and Acquisition Co. are required to perform or to comply with
pursuant to this Agreement at or prior to the Closing must have been performed
and complied with in all material respects, including, without limitation, the
obligations of Entravision and Acquisition Co. pursuant to Section 3.3 above.
(c) Closing Certificate. LCG shall have received from a duly-
-------------------
authorized officer of Entravision a certificate, dated as of the Closing,
certifying that the conditions specified in Sections 8.2(a) and 8.2(b) above
have been fulfilled.
(d) No Order. There shall not be in effect any Order of a
--------
Governmental Body which prevents, makes illegal or otherwise prohibits any of
the Contemplated Transactions.
(e) No Prohibition. There shall not be in effect any Legal
--------------
Requirement that prevents, makes illegal or otherwise prohibits any of the
Contemplated Transactions.
(f) Consents. Subject to Section 3.1 above, the FCC Consent shall
--------
have become a Final Order. The applicable waiting period under the HSR Act
shall have expired or been terminated.
(g) Stockholder Approval. The Stockholders shall have approved the
--------------------
Merger and this Agreement at the Meeting in accordance with the Delaware Code
and the Certificate of Incorporation and Bylaws of LCG.
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ARTICLE 9.
TERMINATION
9.1 Termination Events. This Agreement may, by written notice given prior
------------------
to or at the Closing, be terminated:
(a) by Entravision: (i) if any of the material conditions set forth in
this Agreement, including, without limitation, the material conditions set forth
in Section 8.1 above, have not been materially satisfied as of the Closing Date
or if satisfaction of such material conditions is or becomes impossible (other
than through the failure of Entravision or Acquisition Co. to comply with their
obligations under this Agreement) and Entravision has not waived such condition
in writing on or before the Closing Date; (ii) if LCG remains in default in any
material respect in the observance or in the due and timely performance of any
of its material covenants, agreements, representations or warranties contained
herein after fifteen (15) days written notice and opportunity to cure; or (iii)
if the FCC dismisses or denies the application for the FCC Consent and such
order is a Final Order or if the FCC designates the applications for FCC Consent
for an evidentiary hearing;
(b) by LCG: (i) if any of the material conditions set forth in this
Agreement, including, without limitation, the material conditions set forth in
Section 8.2 above, have not been materially satisfied as of the Closing Date or
if satisfaction of such material conditions is or becomes impossible (other than
through the failure of LCG to comply with its obligations under this Agreement)
and LCG has not waived such condition in writing on or before the Closing Date;
(ii) if Entravision and/or Acquisition Co. remains in default in any material
respect in the observance or in the due and timely performance of any of their
material covenants, agreements, representations or warranties contained herein
after fifteen (15) days written notice and opportunity to cure; (iii) if the FCC
dismisses or denies the application for the FCC Consent and such order is a
Final Order or if the FCC designates the applications for FCC Consent for an
evidentiary hearing; or (iv) if, upon satisfaction or waiver of all of
Entravision and Acquisition Co.'s conditions to close set forth in this
Agreement, Entravision does not have adequate available funds to pay the
Aggregate Merger Consideration;
(c) by mutual consent of Entravision and LCG;
(d) by either Entravision or LCG if the Closing has not occurred
(other than through the failure of any party seeking to terminate this Agreement
to materially comply with its obligations under this Agreement) on or before the
date which is six (6) months from the date of this Agreement; provided, however,
that the Closing Date shall be extended for four (4) additional months if the
only condition to the Closing which has not been satisfied or waived is the
receipt of the FCC Consent as a Final Order, or such later date as the parties
may agree upon; provided, however, that this section may not be utilized by any
party at such time as such party is in Breach of or default under this Agreement
in any material respect; or
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<PAGE>
(e) by Entravision within forty-five (45) days from the date of this
Agreement if the Environmental Audit discloses any matters which would have an
LCG Material Adverse Effect unless LCG agrees to fully indemnify Entravision and
the Surviving Corporation for any Liability arising from such matter.
(f) Notwithstanding anything in the foregoing to the contrary, no
party that is in material Breach of this Agreement shall be entitled to
terminate this Agreement except with the consent of the other parties hereto.
9.2 Rights of Parties for Nonperformance or Upon Termination.
--------------------------------------------------------
(a) If LCG does not have a right to terminate under Section 9.1 above
and all conditions precedent to LCG's obligation to close under Section 8.2
above have been satisfied, but LCG refuses to close the Contemplated
Transactions, Entravision shall have the right to waive any grounds it may have
to terminate under Section 9.1 above and to seek specific performance of the
obligation of LCG to consummate the Contemplated Transactions. LCG acknowledges
and agrees that the Radio Stations and the Newspapers are unique assets and LCG
expressly agrees that monetary damages may be inadequate to compensate
Entravision for the refusal of LCG to perform the obligations for which the
remedy of specific performance is made available herein. Accordingly, LCG
acknowledges and agrees that such refusals to perform may cause irreparable
injury to Entravision and that Entravision shall be entitled to seek injunctive
relief for specific performance of the obligations specifically listed in this
Section 9.2. Notwithstanding anything herein to the contrary, LCG's monetary
liability to Entravision and Acquisition Co. in the event of a termination of
this Agreement pursuant to Section 9.1(a) above shall in no event exceed Seven
Million Dollars ($7,000,000).
(b) If this Agreement is terminated for any reason other than by LCG
under Section 9.1(b)(ii) or 9.1(b)(iv) above, the parties acknowledge and agree
that Entravision shall be entitled to the return of the entire Escrow Deposit,
plus interest. If this Agreement is terminated by LCG under Section 9.1(b)(ii)
or 9.1(b)(iv) above, the parties acknowledge and agree that LCG will suffer
damages that are not practicable to ascertain. Accordingly, in such event, LCG
shall be entitled to the entire Escrow Deposit as liquidated damages, payable
(i) if the Escrow Deposit is in the form of immediately available funds, by
release of the entire Escrow Deposit (plus interest) to LCG, and (ii) if the
Escrow Deposit is in the form of the Earnest Money Letter of Credit, by LCG
drawing upon the Earnest Money Letter of Credit. In the event of a dispute
concerning the right of LCG to receive the liquidated damages provided for
herein, the prevailing party shall be entitled to receive (in addition to the
right to draw upon the Earnest Money Letter of Credit or the release of the
entire Seven Million Dollars ($7,000,000) plus interest in funds) interest from
Entravision and Acquisition Co., on the one hand, or from LCG, on the other
hand, at the rate of eight percent (8%) per annum from the date of purported
termination of this Agreement until the date on which such accrued and unpaid
interest is paid in full. The parties agree that the foregoing liquidated
damages are reasonable considering all the circumstances existing as of the date
hereof and constitute the parties' good faith estimate of the actual damages
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reasonably expected to result from the termination of this Agreement by LCG
pursuant to Section 9.1(b)(ii) or 9.1(b)(iv) above. In such event, Entravision
shall immediately instruct the Escrow Agent to deliver the Earnest Money Letter
of Credit to LCG to permit it to draw upon the Earnest Money Letter of Credit or
to release the funds. LCG AGREES THAT, TO THE FULLEST EXTENT PERMITTED BY LAW,
THE RIGHT TO DRAW UPON THE EARNEST MONEY LETTER OF CREDIT OR THE RELEASE OF THE
SEVEN MILLION DOLLARS ($7,000,000), AND THE RIGHT TO RECEIVE INTEREST, PROVIDED
IN THIS SECTION 9.2(b) SHALL BE ITS SOLE AND EXCLUSIVE REMEDY IF THE CLOSING
DOES NOT OCCUR WITH RESPECT TO ANY DAMAGES WHATSOEVER THAT LCG MAY SUFFER OR
ALLEGE TO SUFFER AS A RESULT OF ANY CLAIM OR CAUSE OF ACTION ASSERTED BY LCG
RELATING TO OR ARISING FROM BREACHES OF THE REPRESENTATIONS, WARRANTIES OR
COVENANTS OF ENTRAVISION OR ACQUISITION CO. CONTAINED IN THIS AGREEMENT AND TO
BE MADE OR PERFORMED AT OR PRIOR TO THE CLOSING. In the event of any dispute
between the parties with respect to the right of LCG to receive the liquidated
damages provided for herein, the prevailing party shall be entitled to receive
from the other, on demand, its reasonable attorney's fees in connection with the
final resolution of such dispute.
(c) If this Agreement is terminated as provided in this Article 9,
the Contemplated Transactions shall be abandoned without further action, rights
or obligations by the parties hereto to one another, and all filings,
applications and other submissions made hereunder shall, to the extent
practicable, be withdrawn from the persons to which they were made, except that
the last sentence of Section 6.1, Sections 13.1, 13.3, 13.4, 13.13, 13.14 and
13.17, and this Section 9.2 and the Confidentiality Agreement shall remain in
effect, and provided that nothing herein shall relieve any party from liability
for any breach of any covenant or agreement in this Agreement prior to such
termination.
ARTICLE 10.
TAX RETURNS AND PAYMENTS
10.1 Returns.
-------
(a) Income Tax Returns.
------------------
(i) Pre-Cut-Off Date Returns. The LCG Representatives shall
------------------------
cause to be prepared and Entravision shall cause to be timely filed all required
federal, state, local and foreign Income Tax Returns of LCG and the LCG
Subsidiaries for any period which ends on or before December 31, 1999 (the "Cut-
Off Date"), for which returns have not been filed as of the Closing Date. Such
Tax Returns shall, to the extent not otherwise required by law, be prepared in a
manner consistent with LCG's past practice (including any Tax elections and
methods of accounting). Entravision and its Related Persons, including the
Surviving Corporation after the Closing Date, shall reasonably cooperate with
the LCG Representatives and their Related Persons in the preparation of such
returns. The LCG Representatives shall submit such returns to
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Entravision not less than three (3) days before the due date (including
extensions) for filing such returns.
(ii) Straddle Returns. Entravision shall cause to be prepared
----------------
and timely filed all required federal, state, local and foreign Income Tax
Returns of, or which include, LCG and the LCG Subsidiaries for taxable periods
beginning before and ending after the Cut-Off Date ("Straddle Returns") which
have not been filed as of the Closing Date. Such Tax Returns shall, to the
extent not otherwise required by law, be prepared in a manner consistent with
LCG's past practice (including any Tax elections and methods of accounting). At
least fifteen (15) days prior to the filing of any Straddle Returns required to
be caused to be filed by Entravision pursuant to the preceding sentence,
Entravision shall submit for their approval copies of such returns to the LCG
Representatives which approval shall not be unreasonably withheld. Entravision
shall take no position on such returns that would adversely affect the
Stockholders after the Closing Date unless such position would be reasonable in
the case of a Person that owned LCG and the LCG Subsidiaries both before and
after the Closing Date.
(b) Other Tax Returns.
-----------------
(i) Pre-Closing Date Returns. The LCG Representatives shall
------------------------
cause to be prepared and Entravision shall cause to be timely filed all required
Other Tax Returns of LCG and the LCG Subsidiaries for any period which ends on
or before the Closing Date for which returns have not been filed as of the
Closing Date. Such Tax Returns shall, to the extent not otherwise required by
law, be prepared in a manner consistent with LCG's past practice (including any
Tax elections and methods of accounting). Entravision and its Related Persons,
including the Surviving Corporation after the Closing Date, shall reasonably
cooperate with the LCG Representatives and their Related Persons in the
preparation of such returns. The LCG Representatives shall submit such returns
to Entravision not less than three (3) days before the due date (including
extensions) for filing such returns.
(ii) Straddle Returns. Entravision shall cause to be prepared
----------------
and timely filed all required Other Tax Returns of, or which include, LCG and
the LCG Subsidiaries for taxable periods beginning before and ending after the
Closing Date ("Other Tax Straddle Returns") which have not been filed as of the
Closing Date. Such Tax Returns shall, to the extent not otherwise required by
law, be prepared in a manner consistent with LCG's past practice (including any
Tax elections and methods of accounting). At least fifteen (15) days prior to
the filing of any Other Tax Straddle Returns required to be caused to be filed
by Entravision pursuant to the preceding sentence, Entravision shall submit for
their approval copies of such returns to the LCG Representatives which approval
shall not be unreasonably withheld. Entravision shall take no position on such
returns that would adversely affect the Stockholders after the Closing Date
unless such position would be reasonable in the case of a Person that owned LCG
and the LCG Subsidiaries both before and after the Closing Date.
10.2 Payments.
--------
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(a) Income Tax Payments. Entravision shall timely cause to be paid
-------------------
all federal, state, local and foreign Income Taxes with respect to the Income
Tax Returns to be caused to be filed by Entravision pursuant to Section 10.1(a)
above. Such Income Taxes to be caused to be paid by Entravision, to the extent
attributable to any period or portion of any period ending on or before the Cut-
Off Date, shall be referred to herein as "Pre-Cut-Off Date Taxes." Prior to the
Closing, LCG shall pay to Entravision an amount equal to the Pre-Cut-Off Date
Taxes due and not yet paid or reserved for on the Financial Statements with
respect to any such returns caused to be filed by Entravision. Where the Pre-
Cut-Off Date Taxes involve a period which begins before and ends after the Cut-
Off Date (a "Straddle Period"), such Pre-Cut-Off Date Taxes shall be calculated
as through the taxable year of LCG terminated at the close of business on the
Cut-Off Date.
(b) Other Tax Payments. Entravision shall timely cause to be paid
------------------
all Other Taxes with respect to the returns to be caused to be filed by
Entravision pursuant to Section 10.1(b) above. Such Other Taxes to be caused to
be paid by Entravision, to the extent attributable to any period or portion of a
period ending on or before the Closing Date, shall be referred to herein as
"Pre-Closing Date Taxes." LCG shall pay to Entravision an amount equal to the
Pre-Closing Date Taxes due and not yet paid or reserved for on the Financial
Statements with respect to any such returns caused to be filed by Entravision.
Where a Pre-Closing Date Tax involves a period which begins before and ends
after the Closing Date (an "Other Tax Straddle Period"), such Pre-Closing Date
Tax shall be equal to the amount of such Other Tax for the taxable year,
multiplied by a fraction, the numerator of which shall be the number of days
from the beginning of the taxable year through the Closing Date and the
denominator of which shall be the number of days in the taxable year.
Any amounts owed by LCG with respect to Tax Returns filed pursuant to
Section 10.1(a)(i) or 10.1(b)(i) above shall be paid to Entravision by LCG ten
(10) days prior to the due date of each such Tax Return. Prior to the Closing,
any amounts owed by LCG to Entravision pursuant to this Section 10.2
attributable to Straddle Returns or Other Tax Straddle Returns shall be paid by
LCG within the later of ten (10) days of Entravision's request therefor or ten
(10) days prior to the date on which Entravision is required to cause to be paid
the related Tax liability. All amounts due from LCG for periods prior to the
Closing and not paid in a timely fashion shall bear interest until paid at the
lesser of ten percent (10%) per annum or the highest rate allowed by law.
10.3 Refunds.
-------
(a) Income Taxes. Any refunds or credits of federal, state, local
------------
or foreign Income Taxes (including any interest thereon) received by or credited
to LCG or any of the LCG Subsidiaries attributable to periods ending on or prior
to the Cut-Off Date or to Straddle Periods (in the case of Straddle Periods,
which were not borne by Entravision) (collectively, the "Stockholders' Refunds")
shall be for the benefit of the Stockholders, and Entravision shall use its
Commercially Reasonable Efforts at the Stockholders' expense to obtain any of
the
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Stockholders' Refunds and shall cause the Surviving Corporation to pay over to
the LCG Representatives any of the Stockholders' Refunds, net of any Tax costs
to Entravision or any of its Related Persons, including the Surviving
Corporation, immediately upon receipt thereof. In addition, if the Cut-Off Date
Taxes with respect to a Straddle Period are conclusively determined to be less
than the payments previously made by or credited to LCG or any of the LCG
Subsidiaries with respect to such Straddle Period, Entravision shall cause the
Surviving Corporation to pay to the LCG Representatives, on behalf of the
Stockholders, the excess of such previous payments over such Pre-Cut-Off Date
Taxes within ten (10) days of the Surviving Corporation receiving the benefit of
such excess payments through a reduction in any Tax payment required to be made
by the Surviving Corporation with respect to any period beginning after the Cut-
Off Date.
(b) Other Taxes. Any refunds or credits of Other Taxes (including
-----------
any interest thereon) received or credited to LCG or any of the LCG Subsidiaries
attributable to periods ending on or prior to the Closing Date or to Other Tax
Straddle Periods (in the case of Other Tax Straddle Periods, which were not
borne by Entravision) (collectively, the "Stockholders' Other Tax Refunds")
shall be for the benefit of the Stockholders, Entravision shall use its
Commercially Reasonable Efforts at the Stockholders' expense to obtain any of
the Stockholders' Other Tax Refunds and shall cause the Surviving Corporation to
pay over to the LCG Representatives any of the Stockholders' Other Tax Refunds,
net of any Tax costs to Entravision or any of its Related Persons, including the
Surviving Corporation, immediately upon receipt thereof. In addition, if the
Pre-Closing Date Taxes with respect to an Other Tax Straddle Period are
conclusively determined to be less than the payments previously made by or
credited to LCG or any of the LCG Subsidiaries with respect to such Other Tax
Straddle Period, Entravision shall cause the Surviving Corporation to pay to the
LCG Representatives, on behalf of the Stockholders, the excess of such previous
payments over such Pre-Closing Date Taxes within ten (10) days of the Surviving
Corporation receiving the benefit of such excess payments through a reduction in
any Tax payment required to be made by the Surviving Corporation after the
Closing Date.
10.4 Tax Cooperation. Subject to the Confidentiality Agreement,
---------------
Entravision and the LCG Representatives shall provide the other party with such
information and records and make such of its officers, directors, employees and
agents available as may reasonably be requested by such other party in
connection with the preparation of any Tax Return or any audit or other
proceeding that relates to LCG or any LCG Subsidiary. Entravision shall prepare
and provide to the LCG Representatives such federal, state, local and foreign
tax information packages as the LCG Representatives shall reasonably request for
use in preparing any Tax Return that relates to LCG or any LCG Subsidiary. Such
information packages shall be completed by Entravision and provided to the LCG
Representatives within sixty (60) days after a request therefor. Notwithstanding
any other provisions hereof, each party shall bear its own expenses in complying
with the foregoing provisions.
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10.5 Entravision's Taxes. Notwithstanding anything in this Agreement to
-------------------
the contrary, Entravision shall pay, or cause to be paid, and Entravision and
the Surviving Corporation shall jointly and severally indemnify the LCG
Representatives, the Stockholders, the Option Holders and their affiliates
against and hold them harmless from any liability for Taxes arising from any
action or failure to act by Entravision or any of their Related Persons
(including the Surviving Corporation) from and after the Closing.
10.6 Taxes of Other Persons. Solely out of the funds in the Escrow
----------------------
Account, the Stockholders and the Option Holders agree to indemnify Entravision
and the Surviving Corporation for any Liability to the Surviving Corporation for
Taxes attributable to LCG or any of the LCG Subsidiaries as a transferee or
successor or by Contract, for the periods ending on or before the Cut-Off Date
with respect to Income Taxes (and in the case of Other Taxes, for the periods
ending on or before the Closing Date).
10.7 Amended Returns. Entravision shall not amend or cause to be amended
---------------
any Tax Return relating to any taxable period or portion of any taxable period
ending on or before the Closing Date without first obtaining the written consent
of the LCG Representatives, which shall not be unreasonably withheld.
ARTICLE 11.
INDEMNIFICATION; REMEDIES
11.1 Survival. All representations, warranties, covenants and obligations
--------
in this Agreement, the Schedules and any other certificate or document delivered
pursuant to this Agreement will survive the Closing until April 1, 2002.
11.2 Indemnification by Stockholders and Option Holders. Each of the
--------------------------------------------------
Stockholders and the Option Holders hereby agrees to indemnify, defend and hold
harmless (solely and exclusively out of funds on deposit in the Escrow Account
and subject to the limitations contained herein) Entravision, Acquisition Co.
and the Surviving Corporation, and their respective Representatives, successors,
assigns, stockholders, members, officers, directors, agents, employees,
controlling Persons and affiliates (collectively, the "Entravision Indemnified
Parties") from and against, and will pay to the Entravision Indemnified Parties
the amount of any loss, liability, claim, damage (including incidental and
consequential damages), cost or expense (including costs of investigation and
defense and reasonable out-of-pocket attorney's fees and expenses), whether or
not involving a third-party claim (collectively, "Damages") (provided, however,
that Damages shall be calculated net of the amount of insurance proceeds or
third-party contribution or indemnification payments actually paid to such
indemnified party as reimbursement for such Damages), arising, directly or
indirectly, from or in connection with (i) any Breach of any representation,
warranty, covenant, obligation or agreement made by LCG in this Agreement, the
Schedules or any other certificate or document delivered by LCG pursuant to this
Agreement, (ii) any payments by Entravision or the Surviving Corporation to
holders of Dissenting Shares (a) arising from a final non-appealable court award
that has been entered
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against the Surviving Corporation with respect to Dissenting Shares or (b)
arising from a final, written, binding settlement agreement with respect to
Dissenting Shares, (iii) any claim by a party for broker's or finder's fees or
commissions, or similar payment or remuneration in respect of the Contemplated
Transactions, (iv) the sale or divestiture of Station KMYC(AM), Marysville,
California pursuant to the Huth Asset Purchase Agreement and (v) the Portland
Land Sale.
11.3 Indemnification by Entravision. Entravision hereby agrees to
------------------------------
indemnify, defend and hold harmless each of the LCG Representatives,
Stockholders, the Option Holders and their respective Representatives,
successors, assigns, stockholders, members, officers, directors, agents,
employees, controlling Persons and affiliates (collectively, the "Stockholder
Indemnified Parties") from and against, and will pay to the Stockholder
Indemnified Parties the amount of, any Damages arising, directly or indirectly,
from or in connection with (i) any Breach of any representation, warranty,
covenant, obligation or agreement made by Entravision or Acquisition Co. in this
Agreement or any other certificate or document delivered by Entravision or
Acquisition Co. pursuant to this Agreement and (ii) any claim by a party for
broker's or finder's fees or commissions, or similar payment or remuneration in
respect of the Contemplated Transactions.
11.4 Procedure for Indemnification.
-----------------------------
(a) Promptly (and in all cases within thirty (30) days) after
receipt by an indemnified party in this Article 11 of notice of the commencement
of any Proceeding against it or the existence of any written third-party claim
against it relating to a matter covered by this Article 11, such indemnified
party will, if a claim is to be made against an indemnifying party under such
section, give notice to the indemnifying party of the commencement of such
claim, but the failure to notify the indemnifying party will not relieve the
indemnifying party of any liability that it may have to any indemnified party,
except to the extent that the indemnifying party is prejudiced by the
indemnified party's failure to give such notice.
(b) If any Proceeding referred to in Section 11.4(a) above is
brought against an indemnified party and it gives notice to the indemnifying
party of the commencement of such Proceeding, the indemnifying party will be
entitled to participate in such Proceeding and, to the extent that it wishes
(unless the indemnifying party is also a party to such Proceeding and the
indemnified party determines in good faith that joint representation would be
inappropriate), to assume the defense of such Proceeding with counsel reasonably
satisfactory to the indemnified party and, after notice from the indemnifying
party to the indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party will not, as long as it diligently conducts
such defense, be liable to the indemnified party under this section for any fees
of other counsel or any other expenses with respect to the defense of such
Proceeding, in each case subsequently incurred by the indemnified party in
connection with the defense of such Proceeding, other than reasonable costs of
investigation. If the indemnifying party assumes the defense of a Proceeding:
(i) no compromise or settlement of such claims may be effected by the
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indemnifying party without the indemnified party's consent (which shall not be
unreasonably withheld) unless there is no finding or admission of any violation
of Legal Requirements or any violation of the rights of any Person and no effect
on any other claims that may be made against the indemnified party and the sole
relief provided is monetary damages that are paid in full by the indemnifying
party; and (ii) the indemnified party will have no liability with respect to any
compromise or settlement of such claims effected without its consent, unless the
indemnified party unreasonably withholds its consent. If the indemnified party
unreasonably withholds its consent to a proposed compromise or settlement of a
claim, the indemnifying party shall have no obligations whatsoever to the
indemnified party with respect to Damages related to such claim in an amount in
excess of the proposed compromise or settlement. If notice is given to an
indemnifying party of the commencement of any Proceeding and the indemnifying
party does not, within thirty (30) days after the indemnified party's notice is
given, give notice to the indemnified party of its election to assume the
defense of such Proceeding, the indemnifying party may assume the defense of
such Proceeding, the indemnified party may assume the defense of such
Proceeding. If the indemnified party assumes the defense of a Proceeding, no
compromise or settlement of such claims may be effected by the indemnified party
without the indemnifying party's consent (which consent shall not be
unreasonably withheld).
(c) A claim for indemnification for any matter not involving a
third-party claim may be asserted by notice to the party from whom
indemnification is sought.
11.5 Tax Claims. Notwithstanding the procedure set forth in Section 11.4
----------
above, if a written claim shall be made to Entravision or the Surviving
Corporation by any taxing authority with respect to Taxes which, if successful,
might result in an indemnity payment to Entravision or the Surviving Corporation
or any of their Related Persons, Entravision shall promptly notify the LCG
Representatives of such claim (a "Tax Claim") and the LCG Representatives shall
have sole control over the Proceedings and the filing of any amended Tax Returns
and may make all decisions in connection with such Tax Claim. The LCG
Representatives shall keep Entravision informed in respect of all material
aspects of such Tax Claim. Entravision and the Surviving Corporation shall
reasonably cooperate with the LCG Representatives in defending or contesting any
such Tax Claim, which cooperation shall include the retention and (upon request)
the provision of records and information which are reasonably relevant to such
Tax Claim, and making employees available on a mutually convenient basis to
provide additional information or explanation of any material provided hereunder
or to testify at proceedings relating to such Tax Claim. Notwithstanding
anything in this Agreement to the contrary, any Tax Claim shall not be subject
to the Threshold Amount set forth in Section 11.6 below.
11.6 Threshold Indemnification Obligations. Subject to the last sentence
-------------------------------------
of Section 11.5 above, the parties hereto shall have no liability for
indemnification under this Article 11 unless and until the total of the alleged
Damages with respect to any such individual matter equals or exceeds Five
Hundred Thousand Dollars ($500,000) (the "Threshold Amount"). At such time as
the aggregate Damages equal or exceed the Threshold Amount, the indemnified
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party(ies) shall be indemnified to the full extent of all such Damages (in
excess of the Threshold Amount).
11.7 Maximum Indemnification Obligations. The aggregate amount of all
-----------------------------------
claims subject to indemnification (including claims and payments under Article
10) hereunder by the LCG Representatives, on behalf of the Stockholders and the
Option Holders (solely from the funds in the Escrow Account), on one hand, and
Entravision, on the other hand, shall not exceed Seven Million Dollars
($7,000,000).
11.8 Certificate of Incorporation and Bylaws. No Stockholder or Option
---------------------------------------
Holder shall be entitled to indemnification directly or indirectly under the
Certificates of Incorporation or Bylaws of LCG or any of the LCG Subsidiaries
for any matter upon which such Stockholder or Option Holder has an
indemnification obligation hereunder and such Certificates of Incorporation and
Bylaws shall be deemed amended accordingly. However, the provisions of this
Section 11.8 are intended only for the regulation of relations between the
Entravision Indemnified Parties and the Stockholders and the Option Holders, and
this Section 11.8 is not intended for the benefit of creditors or other third
parties and does not grant any rights to creditors or other third parties.
11.9 Unaffected by Knowledge. The rights of the parties to
-----------------------
indemnification, payment of Damages or other remedy under this Article 11 will
not be affected by any knowledge with respect to the accuracy or inaccuracy of
or compliance with, any representation, warranty, covenant or obligation of any
party under this Agreement.
11.10 Exclusivity. Each of the parties hereby acknowledges and agrees that
-----------
the indemnity obligations set forth above shall be the exclusive remedy of any
party with respect to the Contemplated Transactions (including, without
limitation, any matters or claims arising under the Environmental Laws) other
than with respect to fraud or willful misconduct of any party.
11.11 Tax Benefit. Notwithstanding anything to the contrary in this
-----------
Agreement, any indemnification obligation hereunder shall be reduced by the
amount of any Tax benefit actually realized by an indemnified party as a result
of the incurrence of the liability or event giving rise to such indemnification
obligation.
11.12 Purchase Price Adjustment. Except as otherwise required by law, the
-------------------------
parties agree to treat all payments made under this Article 11 as adjustments to
the purchase price.
ARTICLE 12.
REPRESENTATIVES
By virtue of the approval of this Agreement and the Merger by the Board of
Directors of LCG and the approval of this Agreement and the Merger by the
Stockholders pursuant to the
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Certificate of Incorporation and Bylaws of LCG and the applicable provisions of
the Delaware Code, each Stockholder and each Option Holder (whether or not he,
she or it executes and delivers a Letter of Transmittal) will be agreeing as
follows:
12.1 Authorization of the LCG Representatives. Upon adoption of this
----------------------------------------
Agreement and the Merger by the Board of Directors of LCG and approval of this
Agreement and the Merger by the Stockholders pursuant to the Certificate of
Incorporation and Bylaws of LCG and the applicable provisions of the Delaware
Code, the LCG Representatives (and each successor appointed in accordance with
Section 12.6 below) hereby are appointed, authorized and empowered to act, by
unanimous decision of the LCG Representatives, as the LCG Representatives, on
behalf of the Stockholders and the Option Holders, in connection with and to
facilitate the consummation of the Contemplated Transactions, and in connection
with the activities to be performed on behalf of the Stockholders and the Option
Holders under the Indemnity Escrow Agreement and the Escrow Account for the
purposes and with the powers and authority hereinafter set forth in this Article
12 and in the Indemnity Escrow Agreement, which shall include the power and
authority:
(a) to execute and deliver the Earnest Money Escrow Agreement and
the Indemnity Escrow Agreement (collectively, the "Escrow Agreements") (with
such modifications or changes therein as to which the LCG Representatives, in
their sole unanimous discretion, shall have consented) and to agree to such
amendments or modifications thereto as the LCG Representatives, in their sole
unanimous discretion, may deem necessary or desirable;
(b) to execute and deliver such waivers and consents in connection
with this Agreement, the Escrow Agreements and the consummation of the
Contemplated Transactions as the LCG Representatives, in their sole unanimous
discretion, may deem necessary or desirable;
(c) to deliver any Letters of Transmittal and all Certificates
representing the Shares tendered therewith to Entravision and to collect and
receive all moneys and other proceeds and property payable to the Stockholders
and Option Holders pursuant to Section 2.8 above (including moneys and other
proceeds and property payable to Stockholders who do not tender counterpart
signature pages and/or Letters of Transmittals to the LCG Representatives for
delivery to Entravision at the Closing) and, subject to the withholding and
retention provisions hereinafter set forth in this Article 12 and the payment of
expenses payable by the LCG Representatives, to disburse and pay the same to
each of the Stockholders and Option Holders pursuant to Section 2.8 above (other
than Stockholders who shall at such time be Dissenting Holders);
(d) as the LCG Representatives of the Stockholders and Option
Holders, to enforce and protect the rights and interests of the Stockholders and
Option Holders and to enforce and protect the rights and interests of the LCG
Representatives arising out of or under or in any manner relating to this
Agreement, the Escrow Agreements and each other agreement, document, instrument
or certificate referred to herein or therein or the transactions provided for
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herein or therein (including, without limitation, in connection with any and all
claims for indemnification brought by any Entravision Indemnified Party under
Article 11 above) and, in connection therewith, to (i) assert by claim or
institute any action, proceeding or investigation; (ii) investigate, defend,
contest or litigate any claim, action, proceeding or investigation initiated by
any Entravision Indemnified Party, or any other Person, against the LCG
Representatives and/or the Escrow Account, and receive process on behalf of any
or all Stockholders and Option Holders in any such claim, action, proceeding or
investigation and compromise or settle on such terms as the LCG Representatives
shall determine to be appropriate, and give receipts, releases and discharges on
behalf of all of the Stockholders and Option Holders with respect to, any such
claim, action, proceeding or investigation; (iii) file any proofs of debts,
claims and petitions as the LCG Representatives may deem advisable or necessary;
(iv) settle or compromise any claims asserted under Article 11 above; (v)
assume, on behalf of all of the Stockholders and Option Holders, the defense of
any Claim that is the basis of any claim asserted under Article 11 above; and
(vi) file and prosecute appeals from any decision, judgment or award rendered in
any of the foregoing actions, proceedings or investigations, it being understood
that the LCG Representatives shall not have any obligation to take any such
actions, and shall not have any liability to the Stockholders or the Option
Holders for any failure to take any such actions;
(e) to enforce payment from the Escrow Account and any other amounts
payable to the Stockholders and Option Holders, in each case on behalf of the
Stockholders and Option Holders, in the names of the LCG Representatives or, if
the LCG Representatives so elect, in the names of one or more of the
Stockholders or Option Holders;
(f) to cause to be paid out of the Escrow Account the full amount of
any judgment or judgments and legal interest and costs awarded in favor of any
indemnified party arising out of the indemnification provisions set forth in
Article 11 above;
(g) to refrain from enforcing any right of the Stockholders, Option
Holders or any of them and/or of the LCG Representatives arising out of or under
or in any manner relating to this Agreement, the Escrow Agreements or any other
agreement, instrument or document in connection with the foregoing; and
(h) to make, execute, acknowledge and deliver all such other
agreements, guarantees, orders, receipts, endorsements, notices, requests,
instructions, certificates, stock powers, letters and other writings, and, in
general, to do any and all things and to take any and all action that the LCG
Representatives, in their sole and absolute discretion, may consider necessary
or proper or convenient in connection with or to carry out the activities
described in paragraphs (a) through (g) above and the Contemplated Transactions.
The grant of authority provided for in this Section 12.1: (i) is coupled
with an interest and is being granted, in part, as an inducement to Entravision
and Acquisition Co. to enter into this Agreement and the Indemnity Escrow
Agreement and shall be irrevocable and survive the death, incompetency,
bankruptcy or liquidation of any Stockholder or Option Holder and shall be
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binding on any successor thereto; (ii) subject to the provisions of Section 12.6
below, may only be exercised by all of the LCG Representatives, each acting by
signing as an LCG Representative of each of the Stockholders and Option Holders;
and (iii) shall survive the delivery of an assignment by a Stockholder or Option
Holder of the whole or any fraction of his, her of its interest in the Escrow
Accounts or distributions from the Custodial Account.
12.2 Payments of Expenses; Holdbacks.
-------------------------------
(a) The LCG Representatives shall withhold and retain from any
distributions to the LCG Representatives on behalf of the Stockholders and the
Option Holders or withdrawals by the LCG Representatives on behalf of the
Stockholders and the Option Holders out of the Custodial Accounts such amount or
amounts as shall be sufficient to pay all known, or reasonably anticipated,
expenses which are required to be paid or borne by the Stockholders and the
Option Holders pursuant to this Agreement (including, without limitation, all
transaction costs, fees and expenses), the Indemnity Escrow Agreement or are
otherwise incurred by the LCG Representatives in performance of their duties
hereunder, including, without limitation, their own out-of-pocket expenses and
the payment of any fees and expenses under the Indemnity Escrow Agreement to the
Escrow Agent, and shall pay all such expenses out of the amount or amounts so
withheld. In the event that the amounts so withheld (if any) are insufficient
to pay all such expenses, each Stockholder and Option Holder, upon written
notification from the LCG Representatives of any such deficiency, shall promptly
deliver to the LCG Representatives full payment of its ratable share of the
amount of such deficiency in accordance with such Stockholder's or Option
Holder's Pro Forma Outstanding Shares.
(b) If a Stockholder or an Option Holder fails to make a payment
referred to above or referred to in Section 12.5 below, or any portion thereof
(a "Defaulting Stockholder"), all other Stockholders and Option Holders shall
make such payment, or portion thereof, on behalf of each Defaulting Stockholder
in proportion to their respective Pro Forma Outstanding Shares (computed without
reference to the Pro Forma Outstanding Shares of any Defaulting Stockholder).
In no event shall a Defaulting Stockholder be released from liability for
failing to make such payment hereunder. A Defaulting Stockholder shall be
liable to each other Stockholder, Option Holder and to the LCG Representatives
for all payments, costs and expenses incurred as a result of the failure of the
Defaulting Stockholder to comply with the terms hereof, including, without
limitation, any costs and expenses incurred in enforcing the provisions of this
Agreement.
(c) In connection with the performance of their obligations
hereunder and under the Indemnity Escrow Agreement, the LCG Representatives
shall have the right at any time and from time to time to select and engage, at
the cost and expense of the Stockholders and the Option Holders, attorneys,
accountants, investment bankers, advisors, consultants and clerical personnel
and obtain such other professional and expert assistance, and maintain such
records, as the LCG Representatives may deem necessary or desirable and incur
other out-of-pocket expenses.
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12.3 Disbursements.
-------------
(a) All payments to the Stockholders and the Option Holders by the
LCG Representatives hereunder, and all sums, proceeds and other property held by
the LCG Representatives, shall be allocated among the Stockholders and the
Option Holders (other than Stockholders who shall at such time be Dissenting
Holders) in accordance with Section 2.8 above.
(b) All money or other proceeds received by the LCG Representatives
shall be distributed by the LCG Representatives as promptly as practicable to
each Stockholders and Option Holder as set forth on Section 12.3(a) above,
subject, however, to the right of the LCG Representatives to deduct and withhold
amounts as contemplated by the provisions of Section 12.2 above.
12.4 Bank Accounts; Investments.
--------------------------
(a) The LCG Representatives shall have the right to open such
account or accounts in their own names as LCG Representatives of the
Stockholders and the Option Holders in any bank or trust company as they may
select in order to deposit all sums which they may receive and hold hereunder
(including amounts under Section 12.2(a) above) and to issue checks or draw
money upon the signature of any of the then-acting LCG Representatives (or the
signature of one or more Persons the LCG Representatives may designate) on each
such account.
(b) The LCG Representatives shall have the right, in their sole and
absolute unanimous discretion, to invest and reinvest any of the proceeds held
by them under the terms of this Agreement in investments only of a type which
the Escrow Agent is permitted to make pursuant to the Indemnity Escrow
Agreement. Any securities or other property at any time held by the LCG
Representatives may be held by them in bearer or registered form or in the name
of any other Person or Persons they may designate, and the LCG Representatives
may deal with such securities or other property to the same extent and with the
same powers as an individual owner thereof might do. The LCG Representatives
shall have no responsibility or obligation whatsoever to any Stockholder or
Option Holder for the performance of any investments made in accordance with the
provisions of this Agreement or for any losses realized by any thereof.
12.5 Compensation; Exculpation; Indemnity.
------------------------------------
(a) The LCG Representatives shall not be entitled to any fee,
commission or other compensation for the performance of their services
hereunder, but shall be entitled to the payment out of the Custodial Accounts of
all of their out-of-pocket expenses incurred as LCG Representatives, and in
furtherance of the foregoing, may pay or cause to be paid or reimburse
themselves for the payment of any and all such expenses.
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(b) In dealing with this Agreement, the Escrow Agreements and any
instruments, agreements or documents relating thereto, and in exercising or
failing to exercise all or any of the powers conferred upon the LCG
Representatives hereunder or thereunder, (i) the LCG Representatives shall not
assume any, and shall incur no, responsibility whatsoever to any Stockholder or
Option Holder by reason of any error in judgment or other act or omission
performed or omitted hereunder or in connection with this Agreement, the Escrow
Agreements or any such other agreement, instrument or document and (ii) the LCG
Representatives shall be entitled to rely on the advice of counsel, public
accountants or other independent experts experienced in the matter at issue, and
any error in judgment or other act or omission of the LCG Representatives
pursuant to such advice shall in no event subject the LCG Representatives to
liability to any Stockholder, Option Holder, the Company, Entravision,
Acquisition Co., the Surviving Corporation or any other Person.
(c) Each Stockholder and each Option Holder, severally, shall
indemnify the LCG Representatives up to, but not exceeding, an amount equal to
the aggregate Per Share Merger Consideration received by such Person hereunder
against all damages, liabilities, claims, obligations, costs and expenses,
including reasonable attorney's, accountants' and other experts' fees and the
amount of any judgment against them, of any nature whatsoever, arising out of or
in connection with any claim, investigation, challenge, action or proceeding or
in connection with any appeal thereof, relating to the acts or omissions of the
LCG Representatives hereunder, or under the Escrow Agreements or otherwise. The
foregoing indemnification shall not be deemed exclusive of any other right to
which the LCG Representatives may be entitled apart from the provisions hereof.
In the event of any indemnification under this Section 12.5(c), the LCG
Representatives shall first proceed against any distributions to the LCG
Representatives on behalf of the Stockholders and the Option Holders.
Thereafter, upon written notice from the LCG Representatives to the Stockholders
and the Option Holders as to the existence of a deficiency toward the payment of
any such indemnification amount, each Stockholder and Option Holder shall
promptly deliver to the LCG Representatives full payment of his, her or its
ratable share of the amount of such deficiency, in accordance with such
Stockholder's and Option Holder's Pro Forma Outstanding Shares.
(d) All of the indemnities, immunities and powers granted to the LCG
Representatives under this Agreement shall survive the Closing and/or any
termination of this Agreement and the Escrow Agreements.
(e) Entravision and the Surviving Corporation shall have the right
to rely upon all actions taken or omitted to be taken by the LCG Representatives
pursuant to this Agreement or any applicable ancillary document; provided,
however, that Entravision and the Surviving Corporation shall not have the right
to rely upon any such written action taken by the LCG Representatives unless
such written action is evidenced by a writing executed by all three LCG
Representatives. Notwithstanding anything herein to the contrary, none of
Entravision, Acquisition Co., LCG or the Surviving Corporation shall have any
responsibility or obligation
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whatsoever to any Stockholder, Option Holder or to any other party with respect
to or arising out of any actions taken or any inaction by the LCG
Representatives.
12.6 Removal and Replacement of a LCG Representatives; Successor LCG
---------------------------------------------------------------
Representatives; Action by LCG Representatives.
----------------------------------------------
(a) If one or more of the LCG Representatives is unable or
unavailable to perform his, her or its duties hereunder, a successor for such
LCG Representative or Representatives shall be appointed as follows: (i) in the
case of Latin Investors, by Latin Investors, with written notice delivered to
the LCG Representatives, Entravision and the Surviving Corporation; (ii) in the
case of the Trefoil Designee, by the Trefoil Entities, with written notice
delivered to the LCG Representatives, Entravision and the Surviving Corporation;
and (iii) in the case of the Other Holders Designee, by the written vote of the
holders of a majority of the Pro Forma Outstanding Shares with written notice
delivered to the LCG Representatives, the Stockholders and Option Holders,
Entravision and the Surviving Corporation.
(b) Any LCG Representative or all of them may be removed at any time
as follows: (i) in the case of Latin Investors, by written notice delivered by
Latin Investors to the LCG Representatives, Entravision and the Surviving
Corporation; (ii) in the case of the Trefoil Designee, by written notice
delivered by the Trefoil Entities to the LCG Representatives, Entravision and
the Surviving Corporation; and (iii) in the case of the Other Holders Designee,
by written notice delivered by the holders of a majority of the Pro Forma
Outstanding Shares to the LCG Representatives, the other Stockholders and Option
Holders, Entravision and the Surviving Corporation. Any of Latin Investors, any
Trefoil Designee or any Other Holders Designee so removed shall be replaced in
the manner set forth in Section 12.6(a) above.
(c) Any successor LCG Representative shall have all of the authority
and responsibilities conferred upon or delegated to a LCG Representative
pursuant to this Article 12.
ARTICLE 13.
GENERAL PROVISIONS
13.1 Expenses. Except as otherwise expressly provided in this Agreement,
--------
each party to this Agreement shall separately bear its own expenses incurred in
connection with the preparation, execution and performance of this Agreement and
the Contemplated Transactions, including all fees and expenses of agents,
representatives, counsel and accountants, regardless of whether the Contemplated
Transactions are consummated.
13.2 Public Announcements. Other than as required by law or those
--------------------
incidental to filings required to comply with Legal Requirements, any public
announcement or similar publicity with respect to this Agreement or the
Contemplated Transactions will be issued, if at all, at such time and in such
manner as the parties mutually determine. Unless consented to by
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the other parties in advance or required by Legal Requirements, prior to the
Closing, the parties hereto shall keep this Agreement strictly confidential and
may not make any disclosure of this Agreement to any Person.
13.3 Confidentiality. Between the date of this Agreement and the Closing
---------------
Date, the parties will abide by the terms and conditions of the Confidentiality
Agreement and will maintain in confidence, and will cause the directors,
officers, employees, agents and advisors of each of them to maintain in
confidence, any information disclosed pursuant to the Confidentiality Agreement.
13.4 Notices. All notices, consents, waivers and other communications
-------
under this Agreement must be in writing and will be deemed to have been duly
given when (i) delivered by hand (with written confirmation of receipt), (ii)
sent by facsimile (with written confirmation of receipt), provided that a copy
is mailed by certified mail, return receipt requested, or (iii) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and facsimile
numbers set forth below (or to such other addresses and facsimile numbers as a
party may designate by notice to the other parties):
<TABLE>
<S> <C>
If to Entravision or Acquisition Co: Entravision Communications Company, L.L.C.
Attention: Walter F. Ulloa and Philip C. Wilkinson
11900 Olympic Boulevard, Suite 590
Los Angeles, California 90064
Telephone: (310) 820-5355
Facsimile: (310) 820-2445
with a required copy to: Zevnik Horton Guibord McGovern
Palmer & Fognani, L.L.P.
Attention: Kenneth D. Polin, Esq.
101 West Broadway, 17th Floor
San Diego, California 92101
Telephone: (619) 515-9600
Facsimile: (619) 515-9628
If to LCG: Latin Communications Group Inc.
Attention: Martin D. Payson
750 Lexington Avenue, 25th Floor
New York, New York 10022
Telephone: (212) 446-5203
Facsimile: (212) 446-5240
</TABLE>
-55-
<PAGE>
with a required copy to: Shamrock Capital Advisors, Inc.
Attention: Steven D. Royer
444 Lakeside Drive
Burbank, California 91505
Telephone: (818) 973-4288
Facsimile: (818) 842-3142
and with a required copy to: Fried, Frank, Harris, Shriver & Jacobson
Attention: David K. Robbins, Esq.
350 South Grand Avenue, 32nd Floor
Los Angeles, California 90071
Telephone: (213) 473-2000
Facsimile: (213) 473-2222
If to Latin Investors: Latin Investors Limited Partnership
Attention: James Costello
c/o LI Management Inc.
204 Dudley Road
Wilton, Connecticut 06897
Telephone: (203) 762-2773
Facsimile: (203) 831-0403
with a required copy to: Dewey Ballantine LLP
Attention: E. Ann Gill, Esq.
1301 Avenue of the Americas
New York, New York 10019
Telephone: (212) 259-8000
Facsimile: (212) 259-6333
If to the Trefoil Designee: Shamrock Capital Advisors, Inc.
Attention: Stephen D. Royer
444 Lakeside Drive
Burbank, California 91505
Telephone: (818) 973-4288
Facsimile: (818) 842-3142
with a required copy to: Sigma Hedge Partners, G.P.
c/o General Electric Pension Trust
Attention: Michael Pastore
3003 Summer Street
Stamford, Connecticut 06905
Telephone: (203) 326-2312
Facsimile: (203) 326-4073
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<PAGE>
with a required copy to: Fried, Frank Harris, Shriver & Jacobson
Attention: David K. Robbins, Esq.
350 South Grand Avenue, 32nd Floor
Los Angeles, California 90071
Telephone: (213) 473-2000
Facsimile: (213) 473-2222
If to the Other Holders Designee: Martin D. Payson
750 Lexington Avenue, 25th Floor
New York, New York 10022
Telephone: (212) 446-5203
Facsimile: (212) 446-5240
with a required copy to: Fried, Frank Harris, Shriver & Jacobson
Attention: David K. Robbins, Esq.
350 South Grand Avenue, 32nd Floor
Los Angeles, California 90071
Telephone: (213) 473-2000
Facsimile: (213) 473-2222
13.5 Further Assurances. The parties agree to furnish upon request to
------------------
each other such further information, execute and deliver to each other such
other documents and to do such other acts and things, all as the other party may
reasonably request for the purpose of carrying out the intent of this Agreement
and the documents referred to in this Agreement.
13.6 Waiver. The rights and remedies of the parties to this Agreement are
------
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power or privilege, and no single or partial exercise of any such right, power
or privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege. To the
maximum extent permitted by applicable law, (i) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party, (ii) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given and (iii) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
13.7 Entire Agreement and Modification. This Agreement supersedes all
---------------------------------
prior agreements between the parties with respect to its subject matter,
including, without limitation, that certain Letter of Intent dated November 3,
1999, as amended, except for the Confidentiality Agreement, and constitutes
(along with the Confidentiality Agreement and recitals hereto, and
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<PAGE>
the exhibits, Schedules and documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement executed by the party to be charged with the amendment.
13.8 Schedules. The Schedules are hereby incorporated by reference into
---------
this Agreement in their entirety. Entravision and Acquisition Co. hereby
acknowledge and agree that any matter disclosed on any particular Schedule shall
be deemed to be disclosed on all Schedules and shall modify all representations
and warranties of LCG herein.
13.9 Assignment, Successors and No Third-Party Rights. No party may
------------------------------------------------
assign any of its rights under this Agreement without the prior consent of the
other parties, which will not be unreasonably withheld or delayed, except that
Entravision and Acquisition Co. may assign any of their rights under this
Agreement to one another or to any Related Person of Entravision and Acquisition
Co., including, without limitation, to a newly-formed corporation created for
purposes of a contemplated roll-up of the equity ownership of Entravision into
such new entity; provided, however, that no such assignment shall be permitted
if such assignment would impair or delay the consummation of the Contemplated
Transactions. Subject to the preceding sentence, this Agreement will apply to,
be binding in all respects upon, and inure to the benefit of the successors and
permitted assigns of the parties. Except as set forth in Section 7.6 above,
nothing expressed or referred to in this Agreement will be construed to give any
Person other than the parties to this Agreement any legal or equitable right,
remedy or claim under or with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and conditions are for the
sole and exclusive benefit of the parties to this Agreement and their successors
and assigns.
13.10 Severability. If any provision of this Agreement is held invalid or
------------
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
13.11 Section Headings; Construction. The headings of sections in this
------------------------------
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding section or sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
13.12 Time of Essence. With regard to all dates and time periods set forth
---------------
or referred to in this Agreement, time is of the essence.
13.13 Attorney's Fees. The prevailing party(ies) in any Proceeding
---------------
relating to the enforcement or interpretation of this Agreement may recover from
the unsuccessful party(ies) all
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<PAGE>
costs, expenses and actual attorney's fees (including expert witness and other
consultants fees and costs) relating to or arising out of (i) the Proceeding
(whether or not the Proceeding results in a judgment) and (ii) any post-judgment
or post-award Proceeding including, without limitation, one to enforce or
collect any judgment or award resulting from the Proceeding. All such judgments
and awards shall contain a specific provision for the recovery of all such
subsequently incurred costs, expenses and actual attorney's fees.
13.14 Governing Law. This Agreement will be governed by the laws of the
-------------
State of Delaware without regard to conflicts of laws principles.
13.15 Jurisdiction; Service of Process. Any Proceeding seeking to enforce
--------------------------------
any provision of, or based on any right arising out of, this Agreement must be
brought against any of the parties in the United States District Court for the
Central District of California, and each of the parties consents to the
jurisdiction of such courts (and of the appropriate appellate courts) in any
such Proceeding and waives any objection to venue laid therein. Process in any
Proceeding referred to in the preceding sentence may be served on any party
anywhere in the world. In the event that the dispute fails to meet the
jurisdictional threshold requirements of the federal courts, venue shall lie in
the appropriate state courts sitting in Los Angeles County, California.
13.16 Counterparts; Facsimile. This Agreement may be executed in one or
-----------------------
more counterparts, all of which when fully executed and delivered by all parties
hereto and taken together shall constitute a single agreement, binding against
each of the parties. To the maximum extent permitted by law or by any
applicable governmental authority, this Agreement may be signed and transmitted
by facsimile with the same validity as if it were an ink-signed document. Each
signatory below represents and warrants by his or her signature that he or she
is duly authorized (on behalf of the respective entity for which such signatory
has acted) to execute and deliver this instrument and any other document related
to this transaction, thereby fully binding each such respective entity.
13.17 Transfer Taxes. Notwithstanding anything in this Agreement to the
--------------
contrary, Entravision, on the one hand, and the LCG Representatives on behalf of
the Stockholders and the Option Holders, on the other hand, shall each pay one-
half ( 1/2) of all sales, use, transfer, real property transfer, documentary,
recording, gains, stock transfer and similar taxes and fees, and any deficiency,
interest or penalty asserted with respect thereto (collectively, "Transfer
Taxes") arising out of or in connection with the Merger, and Entravision, on the
one hand, and the Stockholders and the Option Holders, on the other hand, shall
indemnify, defend and hold harmless the other parties and their respective
Representatives with respect to such party's proportionate share of such
Transfer Taxes. Entravision shall timely file the necessary documentation and
Tax Returns with respect to such Transfer Taxes.
[Remainder of Page Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Acquisition Agreement and Plan of Merger as of the date first written above.
Entravision ENTRAVISION COMMUNICATIONS COMPANY, L.L.C.,
a Delaware limited liability company
By: /s/ Walter F. Ulloa
------------------------------------------------------
Walter F. Ulloa, Chairman, Chief Executive Officer
and Managing Member
By: /s/ Philip C. Wilkinson
------------------------------------------------------
Philip C. Wilkinson, President, Chief Operating
Officer and Managing Member
Acquisition Co. LCG ACQUISITION CORPORATION,
a Delaware corporation
By: /s/ Walter F. Ulloa
------------------------------------------------------
Walter F. Ulloa, Chairman and Chief Executive
Officer
By: /s/ Philip C. Wilkinson
------------------------------------------------------
Philip C. Wilkinson, President and Chief Operating
Officer
LCG LATIN COMMUNICATIONS GROUP INC.,
a Delaware corporation
By: /s/ Stephen D. Royer
------------------------------------------------------
Name: Stephen D. Royer
-----------------------------------------------------
Title: Vice President
----------------------------------------------------
[Signature Page No. 1 to Agreement and Plan of Merger]
<PAGE>
LCG Representatives
/s/ James Costello
----------------------------------------------------------
James Costello, as the Latin Investors Designee
/s/ Stephen D. Royer
----------------------------------------------------------
Stephen D. Royer, as the Trefoil Designee
/s/ Martin D. Payson
----------------------------------------------------------
Martin D. Payson, as the Other Holders Designee
[Signature Page No. 2 to Agreement and Plan of Merger]
<PAGE>
Schedule 3.2 Required Consents
Schedule 4.1 LCG Subsidiaries
Schedule 4.2 Third Party Consents
Schedule 4.3 Broker's or Finder's Fee
Schedule 4.4 Qualifications to Do Business
Schedule 4.5 Capitalization
Schedule 4.6 Subsidiaries
Schedule 4.7 Financial Statements
Schedule 4.9 Assets
Schedule 4.10 Liabilities
Schedule 4.11 Taxes
Schedule 4.12 Employee Benefits
Schedule 4.13 Non-Compliance with Legal Requirements
Schedule 4.14 Governmental Authorizations
Schedule 4.15 Legal Proceedings
Schedule 4.16 Certain Changes and Events
Schedule 4.17 Applicable Contracts; No Defaults
Schedule 4.19 Real Property
Schedule 4.20 Environmental Matters
Schedule 4.22 Labor Relations
Schedule 4.23 Intellectual Property
Schedule 4.24 Relationships with Related Persons
Schedule A Radio Stations and Newspapers
Schedule B Stockholders
Exhibit A Voting Agreement
Exhibit B Certificate of Merger
Exhibit C Indemnity Escrow Agreement
Exhibit D Earnest Money Escrow Agreement
Exhibit E-1 Legal Opinion of Corporate Counsel for LCG
Exhibit E-2 Legal Opinion of FCC Counsel for LCG
Exhibit F Legal Opinion of Counsel for Entravision and Acquisition Co.
The registrant hereby agrees to furnish a copy of any omitted schedule or
exhibit upon request.
<PAGE>
EXHIBIT 2.3
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made as of February 29,
2000, by and between Citicasters Co., an Ohio corporation ("Seller") and
Entravision Communications Corporation, a Delaware corporation ("Buyer").
Recitals
--------
A. Seller owns and operates the following radio broadcast stations
(collectively, the "Stations") pursuant to certain authorizations issued by the
Federal Communications Commission (the "FCC"):
KACD(FM), Santa Monica, California
KBCD(FM), Newport Beach, California
B. Subject to the terms and conditions set forth herein, Buyer desires
to acquire the Station Assets (defined below).
C. Clear Channel Communications, Inc. (Seller's parent), CCU Merger Sub,
Inc. and AMFM Inc. are parties to an Agreement and Plan of Merger dated October
2, 1999 (the "AMFM Agreement").
Agreement
---------
NOW, THEREFORE, taking the foregoing into account, and in consideration of
the mutual covenants and agreements set forth herein, the parties, intending to
be legally bound, hereby agree as follows:
ARTICLE 1: PURCHASE OF ASSETS
------------------
1.1. Station Assets. On the terms and subject to the conditions hereof,
--------------
on the Closing Date (defined below), Seller shall sell, assign, transfer, convey
and deliver to Buyer, and Buyer shall purchase and acquire from Seller, all of
the right, title and interest of Seller in and to all of the assets, properties,
interests and rights of Seller of whatsoever kind and nature, real and personal,
tangible and intangible, which are used exclusively in the operation of the
Stations and specifically described in this Section 1.1, but excluding the
Excluded Assets as hereafter defined (the "Station Assets"):
(a) all licenses, permits and other authorizations which are issued
to Seller by the FCC with respect to the Stations (the "FCC Licenses") including
those listed and described on Schedule 1.1(a), including any renewals or
---------------
modifications thereof between the date hereof and Closing;
<PAGE>
(b) all equipment, electrical devices, antennae, cables, tools,
hardware, office furniture and fixtures, office materials and supplies,
inventory, motor vehicles, spare parts and other tangible personal property of
every kind and description which are used exclusively in the operation of the
Stations and listed on Schedule 1.1(b), except any retirements or dispositions
---------------
thereof made between the date hereof and Closing in the ordinary course of
business and consistent with past practices of Seller (the "Tangible Personal
Property");
(c) all Time Sales Agreements and Trade Agreements (both defined in
Section 2.1), Real Property Leases (defined in Section 7.7), and other
contracts, agreements, and leases which are used in the operation of the
Stations and listed on Schedule 1.1(c), together with all contracts, agreements,
---------------
and leases made between the date hereof and Closing in the ordinary course of
business that are used in the operation of the Stations (except any employment
or programming agreements not terminable by Buyer without penalty on 30 days
notice) (the "Station Contracts");
(d) all of Seller's rights in and to the Stations' call letters and
Seller's rights in and to the trademarks, trade names, service marks,
franchises, copyrights, computer software, programs and programming material,
jingles, slogans, logos, and other intangible property which are used
exclusively in the operation of the Stations and listed on Schedule 1.1(d) (the
---------------
"Intangible Property");
(e) Seller's rights in and to all the files, documents, records, and
books of account (or copies thereof) relating exclusively to the operation of
the Stations, including the Stations' local public files, programming
information and studies, blueprints, technical information and engineering data,
advertising studies, marketing and demographic data, sales correspondence, lists
of advertisers, credit and sales reports, and logs, but excluding records
relating to Excluded Assets (defined below); and
(f) any real property which is used exclusively in the operation of
the Stations (including any of Seller's appurtenant easements and improvements
located thereon) and described on Schedule 1.1(f) (the "Real Property").
---------------
The Station Assets shall be transferred to Buyer free and clear of
liens, claims and encumbrances ("Liens") except for (i) Assumed Obligations
(defined in Section 2.1), (ii) liens for taxes not yet due and payable and for
which Buyer receives a credit pursuant to Section 3.3, (iii) such liens,
easements, rights of way, building and use restrictions, exceptions,
reservations and limitations that do not in any material respect detract from
the value of the property subject thereto or impair the use thereof in the
ordinary course of the business of the Stations, and (iv) any items listed on
Schedule 1.1(b) (collectively, "Permitted Liens").
- ---------------
- 2 -
<PAGE>
1.2. Excluded Assets. Notwithstanding anything to the contrary contained
---------------
herein, the Station Assets shall not include the following assets along with all
rights, title and interest therein (the "Excluded Assets"):
(a) all cash and cash equivalents of Seller, including without
limitation certificates of deposit, commercial paper, treasury bills, marketable
securities, asset or money market accounts and all such similar accounts or
investments;
(b) all accounts receivable or notes receivable arising in the
operation of the Stations prior to Closing;
(c) all tangible and intangible personal property of Seller disposed
of or consumed in the ordinary course of business of Seller between the date of
this Agreement and Closing;
(d) all Station Contracts that terminate or expire prior to Closing
in the ordinary course of business of Seller;
(e) Seller's name, corporate minute books, charter documents,
corporate stock record books and such other books and records as pertain to the
organization, existence or share capitalization of Seller, duplicate copies of
the records of the Stations, and all records not relating exclusively to the
operation of the Stations;
(f) contracts of insurance, and all insurance proceeds or claims
made thereunder;
(g) except as provided in Section 10.4, all pension, profit sharing
or cash or deferred (Section 401(k)) plans and trusts and the assets thereof and
any other employee benefit plan or arrangement and the assets thereof, if any,
maintained by Seller; and
(h) all rights, properties and assets described on Schedule 1.2(h),
---------------
and all rights, properties and assets not specifically described in Section 1.1.
ARTICLE 2: ASSUMPTION OF OBLIGATIONS
-------------------------
2.1. Assumed Obligations. On the Closing Date, Buyer shall assume the
-------------------
obligations of Seller (the "Assumed Obligations") arising after Closing under
the Station Contracts, including without limitation all agreements for the sale
of advertising time on the Stations for cash in the ordinary course of business
("Time Sales Agreements") and all agreements for the sale of advertising time on
the Stations for non-cash consideration ("Trade Agreements").
2.2. Retained Obligations. Buyer does not assume or agree to discharge or
--------------------
perform and will not be deemed by reason of the execution and delivery of this
Agreement or any agreement, instrument or document delivered pursuant to or in
connection with this Agreement or otherwise by reason of the consummation of the
transactions contemplated hereby, to have
- 3 -
<PAGE>
assumed or to have agreed to discharge or perform, any liabilities, obligations
or commitments of Seller of any nature whatsoever whether accrued, absolute,
contingent or otherwise and whether or not disclosed to Buyer, other than the
Assumed Obligations (the "Retained Obligations").
ARTICLE 3: PURCHASE PRICE
--------------
3.1. Purchase Price. In consideration for the sale of the Station Assets
--------------
to Buyer, in addition to the assumption of the Assumed Obligations, Buyer shall
at Closing (defined below) deliver to Seller by wire transfer of immediately
available funds, Eighty-Five Million Dollars ($85,000,000), subject to
adjustment pursuant to Section 3.3 (the "Purchase Price").
3.2. Deposit. Within three (3) business days of the date of this
-------
Agreement (with no Cure Period (defined below)), Buyer shall deposit an amount
equal to 20% of the Purchase Price (the "Deposit") with NationsBank/Bank of
America (the "Escrow Agent") pursuant to the Escrow Agreement (the "Escrow
Agreement") of even date herewith among Buyer, Seller and the Escrow Agent. At
Closing, the Deposit shall be applied to the Purchase Price and any interest
accrued thereon shall be disbursed to Buyer. If this Agreement is terminated by
Seller due to Buyer's failure to consummate the Closing on the Closing Date in
accordance with this Agreement or if this Agreement is otherwise terminated by
Seller pursuant to Section 16.1(c), the Deposit and any interest accrued thereon
shall be disbursed to Seller as partial payment of liquidated damages pursuant
to Section 16.3. If this Agreement is terminated for any other reason, the
Deposit and any interest accrued thereon shall be disbursed to Buyer.
3.3. Prorations and Adjustments. Except as otherwise provided herein, all
--------------------------
deposits, reserves and prepaid and deferred income and expenses relating to the
Station Assets or the Assumed Obligations and arising from the conduct of the
business and operations of the Stations shall be prorated between Buyer and
Seller in accordance with generally accepted accounting principles as of 11:59
p.m. on the date immediately preceding the Closing Date. Such prorations shall
include, without limitation, all ad valorem, real estate and other property
taxes (but excluding taxes arising by reason of the transfer of the Station
Assets as contemplated hereby which shall be paid as set forth in Section 13.1),
business and license fees, music and other license fees (including any
retroactive adjustments thereof), utility expenses, amounts due or to become due
under Station Contracts, rents, lease payments and similar prepaid and deferred
items. Real estate taxes shall be apportioned on the basis of taxes assessed for
the preceding year, with a reapportionment, if any, as soon as the new tax rate
and valuation can be ascertained. Except as otherwise provided herein, the
prorations and adjustments contemplated by this Section 3.3, to the extent
practicable, shall be made on the Closing Date. As to those prorations and
adjustments not capable of being ascertained on the Closing Date, an adjustment
and proration shall be made within ninety (90) calendar days of the Closing
Date. In the event of any disputes between the parties as to such adjustments,
the amounts not in dispute shall nonetheless be paid at the time provided herein
and such disputes shall be determined by an independent certified public
accountant mutually acceptable to the parties, and the fees and expenses of such
accountant shall be paid one-half by Seller and one-half by Buyer.
- 4 -
<PAGE>
3.4. Allocation. The Purchase Price shall be allocated among the Station
----------
Assets in a manner as mutually agreed between the parties based upon an
appraisal prepared by Bond & Pecaro (whose fees shall be paid one-half by Seller
and one-half by Buyer). Seller and Buyer agree to use the allocations determined
pursuant to this Section 3.4 for all tax purposes, including without limitation,
those matters subject to Section 1060 of the Internal Revenue Code of 1986, as
amended.
ARTICLE 4: CLOSING
-------
4.1. Closing. The consummation of the sale and purchase of the Station
-------
Assets (the "Closing") shall occur on a date (the "Closing Date") and at a time
and place designated solely by Seller after FCC Consent (defined below), subject
to satisfaction or waiver of the conditions to Closing contained herein (other
than those to be satisfied at Closing). If requested by Seller, prior to Closing
the parties shall hold a pre-closing conference at a time and place designated
by Seller, at which the parties shall provide (for review only) all documents to
be delivered at Closing under this Agreement, each duly executed but undated,
and otherwise confirm their ability to timely consummate the Closing. If Closing
occurs prior to the FCC Consent becoming final (i.e., no longer subject to
appeal), and prior to such finality the FCC Consent is reversed or otherwise set
aside pursuant to a final order of the FCC (or court of competent jurisdiction),
then the parties shall comply with such order in a manner that otherwise
complies with applicable law and returns the parties to the status quo ante in
all material respects, including the return of the Purchase Price and the
Stations (it being understood that in such event Buyer may designate one or more
third parties as the transferees of the Stations).
ARTICLE 5: GOVERNMENTAL CONSENTS
---------------------
Closing is subject to and conditioned upon (i) prior FCC consent (the "FCC
Consent") to the assignment of the FCC Licenses to Buyer, (ii) United States
Department of Justice ("DOJ") prior approval (the "DOJ Consent") of the
transactions contemplated hereby, including without limitation any such approval
as may be necessary to enable Seller to consummate the merger under the AMFM
Agreement, and (iii) expiration or termination of any applicable waiting period
("HSR Clearance") under the HSR Act (defined below).
5.1. FCC. On a date designated by Seller, Buyer and Seller shall file an
---
application with the FCC (the "FCC Application") requesting the FCC Consent.
Buyer and Seller shall diligently prosecute the FCC Application and otherwise
use their best efforts to obtain the FCC Consent as soon as possible. If the FCC
Consent imposes upon Buyer any condition (including without limitation any
divestiture condition), Buyer shall timely comply therewith.
5.2. HSR. If not previously filed, then within five (5) business days
---
after the execution of this Agreement, Buyer and Seller shall make any required
filings with the Federal Trade Commission and the DOJ pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
with respect to the transactions contemplated hereby (including a request for
early termination of the waiting period thereunder), and shall thereafter
- 5 -
<PAGE>
promptly respond to all requests received from such agencies for additional
information or documentation.
5.3. General. Buyer and Seller shall notify each other of all documents
-------
filed with or received from any governmental agency with respect to this
Agreement or the transactions contemplated hereby. Buyer and Seller shall
furnish each other with such information and assistance as such the other may
reasonably request in connection with their preparation of any governmental
filing hereunder. If Buyer becomes aware of any fact relating to it which would
prevent or delay the FCC Consent, the DOJ Consent or HSR Clearance, Buyer shall
promptly notify Seller thereof and take such steps as necessary to remove such
impediment, including but not limited to divesting any stations and terminating
any agreements to acquire or program or market any stations.
ARTICLE 6: REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer hereby makes the following representations and warranties to Seller:
6.1. Organization and Standing. Buyer is duly organized, validly existing
-------------------------
and in good standing under the laws of the jurisdiction of its organization, and
is qualified to do business in each jurisdiction in which the Station Assets are
located. Buyer has the requisite power and authority to execute and deliver this
Agreement and all of the other agreements and instruments to be executed and
delivered by Buyer pursuant hereto (collectively, the "Buyer Ancillary
Agreements"), to consummate the transactions contemplated hereby and thereby and
to comply with the terms, conditions and provisions hereof and thereof.
6.2. Authorization. The execution, delivery and performance of this
-------------
Agreement and the Buyer Ancillary Agreements by Buyer have been duly authorized
and approved by all necessary action of Buyer and do not require any further
authorization or consent of Buyer. This Agreement is, and each Buyer Ancillary
Agreement when executed and delivered by Buyer and the other parties thereto
will be, a legal, valid and binding agreement of Buyer enforceable in accordance
with its respective terms, except in each case as such enforceability may be
limited by bankruptcy, moratorium, insolvency, reorganization or other similar
laws affecting or limiting the enforcement of creditors' rights generally and
except as such enforceability is subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
6.3. No Conflicts Neither the execution and delivery by Buyer of this
------------
Agreement and the Buyer Ancillary Agreements or the consummation by Buyer of any
of the transactions contemplated hereby or thereby nor compliance by Buyer with
or fulfillment by Buyer of the terms, conditions and provisions hereof or
thereof will: (i) conflict with any organizational documents of Buyer or any
law, judgment, order or decree to which Buyer is subject; or (ii) require the
approval, consent, authorization or act of, or the making by Buyer of any
declaration, filing or registration with, any third party or any foreign,
federal, state or local court, governmental or regulatory authority or body,
except the FCC Consent and DOJ Consent, and, if applicable, HSR Clearance.
- 6 -
<PAGE>
6.4. Qualification. Buyer is legally, financially and otherwise qualified
-------------
to be the licensee of, acquire, own and operate the Stations under the
Communications Act of 1934, as amended (the "Communications Act") and the rules,
regulations and policies of the FCC. There are no facts that would, under
existing law and the existing rules, regulations, policies and procedures of the
FCC, disqualify Buyer as an assignee of the FCC Licenses or as the owner and
operator of the Stations. No waiver of any FCC rule or policy is necessary for
the FCC Consent to be obtained. There is no action, suit or proceeding pending
or threatened against Buyer which questions the legality or propriety of the
transactions contemplated by this Agreement or could materially adversely affect
Buyer's ability to perform its obligations hereunder. Buyer has and will have
available on the Closing Date sufficient funds to enable it to consummate the
transactions contemplated hereby.
6.5. No Finder. No broker, finder or other person is entitled to a
---------
commission, brokerage fee or other similar payment in connection with this
Agreement or the transactions contemplated hereby as a result of any agreement
or action of Buyer or any party acting on Buyer's behalf.
ARTICLE 7: REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Seller makes the following representations and warranties to Buyer:
7.1. Organization. Seller is duly organized, validly existing and in good
------------
standing under the laws of the jurisdiction of its organization, and is
qualified to do business in each jurisdiction in which the Station Assets are
located. Seller has the requisite power and authority to execute and deliver
this Agreement and all of the other agreements and instruments to be executed
and delivered by Seller pursuant hereto (collectively, the "Seller Ancillary
Agreements"), to consummate the transactions contemplated hereby and thereby and
to comply with the terms, conditions and provisions hereof and thereof.
7.2. Authorization. The execution, delivery and performance of this
-------------
Agreement and the Seller Ancillary Agreements by Seller have been duly
authorized and approved by all necessary action of Seller and do not require any
further authorization or consent of Seller. This Agreement is, and each Seller
Ancillary Agreement when executed and delivered by Seller and the other parties
thereto will be, a legal, valid and binding agreement of Seller enforceable in
accordance with its respective terms, except in each case as such enforceability
may be limited by bankruptcy, moratorium, insolvency, reorganization or other
similar laws affecting or limiting the enforcement of creditors' rights
generally and except as such enforceability is subject to general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
7.3. No Conflicts. Neither the execution and delivery by Seller of this
------------
Agreement and the Seller Ancillary Agreements or the consummation by Seller of
any of the transactions contemplated hereby or thereby nor compliance by Seller
with or fulfillment by Seller of the
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terms, conditions and provisions hereof or thereof will: (i) conflict with any
organizational documents of Seller or any law, judgment, order, or decree to
which Seller is subject or, except as set forth on Schedule 1.1(c), any Station
---------------
Contract; or (ii) require the approval, consent, authorization or act of, or the
making by Seller of any declaration, filing or registration with, any third
party or any foreign, federal, state or local court, governmental or regulatory
authority or body, except the FCC Consent and DOJ Consent and, if applicable,
HSR Clearance.
7.4. FCC Licenses. Seller (or one of the companies comprising Seller) is
------------
the holder of the FCC Licenses described on Schedule 1.1(a). The FCC Licenses
---------------
listed in Schedule 1.1(a) comprise all material FCC licenses used in the present
---------------
operation of the Stations and each is in full force and effect and has not been
revoked, suspended, canceled, rescinded or terminated and has not expired. There
is not pending, or to Seller's knowledge threatened, any action by or before the
FCC to revoke, suspend, cancel, rescind or materially adversely modify any of
the FCC Licenses (other than proceedings to amend FCC rules of general
applicability), and there is not now issued or outstanding, by or before the
FCC, any order to show cause, notice of violation, notice of apparent liability,
or notice of forfeiture against Seller with respect to the Stations. The
Stations are operating in compliance in all material respects with the FCC
Licenses, the Communications Act, and the rules, regulations and policies of the
FCC. The Stations are being operated in all material respects in accordance with
the terms and conditions of the FCC Licenses, the underlying construction
permits, the Communications Act of 1934, as amended, and all rules, regulations
and policies of the FCC.
7.5. Taxes. Seller has, in respect of the Stations' business, filed all
-----
foreign, federal, state, county and local income, excise, property, sales, use,
franchise and other tax returns and reports which are required to have been
filed by it under applicable law and has paid all taxes which have become due
pursuant to such returns or pursuant to any assessments which have become
payable.
7.6. Personal Property. Schedule 1.1(b) contains a list of all material
----------------- ---------------
items of Tangible Personal Property included in the Station Assets. Seller has
title to the Tangible Personal Property free and clear of Liens other than
Permitted Liens. The items of Tangible Personal Property listed on Schedule
1.1(b) are in all material respects in good working condition, ordinary wear and
tear excepted.
7.7. Real Property. Schedule 1.1(f) contains a description of all Real
------------- ---------------
Property included in the Station Assets. Seller has fee simple title to the
owned Real Property ("Owned Real Property") free and clear of Liens other than
Permitted Liens. Schedule 1.1(f) includes a description of each lease of Real
---------------
Property or similar agreement included in the Station Assets (the "Real Property
Leases"). The Owned Real Property includes, and the Real Property Leases
provide, access to the Stations' facilities. To Seller's knowledge, the Real
Property is not subject to any suit for condemnation or other taking by any
public authority.
7.8. Contracts. Each of the Station Contracts (including without
---------
limitation each of the Real Property Leases) is in effect and is binding upon
Seller and, to Seller's knowledge,
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the other parties thereto (subject to bankruptcy, insolvency, reorganization or
other similar laws relating to or affecting the enforcement of creditors' rights
generally). Seller has performed its obligations under each of the Station
Contracts in all material respects, and is not in material default thereunder,
and to Seller's knowledge, no other party to any of the Station Contracts is in
default thereunder in any material respect. Seller has delivered to Buyer true
and correct copies of all Real Property Leases.
7.9. Environmental. Except as set forth in any environmental report
-------------
delivered by Seller to Buyer prior to the date of this Agreement and except as
set forth on Schedule 1.1(f), to Seller's knowledge, no hazardous or toxic
---------------
substance or waste regulated under any applicable environmental, health or
safety law has been generated, stored, transported or released on, in, from or
to the Real Property included in the Station Assets. Except as set forth in any
environmental report delivered by Seller to Buyer prior to the date of this
Agreement and except as set forth on Schedule 1.1(f), to Seller's knowledge,
---------------
Seller has complied in all material respects with all environmental, health and
safety laws applicable to the Stations.
7.10. Intangible Property. Schedule 1.1(d) contains a description of the
------------------- ---------------
material Intangible Property included in the Station Assets. Except as set forth
on Schedule 1.1(d), Seller has received no notice of any claim that its use of
---------------
the Intangible Property infringes upon any third party rights. Except as set
forth on Schedule 1.1(d), Seller owns or has the right to use the Intangible
---------------
Property free and clear of Liens other than Permitted Liens.
7.11. Compliance with Law. Seller has complied in all material respects
-------------------
with all laws, regulations, rules, writs, injunctions, ordinances, franchises,
decrees or orders of any court or of any foreign, federal, state, municipal or
other governmental authority which are applicable to the operation of the
Stations. There is no action, suit or proceeding pending or threatened against
Seller in respect of the Stations that will subject Buyer to liability or which
questions the legality or propriety of the transactions contemplated by this
Agreement. To Seller's knowledge, there are no governmental claims or
investigations pending or threatened against Seller in respect of the Stations
(except those affecting the industry generally).
7.12. No Finder. No broker, finder or other person is entitled to a
---------
commission, brokerage fee or other similar payment in connection with this
Agreement or the transactions contemplated hereby as a result of any agreement
or action of Seller or any party acting on Seller's behalf.
ARTICLE 8: ACCOUNTS RECEIVABLE
-------------------
8.1. Accounts Receivable. All accounts receivable arising prior to the
-------------------
Closing Date in connection with the operation of the Stations, including but not
limited to accounts receivable for advertising revenues for programs and
announcements performed prior to the Closing Date and other broadcast revenues
for services performed prior to the Closing Date, shall remain the property of
Seller (the "Accounts Receivable") and Buyer shall not acquire any right or
interest therein. For a period of six months from Closing (the "Collection
Period"), Buyer shall collect the Accounts Receivable in the normal and ordinary
course of
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Buyer's business and shall apply all such amounts collected to the debtor's
oldest account receivable first. Buyer's obligation shall not extend to the
institution of litigation, employment of counsel or a collection agency or any
other extraordinary means of collection. During the Collection Period, neither
Seller or its agents shall make any direct solicitation of any such account
debtor for collection purposes or institute litigation for the collection of
amounts due. Any amounts relating to the Accounts Receivable that are paid
directly to Seller shall be retained by Seller. Within ten calendar days after
the end of each month, Buyer shall make a payment to Seller equal to the amount
of all collections of Accounts Receivable during the preceding month. At the end
of the Collection Period, any remaining Accounts Receivable shall be returned to
Seller for collection.
ARTICLE 9: COVENANTS OF SELLER
-------------------
9.1. Seller's Covenants. Seller covenants and agrees with respect to the
------------------
Stations that, between the date hereof and Closing, except as permitted by this
Agreement or with the prior written consent of Buyer, which shall not be
unreasonably withheld, Seller shall:
(a) operate the Stations in the ordinary course of business
consistent with past practice and in all material respects in accordance with
FCC rules and regulations and with all other applicable laws, regulations, rules
and orders;
(b) not, other than in the ordinary course of business in
accordance with past practice, sell, lease or dispose of or agree to sell, lease
or dispose of any of the Station Assets, or create, assume or permit to exist
any Liens upon the Station Assets, except for Permitted Liens, and not modify or
amend in any material adverse respect the Real Property Leases;
(c) furnish Buyer with such information relating to the Station
Assets as Buyer may reasonably request, at Buyer's expense and provided such
request does not interfere unreasonably with the business of the Stations;
(d) after Seller publicly announces the transaction contemplated by
this Agreement and files this Agreement with the FCC, then, when reasonably
requested by Buyer, provide Buyer access to the Station facilities that are
included in the Station Assets during the Stations' normal business hours,
provided such access does not interfere unreasonably with the business of the
Stations; and
(e) make available to Buyer, and authorize its accountants to
cooperate and make available to Buyer, at Buyer's expense and reasonable request
such financial information regarding the Stations as is maintained by Seller on
a basis not consolidated with other stations.
ARTICLE 10: JOINT COVENANTS
---------------
Buyer and Seller hereby covenant and agree that between the date hereof and
Closing:
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<PAGE>
10.1. Cooperation. Subject to express limitations contained elsewhere
-----------
herein, each party (i) shall cooperate fully with one another in taking any
reasonable actions (including without limitation, reasonable actions to obtain
the required consent of any governmental instrumentality or any third party)
necessary or helpful to accomplish the transactions contemplated by this
Agreement, including but not limited to the prompt satisfaction of any condition
to Closing set forth herein, and (ii) shall not take any action that conflicts
with its obligations hereunder or that causes its representations and warranties
to become untrue in any material respect.
10.2. Control of Stations. Buyer shall not, directly or indirectly,
-------------------
control, supervise or direct the operations of the Stations prior to Closing.
Such operations, including complete control and supervision of all Station
programs, employees and policies, shall be the sole responsibility of Seller.
10.3. Consents to Assignment. The parties shall use commercially
----------------------
reasonable efforts to obtain any third party consents necessary for the
assignment of any Station Contract (which shall not require any payment to any
such third party). To the extent that any Station Contract may not be assigned
without the consent of any third party, and such consent is not obtained prior
to Closing, this Agreement and any assignment executed pursuant hereto shall not
constitute an assignment thereof, but to the extent permitted by law shall
constitute an equitable assignment by Seller and assumption by Buyer of Seller's
rights and obligations under the applicable Station Contract, with Seller making
available to Buyer the benefits thereof and Buyer performing the obligations
thereunder on Seller's behalf.
10.4. Employee Matters.
----------------
(a) Prior to Closing, Seller shall deliver to Buyer a list of
employees of the Stations that Seller does not intend to retain after Closing.
Buyer may interview and elect to hire such listed employees, but not any other
employees of Seller. Buyer is obligated to hire only those employees that are
under employment contracts (and assume Seller's obligations and liabilities
under such employment contracts) which are included in the Station Contracts.
With respect to employees hired by Buyer ("Transferred Employees"), to the
extent permitted by law, Seller shall provide Buyer access to its personnel
records and such other information as Buyer may reasonably request prior to
Closing. With respect to such hired employees, Seller shall be responsible for
the payment of all compensation and accrued employee benefits payable by it
until Closing and thereafter Buyer shall be responsible for all such obligations
payable by it. Buyer shall cause all employees it hires to be eligible to
participate in its "employee welfare benefit plans" and "employee pension
benefit plans" (as defined in Section 3(1) and 3(2) of ERISA, respectively) in
which similarly situated employees are generally eligible to participate;
provided, however, that all such employees and their spouses and dependents
shall be eligible for coverage immediately after Closing (and shall not be
excluded from coverage on account of any pre-existing condition) to the extent
provided under such plans. For purposes of any length of service requirements,
waiting periods, vesting periods or differential benefits based on length of
service in any such plan for which such employees may be eligible after Closing,
Buyer shall ensure that service with Seller shall be deemed to have
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<PAGE>
been service with the Buyer. In addition, Buyer shall ensure that each such
employee receives credit under any welfare benefit plan of Buyer for any
deductibles or co-payments paid by such employees and dependents for the current
plan year under a plan maintained by Seller. Notwithstanding any other provision
contained herein, Buyer shall grant credit to each such employee for all unused
sick leave accrued as of Closing as an employee of Seller. Notwithstanding any
other provision contained herein, Buyer shall assume and discharge Seller's
liabilities for the payment of all unused vacation leave accrued by such
employees as of Closing.
(b) As soon as administratively feasible following the execution of
a closing agreement with the Internal Revenue Service relating to the tax-
qualified status of Seller's 401(k) Plan (the "Savings Plan") and the issuance
of a favorable determination letter as to the tax-qualified status of the
Savings Plan under Section 401(a) of the Code (or an opinion of counsel that the
form of the Savings Plan is so qualified), Buyer and Seller shall enter into a
401(k) plan asset transfer agreement pursuant to which Buyer shall establish a
defined contribution plan (or cover Transferred Employees under an existing
defined contribution plan sponsored by Buyer) for the benefit of Transferred
Employees who were participants in the Savings Plan. Such Transferred Employees
are referred to hereinafter as the "Savings Plan Employees."
(c) Following execution of the agreement contemplated in clause (b)
above, Seller shall cause to be transferred from the Savings Plan to the plan
covering the Savings Plan Employees (the "Transferee Savings Plan") the
liability for the account balances of the Savings Plan Employees (including
outstanding loan balances of Savings Plan Employees), together with cash, cash
equivalents or other mutually acceptable property, the value of which on such
transfer date is equal to such liability, and Buyer shall cause the Transferee
Savings Plan to accept such transfer, all in accordance with the rules and
regulations under Section 414(l) of the Code.
(d) Pending completion of the transfers described in this Section,
Seller and Buyer shall make arrangements for any distributions, if any, to the
Savings Plan Employees from the Savings Plan. Seller and Buyer shall provide
each other with access to information reasonably necessary in order to carry out
the provisions of this paragraph. In addition, until the asset transfer is
effectuated, Buyer shall cooperate with the reasonable requests of Seller to
continue to withhold from the pay checks of Transferred Employees' who have
outstanding loan balances in the Seller's 401(k) Savings Plan and Buyer shall
remit such withheld amounts to the Seller in a timely fashion such that the
outstanding loans do not go into default.
10.5. 1031 Exchange. At or prior to Closing, Seller may assign its rights
-------------
under this Agreement (in whole or in part) to a qualified intermediary (as
defined in Treasury regulation section 1.1031(k)-1(g)(4)) or similar entity or
arrangement ("Qualified Intermediary"). Upon any such assignment, Seller shall
promptly give written notice thereof to Buyer, and Buyer shall cooperate with
the reasonable requests of Seller and any Qualified Intermediary in connection
therewith. Without limiting the generality of the foregoing, if Seller gives
notice of such assignment, Buyer shall (i) promptly provide Seller with written
acknowledgment of such
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<PAGE>
notice and (ii) at Closing, pay the Purchase Price (or any portion thereof
designated by the Qualified Intermediary) to or on behalf of the Qualified
Intermediary (which payment shall, to the extent thereof, satisfy the
obligations of Buyer to make such payment hereunder). Seller's assignment to a
Qualified Intermediary will not relieve Seller of any of its duties or
obligations herein. Except for the obligations of Buyer set forth in this
Section, Buyer shall not have any liability or obligation to Seller for the
failure of the contemplated exchange to qualify as a like-kind exchange under
Section 1031 of the Internal Revenue Code unless such failure is the result of
the material breach or default by Buyer under this Agreement.
10.6. Trust. Notwithstanding anything in this Agreement to the contrary,
-----
Seller may at it option assign this Agreement (in whole or part) and assign and
transfer the Station Assets (in whole or in part) to a trustee to hold and
operate pursuant to a trust agreement, provided such trustee assumes Seller's
duties and obligations hereunder with respect to the Station Assets held in such
trust.
ARTICLE 11: CONDITIONS OF CLOSING BY BUYER
------------------------------
The obligations of Buyer hereunder are, at its option, subject to
satisfaction, at or prior to Closing, of each of the following conditions:
11.1. Representations, Warranties and Covenants. The representations and
-----------------------------------------
warranties of Seller made in this Agreement shall be true and correct in all
material respects as of the Closing Date except for changes permitted or
contemplated by the terms of this Agreement, and the covenants and agreements to
be complied with and performed by Seller at or prior to Closing shall have been
complied with or performed in all material respects. Buyer shall have received
a certificate dated as of the Closing Date from Seller, executed by an
authorized officer of Seller to the effect that the conditions set forth in this
Section have been satisfied.
11.2. Governmental Consents. The FCC Consent and DOJ Consent, and, if
---------------------
applicable, HSR Clearance, shall have been obtained, and no court or
governmental order prohibiting Closing shall be in effect.
ARTICLE 12: CONDITIONS OF CLOSING BY SELLER
-------------------------------
The obligations of Seller hereunder are, at its option, subject to
satisfaction, at or prior to Closing, of each of the following conditions:
12.1. Representations, Warranties and Covenants. The representations and
-----------------------------------------
warranties of Buyer made in this Agreement shall be true and correct in all
material respects as of the Closing Date except for changes permitted or
contemplated by the terms of this Agreement, and the covenants and agreements to
be complied with and performed by Buyer at or prior to Closing shall have been
complied with or performed in all material respects. Seller shall have received
a certificate dated as of the Closing Date from Buyer, executed by an authorized
officer of Buyer, to the effect that the conditions set forth in this Section
have been satisfied.
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<PAGE>
12.2. Governmental Consents. The FCC Consent and DOJ Consent, and, if
---------------------
applicable, HSR Clearance, shall have been obtained, and no court or
governmental order prohibiting Closing shall be in effect.
12.3. AMFM Closing. The closing under the AMFM Agreement shall have been
------------
consummated.
ARTICLE 13: EXPENSES
--------
13.1. Expenses. Each party shall be solely responsible for all costs and
--------
expenses incurred by it in connection with the negotiation, preparation and
performance of and compliance with the terms of this Agreement, except that (i)
all recordation, transfer and documentary taxes, fees and charges, and any
excise, sales or use taxes, applicable to the transfer of the Station Assets
shall be paid by Buyer, (ii) all FCC filing fees shall be paid equally by Buyer
and Seller, and (iii) all HSR Act filing fees and expenses shall be paid by
Buyer.
ARTICLE 14: DOCUMENTS TO BE DELIVERED AT CLOSING
------------------------------------
14.1. Seller's Documents. At Closing, Seller shall deliver or cause to be
------------------
delivered to Buyer:
(i) certified copies of resolutions authorizing its execution,
delivery and performance of this Agreement, including the consummation of the
transactions contemplated hereby;
(ii) the certificate described in Section 11.1; and
(iii) such bills of sale, assignments, special warranty deeds,
documents of title and other instruments of conveyance, assignment and transfer
as may be necessary to convey, transfer and assign the Station Assets to Buyer,
free and clear of Liens, except for Permitted Liens.
14.2. Buyer's Documents. At Closing, Buyer shall deliver or cause to be
-----------------
delivered to Seller:
(i) the certified copies of resolutions authorizing its execution,
delivery and performance of this Agreement, including the consummation of the
transactions contemplated hereby;
(ii) the certificate described in Section 12.1; and
(iii) such documents and instruments of assumption as may be
necessary to assume the Assumed Obligations, and the Purchase Price in
accordance with Section 3.1 hereof.
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<PAGE>
ARTICLE 15: SURVIVAL; INDEMNIFICATION
-------------------------
15.1. Survival. The covenants, agreements, representations and warranties
--------
in this Agreement shall survive Closing for a period of twelve (12) months from
the Closing Date whereupon they shall expire and be of no further force or
effect, except those under (i) this Article 15 that relate to Damages (defined
below) for which written notice is given by the indemnified party to the
indemnifying party prior to the expiration, which shall survive until resolved
and (ii) Sections 2.1 (Assumed Obligations), 3.3 (Adjustments), 3.4
(Allocation), 8.1 (Accounts Receivable) and 13.1 (Expenses), and indemnification
obligations with respect to such provisions, which shall survive until
performed.
15.2. Indemnification.
---------------
(a) From and after the Closing, Seller shall defend, indemnify and
hold harmless Buyer from and against any and all losses, costs, damages,
liabilities and expenses, including reasonable attorneys' fees and expenses
("Damages") incurred by Buyer arising out of or resulting from: (i) any breach
or default by Seller under this Agreement; (ii) the Retained Obligations; or
(iii) the business or operation of the Stations before Closing; provided,
however, that (i) Seller shall have no liability to Buyer hereunder until, and
only to the extent that, Buyer's aggregate Damages exceed $100,000 and (ii) the
maximum liability of Seller hereunder shall be $17,000,000 (provided that such
basket and cap limitations shall not apply to any return of the Purchase Price
pursuant to the last sentence of Section 4.1 of this Agreement).
(b) From and after the Closing, Buyer shall defend, indemnify and
hold harmless Seller from and against any and all Damages incurred by Seller
arising out of or resulting from: (i) any breach or default by Buyer under this
Agreement; (ii) the Assumed Obligations; or (iii) the business or operation of
the Stations after Closing.
15.3. Procedures. The indemnified party shall give prompt written notice
----------
to the indemnifying party of any demand, suit, claim or assertion of liability
by third parties or other circumstances that could give rise to an
indemnification obligation hereunder against the indemnifying party (a "Claim"),
but a failure to give such notice or delaying such notice shall not affect the
indemnified party's right to indemnification and the indemnifying party's
obligation to indemnify as set forth in this Agreement, except to the extent the
indemnifying party's ability to remedy, contest, defend or settle with respect
to such Claim is thereby prejudiced. The obligations and liabilities of the
parties with respect to any Claim shall be subject to the following additional
terms and conditions:
(a) The indemnifying party shall have the right to undertake, by
counsel or other representatives of its own choosing, the defense or opposition
to such Claim.
(b) In the event that the indemnifying party shall elect not to
undertake such defense or opposition, or, within twenty (20) days after written
notice (which shall include sufficient description of background information
explaining the basis for such Claim) of any
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<PAGE>
such Claim from the indemnified party, the indemnifying party shall fail to
undertake to defend or oppose, the indemnified party (upon further written
notice to the indemnifying party) shall have the right to undertake the defense,
opposition, compromise or settlement of such Claim, by counsel or other
representatives of its own choosing, on behalf of and for the account and risk
of the indemnifying party (subject to the right of the indemnifying party to
assume defense of or opposition to such Claim at any time prior to settlement,
compromise or final determination thereof).
(c) Anything herein to the contrary notwithstanding: (i) the
indemnified party shall have the right, at its own cost and expense, to
participate in the defense, opposition, compromise or settlement of the Claim;
(ii) the indemnifying party shall not, without the indemnified party's written
consent, settle or compromise any Claim or consent to entry of any judgment
which does not include as an unconditional term thereof the giving by the
claimant or the plaintiff to the indemnified party of a release from all
liability in respect of such Claim; and (iii) in the event that the indemnifying
party undertakes defense of or opposition to any Claim, the indemnified party,
by counsel or other representative of its own choosing and at its sole cost and
expense, shall have the right to consult with the indemnifying party and its
counsel or other representatives concerning such Claim and the indemnifying
party and the indemnified party and their respective counsel or other
representatives shall cooperate in good faith with respect to such Claim.
(d) All claims not disputed shall be paid by the indemnifying party
within thirty (30) days after receiving notice of the Claim. "Disputed Claims"
shall mean claims for Damages by an indemnified party which the indemnifying
party objects to in writing within thirty (30) days after receiving notice of
the Claim. In the event there is a Disputed Claim with respect to any Damages,
the indemnifying party shall be required to pay the indemnified party the amount
of such Damages for which the indemnifying party has, pursuant to a final
determination, been found liable within ten (10) days after there is a final
determination with respect to such Disputed Claim. A final determination of a
Disputed Claim shall be (i) a judgment of any court determining the validity of
a Disputed Claim, if no appeal is pending from such judgment and if the time to
appeal therefrom has elapsed; (ii) an award of any arbitration determining the
validity of such disputed claim, if there is not pending any motion to set aside
such award and if the time within which to move to set aside such award has
elapsed; (iii) a written termination of the dispute with respect to such claim
signed by the parties thereto or their attorneys; (iv) a written acknowledgment
of the indemnifying party that it no longer disputes the validity of such claim;
or (v) such other evidence of final determination of a disputed claim as shall
be acceptable to the parties. No undertaking of defense or opposition to a Claim
shall be construed as an acknowledgment by such party that it is liable to the
party claiming indemnification with respect to the Claim at issue or other
similar Claims.
ARTICLE 16: TERMINATION
-----------
16.1. Termination. This Agreement may be terminated at any time prior to
-----------
Closing as follows:
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<PAGE>
(a) by mutual written consent of Buyer and Seller;
(b) by written notice of Buyer to Seller if Seller (i) does not
satisfy the conditions or perform the obligations to be satisfied or performed
by it on the Closing Date; or (ii) otherwise breaches in any material respect
any of its representations or warranties or defaults in any material respect in
the performance of any of its covenants or agreements herein contained and such
breach or default is not cured within the Cure Period (defined below);
(c) by written notice of Seller to Buyer if Buyer (i) does not
satisfy the conditions or perform the obligations to be satisfied or performed
by it on the Closing Date; or (ii) otherwise breaches in any material respect
any of its representations or warranties or defaults in any material respect in
the performance of any of its covenants or agreements herein contained and such
breach or default is not cured within the Cure Period (defined below);
(d) by written notice of Buyer to Seller, or by Seller to Buyer, if
the FCC denies the FCC Application;
(e) by written notice of Seller to Buyer if the Closing shall not
have been consummated on or before the date four months after the date of this
Agreement; or
(f) by written notice of Seller to Buyer if the AMFM Agreement is
terminated or expires.
The term "Cure Period" as used herein means a period commencing the date
Buyer or Seller receives from the other written notice of breach or default
hereunder and continuing until the earlier of (i) thirty (30) days thereafter or
(ii) the Closing Date; provided, however, that if the breach or default cannot
reasonably be cured within such period but can be cured before the Closing Date,
and if diligent efforts to cure promptly commence, then the Cure Period shall
continue as long as such diligent efforts to cure continue, but not beyond the
Closing Date. Except as set forth below, the termination of this Agreement shall
not relieve any party of any liability for breach or default under this
Agreement prior to the date of termination. Notwithstanding anything contained
herein to the contrary, Section 13.1 shall survive any termination of this
Agreement.
16.2. Remedies. The parties recognize that if either party refuses to
--------
consummate the Closing pursuant to the provisions of this Agreement or either
party otherwise breaches or defaults such that the Closing has not occurred
("Breaching Party"), monetary damages alone will not be adequate to compensate
the non-breaching party ("Non-Breaching Party") for its injury. Such Non-
Breaching Party shall therefore be entitled to obtain specific performance of
the terms of this Agreement in lieu of, and not in addition to, any other
remedies, including but not limited to monetary damages, that may be available
to it; provided however, that Seller may elect to recover liquidated damages in
lieu of obtaining specific performance. If any action is brought by the Non-
Breaching Party to enforce this Agreement, the Breaching Party shall waive the
defense that there is an adequate remedy at law. In the event of a default by
the Breaching Party which results in the filing of a lawsuit for damages,
specific performance, or
- 17 -
<PAGE>
other remedy, the Non-Breaching Party shall be entitled to reimbursement by the
Breaching Party of reasonable legal fees and expenses incurred by the Non-
Breaching Party, provided that the Non-Breaching Party is successful in such
lawsuit.
16.3. Liquidated Damages. If Seller terminates this Agreement due to
------------------
Buyer's failure to consummate the Closing on the Closing Date or if this
Agreement is otherwise terminated by Seller pursuant to Section 16.1(c), then
Buyer shall pay Seller as liquidated damages an amount equal to 25% of the
Purchase Price. It is understood and agreed that such liquidated damages amount
represents Buyer's and Seller's reasonable estimate of actual damages and does
not constitute a penalty.
ARTICLE 17: MISCELLANEOUS PROVISIONS
------------------------
17.1. Casualty Loss. In the event any loss or damage of the Station
-------------
Assets exists on the Closing Date, Buyer and Seller shall consummate the Closing
and Seller shall assign to Buyer the proceeds of any insurance payable to Seller
on account of such damage or loss.
17.2. Further Assurances. After the Closing, Seller shall from time to
------------------
time, at the request of and without further cost or expense to Buyer, execute
and deliver such other instruments of conveyance and transfer and take such
other actions as may reasonably be requested in order to more effectively
consummate the transactions contemplated hereby to vest in Buyer good title to
the Station Assets, and Buyer shall from time to time, at the request of and
without further cost or expense to Seller, execute and deliver such other
instruments and take such other actions as may reasonably be requested in order
more effectively to relieve Seller of any obligations being assumed by Buyer
hereunder.
17.3. Assignment. Except as set forth in Sections 10.5 (1031 Exchange)
----------
and 10.6 (Trust), neither party may assign this Agreement without the prior
written consent of the other party hereto. With respect to any permitted
assignment, the parties shall take all such actions as are reasonably necessary
to effectuate such assignment, including but not limited to cooperating in any
appropriate filings with the FCC or other governmental authorities. All
covenants, agreements, statements, representations, warranties and indemnities
in this Agreement by and on behalf of any of the parties hereto shall bind and
inure to the benefit of their respective successors and permitted assigns of the
parties hereto.
17.4. Amendments. No amendment, waiver of compliance with any provision
----------
or condition hereof or consent pursuant to this Agreement shall be effective
unless evidenced by an instrument in writing signed by the party against whom
enforcement of any waiver, amendment, change, extension or discharge is sought.
17.5. Headings. The headings set forth in this Agreement are for
--------
convenience only and will not control or affect the meaning or construction of
the provisions of this Agreement.
- 18 -
<PAGE>
17.6. Governing Law. The construction and performance of this Agreement
-------------
shall be governed by the laws of the State of Texas without giving effect to the
choice of law provisions thereof.
17.7. Notices. Any notice, demand or request required or permitted to be
-------
given under the provisions of this Agreement shall be in writing, including by
facsimile, and shall be deemed to have been received on the date of personal
delivery, on the third day after deposit in the U.S. mail if mailed by
registered or certified mail, postage prepaid and return receipt requested, on
the day after delivery to a nationally recognized overnight courier service if
sent by an overnight delivery service for next morning delivery or when
delivered by facsimile transmission, and shall be addressed as follows (or to
such other address as any party may request by written notice):
if to Seller: c/o Clear Channel Broadcasting, Inc.
200 Concord Plaza, Suite 600
San Antonio, Texas 78216
Attention: President
Facsimile: (210) 822-2299
with a copy (which shall not
constitute notice) to: Wiley, Rein & Fielding
1776 K Street, N.W.
Washington, D.C. 20006
Attention: Richard J. Bodorff, Esq.
Facsimile: (202) 719-7049
if to Buyer: Entravision Communications Corporation
2425 Olympic Boulevard, Suite 6000 West
Santa Monica, California 90404
Attention: Walter Ulloa
with copies (which shall not
constitute notice) to: Michael Rowles
Zevnick, Horton, Guibard McGovern Palmer & Fugnani
101 West Broadway
17th Floor
San Diego, California 92101
and to: EXCL Communications, Inc.
2905 S. King Road
San Jose, California 95122
Attention: Athena S. Marks
Facsimile: (408) 274-1170
and to: McBride Baker & Coles
- 19 -
<PAGE>
Northwestern Atrium Center
500 West Madison Street, 40th Floor
Chicago, Illinois 60661-2511
Attention: Elias N. Matsakis, Esq.
Facsimile: (312) 993-9350
17.8. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which will be deemed an original and all of which together
will constitute one and the same instrument.
17.9. No Third Party Beneficiaries. Nothing herein expressed or implied
----------------------------
is intended or shall be construed to confer upon or give to any person or entity
other than the parties hereto and their successors or permitted assigns, any
rights or remedies under or by reason of this Agreement.
17.10. Severability. The parties agree that if one or more provisions
------------
contained in this Agreement shall be deemed or held to be invalid, illegal or
unenforceable in any respect under any applicable law, this Agreement shall be
construed with the invalid, illegal or unenforceable provision deleted, and the
validity, legality and enforceability of the remaining provisions contained
herein shall not be affected or impaired thereby.
17.11. Entire Agreement. This Agreement embodies the entire agreement and
----------------
understanding of the parties hereto and supersedes any and all prior agreements,
arrangements and understandings relating to the matters provided for herein.
This Agreement does not supersede any confidentiality agreement relating to the
Stations.
[SIGNATURE PAGE FOLLOWS]
- 20 -
<PAGE>
SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT
------------------------------------------
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.
SELLER: CITICASTERS CO.
By: /s/ Mark P. Mays
Print Name: Mark P. Mays
Title: President
BUYER: ENTRAVISION COMMUNICATIONS
CORPORATION, a Delaware corporation
By: /s/ Walter F. Ulloa
Walter F. Ulloa, Chairman and Chief
Executive Officer
By: /s/ Philip C. Wilkinson
Philip C. Wilkinson, President and Chief
Operating Officer
<PAGE>
Schedules
- ---------
1.1(a) - FCC Licenses
1.1(b) - Tangible Personal Property
1.1(c) - Station Contracts
1.1(d) - Intangible Property
1.1(f) - Real Property
1.2(h) - Excluded Assets
The registrant hereby agrees to furnish a copy of any omitted schedule or
exhibit upon request.
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
ENTRAVISION COMMUNICATIONS CORPORATION
ARTICLE I.
The name of the corporation is Entravision Communications Corporation.
ARTICLE II.
The address of the registered office of the corporation in the State of
Delaware is 15 East North Street, County of Kent, Dover, Delaware 19903-0899.
The name of its registered agent at such address is Incorporating Services, Ltd.
ARTICLE III.
The name and mailing address of the incorporator is Kenneth D. Polin, Esq.,
Zevnik Horton Guibord McGovern Palmer & Fognani, L.L.P., 101 West Broadway,
Seventeenth Floor, San Diego, California 92101.
ARTICLE IV.
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the Delaware General Corporation Law.
ARTICLE V.
The corporation is authorized to issue one class of stock to be designated
"Common Stock." The total number of shares which the corporation is authorized
to issue is 1,000,000 shares, $0.001 par value per share.
ARTICLE VI.
Except as otherwise provided herein, in furtherance and not in limitation
of the powers conferred by statute, the Board of Directors of the corporation is
expressly authorized to make, repeal, alter, amend and rescind any or all of the
bylaws of the corporation, but the stockholders may make additional bylaws and
may repeal, alter, amend or rescind any bylaw whether adopted by them or
otherwise.
ARTICLE VII.
<PAGE>
The number of directors of the corporation shall be fixed from time to time
by, or in the manner provided in, the bylaws or amendment thereof duly adopted
by the Board of Directors or by the stockholders.
ARTICLE VIII.
Elections of directors need not be by written ballot except and to the
extent provided in the bylaws of the corporation.
ARTICLE IX.
Meetings of the stockholders may be held within or without the State of
Delaware, as the bylaws may provide. The books of the corporation may be kept
(subject to any provisions contained in applicable statutes) 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 bylaws of the corporation.
ARTICLE X.
Directors and officers of the corporation shall, to the fullest extent
permitted by the Delaware General Corporation Law as it now exists or as it may
hereafter be amended, not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director or
officer, except for liability (i) for any breach of 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) under
Section 174 of the Delaware General Corporation Law or (iv) for any transaction
from which the director or officer derived any improper personal benefit. If
the Delaware General Corporation Law is amended after approval by the
stockholders of this Article X to authorize corporate action further eliminating
or limiting the personal liability of directors or officers, then the personal
liability of directors or officers of the corporation shall be further
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law. Any repeal or modification of any of the foregoing provisions
by the stockholders of the corporation, or the adoption of any provision hereof
inconsistent with this Article X, shall not adversely affect any right or
protection of directors or officers of the corporation existing at the time of,
or increase the liability of directors and officers of the corporation with
respect to any acts or omissions of such director or officer occurring prior to,
such repeal or modification.
ARTICLE XI.
Each person who is or was a director or officer of the corporation
(including the heirs, executors, administrators or estate of such person) shall
be indemnified (including, without limitation, advancement of expenses) by the
corporation as of right, to the fullest extent permitted or authorized by the
Delaware General Corporation Law as it now exists or as it may hereafter be
amended, against any liability, cost or expense asserted against such director
or
-2-
<PAGE>
officer and incurred by such director or officer in any such person's capacity
as a director or officer, or arising out of any such person's status as a
director or officer, in excess of the indemnification and advancement otherwise
permitted by Section 145 of the Delaware General Corporation Law, subject only
to the limits created by applicable Delaware law (whether statutory or non-
statutory) with respect to actions for breach of duty to the corporation, its
stockholders and others. The corporation may, but shall not be obligated to,
maintain insurance, at its expense, to protect itself and any such person
against any such liability, cost or expense. Any repeal or modification of any
of the foregoing provisions by the stockholders of the corporation, or the
adoption of any provision hereof inconsistent with this Article XI, shall not
adversely affect any right or protection of directors or officers of the
corporation existing at the time of, or increase the liability of directors and
officers of the corporation with respect to any acts or omissions of such
director or officer occurring prior to, such repeal or modification.
ARTICLE XII.
The corporation reserves the right to amend, alter, change or repeal any
provision contained herein in the manner now or hereafter prescribed by statute,
and all rights conferred upon stockholders, directors and officers of the
corporation herein are granted subject to such revision.
IN WITNESS WHEREOF, the undersigned hereby certifies under penalty of
perjury that he has read the foregoing Certificate of Incorporation of
Entravision Communications Corporation and knows the contents thereof, that it
is his act and deed and that the facts stated therein are true.
Dated: February 10, 2000.
/s/ Kenneth D. Polin
----------------------------------
Kenneth D. Polin, Esq.
-3-
<PAGE>
EXHIBIT 3.2
FIRST RESTATED CERTIFICATE OF INCORPORATION
OF
ENTRAVISION COMMUNICATIONS CORPORATION
Entravision Communications Corporation, a corporation organized and
existing under and by virtue of the provisions of the Delaware General
Corporation Law, does hereby certify:
FIRST: That the name of the corporation is Entravision Communications
Corporation and that the corporation was originally incorporated on February 11,
2000 under the name "Entravision Communications Corporation."
SECOND: That the Board of Directors duly adopted resolutions proposing to
amend and restate the Certificate of Incorporation of the corporation, declaring
said amendment and restatement to be advisable and in the best interests of the
corporation, which resolution setting forth the proposed amendment and
restatement is as follows:
RESOLVED, that the Certificate of Incorporation of the corporation be
amended and restated in its entirety as follows:
ARTICLE 1.
The name of the corporation is Entravision Communications Corporation.
ARTICLE 2.
The address of the registered office of the corporation in the State of
Delaware is 15 East North Street, County of Kent, Dover, Delaware 19903-0899.
The name of its registered agent at such address is Incorporating Services, Ltd.
ARTICLE 3.
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the Delaware General Corporation Law.
ARTICLE 4.
4.1 Classes of Stock. The corporation shall have the authority to issue
----------------
415,000,000 shares of Common Stock, par value $0.0001 per share, divided into
the following classes: (i) 305,000,000 shares of Class A Common Stock (the
"Class A Common Stock"); (ii) 60,000,000 shares of Class B Common Stock (the
"Class B Common Stock"); and (iii) 50,000,000 shares of Class C Common Stock
(the "Class C Common Stock" and together with the Class A Common Stock and the
Class B Common Stock, the "Common Stock"). The corporation shall also have
<PAGE>
the authority to issue 50,000,000 shares of Preferred Stock, par value $0.0001
per share (the "Preferred Stock"). The Common Stock and the Preferred Stock are
collectively referred to herein as the "Capital Stock."
4.2 Certain Definitions. As used in this First Restated Certificate of
-------------------
Incorporation, the following terms have the meanings indicated:
"Affiliate" means any person or entity directly or indirectly controlling
or controlled by or under direct or indirect common control with another Person
(as defined below).
"Board" means the Board of Directors of the corporation.
"Class B Holder(s)" means Walter F. Ulloa, Philip C. Wilkinson or Paul A.
Zevnik, or any Permitted Transferee (as defined below) of Walter F. Ulloa,
Philip C. Wilkinson or Paul A. Zevnik (hereinafter each of such individuals and
his respective Permitted Transferee(s) is referred to as "Ulloa," "Wilkinson"
and "Zevnik," respectively).
"Class B Required Amount" means, in the case of each Class B Holder, a
number of shares equal to thirty percent (30%) of the Class B Base Amount. The
Class B Base Amount shall be equal to ______________ shares of Class B Common
Stock with respect to Ulloa, _______________ shares of Class B Common Stock with
respect to Wilkinson and ________________ shares of Class B Common Stock with
respect to Zevnik, which shall be increased to give effect to stock dividends
and stock splits and shall be decreased to give effect to reverse stock splits
and repurchases by the corporation of the Class B Common Stock approved by the
Board in accordance with the bylaws.
"Class C Holder" means Univision Communications Inc. ("Univision"), or any
Permitted Transferee of Univision.
"Class C Required Amount" means, in the case of the Class C Holder, a
number of shares equal to thirty percent (30%) of the Class C Base Amount. The
Class C Base Amount shall be equal to _______________ shares of Class C Common
Stock, which shall be increased to give effect to stock dividends and stock
splits and shall be decreased to give effect to reverse stock splits and
repurchases by the corporation of the Class C Common Stock approved by the Board
in accordance with the bylaws.
"Communications Act" means the Communications Act of 1934, and the rules,
regulations, decisions and written policies of the Federal Communications
Commission (the "FCC") thereunder (as the same may be amended from time to
time).
"Entire Board" means the number of directors of the corporation which would
be in office if there are no vacancies on the Board and no unfilled newly-
created directorships.
-2-
<PAGE>
"Permitted Transferee" means: (i) any entity all of the equity (other than
directors' qualifying shares) of which is directly or indirectly owned by the
transferor that is not an Affiliate of any other Person; (ii) in the case of an
transferor who is an individual, (a) such transferor's spouse, lineal
descendants, adopted children and minor children supported by such transferor,
(b) any trustee of any trust created primarily for the benefit of any, or some
of or all of such spouse or lineal descendants (but which may include
beneficiaries that are charities) or any revocable trust created by such
transferor, (c) the transferor, in the case of a transfer from any "Permitted
Transferee" back to its transferor and (d) any entity all of the equity of which
is directly or indirectly owned by any of the foregoing which is not an
Affiliate of any Person other than the Persons described in clauses (a) through
(c) above; and (iii) in the case of a Class B Holder, any other Class B Holder.
"Person" means any individual, a corporation, a partnership, an
association, a limited liability company or a trust.
"Transfer" means any direct or indirect sale, pledge, hypothecation,
voluntary or involuntary, and whether by merger or other operation of law, other
than a bona fide pledge of shares to secure financing; provided that a
foreclosure on such pledged shares shall constitute a Transfer.
4.3 Common Stock. Except as otherwise provided by law or by this First
------------
Restated Certificate of Incorporation, each of the shares of Common Stock shall
be identical in all respects, including with respect to dividends and upon
liquidation.
(a) Stock Dividends; Stock Splits.
-----------------------------
(i) A dividend of Common Stock on any share of Common Stock
shall be declared and paid only in an equal per share amount on the then
outstanding shares of each class of Common Stock and only in shares of the same
class of Common Stock as the shares on which the dividend is being declared and
paid. For example, if and when a dividend of Class A Common Stock is declared
and paid to the then outstanding shares of Common Stock: (i) the dividend of
Class A Common Stock shall be paid solely to the outstanding shares of Class A
Common Stock; and (ii) a dividend of Class B Common Stock and Class C Common
Stock shall similarly be declared and paid in an equal per share amount solely
to the then outstanding shares of Class B Common Stock and Class C Common Stock,
respectively.
(ii) If the corporation shall in any manner subdivide or combine,
or make a rights offering with respect to, the outstanding shares of Class A
Common Stock, Class B Common Stock or Class C Common Stock, the outstanding
shares of the other classes of Common Stock shall be proportionally subdivided
or combined, or a rights offering shall be made, in the same manner and on the
same basis as the outstanding shares of Class A Common Stock, Class B Common
Stock or Class C Common Stock, as the case may be, that have been subdivided or
combined or made subject to a rights offering.
-3-
<PAGE>
(b) Voting Rights.
-------------
(i) The holders of the Class A Common Stock and the Class C
Common Stock shall have one (1) vote for each share held; the holders of the
Class B Common Stock shall have ten (10) votes for each share held.
(ii) Members of the Board shall be elected as set forth in
Section 4.5 below.
(iii) Without the consent of the holders of at least a majority
of the shares of Class C Common Stock then outstanding, voting as a separate
class, given in writing or by vote at a meeting of such Class C Holder called
for such purpose, the corporation will not:
(A) merge, consolidate or enter into a business
combination, or otherwise reorganize the corporation with or into one or more
entities (other than a merger of a wholly-owned subsidiary of the corporation
into another wholly-subsidiary of the corporation);
(B) dissolve, liquidate or terminate the corporation;
(C) directly or indirectly dispose of any interest in any
FCC license with respect to television stations which are affiliates of
Univision;
(D) amend, alter or repeal any provision of the First
Restated Certificate of Incorporation or bylaws of the corporation, each as
amended, so as to adversely affect the rights, privileges or restrictions
provided for the benefit of the holders of the Class C Common Stock.
(c) Conversion Rights.
-----------------
(i) Voluntary Conversion. Each share of Class B Common Stock
--------------------
or Class C Common Stock shall be convertible into one fully paid and non-
assessable share of Class A Common Stock at any time at the option of the holder
thereof.
(ii) Class B Automatic Conversion. Each share of Class B Common
----------------------------
Stock shall convert automatically into one (1) fully paid and non-assessable
share of Class A Common Stock upon its Transfer to any party other than a
Permitted Transferee of the holder thereof. Each share of Class B Common Stock
held by a Class B Holder or his respective Permitted Transferee(s) shall convert
automatically into one (1) fully paid and non-assessable share of Class A Common
Stock (i) upon the death of such Class B Holder, (ii) when such Class B Holder
is no longer actively involved in the business of the corporation or (iii) if
such Class B Holder (or his Permitted Transferee(s)) owns less than the Class B
Required Amount. Each share of Class B Common Stock shall automatically convert
into one (1) fully paid and non-assessable share of Class A Common Stock (i)
upon the death of the second to die of Ulloa and
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<PAGE>
Wilkinson or (ii) when the second of Ulloa and Wilkinson ceases to be actively
involved in the business of the corporation.
(iii) Class C Automatic Conversion. Each share of Class C Common
----------------------------
Stock shall convert automatically into one (1) fully paid and non-assessable
share of Class A Common Stock upon its Transfer to any party other than
Permitted Transferee of the holder thereof. Each share of Class C Common Stock
shall convert automatically into one (1) fully paid and non-assessable share of
Class A Common Stock when the Class C Holder (or its Permitted Transferee) owns
less than the Class C Required Amount.
(iv) Unconverted Shares. If less than all of the shares of
------------------
Class B Common Stock or Class C Common Stock are converted pursuant to
subparagraphs (i), (ii) or (iii) above, and such shares are evidenced by a
certificate surrendered to the corporation in accordance with the procedures as
the Board may determine, representing shares in excess of the shares being
converted, the corporation shall execute and deliver to or upon the written
order of the holder of such certificate, without charge to the holder, a new
certificate evidencing the number of shares of Class B Common Stock or Class C
Common Stock, as the case may be, not converted.
(v) Reservation. The corporation hereby reserves and shall at
-----------
all times reserve and keep available, out of its authorized and unissued shares
of Class A Common Stock, to effect conversions, such number of duly authorized
shares of Class A Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding shares of Class B Common Stock and
Class C Common Stock. The corporation covenants that all of the shares of Class
A Common Stock so issuable shall, when so issued, be duly and validly issued,
fully paid and non-assessable, and free from liens and charges with respect to
the issue. The corporation will take all such action as may be necessary to
assure that all such shares of Class A Common Stock may be so issued without
violation of any applicable law or regulation.
(d) Elimination of Class Rights.
---------------------------
(i) Class B Common Stock. Upon the occurrence of a Class B
--------------------
Voting Election, the rights of the Class B Holders to vote as a separate class
with respect to any matter (except as required by law) shall cease and be
eliminated. The "Class B Voting Election" shall be conclusively deemed to have
occurred upon receipt by the Secretary of the corporation of a written consent
signed by the record holders of a majority of the outstanding shares of Class B
Common Stock electing to eliminate the voting rights of the Class B Common Stock
as provided in the preceding sentence and such election shall be irrevocable.
Additionally, if at any time any of the Class B Holders own less than the Class
B Required Amount (a "Class B Voting Event," and together with a Class B Voting
Election, a "Class B Voting Conversion"), the rights of such Class B Holder(s)
to vote as a separate class with respect to any matter (except as required by
law) shall cease and be eliminated. From and after a Class B Voting Conversion,
such Class B
-5-
<PAGE>
Holder(s) shall vote together as a class with the holders of the Class A Common
Stock (and, if a Class C Voting Conversion has occurred, the Class C Holder),
except as required by law.
(ii) Class C Common Stock. Upon the occurrence of a Class C
--------------------
Voting Election, the rights of the Class C Holder to vote as a separate class
with respect to any matter (except as required by law) shall cease and be
eliminated. The "Class C Voting Election" shall be conclusively deemed to have
occurred upon receipt by the Secretary of the corporation of a written consent
signed by the record holders of a majority of the outstanding shares of Class C
Common Stock electing to eliminate the voting rights of the Class C Common Stock
as provided in the preceding sentence and such election shall be irrevocable.
Additionally, if at any time the Class C Holder (or its Permitted Transferee)
owns less than the Class C Required Amount (a "Class C Voting Event," and
together with a Class C Voting Election, a "Class C Voting Conversion"), the
rights of the Class C Holder to vote as a separate class with respect to any
matter (except as required by law) shall cease and be eliminated. From and
after a Class C Voting Conversion, the Class C Holder shall vote together as a
class with the holders of the Class A Common Stock (and, if a Class B Voting
Conversion has occurred, the Class B Holders), except as required by law.
4.4 Preferred Stock. The Board is authorized, subject to limitations
---------------
prescribed by law and the provisions of this First Restated Certificate of
Incorporation and the bylaws, by resolution or resolutions of the Board, from
time to time to provide for the issuance of the shares of the Preferred Stock in
one or more series and to establish the number of shares to be included in each
such series and to fix the designation, powers, preferences and rights of the
shares of each such series and the qualifications, limitations or restrictions
thereof.
The authority of the Board with respect to each series shall include,
without limitation, determination of the following: (i) the number of shares
constituting that series and the distinctive designation of that series; (ii)
the dividend rate, if any, on the shares of that series, whether dividends shall
be cumulative, and, if so, from which date or dates, and the relative rights of
priority, if any, of payment of dividends on shares of that series; (iii)
whether that series shall have voting rights, in addition to the voting rights
provided by law, and, if so, the terms of such voting rights; (iv) whether that
series shall be subject to conversion or exchange, and, if so, the terms and
conditions of such conversion or exchange, including provision for adjustment of
the conversion or exchange rate in such events as the Board shall determine; (v)
whether or not the shares of that series shall be redeemable, and, if so, the
terms and conditions of such redemption, including the date or dates upon or
after which they shall be redeemable, and the type and amount of consideration
per share payable in case of redemption, which amount may vary under different
conditions and at different redemption dates; (vi) whether that series shall
have a sinking fund for the redemption or purchase of shares of that series,
and, if so, the terms and amount of such sinking fund; (vii) the rights, if any,
of the shares of that series in the event of voluntary or involuntary
liquidation, dissolution or winding up of the corporation, and the relative
rights of priority, if any, of payment of shares of that series; and (viii) any
other relative rights, preferences and limitations, if any, of that series.
-6-
<PAGE>
4.5 Election of Directors. The directors of the corporation shall be
---------------------
elected as follows:
(a) Unless a Class C Voting Conversion has occurred, the holders of
the Class C Common Stock, voting as a separate class, shall be entitled to elect
two (2) directors to the Board. The directors that the holders of the Class C
Common Stock have the right to elect hereunder are referred to as the "Class C
Director(s)." Unless a Class C Voting Conversion has occurred, the holders of
the Class C Common Stock, voting as a separate class, shall also have the sole
right to remove any Class C Director without cause. Unless a Class C Voting
Conversion has occurred, any vacancy in the office of a Class C Director shall
be filled solely by (i) the holders of the Class C Common Stock, voting as a
separate class, or (ii) the sole Class C Director. At such time as a Class C
Voting Conversion has occurred, the voting rights of the holders of the Class C
Common Stock pursuant to this Section 4.5(a) shall terminate and the directors
formerly denominated Class C Directors shall be redesignated Class A/B Directors
and shall be elected pursuant to the provisions of Section 4.5(b) below.
(b) The remainder of the Entire Board after the elections described in
Section 4.5(a) above shall be elected by all holders of the Class A Common Stock
and Class B Common Stock (and if a Class C Voting Conversion has occurred, the
Class C Common Stock) voting together as a single class, and shall be referred
to herein as the "Class A/B Director(s)." All holders of Class A Common Stock
and Class B Common Stock (and if a Class C Voting Conversion has occurred, the
Class C Common Stock), voting together as a single class, shall also have the
sole right to remove any of the Class A/B Directors without cause. Any vacancy
in the office of a Class A/B Director or any newly-created Class A/B
directorship shall be filled solely by the holders of the Class A Common Stock
and Class B Common Stock (and if a Class C Voting Conversion has occurred, the
Class C Common Stock), voting together as a single class. The number of Class
A/B Directors shall be increased by the number of directors formerly denominated
Class C Directors pursuant to Section 4.5(a) above upon the occurrence of a
Class C Voting Conversion.
ARTICLE 5.
Except as otherwise provided herein, in furtherance and not in limitation
of the powers conferred by statute, the Board is expressly authorized to make,
repeal, alter, amend and rescind any or all of the bylaws of the corporation,
but the stockholders may make additional bylaws and may repeal, alter, amend or
rescind any bylaw whether adopted by them or otherwise.
ARTICLE 6.
The number of directors of the corporation shall be fixed from time to time
by, or in the manner provided in, the bylaws or amendment thereof duly adopted
by the Board or by the stockholders.
ARTICLE 7.
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<PAGE>
Elections of directors need not be by written ballot except and to the
extent provided in the bylaws of the corporation.
ARTICLE 8.
Meetings of the stockholders may be held within or without the State of
Delaware, as the bylaws may provide. The books of the corporation may be kept
(subject to any provisions contained in applicable statutes) outside the State
of Delaware at such place or places as may be designated from time to time by
the Board or in the bylaws of the corporation.
ARTICLE 9.
Directors of the corporation shall, to the fullest extent permitted by the
Delaware General Corporation Law as it now exists or as it may hereafter be
amended, not be personally liable to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of 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) under Section 174 of
the Delaware General Corporation Law or (iv) for any transaction from which the
director derived any improper personal benefit. If the Delaware General
Corporation Law is amended after approval by the stockholders of this Article 9
to authorize corporate action further eliminating or limiting the personal
liability of directors, then the personal liability of directors of the
corporation shall be further eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law. Any repeal or modification
of any of the foregoing provisions by the stockholders of the corporation, or
the adoption of any provision hereof inconsistent with this Article 9, shall not
adversely affect any right or protection of directors of the corporation
existing at the time of, or increase the liability of directors of the
corporation with respect to any acts or omissions of such director occurring
prior to, such repeal or modification.
ARTICLE 10.
The corporation reserves the right to amend, alter, change or repeal any
provision contained herein in the manner now or hereafter prescribed by statute,
and all rights conferred upon stockholders, directors and officers of the
corporation herein are granted subject to such revision.
ARTICLE 11.
11.1 Right to Indemnification. Each person who was or is made party or is
------------------------
threatened to be made a party to or is otherwise involved (including involvement
as a witness) in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "proceeding") by reason of the fact that he
or she is or was a director or officer of the corporation or, while a
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<PAGE>
director or officer of the corporation, is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation
(including any subsidiary of the corporation) or of a partnership, joint
venture, trust or other enterprise, including service with respect to an
employee benefit plan (an "indemnitee"), whether the basis of such proceeding is
alleged action in an official capacity as a director or officer or in any other
capacity while serving as a director or officer, shall be indemnified and held
harmless by the corporation to the fullest extent authorized by the Delaware
General Corporation Law, as the same exists or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such amendment permits
the corporation to provide for broader indemnification rights than permitted as
of the date this First Restated Certificate of Incorporation is filed with the
State of Delaware), against all expense, liability and loss (including
attorney's fees, judgments, fines, excise taxes or penalties and amounts paid in
settlement) reasonably incurred or suffered by such indemnitee in connection
therewith and such indemnification shall continue as to an indemnitee who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators; provided,
however, that except as provided in Section 11.2 below, with respect to
proceedings to enforce rights to indemnification, the corporation shall
indemnify any such indemnitee in connection with a proceeding (or part thereof)
initiated by such indemnitee only if such proceeding (or part thereof) was
authorized by the Board. The right to indemnification conferred in this Section
11.1 shall be a contract right and shall include the obligation of the
corporation to pay the expenses incurred in defending any such proceeding in
advance of its final disposition (an "advance of expenses"); provided, however,
that if and to the extent that the Board requires, an advance of expenses
incurred by an indemnitee in his or her capacity as a director or officer (and
not in any other capacity in which service was or is rendered by such
indemnitee, including, without limitation, service to an employee benefit plan)
shall be made only upon delivery to the corporation of an undertaking (an
"undertaking"), by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal (hereinafter a "final adjudication")
that such indemnitee is not entitled to be indemnified for such expenses under
this Section 11.1 or otherwise. The corporation may, by action of its Board,
provide indemnification to employees and agents of the corporation with the same
or lesser scope and effect as the foregoing indemnification of directors and
officers.
11.2 Procedure for Indemnification. Any indemnification of a director or
-----------------------------
officer of the corporation or advance of expenses under Section 11.1 above shall
be made promptly, and in any event within forty-five (45) days (or, in the case
of an advance of expenses, twenty (20) days) upon the written request of the
director or officer. If a determination by the corporation that the director or
officer is entitled to indemnification pursuant to this Article 11 is required,
and the corporation fails to respond within sixty (60) days to a written request
for indemnity, the corporation shall be deemed to have approved the request. If
the corporation denies a written request for indemnification or advance of
expenses, in whole or in part, or if payment in full pursuant to such request is
not made within forty-five (45) days (or, in the case of an advance of expenses,
twenty days), the right to indemnification or advances as granted by this
Article 11 shall be enforceable by the director or officer in any court of
competent jurisdiction. Such
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<PAGE>
person's costs and expenses incurred in connection with successfully
establishing his or her right to indemnification, in whole or in part, in such
action shall also be indemnified by the corporation. It shall be a defense to
any such action (other than an action brought to enforce a claim for the advance
of expenses where the undertaking required pursuant to Section 11.1 above, if
any, has been tendered to the corporation) that the claimant has not met the
standards of conduct which make it permissible under the Delaware General
Corporation Law for the corporation to indemnify the claimant for the amount
claimed, but the burden of such defense shall be on the corporation. Neither the
failure of the corporation (including its Board, independent legal counsel, or
its stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in
Delaware General Corporation Law, nor an actual determination by the corporation
(including its Board, independent legal counsel or its stockholders) that the
claimant has not met such applicable standard of conduct, shall be a defense to
the action or create a presumption that the claimant has not met the applicable
standard of conduct.
The procedure for indemnification of other employees and agents for whom
indemnification is provided pursuant to Section 11.1 above shall be the same
procedure set forth in this Section 11.2 for directors or officers, unless
otherwise set forth in the action of the Board providing for indemnification for
such employee or agent.
11.3 Insurance. The corporation may purchase and maintain insurance on its
---------
own behalf and on behalf of any person who is or was a director, officer,
employee or agent of the corporation or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation
(including any subsidiary of the corporation), partnership, joint venture, trust
or other enterprise against any expense, liability or loss asserted against him
or her and incurred by him or her in any such capacity, whether or not the
corporation would have the power to indemnify such person against such expenses,
liability or loss under the Delaware General Corporation Law.
11.4 Service for Subsidiaries. Any person serving as a director, officer,
------------------------
employee or agent of another corporation, partnership, limited liability
company, joint venture or other enterprise, at least fifty percent (50%) of
whose equity interests are owned by the corporation (a "subsidiary" for purposes
of this Article 11) shall be conclusively presumed to be serving in such
capacity at the request of the corporation.
11.5 Reliance. Persons who after the date of the adoption of this
--------
provision are directors or officers of the corporation or who, while a director
or officer of the corporation, or a director, officer, employee or agent of a
subsidiary, shall be conclusively presumed to have relied on the rights to
indemnity, advance of expenses and other rights contained in this Article 11 in
entering into or continuing such service. The rights to indemnification and to
the advance of expenses conferred in this Article 11 shall apply to claims made
against an indemnitee arising out of acts or omissions which occurred or occur
both prior and subsequent to the adoption hereof.
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<PAGE>
11.6 Non-Exclusivity of Rights. The rights to indemnification and to the
-------------------------
advance of expenses conferred in this Article 11 shall not be exclusive of any
other right which any person may have or hereafter acquire under this First
Restated Certificate of Incorporation or under any statute, bylaw, agreement,
vote of stockholders or disinterested directors or otherwise.
11.7 Merger or Consolidation. For purposes of this Article 11, references
-----------------------
to "the corporation" shall include any constituent corporation (including any
constituent of a constituent) absorbed into the corporation in a consolidation
or merger which, if its separate existence had continued, would have had power
and authority to indemnify its directors, officers and employees or agents, so
that any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this Article 11 with respect to the resulting or surviving
corporation as he or she would have with respect to such constituent corporation
if its separate existence had continued.
ARTICLE 12.
12.1 Foreign Ownership Restrictions.
------------------------------
(a) The corporation shall at all times be in compliance with 47 C.F.R.
(S) 310(a) and (b) and interpretations thereof by the FCC (the "Foreign
Ownership Restrictions"). The Board shall have all powers necessary to insure
compliance with this Article 12, including, without limitation, the redemption
of shares of capital stock the transfer or ownership of which resulted in a
violation of the Foreign Ownership Restrictions; provided, however, that the
corporation may, at the request of a stockholder, first seek a waiver of such
Foreign Ownership Restrictions from the FCC in the event that any violation
thereof results from open-market purchases of publicly traded shares of the
corporation, whether shares of capital stock in the corporation or shares of
capital stock in an entity which holds capital stock of the Corporation, the
foreign ownership of which is attributed to the corporation by operation of the
rules of the FCC. As a last resort, the Board shall be required to redeem the
shares of capital stock the transfer or ownership of which resulted in the
violation of the Foreign Ownership Restrictions to insure such compliance
(subject, however, to Sections 12(b) and (c) below).
(b) In exercising powers or taking actions to achieve or preserve such
compliance, the Board (acting in good faith and based upon advice of outside
counsel expert in FCC matters) shall select the method that is least detrimental
to the stockholders of the corporation affected by the action. In the case of
redemption by the corporation of shares of different classes, the shares of the
class having greater voting rights shall occur first.
(c) If the Board, pursuant to Section 12(a) above, should invoke its
powers to redeem any of the capital stock held by a party in order to secure
compliance with the Foreign Ownership Restrictions, such redemption shall be at
fair market value as determined by a third-
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<PAGE>
party valuation expert retained by the Board, whose costs and expenses shall be
charged to the party from whom the shares are redeemed.
12.2 FCC Compliance Restrictions. The corporation shall at all times be in
---------------------------
compliance with, and shall not take any action, nor shall it cause any act to be
done, that would cause it to be in violation of the limitations on ownership of
mass media, cable television and newspaper (or such other interests as the
legislation or the FCC shall require in the future) interests, as set forth in
the Communications Act or the rules of the FCC.
THIRD: That the corporation has not yet received any payment for any of its
stock and that the foregoing amendment and restatement was duly adopted in
accordance with the provisions of Section 241 and 245 of the Delaware General
Corporation Law.
[Remainder of Page Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, this First Restated Certificate of Incorporation has
been executed by the President and Secretary of the corporation on this _____
day of ________________, 2000.
________________________________________
Philip C. Wilkinson, President
________________________________________
Paul A. Zevnik, Secretary
[Signature Page to First Restated Certificate of Incorporation
of Entravision Communications Corporation]
<PAGE>
EXHIBIT 3.3
================================================================================
FIRST AMENDED AND RESTATED
BYLAWS
OF
ENTRAVISION COMMUNICATIONS CORPORATION
a Delaware corporation
================================================================================
<PAGE>
FIRST AMENDED AND RESTATED
BYLAWS
OF
ENTRAVISION COMMUNICATIONS CORPORATION
a Delaware corporation
ARTICLE 1.
OFFICES
1.1 Registered Office. The registered office of Entravision
-----------------
Communications Corporation, a Delaware corporation, shall be in the State of
Delaware, located at Incorporating Services, Ltd. 15 East North Street, County
of Kent, Dover, Delaware 19903-0899 and the name of the resident agent in charge
thereof is the agent named in the Certificate of Incorporation of the
corporation (as may be amended from time to time, the "Certificate of
Incorporation") until changed by the Board of Directors (the "Board").
1.2 Principal Office. The principal office for the transaction of the
----------------
business of the corporation shall be at such place as may be established by the
Board. The Board is granted full power and authority to change said principal
office from one location to another.
1.3 Other Offices. The corporation may also have an office or offices at
-------------
such other places, either within or without the State of Delaware, as the Board
may from time to time designate or the business of the corporation may require.
ARTICLE 2.
MEETINGS OF STOCKHOLDERS
2.1 Place of Meetings. Meetings of stockholders shall be held at such
-----------------
time and place, within or without the State of Delaware, as shall be stated in
the notice of the meeting or in a duly executed waiver of notice thereof.
2.2 Annual Meetings. An annual meeting of stockholders shall be held for
---------------
the election of directors at such date, time and place, either within or without
the State of Delaware, as may be designated by resolution of the Board from time
to time. Any other proper business may be transacted at the annual meeting.
2.3 Special Meetings. Special meetings of the stockholders of the
----------------
corporation for any purpose or purposes may be called at any time by the Board
and shall be called by the President or Secretary at the request in writing of
(i) the Chairman of the Board, (ii) a majority of the Board or (iii)
stockholders owning a majority in voting power of the issued and outstanding
shares of Common Stock of the corporation.
2.4 Stockholder Lists. The officer who has charge of the stock ledger of
-----------------
the corporation shall prepare, at least ten (10) days before every meeting of
stockholders, a complete list, by class, of 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
<PAGE>
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 (10) 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 at the place of the meeting, and the list shall also
be available at the meeting during the whole time thereof and may be inspected
by any stockholder who is present.
2.5 Notice of Meetings. Written notice of each meeting of stockholders,
------------------
whether annual or special, stating the place, date and hour of the meeting, and
in the case of a special meeting, the purpose of such meeting, shall be given to
each stockholder entitled to vote at such meeting not less than ten (10) (or
such other period as may be required under applicable law) nor more than sixty
(60) days before the date of the meeting.
2.6 Quorum and Adjournment. Except as set forth below, the holders of a
----------------------
majority in voting interest of capital stock of the corporation entitled to vote
thereat, present in person or represented by proxy, shall constitute a quorum
for holding all meetings of stockholders, except as otherwise provided by
applicable law, these Bylaws or the Certificate of Incorporation.
Notwithstanding the above, holders of a majority of the voting interest of the
corporation's Class A Common Stock, Class B Common Stock or Class C Common
Stock, as the case may be, shall each constitute a quorum for the holding of a
meeting of stockholders of such class(es) for the sole purpose of electing or
removing without cause the director or directors that such class(es) has the
right to elect or to fill a vacancy or a newly created directorship which such
class has a right to fill. If it shall appear that such quorum is not present
or represented at any meeting of stockholders, the Chairman of the meeting shall
have the power to adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally noticed. If the adjournment is for more than thirty
(30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
2.7 Voting. In all matters other than the election of directors, the vote
------
of the holders of a majority in voting interest of the capital stock of the
corporation as defined in the corporation's Certificate of Incorporation that
are present in person or represented by proxy at a meeting at which a quorum is
present, shall decide any question brought before such meeting of stockholders,
unless the question is one upon which by express provision of applicable law, of
the Certificate of Incorporation or of these Bylaws a different vote is
required, in which case such express provision shall govern and control the
decision of such question. Each director of the corporation shall be elected
(i) by a plurality of the votes of the shares of the class(es) of stock which
has the right to elect such director, present in person or represented by proxy
at a meeting at which a quorum is present or (ii) by the written consent of the
holders of a majority in voting interest of the outstanding shares of such
class(es). Each Class A and Class C stockholder shall be entitled to cast one
(1) vote for each share of the capital stock entitled to vote held by such
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<PAGE>
stockholder upon the matter in question, and each Class B stockholder shall be
entitled to cast ten (10) votes for each share of the capital stock entitled to
vote held by such stockholders. The presiding officer at a meeting of
stockholders, in his or her discretion, may require that any votes cast at such
meeting shall be cast by written ballot.
2.8 Proxies. Each stockholder entitled to vote at a meeting of
-------
stockholders may authorize another person or persons to act for him or her by
proxy, but no proxy shall be voted or acted upon after three (3) years from its
date, unless the person executing the proxy specifies therein a longer period of
time for which it is to continue in force. A proxy shall be irrevocable if it
states that it is irrevocable and if, and only as long as, it is coupled with an
interest sufficient in law to support an irrevocable power. A stockholder may
revoke any proxy which is not irrevocable by attending the meeting and voting in
person or by filing an instrument in writing revoking the proxy or by delivering
a proxy in accordance with applicable law bearing a later date to the Secretary
of the corporation.
2.9 Inspector of Election. The Board shall, if required by law, appoint
---------------------
an Inspector or Inspectors of Election for any meeting of stockholders. Such
Inspectors shall decide upon the qualification of the voters and report the
number of shares represented at the meeting and entitled
to vote, shall conduct the voting and accept the votes and when the voting is
completed shall ascertain and report the number of shares voted respectively for
and against each position upon which a vote is taken by ballot. An Inspector
need not be a stockholder, and any officer of the corporation may be an
Inspector on any position other than a vote for or against a proposal in which
he or she shall have a material interest.
2.10 Action Without Meeting. Subject to Section 228 of the Delaware
----------------------
General Corporation Law, any action which may be taken at any annual or special
meeting of stockholders may be taken without a meeting, without prior notice and
without a vote if a consent or consents in writing setting forth the action so
taken, shall be signed by the holders of outstanding capital 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 (by hand or by certified or
registered mail, return receipt requested), 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 corporate action without a meeting by less than unanimous written
consent shall, to the extent required by law, be given to those stockholders who
have not consented in writing.
ARTICLE 3.
DIRECTORS
3.1 Powers. Subject to any limitations set forth in the Certificate of
------
Incorporation, the Board shall have the power to manage or direct the management
of the property, business and
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<PAGE>
affairs of the corporation and, except as expressly limited by law, to exercise
all of its corporate powers. Subject to applicable law, the Board may establish
procedures and rules or may authorize the Chairman of any meeting of
stockholders to establish procedures and rules, for the fair and orderly conduct
of any stockholders' meeting, including without limitation, registration of the
stockholders attending the meeting, adoption of an agenda, establishing the
order of business at the meeting, recessing and adjourning the meeting for the
purposes of tabulating any votes and receiving the result thereof, the timing of
the opening and closing of the polls and the physical layout of the facilities
for the meeting.
3.2 Number, Term and Classes. The Board shall consist of not less than
------------------------
seven (7) nor more than eleven (11) members, as shall be determined from time to
time by resolution of the Board. Until otherwise determined by such resolution,
the Board shall consist of seven (7) members. Except as provided in the
Certificate of Incorporation, there shall be two (2) classes of directors: Class
A/B Directors and Class C Directors, all of which shall be elected as provided
in the Certificate of Incorporation.
3.3 Qualifications. Directors need not be stockholders, and each director
--------------
shall serve until his or her successor is elected and qualified or until his or
her earlier death, retirement, resignation or removal.
3.4 Vacancies and Newly-Created Directorships. Any vacancy on the Board
-----------------------------------------
caused by death, resignation or removal or a newly-created directorship may be
filled as provided in the Certificate of Incorporation. A director so elected
to fill a vacancy or newly-created directorship shall serve until his or her
successor is elected and qualified or until his or her earlier death,
retirement, resignation or removal.
3.5 Regular Meetings. Regular meetings of the Board shall be held without
----------------
call or notice at such time and place within or without the State of Delaware as
shall from time to time be fixed by standing resolution of the Board.
3.6 Special Meetings. Special meetings of the Board may be held at any
----------------
time or place within or without the State of Delaware whenever called by the
Chairman of the Board, a majority of the Board or any Class C Director. Notice
of a special meeting of the Board shall be given to all directors by the person
or persons calling the meeting at least seventy-two (72) hours before the
special meeting.
3.7 Telephonic Meetings. Members of the Board or any committee thereof
-------------------
may, and shall be given the opportunity to, participate in a regular or special
meeting of such Board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in a meeting pursuant to this
section shall constitute presence in person at such meeting.
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<PAGE>
3.8 Quorum. At all meetings of the Board, a majority of the Entire Board
------
(as defined in the Certificate of Incorporation) shall constitute a quorum for
the transaction of business. Except as otherwise set forth in these Bylaws, the
vote of a majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board. Any meeting of the Board may be
adjourned to meet again at a stated day and hour. Notice of any adjourned
meeting need not be given.
3.9 Fees and Expenses. Each director and each member of a committee of
-----------------
the Board, shall receive reimbursement of reasonable out-of-pocket expenses
incurred in connection with attending meetings. Each director and each member
of a committee of the Board, in each case who is neither (i) an owner of more
than a five percent (5%) direct or indirect beneficial interest in the stock of
the corporation (or the spouse, child or other family member of such an owner (a
"Related Person")); (ii) an employee (a) of the corporation, (b) of any direct
or indirect subsidiary of the corporation or (c) of such an owner or Related
Person or an Affiliate (as defined in the Certificate of Incorporation of the
corporation) of such owner or Related Person; nor (iii) any person who controls
any such owner and the spouse, child or other family members of any such person,
shall also receive a fee to be determined by the Board for attending any meeting
of the Board or any such committee (provided that no director shall be entitled
to receive such fee if such director is receiving a fee for attending a meeting
of the Board or any other committee of the corporation held on the same day).
Other than as set forth above, no director or stockholder of the corporation
shall be reimbursed for any expenses incurred by it in its role as an investor
or director.
3.10 Committees. Subject to the Certificate of Incorporation, the Board
----------
may, by resolution passed by a majority of the Entire Board, designate one or
more committees, each committee to consist of one or more of the directors of
the corporation. The Board may designate one or more directors as alternate
members of any committee who may replace any absent or disqualified member at
any meeting of the committee. At least one Class C Director shall sit on the
compensation and audit committees of the Board, if any. Any such audit or
compensation committee, to the extent provided in a resolution of the Board and
to the extent permitted by law and not inconsistent with the Certificate of
Incorporation, shall have and may exercise all the powers and authority of the
Board 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.
3.11 Action Without Meetings. Unless otherwise restricted by applicable
-----------------------
law, the Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board or of any committee thereof
may be taken without a meeting if all members of the Board or of such committee,
as the case may be, consent thereto in writing and the writing or writings are
filed with the minutes of proceedings of the Board or committee.
3.12 Super Majority Board Approvals. Without the approval of the Board (or
------------------------------
where permitted under applicable law, a duly constituted committee of the Board
which includes at least
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<PAGE>
one Class C Director) by a vote which includes, in addition to any other
required vote of directors, the affirmative vote of at least one (1) of the
Class C Directors (so long as a Class C Voting Conversion (as defined in the
Certificate of Incorporation) has not occurred) on the Board or such committee,
as the case may be, the corporation shall not directly or through its
subsidiaries engage in any of the following acts or transactions:
(a) create, designate, issue or sell out of treasury any Common Stock
or Preferred Stock of, or other equity interests in, the corporation, any
securities that are convertible into, exchangeable for, or participate in
dividends with, the Common Stock or Preferred Stock of, or other equity
interests in, the corporation, or any options or conversion, exchange or other
rights in respect of the foregoing (other than (i) shares of Common Stock issued
upon conversion of shares of Preferred Stock or as a dividend or distribution on
Preferred Stock, (ii) shares of Common Stock issued to banks, lenders and
equipment lessors in connection with debt financings or equipment leases, (iii)
shares of Common Stock issued for consideration other than cash in connection
with mergers, consolidations, acquisitions of assets and other acquisitions as
approved by the Board, (iv) shares of Common Stock issuable or issued to
officers, directors, employees of, or consultants to, the corporation pursuant
to any equity incentive plan and/or stock option plan of the corporation,
subject to appropriate adjustments for stock splits, stock dividend combinations
or other recapitalizations, (v) shares of Common Stock issued or issuable in the
initial public offering of the corporation or upon exercise of warrants or
rights granted to underwriters in connection with such initial public offering
or (vi) shares of Common Stock issued by way of dividend or other distribution
on shares of Common Stock);
(b) amend this Article 3, Section 3.12 of these Bylaws by action of
the Board;
(c) acquire or dispose of assets in any one transaction or series of
related transactions for a purchase or sale price in excess of $25,000,000; or
(d) incur debt (other than capitalized lease obligations) as of any
date in an aggregate amount outstanding in excess of (x) the corporation's
EBITDA for the twelve (12) month period ending on the last day of the quarter
preceding such date, multiplied by (y) five (5). For purposes of this
subparagraph (iv), EBITDA means the sum of net income, total depreciation
expense, total amortization expense, interest expense and taxes as determined in
conformity with generally accepted accounting principles; provided, however,
that in the case of debt incurred for the purposes of an acquisition, EBITDA
shall be determined on a pro-forma basis giving effect to such acquisition.
ARTICLE 4.
OFFICERS
4.1 Officers. The corporation shall have a Chairman of the Board, a
--------
President, one or more Vice Presidents, a Secretary and a Treasurer. The
corporation may also have, at the discretion of the Board, one or more Assistant
Secretaries, one or more Assistant Treasurers and
-6-
<PAGE>
such other officers as may be elected or appointed in accordance with the
provisions of Section 4.2 below. Any two or more of such offices may be held by
the same person.
4.2 Election. The officers of the corporation shall be elected annually
--------
by the Board and, subject to whatever rights an officer may have under a
contract of employment with the corporation, all officers shall serve at the
pleasure of the Board.
4.3 Removal and Resignation. Any officer may be removed, either with or
-----------------------
without cause, by the Board at any time. Any such removal shall be without
prejudice to the rights, if any, of the officer under any contract of employment
of the officer. Any officer may resign at any time by giving written notice to
the corporation, but without prejudice to the rights, if any, of the corporation
under any contract to which the officer is a party. Any such resignation shall
take effect at the date of the receipt of such notice or at any later time
specified therein and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
4.4 Vacancies. A vacancy in any office because of death, resignation,
---------
removal, disqualification or any other cause shall be filled in the manner
prescribed in these Bylaws for regular election or appointment to such office.
4.5 Chairman of the Board. The Chairman of the Board shall preside at all
---------------------
meetings of the stockholders and of the Board and shall be the Chief Executive
Officer of the corporation unless the President is the Chief Executive Officer.
4.6 President. The President shall be the Chief Operating Officer of the
---------
corporation and, if designated by the Board, the Chief Executive Officer of the
corporation. Subject to the control of the Board (and to the Chief Executive
Officer, if the President does not hold such office) and to the powers vested by
the Board in any committee or committees appointed by the Board, the President
shall have general supervision, direction and control of the business and
officers of the corporation. The President shall have the general powers and
duties of management usually vested in the Chief Executive Officer of a
corporation and shall have such other powers and duties as may be prescribed by
the Board or these Bylaws.
4.7 Vice Presidents. In the absence or disability of the President, the
---------------
Vice Presidents, in order of their rank as fixed by the Board, or, if not
ranked, the Vice President designated by the Board shall perform all the duties
of the President and when so acting shall have all of the powers of and be
subject to all of the restrictions upon the President. The Vice Presidents
shall have such other powers and perform such duties as may be prescribed for
them, respectively, from time to time, by the Board, the President or these
Bylaws.
4.8 Secretary. The Secretary shall keep, or cause to be kept, at the
---------
principal executive office and such other place as the Board may order, a book
of minutes of all meetings of stockholders, the Board and its committees, with
the time and place of holding, whether regular
-7-
<PAGE>
or special, and if special, how authorized, the notice thereof given, the names
of those present at Board and committee meetings, the number of shares present
or represented at stockholders' meetings and the proceedings thereof. The
Secretary shall keep, or cause to be kept, a copy of these Bylaws of the
corporation at the principal executive office or business office.
The Secretary shall keep, or cause to be kept, at the principal executive
office or at the office of the corporation's transfer agent or registrar, if one
be appointed, a share register or a duplicate share register showing the names
of the stockholders and their addresses, the number and classes of shares held
by each, the number and date of certificates issued for the same, and the number
and date of cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the Board and any committees thereof required by these
Bylaws or by law to be given, shall keep the seal of the corporation in safe
custody, and shall have such other powers and perform such other duties as may
be prescribed by the Board.
4.9 Treasurer. The Treasurer is the Chief Financial Officer of the
---------
corporation and shall keep and maintain, or cause to be kept and maintained,
adequate and correct accounts of the properties and business transactions of the
corporation and shall send or cause to be sent to the stockholders of the
corporation such financial statements and reports as are by law or these Bylaws
required to be sent to them. The books of account shall at all times be open to
inspection by any director.
The Treasurer shall deposit all moneys and other valuables in the name and
to the credit of the corporation with such depositories as may be designated by
the Board. The Treasurer shall disburse the funds of the corporation as may be
ordered by the Board, shall render to the President and the directors, whenever
they request it, an account of all transactions as Treasurer and of the
financial condition of the corporation and shall have such other powers and
perform such other duties as may be prescribed by the Board.
ARTICLE 5.
STOCK CERTIFICATES
5.1 Form of Stock Certificate. Every holder of capital stock in the
-------------------------
corporation shall be entitled to have a certificate signed by, or in the name
of, the corporation by the Chairman of the Board, the President, the Chief
Executive Officer or a Vice President and by the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary of the corporation
certifying the number of shares owned by him, her or it in the corporation. Any
or all of the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the corporation with the same effect as if he or she were such officer,
transfer agent or registrar at the date of the issue.
-8-
<PAGE>
5.2 Transfers of Stock. Subject to any restrictions on transfer
------------------
applicable thereto, upon surrender to the corporation or a transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction upon its books.
5.3 Lost, Stolen or Destroyed Certificates. The corporation may direct a
--------------------------------------
new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of the fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board may, in
its discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his or
her legal representative, 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.
5.4 Record Date. 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, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or 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 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 and which record date: (i) in the case of determination of
stockholders entitled to vote at any meeting of stockholders or adjournment
thereof, shall, unless otherwise required by law, not be more than sixty (60)
nor less than ten (10) days before the date of such meeting; (ii) in the case of
determination of stockholders entitled to express consent to corporate action in
writing without a meeting, shall not be more than ten (10) days from the date
upon which the resolution fixing the record date is adopted by the Board; and
(iii) in the case of any other action, shall not be more than sixty (10) days
prior to such other action. If no record date is fixed: (a) 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; (b) the record date
for determining stockholders entitled to express consent to corporate action in
writing without a meeting when no prior action of the Board 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 in
accordance with applicable law, or, if prior action by the Board is required by
law, shall be at the close of business on the day on which the Board adopts the
resolution taking such prior action; and (c) the record date for determining
stockholders for any other purpose shall be at the close of business on the day
on which the Board adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board may fix a new record date for the adjourned meeting.
-9-
<PAGE>
5.5 Registered Stockholders. The corporation shall be entitled to treat
-----------------------
the holder of record of any share or shares of stock as the holder in fact
thereof and, accordingly, shall not be bound to recognize any equitable or other
claim to or interest in such share on the part of any other person, whether or
not it shall have express or other notice thereof, save as expressly provided by
applicable law.
ARTICLE 6.
NOTICES
6.1 Manner of Notice. Whenever under the provisions of applicable law,
----------------
the Certificate of Incorporation or these Bylaws, notice is required to be given
to any director, committee member, officer or stockholder, it shall not be
construed to mean personal notice, but such notice may be given, in the case of
stockholders, in writing, by mail, by depositing the same in the post office or
letter box, in a postpaid sealed wrapper, addressed to such stockholder, at such
address as appears on the books of the corporation, and, in the case of
directors, committee members and officers, by telephone, by facsimile or other
electronic transmission, or by recognized delivery service to the last business
address known to the Secretary of the corporation, and such notice shall be
deemed to be given at the time when the same shall be thus mailed, telephoned,
sent via facsimile, transmitted or delivered.
6.2 Waiver of Notice. Whenever any notice is required to be given under
----------------
the provisions of applicable law, the Certificate of Incorporation or these
Bylaws, 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.
ARTICLE 7.
AMENDMENTS
7.1 Amendments. Subject to the provisions of the Certificate of
----------
Incorporation, the Board shall have the power to make, adopt, alter, amend and
repeal from time to time these Bylaws, subject to the right of the stockholders
entitled to vote with respect thereto to adopt, alter, amend and repeal Bylaws
made by the Board, provided no amendment made by the Board may adversely affect
the rights accorded to the holders of the Class B Common Stock or the Class C
Common Stock which affects such class differently from the other classes of
Common Stock of the corporation without the consent of a majority of the Class
A/B Directors or a majority of the Class C Directors (unless a Class C Voting
Conversion has occurred), as the case may be.
ARTICLE 8.
GENERAL PROVISIONS
8.1 Fiscal Year. The fiscal year of the corporation shall be determined
-----------
by resolution of the Board.
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<PAGE>
8.2 Seal. The corporate seal shall have the name of the corporation
----
inscribed thereon and shall be in such form as may be approved from time to time
by the Board.
8.3 Waiver of Notice of Meetings of Stockholders, Directors and
-----------------------------------------------------------
Committees. Any written waiver of notice, signed by the person entitled to
- ----------
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at nor the purpose of any
regular or special meeting of the stockholders, directors or members of a
committee of directors need be specified in any written waiver of notice.
8.4 Form of Records. Any records maintained by the corporation in the
---------------
regular course of its business, including its stock ledger, books of account and
minute books, may be kept on, or be in the form of, punch cards, magnetic tape,
photographs, microphotographs or any other information storage device, provided
that the records so kept can be converted into clearly legible form within a
reasonable time.
8.5 Representation of Shares of Other Corporations. The Chief Executive
----------------------------------------------
Officer or any other officer or officers authorized by the Board are each
authorized to vote, represent and exercise on behalf of the corporation all
rights incident to any and all shares of any other corporation or corporations
standing in the name of the corporation. The authority herein granted may be
exercised either by any such officer in person or by any other person authorized
so to do by proxy or power of attorney duly executed by said officer.
8.6 Dividends. Dividends upon the capital stock of the corporation,
---------
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the Certificate of Incorporation.
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 directors from
time to time, in their absolute discretion, think 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 such other purposes as the
directors shall think conducive to the interest of the corporation, and the
directors may modify or abolish any such reserve in the manner in which it was
created.
8.7 Checks. 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 may from time to time designate.
8.8 Loans to Officers. The corporation may lend money to, or guarantee
-----------------
any obligation of, or otherwise assist any officer or other employee of the
corporation or of its
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<PAGE>
subsidiaries, including any officer or employee who is a director of the
corporation or its subsidiaries, whenever, in the judgment of the Board, such
loan, guarantee or assistance may reasonably be expected to benefit the
corporation. The loan, guarantee or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the Board shall
approve, including, without limitation, a pledge of shares of stock of the
corporation. Nothing in these Bylaws shall be deemed to deny, limit or restrict
the powers of guaranty or warranty of the corporation at common law or under any
statute.
8.9 Inspection of Books and Records. Any stockholder of record, in person
-------------------------------
or by attorney or other agent, shall, upon written demand upon oath stating the
purpose thereof, have the right during the usual hours of business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean any purpose reasonably related to such
person's interest as a stockholder. In every instance where an attorney or
other agent shall be the person who seeks the right to inspection, the demand
under oath shall be accompanied by a power of attorney or such other writing
which authorizes the attorney or other agent to so act on behalf of the
stockholder. The demand under oath shall be directed to the corporation at its
registered office in the State of Delaware or at its principal place of
business.
8.10 Section Headings. Section headings in these bylaws are for
----------------
convenience of reference only and shall not be given any substantive effect in
limiting or otherwise construing any provision herein.
8.11 Inconsistent Provisions. In the event that any provision of these
-----------------------
bylaws is or becomes inconsistent with any provision of the Certificate of
Incorporation, the Delaware General Corporation Law or any other applicable law,
the provision of these bylaws shall not be given any effect to the extent of
such inconsistency but shall otherwise be given full force and effect.
[Remainder of Page Intentionally Left Blank]
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<PAGE>
CERTIFICATE OF SECRETARY
OF
ENTRAVISION COMMUNICATIONS CORPORATION
The undersigned, Paul A. Zevnik, hereby certifies that he the duly elected
and acting Secretary of Entravision Communications Corporation, a Delaware
corporation (the "Company"), and that the Amended and Restated Bylaws attached
hereto constitute the Amended and Restated Bylaws of the Company as duly adopted
by the Board of Directors of the Company by unanimous written consent on
____________________, 2000.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his this _____
day of __________________, 2000.
__________________________________________________
Paul A. Zevnik, Secretary
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<PAGE>
EXHIBIT 10.3
AMENDED AND RESTATED CREDIT AGREEMENT
-------------------------------------
THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of November 10, 1998,
among (1) KSMS-TV, INC., a Delaware corporation ("KSMS-TV"), TIERRA ALTA
-------
BROADCASTING, INC., a Delaware corporation ("Tierra Alta"), CABRILLO
-----------
BROADCASTING CORPORATION, a California corporation ("Cabrillo"), GOLDEN HILLS
--------
BROADCASTING CORPORATION, a Delaware corporation ("Golden Hills"), LAS TRES
------------
PALMAS CORPORATION, a Delaware corporation ("Las Tres Palmas"), VALLEY CHANNEL
---------------
48, INC., a Texas corporation ("Valley Channel"), TELECORPUS, INC., a Texas
--------------
corporation ("Telecorpus"), and ENTRAVISION COMMUNICATIONS COMPANY, L.L.C., a
----------
Delaware limited liability company ("Entravision") (each a "Borrower," and
----------- --------
collectively, the "Borrowers"), whose obligations hereunder shall be joint and
---------
several, (2) the several banks and other financial institutions from time to
time parties to this Agreement (the "Lenders") and (3) UNION BANK OF CALIFORNIA,
-------
N.A., as agent for the Lenders hereunder (in such capacity, the "Agent").
-----
RECITALS
--------
A. KSMS-TV, Tierra Alta, Cabrillo, Golden Hills, Las Tres Palmas, Valley
Channel and Entravision (collectively, the "Original Borrowers") are party to
------------------
that certain Credit Agreement dated as of December 31, 1996 among the lenders
referred to therein and the Agent, as agent for such lenders, as amended by the
Consent and First Amendment to Credit Agreement dated as of January 23, 1997,
the Consent and Second Amendment to Credit Agreement dated as of June 4, 1997,
the Third Amendment to Credit Agreement dated as of December 31, 1997, the
Fourth Amendment to Credit Agreement and Waiver dated as of April 21, 1998, the
Fifth Amendment to Credit Agreement and Waiver dated as of May 12, 1998, the
Sixth Amendment to Credit Agreement dated as of July 31, 1998 and the Seventh
Amendment to Credit Agreement dated as of September 17, 1998 (the "Original
--------
Credit Agreement").
- ----------------
B. Pursuant to the Original Credit Agreement, such lenders made available
to the Original Borrowers term loan facilities in the maximum principal amount
of $20,000,000 and a revolving loan facility in the maximum principal amount of
$70,100,000.
C. In connection with the Original Credit Agreement, Telecorpus executed
certain documents in favor of the Agent for the benefit of such lenders,
including a Nonrecourse Guarantee and a Pledge Agreement, each dated as of April
21, 1998. Telecorpus now desires to become a Borrower hereunder and to become
jointly and severally liable for the Obligations (as defined below).
D. The Borrowers have requested that the Lenders amend and restate the
Original Credit Agreement and increase the principal amount of the credit
facility available thereunder and the Lenders have agreed, subject to the terms
and conditions set forth herein.
<PAGE>
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms shall
-------------
have the following meanings:
"Accountants": McGladrey & Pullen, LLP, or such other firm of independent
-----------
certified public accountants of recognized national standing as shall be
selected by the Borrowers and satisfactory to the Agent.
"Activation Date": the date set forth in the Activation Notice as the
---------------
effective date of the Aggregate Incremental Loan Commitment, which date must be
during the period from and including the Closing Date to but excluding September
30, 2000.
"Activation Notice": a notice given by the Borrowers and each Incremental
-----------------
Loan Lender to the Agent, substantially in the form of Exhibit I.
"Acquisitions": the acquisition by, or investment in, (i) U.S. television
------------
or radio properties by Entravision or its Subsidiaries (provided that
-------- ----
Entravision shall be permitted to consummate the foreign investment contemplated
by the Tecate Acquisition) and (ii) U.S. outdoor advertising properties, in each
case as permitted by Section 6.7(e).
"Additional Equity Rights": the right of Univision, pursuant to the
------------------------
Univision Option, to purchase up to an additional 2.0% Class A Membership
Interest in Entravision in connection with, and as partial consideration for,
the purchase by Entravision from Univision of television Station KLUZ, Channel
41, Albuquerque, New Mexico.
"Affiliate": as to any Person, (a) any other Person (other than a
---------
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with, such Person or (b) any Person who is a
director, officer, shareholder or partner (i) of such Person, (ii) of any
Subsidiary of such Person or (iii) of any Person described in the preceding
clause (a). For purposes of this definition, "control" of a Person means the
power, directly or indirectly, either to (i) vote securities having 5% or more
of the ordinary voting power for the election of directors of such Person or
(ii) direct or cause the direction of the management and policies of such Person
whether by contract or otherwise.
"Affiliation Agreements": each affiliation or similar agreement between
----------------------
any Borrower or Subsidiary and Univision, or between any Borrower or Subsidiary
and another network or programmer, or between the licensee of any broadcast
station subject to a Program Services Agreement and Univision or another network
or programmer, and all sideletters or other agreements relating thereto, in each
case in form and substance satisfactory to the Agent and as such agreements may
be further amended from time to time in accordance with the terms hereof.
"Agent": as defined in the preamble hereto.
-----
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<PAGE>
"Aggregate Available Incremental Loan Commitment": the sum of the
-----------------------------------------------
Available Incremental Loan Commitments of each Incremental Loan Lender.
"Aggregate Available Revolving Loan Commitment": the sum of the Available
---------------------------------------------
Revolving Loan Commitments of each Revolving Loan Lender.
"Aggregate Commitment": the sum of the Aggregate Revolving Loan Commitment
--------------------
and, if activated, the Aggregate Incremental Loan Commitment.
"Aggregate Incremental Loan Commitment": the sum of the Incremental Loan
-------------------------------------
Commitments set forth in the Activation Notice, as the same may be adjusted from
time to time pursuant to the provisions hereof, provided that the Aggregate
Incremental Loan Commitment shall not exceed the Maximum Incremental Loan
Facility.
"Aggregate Revolving Loan Commitment": the sum of the Revolving Loan
-----------------------------------
Commitments set forth on the signature pages hereto, as the same may be adjusted
from time to time pursuant to the provisions hereof.
"Agreement": this Amended and Restated Credit Agreement, as amended,
---------
waived, supplemented or otherwise modified from time to time.
"Applicable Lending Office": for any Lender, its offices for LIBOR Loans,
-------------------------
Base Rate Loans and participations in Letters of Credit, specified below its
signature on the signature pages hereof or in the Assignment and Acceptance
pursuant to which it became a party hereto, as the case may be, any of which
offices may, upon 10 days' prior written notice to the Agent and the Borrowers,
be changed by such Lender.
"Applicable Revolving Loan Margin": with respect to Revolving Loans and
--------------------------------
Incremental Loans, for each LIBOR Loan and for each Base Rate Loan as set forth
below:
Revolving Loan
Leverage Level LIBOR Base Rate
-------------- ----- ---------
--------------------------------------------------------------
Revolving Loan
Leverage Level LIBOR Base Rate
-------------- ----- ---------
--------------------------------------------------------------
1(**6.50:1) 2.375% 1.125%
--------------------------------------------------------------
2(**6.00:1 - *6.50:1) 2.125% 0.875%
--------------------------------------------------------------
3(**5.50:1 - *6.00:1) 1.875% 0.625%
--------------------------------------------------------------
4(**5.00:1 - *5.50:1) 1.625% 0.375%
--------------------------------------------------------------
5(**4.50:1 - *5.00:1) 1.375% 0.125%
--------------------------------------------------------------
6(**4.00:1 - *4.50:1) 1.125% 0.000%
--------------------------------------------------------------
7(*4.00:1) 0.875% 0.000%
--------------------------------------------------------------
_____________
* Less than
** Greater than or equal to
"Asset Disposition": the sale, sale and leaseback, transfer, conveyance,
-----------------
exchange, long-term lease accorded sales treatment under GAAP or similar
disposition (including by means of a merger, consolidation, amalgamation, joint
venture or other substantive combination) of any of
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<PAGE>
the Properties, business or assets (other than marketable securities, including
"margin stock" within the meaning of Regulation U, liquid investments and other
financial instruments but, including, without limitation, the assignment of any
lease, license or permit relating to the Properties) of the Borrowers or any of
their Subsidiaries to any Person or Persons other than to the Borrowers or any
of their Subsidiaries; provided that Asset Dispositions shall not include the
--------
sale in the ordinary course of business of equipment.
"Assignment and Acceptance": an Assignment and Acceptance in the form of
-------------------------
Exhibit C to this Agreement.
"Available Incremental Loan Commitment": with respect to each Lender
-------------------------------------
having an Incremental Loan Commitment on the date of determination thereof, the
amount by which (a) the Incremental Loan Commitment of such Lender exceeds (b)
the principal amount of such Lender's Incremental Loans outstanding on such
date.
"Available Revolving Loan Commitment": with respect to each Lender having
-----------------------------------
a Revolving Loan Commitment on the date of determination thereof, the amount by
which (a) the Revolving Loan Commitment of such Lender on such date exceeds (b)
the principal sum of such Lender's (i) Revolving Loans outstanding, (ii)
Revolving Loan Commitment Percentage of the aggregate Letter of Credit Amount of
all Letters of Credit outstanding and (iii) Revolving Loan Commitment Percentage
of the aggregate amount of unreimbursed drawings under all Letters of Credit on
such date.
"Base Rate": for any day, a rate per annum (rounded upwards, if necessary,
---------
to the next 1/16 of 1%) equal to the greater of (a) the Reference Rate in effect
on such day and (b) the Federal Funds Effective Rate in effect on such day plus
1/2 of 1%. "Reference Rate" shall mean the rate of interest per annum publicly
--------------
announced from time to time by Union Bank of California, N.A. as its "reference
rate" in effect at its office in Los Angeles, California. "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 which is a Business Day, the average of the quotations for
the day of such transactions received by the Agent from three federal funds
brokers of recognized standing selected by it. If, for any reason, the 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, without limitation, the inability or failure of the Agent to
obtain sufficient quotations in accordance with the terms hereof, the Base Rate
shall be determined without regard to clause (b) of the first sentence of this
definition until the circumstances giving rise to such inability no longer
exist. Any change in the Base Rate due to a change in the Reference Rate or the
Federal Funds Effective Rate shall be effective on the effective date of such
change in the Reference Rate or the Federal Funds Effective Rate, respectively.
"Base Rate Loans": Loans the rate of interest applicable to which is based
---------------
upon the Base Rate.
"Borrower" or "Borrowers": as defined in the preamble hereto.
-----------------------
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<PAGE>
"Business Day": a day other than a Saturday, Sunday or other day on which
------------
commercial banks in the State of California are authorized or required by law to
close and which, in the case of a LIBOR Loan, is a Eurodollar Business Day.
"Capital Expenditures": for any period, collectively, for any Person, the
--------------------
aggregate of all expenditures which are made during such period (whether paid in
cash or accrued as liabilities), and all contractual commitments for such
expenditures which are entered into during such period (provided that if any
such commitment is included in one fiscal year, the actual payment in a later
fiscal year shall not be included in such later fiscal year), by such Person,
for property, plant or equipment and which would be reflected as additions to
property, plant or equipment on a balance sheet of such Person prepared in
accordance with GAAP (including, without limitation, all Capitalized Lease
Obligations); provided, however, that Capital Expenditures shall exclude any
-------- -------
expenditures which arise from Program Obligations.
"Capitalized Lease Obligations": obligations for the payment of rent for
-----------------------------
any real or personal property under leases or agreements to lease that, in
accordance with GAAP, have been or should be capitalized on the books of the
lessee and, for purposes hereof, the amount of any such obligation shall be the
capitalized amount thereof determined in accordance with GAAP.
"Capital Stock": any and all shares, interests, participations or other
-------------
equivalents (however designated) of capital stock of a corporation, any and all
equivalent ownership interests in a Person (other than a corporation), any and
all warrants, options or rights to purchase, or any other securities convertible
into, any of the foregoing.
"Cash Collateral Deposit": cash deposits made by the Borrowers to the
-----------------------
Agent, to be held by the Agent as Collateral pursuant to the Security Agreement,
for the reimbursement of drawings under Letters of Credit.
"Cash Income Taxes": cash income taxes paid by the Borrowers and their
-----------------
Subsidiaries during the fiscal quarter most recently ended and the immediately
preceding three fiscal quarters.
"Change in Control": the occurrence of any of the following:
-----------------
(a) Walter F. Ulloa, Philip C. Wilkinson and Univision (in the event
Univision exercises the Univision Option) cease collectively to have, directly
or indirectly, Voting Control of each class of membership units of Entravision
having voting power; or
(b) So long as Entravision is a limited liability company, Walter F. Ulloa
and Philip C. Wilkinson cease to (i) be the Managing Members thereof, (ii) have
the veto rights with regard to decisions of the Executive Committee set forth in
Section 16(a)(i) of the Operating Agreement and (iii) have the power to appoint
the Executive Committee thereof.
"Closing Date": the date on which the conditions precedent set forth in
------------
Section 4.1 have been satisfied.
"Code": the Internal Revenue Code of 1986, as amended from time to time.
----
-5-
<PAGE>
"Collateral": all of the property (tangible or intangible) purported to be
----------
subject to the lien or security interest purported to be created by any
mortgage, deed of trust, security agreement, pledge agreement, assignment or
other security document heretofore or hereafter executed by the Borrowers as
security for all or part of the Obligations.
"Collateral Documents": the Mortgages, the Security Agreement, all notices
--------------------
of security interests in deposit accounts requested by the Agent pursuant to the
Security Agreement, Form UCC-1 Financing Statements and amendments thereto and
any other document encumbering the Collateral or evidencing or perfecting a
security interest therein for the benefit of the Lenders executed by the
Borrowers.
"Commitment Percentage": as to any Lender at any time, the percentage of
---------------------
the Aggregate Commitment then constituted by such Lender's Commitments.
"Commitments": as to any Lender, any Revolving Loan Commitment and any
-----------
Incremental Loan Commitment held by it hereunder.
"Commonly Controlled Entity": as to any Person, an entity, whether or not
--------------------------
incorporated, which is under common control with such Person within the meaning
of Section 4001 of ERISA or is part of a group which includes such Person and
which is treated as a single employer under Section 414 of the Code.
"Communications Act": the Communications Act of 1934, as amended, and the
------------------
rules and regulations issued thereunder, as from time to time in effect.
"Consents to Assign": the following consents, each executed in favor of
------------------
the Agent, for the benefit of the Lenders: (i) Consent to Assign and Encumber
dated as of "May __, 1997" executed by Park Place Broadcasting with respect to
the K06MB LMA and the K06MB LMA Option Agreement and (ii) Consents to Assign and
Encumber executed by Univision with respect to each Univision Affiliation
Agreement, and any other written consent required in connection herewith with
respect to any Material Contract, in each case as such consents may be amended
or modified from time to time in accordance with the terms hereof.
"Consideration": with respect to any Acquisition, the aggregate
-------------
consideration, in whatever form (including, without limitation, cash payments,
the principal amount of promissory notes and Indebtedness assumed, the aggregate
amounts payable to acquire, extend and exercise any option, the aggregate amount
payable under Non-Compete Agreements and management agreements, and the fair
market value of other property delivered) paid, delivered or assumed by any
Borrower for such Acquisition and the expenses associated therewith, including
all brokerage commissions, legal fees and similar expenses.
"Continuation Notice": a request for continuation or conversion of a Loan
-------------------
as set forth in Section 2.6, substantially in the form of Exhibit F.
"Contractual Obligation": as to any Person, any provision of any security
----------------------
issued by such Person or of any agreement, instrument or other undertaking to
which such Person is a party or by which it or any of its property is bound.
-6-
<PAGE>
"Corporate Overhead": for any period, all general and administrative
------------------
expenses of the Borrowers and their Subsidiaries for such period not solely
attributable to an individual Station or group of Stations. For the purpose of
illustration (and not for the purpose of limiting the foregoing), Corporate
Overhead shall include the general and administrative expenses of the
headquarters office of Entravision, the salaries of its officers, lease expenses
for its headquarters office and the legal and accounting expenses relating to
Entravision, and Acquisitions by Entravision, and not relating solely to any
Station or group of Stations.
"Covenant Compliance Certificate": a certificate of the Chief Financial
-------------------------------
Officer of Entravision substantially in the form of Exhibit E hereto.
"Default": any of the events specified in Section 7, whether or not any
-------
requirement for the giving of notice, the lapse of time, or both, or any other
condition, has been satisfied.
"Dollars" and "$": dollars in lawful currency of the United States.
------- -
"Drawing Lender": as defined in Section 2.3(c).
--------------
"El Centro Radio Station Acquisition": the acquisition by Entravision of
-----------------------------------
the following radio stations: (i) KWST-FM, Brawley, California, (ii) KMXX-FM,
Imperial California and (iii) KAMP(AM), El Centro, California.
"El Paso Headquarters Deed of Trust": the Mortgage described in item 6 on
----------------------------------
Schedule 1.1.
"El Paso Mortgage Modification": the Mortgage Modification to the El Paso
-----------------------------
Headquarters Deed of Trust.
"Entravision License Subsidiary": Entravision Holdings, LLC, a California
------------------------------
limited liability company, which is owned 99.999% by Entravision, 0.0005% by
Walter F. Ulloa and 0.0005% by Philip C. Wilkinson, formed solely for the
purpose of holding Media Licenses and FCC files and records with respect
thereto.
"Environmental Control Statutes": as defined in Section 3.16.
------------------------------
"Equity Offering": the sale or issuance (or reissuance) by any Borrower or
---------------
Subsidiary of any equity interest (common stock, preferred stock, partnership
interests, member interests or otherwise) or any options, warrants, convertible
securities or other rights to purchase such beneficial or equity interests.
"Equityholder Agreements" each shareholder agreement, member agreement,
-----------------------
partner agreement, voting agreement, buy-sell agreement, option, warrant, put,
call, right of first refusal, and any other agreement or instrument with
conversion rights into equity of any Borrower or Subsidiary either (a) between
any Borrower or Subsidiary and any holder or prospective holder of any equity
interest of any Borrower or Subsidiary (including interests convertible into
such equity) or (b) otherwise between any two or more such holders of equity
interests.
-7-
<PAGE>
"ERISA": the Employee Retirement Income Security Act of 1974, as amended
-----
from time to time.
"ERISA Affiliate": as to any Person, each trade or business including such
---------------
Person, whether or not incorporated, which together with such Person would be
treated as a single employer under Section 4001(a)(14) of ERISA.
"Escrow Deposit": any escrow deposit made by any Borrower in connection
--------------
with an Acquisition.
"Eurodollar Business Day": shall mean any day on which banks are open for
-----------------------
dealings in Dollar deposits in the London Interbank Market.
"Event of Default": any of the events specified in Section 7, provided
---------------- --------
that any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"Excess Cash Flow": for any period, for the Borrowers and their
----------------
Subsidiaries on a consolidated basis, an amount equal to Operating Cash Flow
(provided that Program Payments deducted in the calculation thereof shall be
limited to Program Payments actually made) for such period, less, during such
----
period (in each case, without duplication), (i) Total Debt Service, (ii)
permitted Cash Income Taxes, (iii) Capital Expenditures, (iv) and increases (or
plus decreases) in Net Working Investment.
- ----
"Excluded Taxes": all taxes imposed on or by reference to the net income
--------------
of the Agent or any Lender or its Applicable Lending Office by any Governmental
Authority and all franchise taxes, taxes on doing business or taxes measured by
capital or net worth imposed on the Agent or on any Lender or its Applicable
Lending Office by any Governmental Authority and any taxes imposed by any
Governmental Authority arising as a consequence of the failure of any Lender to
provide accurate documentation required to be provided by such Lender pursuant
to Section 2.14(b).
"Existing Mortgages": each mortgage, deed of trust or similar instrument
------------------
referred to on Schedule 1.1, as modified to date (including as respectively
modified by the Mortgage Modifications) and as each may be further amended or
modified from time to time in accordance with this Agreement.
"FCC": the Federal Communications Commission or any successor thereto.
---
"Federal Funds Effective Rate": as defined in the definition of "Base
---------------------------- ----
Rate" contained in this Section 1.1.
- ----
"Fixed Charge Coverage Ratio": for the Borrowers and their Subsidiaries on
---------------------------
a consolidated basis, the ratio of Operating Cash Flow for the fiscal quarter
most recently ended and the immediately preceding three fiscal quarters to the
sum of (i) Total Debt Service for the fiscal quarter most recently ended and the
immediately preceding three fiscal quarters, (ii) Capital Expenditures for the
fiscal quarter most recently ended and the immediately
-8-
<PAGE>
preceding three fiscal quarters and (iii) permitted Cash Income Taxes for the
fiscal quarter most recently ended and the immediately preceding three fiscal
quarters.
"GAAP": generally accepted accounting principles in the United States in
----
effect from time to time. If, at any time, GAAP changes in a manner which will
materially affect the calculations determining compliance by the Borrowers with
any of the covenants in Section 6.1, such covenants shall continue to be
calculated in accordance with GAAP in effect prior to such changes in GAAP.
"Governmental Authority": any nation or government, any federal, state or
----------------------
other political subdivision thereof and any federal, state or local entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Guarantee Obligation": as to any Person (the "guaranteeing person"), any
-------------------- -------------------
obligation of (a) the guaranteeing person or (b) another Person (including,
without limitation, any bank under any letter of credit) to induce the creation
of which the guaranteeing person has issued a reimbursement, counter-indemnity
or similar obligation, in either case guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends or other obligations (the "primary obligations")
-------------------
of any other third Person (the "primary obligor") in any manner, whether
---------------
directly or indirectly, including, without limitation, any obligation of the
guaranteeing person, whether or not contingent, (i) to purchase any such primary
obligation or any property constituting direct or indirect security therefor,
(ii) to advance or supply funds for the purchase or payment of any such primary
obligation or to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency of the primary
obligor, (iii) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation or (iv) otherwise
to assure or hold harmless the owner of any such primary obligation against loss
in respect thereof; provided, however, that the term Guarantee Obligation shall
-------- -------
not include endorsements of instruments for deposit or collection in the
ordinary course of business. The amount of any Guarantee Obligation of any
guaranteeing person shall be deemed to be the lesser of (a) an amount equal to
the stated or determinable amount of the primary obligation in respect of which
such Guarantee Obligation is made and (b) the maximum amount for which such
guaranteeing person may be liable pursuant to the terms of the instrument
embodying such Guarantee Obligation, unless such primary obligation and the
maximum amount for which such guaranteeing person may be liable are not stated
or determinable, in which case the amount of such Guarantee Obligation shall be
such guaranteeing person's maximum reasonably anticipated liability in respect
thereof as determined by the Borrowers in good faith.
"Guarantees": the guarantees made by each of the Guarantors and all other
----------
guarantees executed by a Guarantor in favor of the Agent for the benefit of the
Lenders, in form and substance substantially identical to those executed in
connection with the Original Credit Agreement, as the same may be amended or
modified from time to time in accordance with the terms hereof.
"Guarantor Collateral": all of the property (tangible or intangible)
--------------------
purported to be subject to the lien or security interest purported to be created
by any mortgage, deed of trust, security agreement, pledge agreement, assignment
or other security document heretofore or
-9-
<PAGE>
hereafter executed by any Guarantor as security for all or part of the
Obligations or the Guarantees.
"Guarantor Collateral Documents": the Guarantor Security Agreements, all
------------------------------
notices of security interests in deposit accounts requested by the Agent
pursuant to the Guarantor Security Agreements, Form UCC-1 Financing Statements
and amendments thereto and any other document encumbering the Guarantor
Collateral or evidencing or perfecting a security interest therein in favor of
the Agent for the benefit of the Lenders executed by any Guarantor.
"Guarantor Security Agreements": (i) each security agreement, in form and
-----------------------------
substance substantially identical to those executed in connection with the
Original Credit Agreement, made by each Subsidiary in favor of the Agent, for
the benefit of the Lenders and (ii) the Pledge Agreements, as the same may be
amended from time to time in accordance with the terms hereof.
"Guarantors": (i) each License Subsidiary, (ii) each Pledgor and (iii)
----------
each Subsidiary of each Borrower (to the extent not referred to in clause (i)).
"Incremental Loan": as defined in Section 2.2(a).
----------------
"Incremental Loan Commitment": with respect to each Lender having an
---------------------------
Incremental Loan Commitment, the commitment listed as its "Incremental Loan
Commitment" in the Activation Notice to make Incremental Loans hereunder through
its Applicable Lending Office, as the same may be adjusted pursuant to the
provisions hereof.
"Incremental Loan Commitment Expiration Date": November 10, 2006 or such
-------------------------------------------
earlier date as the Aggregate Incremental Loan Commitment shall expire (whether
by acceleration, reduction to zero or otherwise).
"Incremental Loan Commitment Percentage": with respect to each Incremental
--------------------------------------
Loan Lender, the percentage equivalent of the ratio which such Incremental Loan
Lender's Incremental Loan Commitment bears to the Aggregate Incremental Loan
Commitment.
"Incremental Loan Lenders": each Lender having an Incremental Loan
------------------------
Commitment and/or which shall have Incremental Loans outstanding.
"Incremental Note" and "Incremental Notes": as defined in Section 2.2(c).
"Indebtedness": of any Person at any date, without duplication, (a) all
------------
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than (i) current trade liabilities incurred
in the ordinary course of business and payable in accordance with customary
practices and (ii) current income taxes) or which is evidenced by a note, bond,
debenture or similar instrument, excluding Program Obligations, (b) all
obligations of such Person under Capitalized Lease Obligations, (c) all
obligations of such Person in respect of acceptances issued or created for the
account of such Person, (d) all liabilities secured by any Lien on any property
owned by such Person even though such Person has not assumed or otherwise become
liable for the payment thereof, (e) all obligations of such Person, whether
absolute or contingent, in respect of letters of credit opened for the account
of such Person (other
-10-
<PAGE>
than any letters of credit opened for the purpose of facilitating the purchase
of goods and services in the ordinary course of business and having a term of
not more than 360 days), (f) all obligations of such Person under Non-Compete
Agreements and (g) all Guarantee Obligations of such Person in respect of any
indebtedness, obligations or liabilities of any other Person of the type
referred to in clauses (a) through (g) of this definition.
"Insolvency": with respect to any Multiemployer Plan, the condition that
----------
such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
---------
"Intellectual Property": as defined in Section 3.5.
---------------------
"Interest Expense": as of any date, for the fiscal quarter most recently
----------------
ended and the immediately preceding three fiscal quarters, (A) the sum of (i)
the amount of all interest on Total Debt which was paid, payable and/or accrued
for such period (without duplication of previous amounts), (ii) all commitment,
letter of credit or line of credit fees paid, payable and/or accrued for such
period (without duplication of previous amounts) to any lender in exchange for
such lender's commitment to lend and (iii) net amounts payable (or receivable)
under all Interest Rate Agreements, less (B) all interest income.
----
"Interest Payment Date": (a) as to any Base Rate Loan, the last day of
---------------------
each March, June, September and December to occur while the Loans are
outstanding, (b) as to any LIBOR Loan having an Interest Period of three months
or less, the last day of such Interest Period, (c) as to any LIBOR Loan having
an Interest Period longer than three months, each day which is at the end of
each three month-period within such Interest Period after the first day of such
Interest Period and the last day of such Interest Period and (d) for each of
(a), (b) and (c) above, on the day on which the Loans become due and payable in
full or are paid or prepaid in full.
"Interest Period": with respect to any LIBOR Loan:
---------------
(a) initially, the period commencing on the borrowing or conversion date,
as the case may be, with respect to such LIBOR Loan and ending one, two, three
or six months thereafter, as selected by the Borrowers in their notice of
borrowing or Continuation Notice, as the case may be, given with respect
thereto; and
(b) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such LIBOR Loan and ending one, two,
three or six months thereafter, as selected by the Borrowers by irrevocable
notice to the Agent not less than three Eurodollar Business Days prior to the
last day of the then current Interest Period with respect thereto;
provided that, all of the foregoing provisions relating to Interest Periods are
- --------
subject to the following:
(i) if any Interest Period pertaining to a LIBOR Loan would
otherwise end on a day that is not a Business Day, such Interest Period
shall be extended to the next succeeding Business Day unless the result of
such extension would be to carry such
-11-
<PAGE>
Interest Period into another calendar month in which event such Interest
Period shall end on the immediately preceding Business Day;
(ii) any Interest Period that would otherwise extend beyond the date
final payment is due on the Revolving Loans or the Incremental Loans, as
applicable, shall end on the date of such final payment;
(iii) any Interest Period pertaining to a LIBOR Loan that begins on
the last Business Day of a calendar month (or on a day for which there is
no numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of a calendar month;
and
(iv) the Borrowers shall select Interest Periods so as not to require
a payment or prepayment of any LIBOR Loan during an Interest Period for the
Revolving Loans or the Incremental Loans.
"Interest Rate Agreement": any interest rate protection agreement,
-----------------------
interest rate future, interest rate option, interest rate swap, interest rate
cap or other interest rate hedge or arrangement entered into pursuant to Section
5.13 with any Lender or any Affiliate of a Lender under which any Borrower is a
party or a beneficiary.
"Investment Company Act": as defined in Section 3.22.
----------------------
"KINT-FM": KINT-FM, El Paso, Texas.
-------
"KNVO Mortgage Indebtedness": that certain debt of Entravision to the KNVO
--------------------------
Mortgage Lender, in a principal amount not exceeding $2,000,000, secured by the
KNVO Purchase Money Mortgage.
"KNVO Mortgage Lender": the commercial mortgage lender extending the KNVO
--------------------
Mortgage Indebtedness to Entravision.
"KNVO Purchase Money Mortgage": that certain first-priority mortgage
----------------------------
executed by Entravision in favor of the KNVO Mortgage Lender, encumbering the
KNVO Real Property.
"KNVO Real Property": that certain real property to be owned by
------------------
Entravision and known as Lot 6-A, Block One (1), Market Center Subdivision,
McAllen, Hidalgo County, Texas for use in connection with the operation of KNVO-
TV, McAllen, Texas.
"K06MB LMA": that certain Local Marketing Agreement dated as of September
---------
29, 1995 between Park Place Broadcasting, as licensee, and Las Tres Palmas, as
operator, with regard to station K05MB, Indio, California, as it may be amended
or modified from time to time in accordance with the Loan Documents.
"K06MB Option Agreement": that certain Option Agreement dated as of
----------------------
September 29, 1995 between Park Place Broadcasting, as licensee and Las Tres
Palmas, as operator, with regard to station K05MB, Indio, California, as it may
be amended or modified from time to time in accordance with the Loan Documents.
-12-
<PAGE>
"KSMS": KSMS-TV, Monterey, California.
----
"KSVE(AM)": KSVE(AM), El Paso, Texas.
--------
"Lease Expense": for any period, the aggregate minimum rental obligations
-------------
payable in respect of such period under leases of real and/or personal property
(net of income from subleases thereof), whether or not such obligations are
reflected as liabilities or commitments on a consolidated balance sheet or in
the notes thereto.
"Lenders": as defined in the preamble hereto and Section 8.8 hereof. When
-------
used in any Collateral Document, Guarantee or Guarantor Collateral Document such
term shall be deemed to include Affiliates of Lenders (and any Person that was a
Lender or an Affiliate of a Lender at the time of its entry into an Interest
Rate Agreement), to the extent the Borrowers have Obligations to such Person
arising under an Interest Rate Agreement, it being understood that such
documents shall secure such Obligations ratably with all other Obligations.
"Letter of Credit": as defined in Section 2.1(a).
----------------
"Letter of Credit Amount": the stated maximum amount available to be drawn
-----------------------
under a particular Letter of Credit, as such amount may be reduced or reinstated
from time to time in accordance with the terms of such Letter of Credit.
"Letter of Credit Request": a request by the Borrowers for the issuance of
------------------------
a Letter of Credit, on the Agent's standard form of Application for Irrevocable
Standby Letter of Credit, the current form of which is attached hereto as
Exhibit G, and containing terms and conditions satisfactory to the Agent in its
sole discretion.
"LIBOR": with respect to each day during each Interest Period pertaining
-----
to a LIBOR Loan, the rate of interest determined by the Agent to be the rate per
annum at which deposits in dollars would be offered to the Agent by leading
banks in the London Interbank Market at or about 9:00 a.m., Los Angeles time,
two Eurodollar Business Days prior to the beginning of such Interest Period, for
delivery on the first day of such Interest Period for the number of days
comprised therein and in an amount comparable to the amount of its LIBOR Loan to
be outstanding during such Interest Period.
"LIBOR Adjusted Rate": with respect to each day during each Interest
-------------------
Period pertaining to a LIBOR Loan, a rate per annum determined for such day in
accordance with the following formula (rounded upward to the nearest 1/100th of
1%):
LIBOR
-----------------------
1.00 - LIBOR Reserve Requirements
"LIBOR Loans": Loans the rate of interest applicable to which is based
-----------
upon LIBOR.
"LIBOR Reserve Requirements": for any day as applied to a LIBOR Loan, the
--------------------------
aggregate (without duplication) of the maximum rates (expressed as a decimal
fraction) of reserve requirements in effect on such day (including, without
limitation, basic, supplemental, marginal and emergency reserves under any
regulations of the Board of Governors of the Federal Reserve
-13-
<PAGE>
System or other Governmental Authority having jurisdiction with respect thereto)
dealing with reserve requirements prescribed for eurocurrency funding (currently
referred to as "Eurocurrency Liabilities" in Regulation D of such Board)
maintained by a member bank of such Federal Reserve System.
"License Subsidiaries": the Entravision License Subsidiary and one or more
--------------------
additional wholly-owned Subsidiaries of the Borrowers or any Subsidiary formed
solely for the purpose of holding Media Licenses and FCC files and records with
respect thereto.
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
----
arrangement, encumbrance, lien (statutory or other), or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any Capitalized Lease Obligation having substantially the
same economic effect as any of the foregoing, and the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction in respect of any of the foregoing).
"Loan": a Revolving Loan or an Incremental Loan.
----
"Loan Documents": this Agreement, the Notes, any Letter of Credit Requests
--------------
that are executed by the Borrowers, the Letters of Credit, the Collateral
Documents, the Subordination Agreement, the Guarantor Collateral Documents, the
Consents to Assign, the Guarantees, any Interest Rate Agreements and any other
agreement executed by an Obligor in connection therewith and herewith including,
but not limited to, UCC-1 Financing Statements, as such agreements and documents
may be amended, supplemented and otherwise modified from time to time in
accordance with the terms hereof.
"Luery Trust": Carol Kruidenier Luery TTE, Carol K. Luery Revocable Trust
-----------
UA Dated 7/27/89.
"Majority Incremental Loan Lenders": Incremental Loan Lenders having
---------------------------------
Incremental Loan Commitments equal to or more than 51% of the Aggregate
Incremental Loan Commitment, or, if the Incremental Loan Commitments have
terminated, Lenders with outstanding Incremental Loans having an unpaid
principal balance equal to or more than 51% of the unpaid principal balance of
all Incremental Loans outstanding, excluding from such calculation Incremental
Loan Lenders which have failed or refused to fund an Incremental Loan when
required to do so.
"Majority Lenders": Lenders having Commitments equal to or more than 51%
----------------
of the Aggregate Commitment, or, if any Commitment has terminated, with respect
to such Commitment, Lenders with outstanding Loans and/or participations in
Letters of Credit (if applicable) having an unpaid principal balance equal to or
more than 51% of the sum of (i) the unpaid principal balance of all Loans
outstanding and (ii) the aggregate Letter of Credit Amount (if applicable),
excluding from such calculation Lenders which have failed or refused to fund a
Loan when required to do so.
"Majority Revolving Loan Lenders": Revolving Loan Lenders having Revolving
-------------------------------
Loan Commitments equal to or more than 51% of the Aggregate Revolving Loan
Commitment, or, if
-14-
<PAGE>
the Revolving Loan Commitments have terminated, Lenders with outstanding
Revolving Loans and/or participations in Letters of Credit having an unpaid
principal balance equal to or more than 51% of the sum of (i) the unpaid
principal balance of all Revolving Loans outstanding and (ii) the aggregate
Letter of Credit Amount, excluding from such calculation Lenders which have
failed or refused to fund a Revolving Loan when required to do so.
"Management Fees": as defined in Section 6.13.
---------------
"Managing Members": with respect to Entravision, Walter F. Ulloa and
----------------
Philip C. Wilkinson.
"Margin Stock": as defined in Regulation U.
------------
"Material Adverse Effect": a material adverse effect on (a) the business,
-----------------------
operations, property, condition or prospects (financial or otherwise) of
Entravision and its Subsidiaries (taken as a whole), (b) the ability of
Entravision and its Subsidiaries (taken as a whole) to perform their respective
obligations under the Loan Documents or (c) the validity or enforceability of
the Loan Documents or the rights or remedies of the Agent and the Lenders
hereunder or thereunder.
"Material Contracts": as defined in Section 3.8.
------------------
"Material Lease": each lease referred to on Schedule 1.1.
--------------
"Maximum Incremental Loan Facility": $100,000,000 in principal amount of
---------------------------------
Incremental Loans.
"Maximum Total Debt Ratio": for the Borrowers and their Subsidiaries on a
------------------------
consolidated basis, the ratio of Total Debt to Operating Cash Flow.
"Media Licenses": any franchise, license, permit, certificate, ordinance,
--------------
approval or other authorization, or any renewal or extension thereof, from any
federal, state or local government or governmental agency, department or body
that is necessary for the broadcast or other operations of the Borrowers or any
Subsidiaries.
"Member": (a) any Person who at the time of execution hereof is a member
------
of any Borrower that is organized as a limited liability company or any
successor, heir, personal representative, executor, administrator or authorized
assignee thereof and (b) any other Person subsequently added as a Member of any
such Borrower (with the consent of Lenders) or any successor, heir, personal
representative, executor, administrator or authorized assignee thereof.
"Minority Shareholders": the Luery Trust (as to the 10.20% interest in
---------------------
Cabrillo owned by it) and Univision, if Univision shall exercise the Univision
Option.
"Mortgage Modifications": modifications to the Existing Mortgages, each in
----------------------
form and substance satisfactory to the Agent.
-15-
<PAGE>
"Mortgages": the Existing Mortgages, and each other mortgage, deed of
---------
trust, collateral assignment of leases and related documents made from time to
time by any Borrower or any Subsidiary in favor of the Agent, for the benefit of
the Lenders, in respect of certain of the Properties, securing the Obligations
to the extent provided therein, in form and substance satisfactory to the Agent,
as the same may be amended from time to time in accordance with the terms
hereof.
"Multiemployer Plan": a plan which is a multiemployer plan as defined in
------------------
Section 4001(a)(3) of ERISA.
"Net Asset Value": as of any date of determination, with respect to the
---------------
Borrowers and their Subsidiaries on a consolidated basis, Operating Cash Flow
for the fiscal quarter most recently ended and the immediately preceding three
fiscal quarters multiplied by eight, less Total Debt.
----
"Net Income": for the Borrowers and their Subsidiaries on a consolidated
----------
basis, net income as determined in accordance with GAAP.
"Net Operating Revenue": with respect to the Stations for any period (i)
---------------------
all times sales, including barter and trade and television subscription revenue
and all affiliate compensation received from Univision less (ii) advertising
----
commissions, music license fees and all similar commissions and fees paid by the
Borrowers, calculated in accordance with GAAP. Unless otherwise agreed in
writing by the Agent, barter and trade sales shall be valued at the fair market
value of the goods or services received by the Borrowers.
"Net Proceeds": (A) with respect to any Asset Disposition, the net amount
------------
equal to the aggregate amount received in cash (including any cash received by
way of deferred payment pursuant to a note receivable, other non-cash
consideration or otherwise, but only as and when such cash is so received) in
connection with such Asset Disposition minus the sum of (a) the reasonable fees,
-----
commissions and other out-of-pocket expenses incurred by the Borrowers or any of
their Subsidiaries in connection with such Asset Disposition (other than amounts
payable to Affiliates of the Person making such disposition), (b) Indebtedness,
other than the Loans, required to be paid as a result of such Asset Disposition
and (c) federal, state and local taxes incurred and paid in connection with such
Asset Disposition; and (B) with respect to any Equity Offering, the net amount
equal to the aggregate amount received in cash (including any cash received by
way of deferred payment pursuant to a note receivable, other non-cash
consideration or otherwise, but only as and when such cash is so received) in
connection with such Equity Offering minus the reasonable fees, commissions and
-----
other out-of-pocket expenses incurred by the Borrowers in connection with such
Equity Offering (other than amounts payable to Affiliates of the Person making
such Equity Offering).
"Net Working Investment": for the Borrowers and their Subsidiaries on a
----------------------
consolidated basis, (i) current assets (excluding cash and permitted liquid
investments) less (ii) current liabilities (excluding the current portion of
Total Debt).
-16-
<PAGE>
"Non-Compete Agreements": all agreements pursuant to which any Borrower or
----------------------
any Station has agreed to make payments (whether in cash or in kind) to another
Person for the agreement of such Person not to compete with such Borrower or
such Station in a given area.
"Nonrecourse Guarantee": each nonrecourse guarantee in form and substance
---------------------
substantially identical to those executed in connection with the Original Credit
Agreement, made by each Pledgor in favor of the Agent, for the benefit of the
Lenders, as the same may be amended from time to time in accordance with the
terms hereof.
"Note": a Revolving Note or an Incremental Note, as the case may be, and
----
"Notes" shall mean the Revolving Notes and/or the Incremental Notes, as the case
- ------
may be.
"Note Purchase Agreement": the Subordinated Note Purchase and Option
-----------------------
Agreement dated as of December 30, 1996, among Univision, the Borrowers and the
Managing Members, as the same may be amended from time to time in accordance
with the terms hereof.
"Obligations": the unpaid principal of and interest on (including, without
-----------
limitation, interest accruing after the maturity of the Incremental Loans and
the Revolving Loans and interest accruing on or after the filing of any petition
in bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Borrowers, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding and whether or not at a
default rate) the Notes, the obligation to reimburse drawings under Letters of
Credit (including the contingent obligation to reimburse any drawings under
outstanding Letters of Credit), all obligations of the Borrowers to any Lender
or Affiliate of a Lender (or any Person that was a Lender or Affiliate of a
Lender at the time of its entry into an Interest Rate Agreement) arising under
any Interest Rate Agreement, and all other obligations and liabilities of the
Borrowers to the Agent and the Lenders, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred, which
may arise under, out of, or in connection with, this Agreement, the Notes, the
Letters of Credit, any other Loan Document and any other document made,
delivered or given in connection herewith or therewith, whether on account of
principal, interest, reimbursement obligations, fees, indemnities, costs,
expenses (including, without limitation, all reasonable fees and disbursements
of counsel, and the allocated reasonable cost of internal counsel, to the Agent
or the Lenders that are required to be paid by the Borrowers pursuant to the
terms of this Agreement) or otherwise.
"Obligor": each Borrower, each Subsidiary, each Guarantor and any other
-------
Person (other than a Lender) obligated under any Loan Document.
"Occupancy Agreements": as defined in Section 5.15.
--------------------
"Operating Agreement": that certain First Amended and Restated Operating
-------------------
Agreement for Entravision Communications Company, L.L.C. dated December 30,
1996, as amended by Amendment No. 1 to Amended and Restated Operating Agreement
dated to be effective as of January 23, 1997, Second Amendment to the First
Amended and Restated Operating Agreement dated to be effective as of December
31, 1997 and Third Amendment to the First Amended and Restated Operating
Agreement dated to be effective as of November [10], 1998 and as such Agreement
may be further amended from time to time in accordance with the terms hereof.
-17-
<PAGE>
"Operating Cash Flow": for any period, for the fiscal quarter most
-------------------
recently ended and the immediately preceding three fiscal quarters, Net Income
after eliminating extraordinary gains and losses, plus (i) provisions for taxes,
----
(ii) depreciation and amortization (including amortization of Program Payments),
(iii) Interest Expense, (iv) permitted termination payments owing by the
Borrowers resulting from early termination of a time brokerage agreement, local
marketing agreement or similar agreement and (v) other non-cash charges, all to
the extent deducted from the computation of Net Income, but after deducting,
without duplication, (A) Program Payments made or scheduled to be made, (B) non-
cash revenues, (C) Management Fees and (D) Corporate Overhead, all to the extent
included in the calculation of Net Income.
"Option Agreement": any option or similar agreement providing for any
----------------
Borrower or its Subsidiaries to purchase the stock or assets of any Person
owning any radio or television station or assets used or useful in the operation
of any radio or television station, including the KO6MB Option Agreement.
"Organic Documents": relative to any entity, its certificate and articles
-----------------
of incorporation or organization, its by-laws or operating agreements, and all
Equityholder Agreements, voting agreements and similar arrangements applicable
to any of its authorized shares of capital stock, its partnership interests or
its member interests, and any other arrangements relating to the control or
management of any such entity (whether existing as corporation, a partnership, a
limited liability company or otherwise).
"Participant": as defined in Section 9.6(b).
-----------
"PBGC": the Pension Benefit Guaranty Corporation established pursuant to
----
Subtitle A of Title IV of ERISA or any successor thereto.
"Person": any individual, firm, partnership, joint venture, corporation,
------
association, limited liability company, business enterprise trust,
unincorporated organization, government or department or agency thereof or other
entity, whether acting in an individual, fiduciary or other capacity.
"Plan": as to any Person, any plan (other than a Multiemployer Plan)
----
subject to Title IV of ERISA maintained for employees of such Person or any
ERISA Affiliate of such Person (and any such plan no longer maintained by such
Person or any of such Person's ERISA Affiliates to which such Person or any of
such Person's ERISA Affiliates has made or was required to make any
contributions within any of the five preceding years).
"Pledge Agreements": each pledge agreement in form and substance
-----------------
substantially identical to those executed in connection with the Original Credit
Agreement, made by each Pledgor in favor of the Agent, for the benefit of the
Lenders, as the same may be amended from time to time in accordance with the
terms hereof.
"Pledgor": each holder of an equity interest in any Borrower, other than
-------
(i) any Borrower or (ii) the Minority Shareholders.
"Program Contracts": all contracts for television, film, programs, music
-----------------
and related audio rights and syndicated series exhibition rights acquired under
license agreements.
-18-
<PAGE>
"Program Obligations": all obligations in respect of the purchase, use,
-------------------
license or acquisition of programs, programming materials, films and similar
assets used in connection with the business and operations of the Borrowers.
"Program Payments": for any period the sum (determined on a consolidated
----------------
basis and without duplication) of all payments by the Borrowers made or
scheduled to be made during such period in respect of Program Obligations.
"Program Services Agreements": any local marketing agreement, time
---------------------------
brokerage agreement, program services agreement or similar agreement providing
for any Borrower or its Subsidiaries (other than License Subsidiaries) to
program or sell advertising on all or any portion of the broadcast time of any
television or radio station, including the K06MB LMA.
"Prohibited Transaction": with respect to any Plan, a prohibited
----------------------
transaction (as defined in Section 406 of ERISA) with respect to such Plan.
"Properties": the collective reference to the real and personal property
----------
owned, leased, used, occupied or operated, under license or permit, (i) by the
Borrowers and the Guarantors (other than the Pledgors) and (ii) by the Pledgors,
to the extent encumbered by a Pledge Agreement.
"Purchasing Lenders": as defined in Section 9.6(c).
------------------
"Register": as defined in Section 9.6(d).
--------
"Regulation D": Regulation D of the Board of Governors of the Federal
------------
Reserve System, as the same is from time to time in effect, and all official
rulings and interpretations thereunder or thereof and any successor regulation
thereto.
"Regulation U": Regulation U of the Board of Governors of the Federal
------------
Reserve System, as the same is from time to time in effect, and all official
rulings and interpretations thereunder or thereof and any successor regulation
thereto.
"Reorganization": with respect to any Multiemployer Plan, the condition
--------------
that such plan is in reorganization within the meaning of Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section 4043(b) of
----------------
ERISA, other than those events as to which the thirty day notice period is
waived under PBGC regulations.
"Requirement of Law": as to any Person, the Organic Documents of such
------------------
Person, and any law, treaty, rule or regulation, determination or policy
statement or interpretation of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.
"Responsible Officer": with respect to any Person, the chief executive
-------------------
officer, the president, the managing member or members (as applicable, with
respect to any limited liability company), any executive vice president, any
senior vice president or any vice president or, with respect to financial
matters, the chief financial officer, treasurer or controller; provided that,
-------- ----
with
-19-
<PAGE>
respect to any Borrower (other than Entravision), a "Responsible Officer" shall
be a Responsible Officer of Entravision to the extent such authority has been so
delegated pursuant to resolutions of such Borrower delivered to the Agent.
"Restricted Payments": as defined in Section 6.6.
-------------------
"Revolving Loan": as defined in Section 2.1(a).
--------------
"Revolving Loan Commitment": with respect to each Lender having a
-------------------------
Revolving Loan Commitment, its commitment listed as its "Revolving Loan
Commitment" on the signature pages hereto to make Revolving Loans and
participate in Letters of Credit hereunder through its Applicable Lending
Office, as the same shall be adjusted from time to time pursuant to this
Agreement.
"Revolving Loan Commitment Expiration Date": November 10, 2006 or such
-----------------------------------------
earlier date as the Aggregate Revolving Loan Commitment shall expire (whether by
acceleration, reduction to zero or otherwise).
"Revolving Loan Commitment Percentage": with respect to each Revolving
------------------------------------
Loan Lender, the percentage equivalent of the ratio which such Revolving Loan
Lender's Revolving Loan Commitment bears to the Aggregate Revolving Loan
Commitment, as such Revolving Loan Lender's Revolving Loan Commitment and the
Aggregate Revolving Loan Commitment may be adjusted from time to time pursuant
to the terms hereof.
"Revolving Loan Lender": each Lender having a Revolving Loan Commitment
---------------------
and/or which shall have (i) Revolving Loans outstanding and/or (ii)
participations in Letters of Credit which are outstanding.
"Revolving Loan Leverage Level": if the Maximum Total Debt Ratio shall be
-----------------------------
greater than or equal to 6.50:1, the Revolving Loan Leverage Level shall be 1;
if the Maximum Total Debt Ratio shall be less than 6.50:1 and greater than or
equal to 6.00:1, the Revolving Loan Leverage Level shall be 2; if the Maximum
Total Debt Ratio shall be less than 6.00:1 and greater than or equal to 5.50:1,
the Revolving Loan Leverage shall be 3; if the Maximum Total Debt Ratio shall be
less than 5.50:1 and greater than or equal to 5.00:1, the Revolving Loan
Leverage Level shall be 4; if the Maximum Total Debt Ratio shall be less than
5.00:1 and greater than or equal to 4.50:1, the Revolving Loan Leverage Level
shall be 5; if the Maximum Total Debt Ratio shall be less than 4.50:1 and
greater than or equal to 4.00:1, the Revolving Loan Leverage Level shall be 6;
if the Maximum Total Debt Ratio shall be less than 4.00:1, the Revolving Loan
Leverage Level shall be 7.
"Revolving Note" and "Revolving Notes": as defined in Section 2.1(c).
------------------------------------
"Security Agreement": the Amended and Restated Security Agreement in form
------------------
and substance reasonably satisfactory to the Majority Lenders, made by the
Borrowers in favor of the Agent, for the benefit of the Lenders, in respect of
the tangible and intangible personal property of the Borrowers described
therein, as the same may be amended from time to time in accordance with the
terms hereof.
-20-
<PAGE>
"Senior Debt": Total Debt other than Subordinated Indebtedness.
-----------
"Single Employer Plan": any Plan which is covered by Title IV of ERISA,
--------------------
but which is not a Multiemployer Plan.
"Solvent": when used with respect to any Person, that:
-------
(i) the present fair salable value of such Person's assets is
in excess of the total amount of the probable liability on such Person's
liabilities;
(ii) such Person is able to pay its debts as they become due;
and
(iii) such Person does not have unreasonably small capital to
carry on such Person's business as theretofore operated and all businesses
in which such Person is about to engage.
"Station": any radio station, any full power television station, low power
-------
television station, any translator and any other television system now or
hereafter owned, leased or operated by the Borrowers or any of their
Subsidiaries.
"Subordinated Indebtedness": the sum of (i) Indebtedness of the Borrower
-------------------------
under the Univision Investment Documents and (ii) all other Indebtedness of the
Borrowers which is subordinated to the payment of the Obligations on terms and
conditions satisfactory to the Majority Lenders as evidenced by their written
consent thereto prior to the incurrence of such Indebtedness.
"Subordination Agreement": the Univision Subordination Agreement.
-----------------------
"Subsidiary": as to any Person at any time of determination, a
----------
corporation, partnership or other entity of which shares of stock or other
ownership interests having ordinary voting power (other than stock or such other
ownership interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other managers of
such corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries or Subsidiaries, or both, by such Person. Unless
otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in
this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrowers.
"Taxes": as defined in Section 2.14(a).
-----
"Tecate Acquisition": the investment by Entravision, pursuant to the
------------------
Tecate Letter Agreement, in (i) a minority interest in a Mexican entity which is
to own the Mexican concession for XHTEB-TV, Channel 49, Tecate, Mexico (which
is, as of the Closing Date, in the process of being constructed), and (ii) 100%
ownership of a Mexican entity which is to have the right to program such
station.
"Tecate Letter Agreement": that certain letter agreement dated as of May
-----------------------
6, 1998 among Entravision, Televisora Alco, S.A. de C.V., a Mexican corporation,
Comercializadora Frontera
-21-
<PAGE>
Norte S.A. de C.V., a Mexican corporation, and the other parties referred to
therein, as amended from time to time in accordance with the terms of this
Agreement.
"Termination Event": (i) a Reportable Event, (ii) the institution of
-----------------
proceedings to terminate a Single Employer Plan by the PBGC under Section 4042
of ERISA, (iii) the appointment by the PBGC of a trustee to administer any
Single Employer Plan or (iv) the existence of any other event or condition that
would reasonably be expected to constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment by the PBGC of a trustee to
administer, any Single Employer Plan.
"Total Debt": the aggregate principal amount of all Indebtedness
----------
(including Subordinated Indebtedness and Capitalized Lease Obligations) of the
Borrowers (but excluding the Univision Subordinated Note).
"Total Debt Service": as of any date, for the fiscal quarter most recently
------------------
ended and the immediately preceding three fiscal quarters, the sum of (i)
Interest Expense and (ii) regularly scheduled principal payments due on Total
Debt (excluding optional and mandatory prepayments but including principal
payments on Revolving Loans due in connection with reductions in the Revolving
Loan Commitment).
"Total Interest Coverage Ratio": the ratio of Operating Cash Flow to
-----------------------------
Interest Expense.
"Tranche": the collective reference to LIBOR Loans the Interest Periods
-------
with respect to all of which begin on the same date and end on the same later
date (whether or not such LIBOR Loans shall originally have been made on the
same day).
"Transferee": as defined in Section 9.6(f).
----------
"Type": as to any Incremental Loan or any Revolving Loan, its nature as a
----
Base Rate Loan or a LIBOR Loan.
"Univision": as applicable, Univision Communications, Inc., a Delaware
---------
corporation, or The Univision Network Limited Partnership, a Delaware limited
partnership.
"Univision Investment Documents": the Note Purchase Agreement, the
------------------------------
Univision Subordinated Note, and such other documents as may relate to the
Univision Subordinated Note, in form and substance acceptable to the Agent, as
the same may be amended from time to time in accordance with the terms hereof.
"Univision Option": Univision's option, pursuant to Section 3 of the
----------------
Univision Subordinated Note, to purchase Class A Membership Units in
Entravision.
"Univision Subordinated Note": that certain Non-Negotiable Subordinated
---------------------------
Note dated December 30, 1996, executed by Entravision in favor of Univision in
the principal amount of $10,000,000, as the same may be amended from time to
time in accordance with the terms hereof.
-22-
<PAGE>
"Univision Subordination Agreement": that certain Amended and Restated
---------------------------------
Subordination Agreement in form and substance satisfactory to the Agent, made by
Univision in favor of the Agent, for the benefit of the Lenders, with regard to
the Univision Investment Documents, as the same may be amended from time to time
in accordance with the terms hereof.
"Voting Control": (i) with respect to any corporation, the power to elect
--------------
a majority of the board of directors of such corporation and (ii) with respect
to Entravision, ownership of a Majority in Interest (as defined in the Operating
Agreement) of each class of membership units of Entravision having voting power.
1.2 Other Definitional Provisions.
-----------------------------
(a) Unless otherwise specified therein, all terms defined in this
Agreement shall have the defined meanings when used in the Notes, any other Loan
Document or any certificate or other document made or delivered pursuant hereto
or thereto.
(b) As used herein, in the Notes, in any other Loan Document, and in any
certificate or other document made or delivered pursuant hereto or thereto,
accounting terms not defined in Section 1.1 and accounting terms partly defined
in Section 1.1, to the extent not defined, shall have the respective meanings
given to them under GAAP.
(c) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, subsection,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be equally applicable
to both the singular and plural forms of such terms.
(e) For the purpose of determining financial covenant compliance hereunder
for any period, acquisitions, divestitures, and asset sales occurring during
such period will be included in the calculations for such period on a pro forma
basis, and will be deemed to have occurred on the first day of such period.
SECTION 2. AMOUNT AND TERMS OF LOANS AND LETTERS OF CREDIT; COMMITMENT
AMOUNTS
2.1 Revolving Loans and Letters of Credit; Revolving Loan Commitment
----------------------------------------------------------------
Amounts.
- -------
(a) Subject to the terms and conditions hereof, each Lender having a
Revolving Loan Commitment severally agrees to (i) make loans on a revolving
credit basis through its Applicable Lending Office to the Borrowers from time to
time from and including the Closing Date to but excluding the Revolving Loan
Commitment Expiration Date (each a "Revolving Loan", and collectively, the
"Revolving Loans") in accordance with the provisions of this Agreement and (ii)
participate through its Applicable Lending Office in letters of credit issued
for the account of the Borrowers pursuant to Section 2.3 from time to time from
and including the Closing Date to but excluding the Revolving Loan Commitment
Expiration Date (each a "Letter of Credit", and collectively, the "Letters of
Credit"); provided, however, that the sum of (A) the aggregate
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<PAGE>
principal amount of all Revolving Loans outstanding, (B) the aggregate Letter of
Credit Amount of all Letters of Credit outstanding and (C) the aggregate amount
of unreimbursed drawings under all Letters of Credit shall not exceed the
Aggregate Revolving Loan Commitment at any time; and provided, further, that the
sum of (x) the aggregate Letter of Credit Amount of all Letters of Credit
outstanding and (y) the aggregate amount of unreimbursed drawings under all
Letters of Credit shall not exceed $10,000,000 at any time. Within the limits of
each Revolving Loan Lender's Revolving Loan Commitment, the Borrowers may
borrow, have Letters of Credit issued for the Borrowers' account, prepay
Revolving Loans, reborrow Revolving Loans, and have additional Letters of Credit
issued for the Borrowers' account after the expiration of previously issued
Letters of Credit.
The principal amount of each Revolving Loan Lender's (A) Revolving Loan and
(B) participation in a Letter of Credit shall be in an amount equal to the
product of (i) such Revolving Loan Lender's Revolving Loan Commitment Percentage
(expressed as a fraction) and (ii) the total amount of the Revolving Loan or
Revolving Loans, or the Letter of Credit or Letters of Credit, requested;
provided that, in no event shall any Revolving Loan Lender be obligated to make
- -------- ----
a Revolving Loan or participate in a Letter of Credit if after giving effect to
such Revolving Loan or such participation the sum of such Revolving Loan
Lender's (x) Revolving Loans outstanding, (y) Revolving Loan Commitment
Percentage of the aggregate Letter of Credit Amount of all Letters of Credit
outstanding and (z) Revolving Loan Commitment Percentage of the aggregate amount
of unreimbursed drawings under all Letters of Credit would exceed its Revolving
Loan Commitment or if the amount of such requested Revolving Loan or such
Revolving Loan Lender's Revolving Loan Commitment Percentage of such Letter of
Credit is in excess of such Revolving Loan Lender's Available Revolving Loan
Commitment.
(b) Subject to Sections 2.10 and 2.12, the Revolving Loans may from time
to time be (i) LIBOR Loans, (ii) Base Rate Loans or (iii) a combination thereof,
as determined by the Borrowers and notified to the Agent in accordance with
either Section 2.1(d) or 2.6. Each Revolving Loan Lender may make or maintain
its Revolving Loans or participate in Letters of Credit to or for the account of
the Borrowers by or through any Applicable Lending Office.
(c) The Revolving Loans made by each Revolving Loan Lender to the
Borrowers shall be evidenced by a promissory note of the Borrowers,
substantially in the form of Exhibit A (a "Revolving Note"), with appropriate
--------------
insertions therein as to payee, date and principal amount, payable to the order
of such Revolving Loan Lender and representing the obligations of the Borrowers
to pay the aggregate unpaid principal amount of all Revolving Loans made by such
Revolving Loan Lender to the Borrowers pursuant to Section 2.1(a) or 2.3(c),
with interest thereon as prescribed in Sections 2.8 and 2.9. Each Revolving Loan
Lender is hereby authorized (but not required) to record the date and amount of
each payment or prepayment of principal of its Revolving Loans made to the
Borrowers, each continuation thereof, each conversion of all or a portion
thereof to another Type and, in the case of LIBOR Loans, the length of each
Interest Period with respect thereto, in the books and records of such Revolving
Loan Lender, and any such recordation shall constitute prima facie evidence of
----- -----
the accuracy of the information so recorded. The failure of any Revolving Loan
Lender to make any such recordation or notation in the books and records of the
Revolving Loan Lender (or any error in such recordation or notation) shall not
affect the obligations of the Borrowers hereunder or under the Revolving Notes.
Each Revolving Note shall (i) be dated the Closing Date, (ii) provide for the
payment of
-24-
<PAGE>
interest in accordance with Sections 2.8 and 2.9 and (iii) be stated to be
payable on the Revolving Loan Commitment Expiration Date.
(d) The Borrowers shall give the Agent irrevocable written notice (which
notice must be received by the Agent prior to 10:00 A.M., Los Angeles time, one
Business Day prior to each proposed borrowing date or, if all or any part of the
Revolving Loans are requested to be made as LIBOR Loans, three Eurodollar
Business Days prior to each proposed borrowing date) requesting that the
Revolving Loan Lenders make the Revolving Loans on the proposed borrowing date
and specifying (i) the aggregate amount of Revolving Loans requested to be made,
(ii) subject to Section 2.1(b), whether the Revolving Loans are to be LIBOR
Loans, Base Rate Loans or a combination thereof and (iii) if the Revolving Loans
are to be entirely or partly LIBOR Loans, the respective amounts of each such
Type of Revolving Loan and the respective lengths of the initial Interest
Periods therefor. On receipt of such notice, the Agent shall promptly notify
each Revolving Loan Lender thereof not later than 11:00 A.M., Los Angeles time,
on the date of receipt of such notice. On the proposed borrowing date, not later
than 12:00 noon, Los Angeles time, each Revolving Loan Lender shall make
available to the Agent at its office specified in Section 9.2 the amount of such
Revolving Loan Lender's pro rata share of the aggregate borrowing amount (as
determined in accordance with the second paragraph of Section 2.1(a)) in
immediately available funds. The Agent may, in the absence of notification from
any Revolving Loan Lender that such Revolving Loan Lender has not made its pro
rata share available to the Agent, on such date, credit the account of the
Borrowers on the books of such office of the Agent with the aggregate amount of
Revolving Loans.
(e) On each date set forth below, the Aggregate Revolving Loan Commitment
shall automatically reduce to the corresponding amount set forth below:
Reduced Aggregate
Effective Date of Reduction Revolving Loan Commitment
--------------------------- -------------------------
December 31, 2000 $147,000,000
March 31, 2001 $145,500,000
June 30, 2001 $144,000,000
September 30, 2001 $139,500,000
December 31, 2001 $135,000,000
March 31, 2002 $131,250,000
June 30, 2002 $127,500,000
September 30, 2002 $123,750,000
December 31, 2002 $120,000,000
March 31, 2003 $114,750,000
June 30, 2003 $109,500,000
September 30, 2003 $104,250,000
December 31, 2003 $ 99,000,000
March 31, 2004 $ 92,250,000
June 30, 2004 $ 85,500,000
September 30, 2004 $ 78,750,000
December 31, 2004 $ 72,000,000
March 31, 2005 $ 64,500,000
-25-
<PAGE>
June 30, 2005 $ 57,000,000
September 30, 2005 $ 49,500,000
December 31, 2005 $ 42,000,000
March 31, 2006 $ 31,500,000
June 30, 2006 $ 21,000,000
September 30, 2006 $ 10,500,000
All outstanding Revolving Loans shall be due and payable, to the extent not
previously paid in accordance with the terms hereof, on the Revolving Loan
Commitment Expiration Date.
(f) Reductions of the Aggregate Revolving Loan Commitment pursuant to this
Section 2.1 or Section 2.5 shall automatically effect a reduction of the
Revolving Loan Commitment of each Revolving Loan Lender to an amount equal to
the product of (i) the Aggregate Revolving Loan Commitment of all Revolving Loan
Lenders, as reduced pursuant to this Section 2.1 or Section 2.5 and (ii) the
Revolving Loan Commitment Percentage of such Revolving Loan Lender, in each case
determined immediately prior to such reduction of the Aggregate Revolving Loan
Commitment on such date.
(g) Upon each reduction of the Aggregate Revolving Loan Commitment, the
Borrowers shall (i) pay the unused commitment fee, payable pursuant to Section
2.16, accrued on the amount of the Aggregate Revolving Loan Commitment so
reduced through the date of such reduction, (ii) prepay the amount, if any, by
which the sum of (A) the aggregate unpaid principal amount of the Revolving
Loans, (B) the aggregate Letter of Credit Amount of all Letters of Credit
outstanding and (C) the aggregate amount of unreimbursed drawings under all
Letters of Credit exceeds the amount of the Aggregate Revolving Loan Commitment
as so reduced, together with accrued interest on the amount being prepaid to the
date of such prepayment (or, with respect to outstanding Letters of Credit, make
a Cash Collateral Deposit in an amount equal to such excess to the extent such
excess is not corrected by the foregoing prepayment) and (iii) compensate the
Revolving Loan Lenders for their funding costs, if any, in accordance with
Section 2.15.
(h) Neither the Agent nor any Revolving Loan Lender shall be responsible
for the obligation or Available Revolving Loan Commitment of any other Revolving
Loan Lender hereunder, nor will the failure of any Revolving Loan Lender to
comply with the terms of this Agreement relieve any other Revolving Loan Lender
or the Borrowers of their obligations under this Agreement and the Revolving
Notes. Nothing herein shall be deemed to relieve any Revolving Loan Lender from
its obligation to fulfill its Commitments hereunder or to prejudice any rights
which the Borrowers may have against any Revolving Loan Lender as a result of
any default by such Revolving Loan Lender hereunder.
(i) The Revolving Loan Commitment of each Revolving Loan Lender and the
Aggregate Revolving Loan Commitment shall terminate on the Revolving Loan
Commitment Expiration Date.
2.2 Incremental Loan Facility.
-------------------------
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<PAGE>
(a) The Borrowers, and all or certain of the Lenders who agree in writing
to participate in such facility and who are selected by the Borrowers may, with
the consent of the Agent, such consent not to be unreasonably withheld, at any
one time during the period from and including the Closing Date to but excluding
September 30, 2000, agree that such Lenders shall become Incremental Loan
Lenders by executing and delivering to the Agent an Activation Notice specifying
the respective Incremental Loan Commitments of the Incremental Loan Lenders and
the Activation Date, and otherwise duly completed. Each Incremental Loan Lender
severally agrees, on the terms and conditions of this Agreement, to make loans
on a revolving credit basis through its Applicable Lending Office to the
Borrowers from time to time from and including the Activation Date to but
excluding the Incremental Loan Commitment Expiration Date (each an "Incremental
Loan" and, collectively, the "Incremental Loans") in an aggregate principal
amount up to but not exceeding its Incremental Loan Commitment. Within the
limits of each Incremental Loan Lender's Incremental Loan Commitment, the
Borrowers may borrow and prepay Incremental Loans and reborrow Incremental Loans
hereunder. Only one Activation Notice may be given under this Agreement. Nothing
in this Section 2.2(a) shall be construed to obligate any Lender to execute an
Activation Notice.
The principal amount of each Incremental Loan Lender's Incremental Loan
shall be in an amount equal to the product of (i) such Incremental Loan Lender's
Incremental Loan Commitment Percentage (expressed as a fraction) and (ii) the
total amount of the Incremental Loan or Incremental Loans requested; provided
that in no event shall any Incremental Loan Lender be obligated to make an
Incremental Loan if after giving effect to such Incremental Loan such
Incremental Loan Lender's Incremental Loans outstanding would exceed its
Incremental Loan Commitment or if the amount of such requested Incremental Loan
is in excess of such Incremental Loan Lender's Available Incremental Loan
Commitment.
(b) Subject to Sections 2.10 and 2.12, the Incremental Loans may from time
to time be (i) LIBOR Loans, (ii) Base Rate Loans or (iii) a combination thereof,
as determined by the Borrowers and notified to the Agent in accordance with
either Section 2.2(e) or 2.6. Each Incremental Loan Lender may make or maintain
its Incremental Loans to the Borrowers by or through any Applicable Lending
Office.
(c) The Incremental Loans made by each Incremental Loan Lender to the
Borrowers shall be evidenced by a promissory note of the Borrowers,
substantially in the form of Exhibit B (an "Incremental Note"), with appropriate
----------------
insertions therein as to payee, date and principal amount, payable to the order
of such Incremental Loan Lender and representing the obligations of the
Borrowers to pay the aggregate unpaid principal amount of all Incremental Loans
made by such Incremental Loan Lender to the Borrowers pursuant to Section
2.2(a), with interest thereon as prescribed in Sections 2.8 and 2.9. Each
Incremental Loan Lender is hereby authorized (but not required) to record the
date and amount of each payment or prepayment of principal of its Incremental
Loans made to the Borrowers, each continuation thereof, each conversion of all
or a portion thereof to another Type and, in the case of LIBOR Loans, the length
of each Interest Period with respect thereto, in the books and records of such
Incremental Loan Lender, and any such recordation shall constitute prima facie
----- -----
evidence of the accuracy of the information so recorded. The failure of any
Incremental Loan Lender to make any such recordation or notation in the books
and records of the Incremental Loan Lender (or any error in such recordation or
notation) shall not affect the obligations of the Borrowers hereunder or under
the Incremental
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<PAGE>
Notes. Each Incremental Note shall (i) be dated the date of issuance thereof,
(ii) provide for the payment of interest in accordance with Sections 2.8 and 2.9
and (iii) be stated to be payable on the Incremental Loan Commitment Expiration
Date.
(d) The Borrowers shall give the Agent irrevocable written notice (which
notice must be received by the Agent prior to 10:00 A.M., Los Angeles time, one
Business Day prior each proposed borrowing date or, if all or any part of the
Incremental Loans are requested to be made as LIBOR Loans, three Eurodollar
Business Days prior to each proposed borrowing date) requesting that the
Incremental Loan Lenders make the Incremental Loans on the proposed borrowing
date and specifying (i) the aggregate amount of Incremental Loans requested to
be made, (ii) subject to Section 2.2(b), whether the Incremental Loans are to be
LIBOR Loans, Base Rate Loans or a combination thereof and (iii) if the
Incremental Loans are to be entirely or partly LIBOR Loans, the respective
amounts of each such Type of Incremental Loan and the respective lengths of the
initial Interest Periods therefor. Upon receipt of such notice the Agent shall
promptly notify each Incremental Loan Lender thereof not later than 11:00 A.M.,
Los Angeles time, on the date of receipt of such notice. On the proposed
borrowing date, not later than 12:00 noon, Los Angeles time, each Incremental
Loan Lender shall make available to the Agent at its office specified in Section
9.2 the amount of such Incremental Loan Lender's pro rata share of the aggregate
borrowing amount (as determined in accordance with the second paragraph of
Section 2.2(a)) in immediately available funds. The Agent may, in the absence
of notification from any Incremental Loan Lender that such Incremental Loan
Lender has not made its pro rata share available to the Agent, on such date,
credit the account of the Borrowers on the books of such office of the Agent
with the aggregate Incremental Loans.
(e) Neither the Agent nor any Incremental Loan Lender shall be responsible
for the obligations or Available Incremental Loan Commitment of any other
Incremental Loan Lender hereunder, nor will the failure of any Incremental Loan
Lender to comply with the terms of this Agreement relieve any other Incremental
Loan Lender or the Borrowers of their obligations under this Agreement and the
Incremental Notes. Nothing herein shall be deemed to relieve any Incremental
Loan Lender from its obligation to fulfill its Commitment hereunder or to
prejudice any rights which the Borrowers may have against any Incremental Loan
Lender as a result of any default by such Incremental Loan Lender hereunder.
(f) On each date set forth below, the Aggregate Incremental Loan Commitment
shall automatically reduce by that percentage of the initial Aggregate
Incremental Loan Commitment (as in effect on the Activation Date) set forth
below:
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<PAGE>
Percent Reduction in
Aggregate
Effective Date of Reduction Incremental Loan Commitment
--------------------------- ---------------------------
September 30, 2001 3.750%
December 31, 2001 3.750%
March 31, 2002 4.375%
June 30, 2002 4.375%
September 30, 2002 4.375%
December 31, 2002 4.375%
March 31, 2003 4.375%
June 30, 2003 4.375%
September 30, 2003 4.375%
December 31, 2003 4.375%
March 31, 2004 5.000%
June 30, 2004 5.000%
September 30, 2004 5.000%
December 31, 2004 5.000%
March 31, 2005 5.625%
June 30, 2005 5.625%
September 30, 2005 5.625%
December 31, 2005 5.625%
March 31, 2006 5.000%
June 30, 2006 5.000%
September 30, 2006 5.000%
All outstanding Incremental Loans shall be due and payable, to the extent not
previously paid in accordance with the terms hereof, on the Incremental Loan
Commitment Expiration Date.
(g) Reductions of the Aggregate Incremental Loan Commitment pursuant to
this Section 2.2 or Section 2.5 shall automatically effect a reduction of the
Incremental Loan Commitment of each Incremental Loan Lender to an amount equal
to the product of (i) the Aggregate Incremental Loan Commitment of all
Incremental Loan Lenders, as reduced pursuant to this Section 2.2 or Section 2.5
and (ii) the Incremental Loan Commitment Percentage of such Incremental Loan
Lender, in each case determined immediately prior to such reduction of the
Aggregate Incremental Loan Commitment on such date.
(h) Upon each reduction of the Aggregate Incremental Loan Commitment, the
Borrowers shall (i) pay the unused commitment fee, payable pursuant to Section
2.16, accrued on the amount of the Aggregate Incremental Loan Commitment so
reduced through the date of such reduction, (ii) prepay the amount, if any, by
which the aggregate unpaid principal amount of the Incremental Loans exceeds the
amount of the Aggregate Incremental Loan Commitment as so reduced, together with
accrued interest on the amount being prepaid to the date of such
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<PAGE>
prepayment and (iii) compensate the Incremental Loan Lenders for their funding
costs, if any, in accordance with Section 2.15.
(i) The Incremental Loan Commitment of each Lender and the Aggregate
Incremental Loan Commitment shall terminate on the Incremental Loan Commitment
Expiration Date.
2.3 Issuance of Letters of Credit.
-----------------------------
(a) The Borrowers shall be entitled to request the issuance of Letters of
Credit from time to time from and including the Closing Date to but excluding
the date which is two Business Days prior to the Revolving Loan Commitment
Expiration Date, by giving the Agent a Letter of Credit Request at least three
(3) Business Days before the requested date of issuance of such Letter of Credit
(which shall be a Business Day). Any Letter of Credit Request received by the
Agent later than 10:00 a.m., Los Angeles time, shall be deemed to have been
received on the next Business Day. Each Letter of Credit Request shall be made
in writing, shall be signed by a Responsible Officer, shall be irrevocable and
shall be effective upon receipt by the Agent. Provided that a valid Letter of
Credit Request has been received by the Agent and upon fulfillment of the other
applicable conditions set forth in Section 4.3, the Agent will issue the
requested Letter of Credit from its office specified in Section 9.2. No Letter
of Credit shall have an expiration date later than two Business Days prior to
the Revolving Loan Commitment Expiration Date.
(b) Immediately upon the issuance of each Letter of Credit, the Agent shall
be deemed to have sold and transferred to each Revolving Loan Lender, and each
Revolving Loan Lender shall be deemed to have purchased and received from the
Agent, in each case irrevocably and without any further action by any party, an
undivided interest and participation in such Letter of Credit, each drawing
thereunder and the obligations of the Borrowers under this Agreement in respect
thereof in an amount equal to the product of (i) such Revolving Loan Lender's
Revolving Loan Commitment Percentage and (ii) the maximum amount available to be
drawn under such Letter of Credit (assuming compliance with all conditions to
drawing). The Agent shall promptly advise each Revolving Loan Lender of the
issuance of each Letter of Credit, the Letter of Credit Amount of such Letter of
Credit, any change in the face amount or expiration date of such Letter of
Credit, the cancellation or other termination of such Letter of Credit and any
drawing under such Letter of Credit.
(c) The payment by the Agent of a draft drawn under any Letter of Credit
shall first be made from any Cash Collateral Deposit held by the Agent with
respect to such Letter of Credit. After any such Cash Collateral Deposit has
been applied, the payment by the Agent of a draft drawn under any Letter of
Credit shall constitute for all purposes of this Agreement the making by the
Agent in its individual capacity as a Lender hereunder (in such capacity, the
"Drawing Lender") of a Base Rate Loan in the amount of such payment (but
--------------
without any requirement of compliance with the conditions set forth in Section
4.3). In the event that any such Loan by the Drawing Lender resulting from a
drawing under any Letter of Credit is not repaid by the Borrowers by 12:00 noon,
Los Angeles time, on the day of payment of such drawing, the Agent shall
promptly notify each other Revolving Loan Lender. Each Revolving Loan Lender
shall, on the day of such notification (or if such notification is not given by
3:00 p.m., Los Angeles time, on such day, then on the next succeeding Business
Day), make a Base Rate Loan, which shall be used to repay the applicable portion
of the Base Rate Loan of the Drawing Lender with respect to such Letter of
Credit drawing, in an amount equal to the amount of such Revolving Loan Lender's
participation in such drawing for application to repay the Drawing Lender (but
without any requirement of compliance with the applicable conditions set forth
in Section 4.3) and shall deliver to the Agent for the account of the Drawing
Lender, on the day of such notification (or if such notification is not given by
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<PAGE>
3:00 p.m., Los Angeles time, on such day, then on the next succeeding Business
Day) and in immediately available funds, the amount of such Base Rate Loan. In
the event that any Revolving Loan Lender fails to make available to the Agent
for the account of the Drawing Lender the amount of such Base Rate Loan, the
Drawing Lender shall be entitled to recover such amount on demand from such
Revolving Loan Lender together with interest thereon at the Federal Funds
Effective Rate for each day such amount remains outstanding.
(d) The obligations of the Borrowers with respect to any Letter of Credit,
any Letter of Credit Request and any other agreement or instrument relating to
any Letter of Credit and any Base Rate Loan made under Section 2.3(c) shall be
absolute, unconditional and irrevocable and shall be paid strictly in accordance
with the terms of the aforementioned documents under all circumstances,
including the following:
(i) any lack of validity or enforceability of any Letter of Credit,
this Agreement or any other Loan Document;
(ii) the existence of any claim, setoff, defense or other right that
the Borrowers may have at any time against any beneficiary or transferee of
any Letter of Credit (or any Person for whom any such beneficiary or
transferee may be acting), the Agent, any Lender (other than the defense of
payment to a Lender in accordance with the terms of this Agreement) or any
other Person, whether in connection with this Agreement, any other Loan
Document, the transactions contemplated hereby or thereby or any unrelated
transaction;
(iii) any statement or other document presented under any 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
whatsoever; and
(iv) any exchange, release or nonperfection of any Collateral or
other collateral, or any release, amendment or waiver of or consent to
departure from any Guarantee, other Loan Document or other guaranty, for
any of the Obligations of the Borrowers in respect of the Letters of
Credit.
(e) The Borrowers shall pay to the Agent for the account of the Revolving
Loan Lenders with respect to each Letter of Credit issued hereunder, for the
period from and including the day such Letter of Credit is issued to but
excluding the day such Letter of Credit expires, a letter of credit fee equal to
the product of (i) the Applicable Revolving Loan Margin for LIBOR Loans per
---
annum and (ii) the Letter of Credit Amount of such Letter of Credit from time
- -----
to time, such letter of credit fee to be payable quarterly in arrears on the
last day of each March, June, September and December and on the expiration date
of such Letter of Credit.
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<PAGE>
(f) The Borrowers shall pay to the Agent for its own account, with respect
to each Letter of Credit issued hereunder, from time to time such additional
fees and charges (including cable charges) as are generally associated with
letters of credit, in accordance with the Agent's standard internal charge
guidelines and the related Letter of Credit Request.
(g) The Borrowers agree to the provisions in the Letter of Credit Request
form; provided, however, that the terms of the Loan Documents shall take
-------- -------
precedence if there is any inconsistency between the terms of the Loan Documents
and the terms of said form.
(h) The Borrowers assume all risks of the acts or omissions of any
beneficiary or transferee of any Letter of Credit with respect to its use of
such Letter of Credit. Neither the Agent nor any Lender nor any of their
respective officers or directors shall be liable or responsible for (i) the use
that may be made of any Letter of Credit or any acts or omissions of any
beneficiary or transferee in connection therewith; or (ii) the validity,
sufficiency or genuineness of documents, or of any endorsement thereof, even if
such documents should prove to be in any or all respects invalid, insufficient,
fraudulent or forged. In furtherance and not in limitation of the foregoing, the
Agent may accept any document that appears on its face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary.
2.4 Optional Prepayments. The Borrowers may on the last day of any
--------------------
Interest Period with respect thereto, in the case of LIBOR Loans, or at any time
and from time to time, in the case of Base Rate Loans, prepay the Loans, in
whole or in part, without premium or penalty, upon at least three Business Days'
irrevocable written notice, in the case of LIBOR Loans, and upon at least one
Business Day's irrevocable written notice, in the case of Base Rate Loans, from
the Borrowers to the Agent, specifying the date and amount of prepayment and
whether the prepayment is of LIBOR Loans, Base Rate Loans or a combination
thereof, and, if of a combination thereof, the amount allocable to each and
whether the prepayment is of Incremental Loans or Revolving Loans, or a
combination thereof, and, if a combination thereof, the amount allocable to
each. Upon receipt of any such notice from the Borrowers, the Agent shall
promptly notify each Lender thereof. If any such notice is given, the amount
specified in such notice shall be due and payable by the Borrowers on the date
specified therein, together with accrued interest to such date on the amount
prepaid. Partial prepayments of Loans shall be in an aggregate principal amount
of $1,000,000 and integral multiples of $250,000 in excess thereof.
2.5 Mandatory Prepayments. (a) On the day of receipt by the Borrowers or
---------------------
any of their Subsidiaries of any Net Proceeds with respect to an Asset
Disposition, the Borrowers shall prepay the Loans (and such prepayment shall be
applied as set forth in Section 2.5(e)) and, after all Loans have been prepaid,
make a Cash Collateral Deposit, in an amount equal to 100% of such Net Proceeds;
provided that no prepayment shall be required with respect to an Asset
- -------- ----
Disposition if (i) the consummation of such Asset Disposition would not result
in (x) the Operating Cash Flow attributable to the assets subject to such Asset
Disposition (based on the most recent financial statements received by the Agent
under Section 5.1(a) or (b) at the time of such Asset Disposition) plus (y) the
----
Operating Cash Flow attributable to the assets subject to all prior Asset
Dispositions consummated since the Closing Date (based, respectively, on the
most recent financial statements received by the Agent under Section 5.1(a) or
(b) at the time of such Asset Disposition) exceeding 15% of the Operating Cash
Flow of the Borrowers as of the date of
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<PAGE>
such Asset Disposition and (ii) the Net Proceeds of any such Asset Dispositions
are used, within one year of such disposition, to invest in assets of the same
type and use as those disposed and with respect to which the Lenders shall have
a first-priority perfected Lien (subject to Section 6.3). On or prior to the
date of any Asset Disposition, the Borrowers agree to provide the Agent with
calculations used by the Borrowers in determining the amount of any such
prepayment (or in determining that a prepayment is not required) under this
Section 2.5(a).
(b) In the event that at the end of any fiscal year of the Borrowers
ending on and after December 31, 1999 there shall exist Excess Cash Flow with
respect to such fiscal year, then on the date which is ten Business Days after
the earlier to occur of (i) the date upon which the audited financial statements
of the Borrowers with respect to such fiscal year become available and (ii) the
120th day after the end of such fiscal year, the Borrowers shall prepay the
Loans (and such prepayment shall be applied as set forth in Section 2.5(e)) and,
after all Loans have been prepaid, make a Cash Collateral Deposit, in an amount
equal to 50% of such Excess Cash Flow; provided that no such prepayment shall
-------- ----
be required if the Maximum Total Debt Ratio as of the end of such fiscal year is
less than 4.50:1. On or prior to the date of any prepayment required by this
Section 2.5(b), the Borrowers agree to provide the Agent with the calculations,
substantially in the form of Exhibit H hereto, used by the Borrowers in
determining the amount of any such prepayment.
(c) If the Borrowers or any of their Subsidiaries receive insurance
proceeds or condemnation proceeds with respect to any of their Properties which
are not fully applied (or contractually committed pursuant to contract(s)
approved by the Agent in its reasonable discretion) toward the repair or
replacement of such damaged or condemned Property within 90 days of the receipt
thereof, the Borrowers shall, on such 90th day prepay the Loans and, after all
Loans have been prepaid, make a Cash Collateral Deposit, in an amount equal to
the amount of such proceeds not so applied (and such prepayment shall be applied
as set forth in Section 2.5(e)).
(d) In the event that the Borrowers or any of their Subsidiaries makes an
Equity Offering during any period in which a Default has occurred and is
continuing, the Borrowers shall immediately prepay the Loans and, after all
Loans have been prepaid, make a Cash Collateral Deposit, in an amount equal to
the Net Proceeds of such Equity Offering (and such prepayment shall be applied
as the Agent shall elect in its sole discretion). No such prepayment shall
limit or restrict the rights and remedies of the Lenders under the Loan
Documents upon the occurrence and during the continuance of a Default.
(e) (i) Each prepayment of the Loans pursuant to this Section 2.5 shall
be applied to the outstanding amounts of Incremental Loans and Revolving Loans
on a pro rata basis determined on the basis of the amount of Incremental Loans,
on the one hand, and Revolving Loans, on the other hand, outstanding at the time
of such prepayment. Each prepayment shall be accompanied by payment in full of
all accrued interest and accrued commitment fees thereon to and including the
date of such prepayment, together with any additional amounts owing pursuant to
Section 2.15.
(i) If, at any time, the Revolving Loans are repaid in full,
additional prepayments hereunder shall be applied first, to make a Cash
-----
Collateral Deposit and
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<PAGE>
thereafter, to permanently reduce the Aggregate Revolving Loan Commitment
----------
by an amount equal to what such prepayment would have been under this
Section 2.5 if Revolving Loans had been outstanding against which to apply
such prepayment. Each prepayment of the Revolving Loans and each Cash
Collateral Deposit under this Section 2.5 shall be applied to permanently
reduce the Aggregate Revolving Loan Commitment pro rata with respect to
each of the scheduled reduction dates set forth in Section 2.1(e) remaining
at such time.
(ii) Each prepayment of the Incremental Loans under this Section 2.5
shall be applied to permanently reduce the Aggregate Incremental Loan
Commitment pro rata with respect to each of the scheduled reduction dates
set forth in Section 2.2(f) remaining at such time.
(iii) Cash Collateral Deposits held by the Agent shall be applied to
reimburse drawings on Letters of Credit in the order in which such drawings
are presented to the Agent. Upon written request of the Borrowers with
regard to any Letter of Credit for which the Agent is holding a Cash
Collateral Deposit, the Agent shall release to the Borrowers any portion of
such Deposit not applied to reimburse drawings thereunder upon the earliest
of (i) fourteen days following expiration of such Letter of Credit
according to its terms, (ii) receipt by the Agent of written
acknowledgement from the beneficiary of such Letter of Credit (a
"Beneficiary Acknowledgement") requesting the cancellation thereof and
---------------------------
relinquishing all its rights thereunder, which Beneficiary Acknowledgement
shall be accompanied by the original of such Letter of Credit and (iii)
receipt by the Agent of a Beneficiary Acknowledgement and a certificate of
a Responsible Officer of the Borrowers stating that thirty days have
elapsed since the beneficiary of such Letter of Credit received a written
request from the Borrowers to cancel and return the original of such Letter
of Credit, and such beneficiary has failed to respond to such request
(provided that, with respect to the preceding clause (iii), the Agent shall
-------- ----
not be required to release such Deposit if the Letter of Credit to which it
relates by its terms permits the transfer thereof to a successive
beneficiary without the prior written consent of the Agent); provided that,
-------- ----
in any case, no Default has occurred and is continuing.
2.6 Conversion and Continuation Options
-----------------------------------
(a) The Borrowers may elect from time to time to convert LIBOR Loans to
Base Rate Loans, by the Borrowers giving the Agent at least two Business Days'
prior irrevocable written notice of such election pursuant to a Continuation
Notice, provided that any such conversion of LIBOR Loans may only be made on the
last day of an Interest Period with respect thereto. The Borrowers may elect
from time to time to convert Base Rate Loans to LIBOR Loans by the Borrowers
giving the Agent at least three Eurodollar Business Days' prior irrevocable
written notice of such election pursuant to a Continuation Notice. Any such
notice of conversion to LIBOR Loans shall specify the length of the initial
Interest Period or Interest Periods therefor. Upon receipt of any such notice
the Agent shall promptly notify each Lender thereof. All or any part of
outstanding LIBOR Loans and Base Rate Loans may be converted as provided herein,
provided that (i) any such conversion may only be made if, after giving effect
thereto, Section 2.7 shall not have been contravened, (ii) no Incremental Loan
may be converted into a LIBOR
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<PAGE>
Loan after the date that is one month prior to the Incremental Loan Commitment
Expiration Date, (iii) no Revolving Loan may be converted into a LIBOR Loan
after the date that is one month prior to the Revolving Loan Commitment
Expiration Date and (iv) the Borrowers shall not have the right to elect to
continue at the end of the applicable Interest Period, or to convert to, a LIBOR
Loan if a Default shall have occurred and be continuing.
(b) Any LIBOR Loan may be continued as such upon the expiration of the
then current Interest Period with respect thereto by the Borrowers giving notice
to the Agent, in accordance with the applicable provisions of the term "Interest
Period" set forth in Section 1.1, of the length of the next Interest Period to
be applicable to such LIBOR Loan, provided that no LIBOR Loan may be continued
--------
as such (i) if, after giving effect thereto, Section 2.7 would be contravened,
(ii) after the date that is one month prior to the Incremental Loan Commitment
Expiration Date, (iii) after the date that is one month prior to the Revolving
Loan Commitment Expiration Date or (iv) if a Default shall have occurred and be
continuing and provided, further, that if the Borrowers shall fail to give any
-------- -------
required notice as described above in this Section or if such continuation is
not permitted pursuant to the preceding proviso, such Loans shall be
automatically converted to Base Rate Loans on the last day of such then-expiring
Interest Period.
2.7 Minimum Amounts of Tranches. All borrowings, conversions and
---------------------------
continuations of Loans hereunder and all selections of Interest Periods
hereunder shall be in such amounts and be made pursuant to such elections so
that, after giving effect thereto, the aggregate principal amount of the Loans
comprising each Tranche (except Loans made pursuant to Section 2.3(c)) shall be
equal to $1,000,000 or a whole multiple of $100,000 in excess thereof and, in
any case, there shall not be more than 12 Tranches.
2.8 Interest Rates and Payment Dates.
--------------------------------
(a) Each LIBOR Loan shall bear interest for each day during each Interest
Period with respect thereto at a rate per annum equal to the LIBOR Adjusted Rate
plus the Applicable Revolving Loan Margin.
(b) Each Base Rate Loan shall bear interest at a rate per annum equal to
the Base Rate plus the Applicable Revolving Loan Margin.
(c) If any Default shall have occurred and be continuing, all amounts
outstanding shall bear interest at a rate per annum which is the rate described
in paragraph (b) of this Section plus 2% from the date of the occurrence of such
Default until such Default is no longer continuing (after as well as before
judgment).
(d) Interest shall be payable in arrears on each Interest Payment Date,
provided that interest accruing pursuant to paragraph (c) of this Section shall
be payable on demand.
(e) For purposes of determining (i) the Applicable Margin for all Loans,
(ii) the Applicable Margin for the letter of credit fees referred to in Section
2.3(e) and (iii) the Maximum Total Debt Ratio for the commitment fees referred
to in Section 2.16, interest rates on the Loans and such fees shall be
calculated on the basis of the Maximum Total Debt Ratio set forth in the most
recent Covenant Compliance Certificate received by the Agent in accordance with
Section 5.1(b). For accrued and unpaid interest and fees only (no changes being
made for interest or fee
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payments previously made), changes in interest rates on the Loans, or in such
fees, attributable to changes in the Applicable Margin (with respect to Loans
and letter of credit fees) and changes in the Maximum Total Debt Ratio (with
respect to commitment fees) caused by changes in the applicable Covenant
Compliance shall be calculated upon the delivery of a Covenant Compliance
Certificate and such change shall be effective (y) in the case of a Base Rate
Loan or such fees, from the first day subsequent to the last day covered by the
Covenant Compliance Certificate and (z) in the case of a LIBOR Loan , from the
first day of the Interest Period applicable to such LIBOR Loan subsequent to the
last day covered by the Covenant Compliance Certificate. If, for any reason,
Entravision shall fail to deliver a Covenant Compliance Certificate when due in
accordance with Section 5.1(b), and such failure shall continue for a period of
ten days, the Revolving Loan Leverage Level shall be deemed to be Revolving Loan
Leverage Level 1 (for purposes of determining the Applicable Margin on Loans or
letter of credit fees) and the applicable rate shall be deemed to be the highest
rate set forth in Section 2.16 (for purposes of determining commitment fees), as
applicable, in each case retroactive to the date on which Entravision should
have delivered such Covenant Compliance Certificate and shall continue until a
Covenant Compliance Certificate indicating a different Revolving Loan Leverage
Level is delivered to the Agent.
2.9 Computation of Interest and Fees.
--------------------------------
(a) Interest on Base Rate Loans (other than Base Rate Loans based on the
Federal Funds Effective Rate) shall be calculated on the basis of a 365- (or
366-, as the case may be), day year for the actual days elapsed and interest on
LIBOR Loans, unused commitment fees and all other Obligations of the Borrowers
shall be calculated on the basis of a 360-day year for the actual days elapsed.
The Agent shall as soon as practicable notify the Borrowers and the Lenders of
each determination of a LIBOR Adjusted Rate. Any change in the interest rate on
a Loan resulting from a change in the Base Rate or the LIBOR Reserve
Requirements shall become effective as of the opening of business on the day on
which such change in the Base Rate is announced or such change in the LIBOR
Reserve Requirements becomes effective, as the case may be. The Agent shall as
soon as practicable notify the Borrowers and the Lenders of the effective date
and the amount of each such change in interest rate.
(b) Each determination of an interest rate by the Agent pursuant to any
provision of this Agreement shall be conclusive and binding on the Borrowers and
the Lenders in the absence of manifest error.
2.10 Inability to Determine Interest Rate. In the event that prior to the
------------------------------------
first day of any Interest Period:
(a) the Agent shall have determined (which determination shall be
conclusive and binding upon the Borrowers absent manifest error) that, by reason
of circumstances affecting the relevant market, adequate and reasonable means do
not exist for ascertaining the LIBOR Adjusted Rate for such Interest Period, or
(b) the Agent shall have received notice from the Majority Lenders acting
in good faith that the LIBOR Adjusted Rate determined or to be determined for
such Interest Period will not adequately and fairly reflect the cost to such
Lenders (as conclusively certified by such
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Lenders) of making or maintaining their affected Loans during such Interest
Period, the Agent shall give telecopy or telephonic notice thereof to the
Borrowers and the Lenders as soon as practicable thereafter. If such notice is
given (x) any LIBOR Loans requested to be made on the first day of such Interest
Period shall accrue interest at the Base Rate, (y) Loans that were to have been
converted on the first day of such Interest Period to LIBOR Loans shall be
continued as Base Rate Loans and (z) any outstanding LIBOR Loans shall be
converted, on the first day of such Interest Period, to Base Rate Loans. Until
such notice has been withdrawn by the Agent, no further LIBOR Loans shall be
made or continued as such, nor shall the Borrowers have the right to convert
Base Rate Loans to LIBOR Loans.
2.11 Pro Rata Treatment and Payments. Each borrowing by the Borrowers
-------------------------------
from the Lenders hereunder, and any reduction of the Aggregate Revolving Loan
Commitment or the Aggregate Incremental Loan Commitment, shall be made pro rata
according to the respective Commitment Percentages of the applicable Lenders.
Each payment (including each prepayment) by the Borrowers on account of
principal of and interest on the Loans shall be made pro rata according to the
respective outstanding principal and interest amounts of such Loans then held by
the Lenders. All payments (including prepayments) to be made by the Borrowers
hereunder and under the Notes, whether on account of principal, interest, fees
or otherwise, shall be made without set off or counterclaim and shall be made
prior to 12:00 Noon, Los Angeles time, on the due date thereof to the Agent, for
the account of the applicable Lenders, at the Agent's office specified in
Section 9.2, in Dollars and in immediately available funds. The Agent shall
distribute such payments to the applicable Lenders promptly upon receipt in like
funds as received. If any payment hereunder (other than payments on the LIBOR
Loans) becomes due and payable on a day other than a Business Day, such payment
shall be extended to the next succeeding Business Day, and, with respect to
payments of principal, interest thereon shall be payable at the then applicable
rate during such extension. If any payment on a LIBOR Loan becomes due and
payable on a day other than a Eurodollar Business Day, the maturity thereof
shall be extended to the next succeeding Eurodollar Business Day (and interest
shall continue to accrue thereon at the applicable rate) unless the result of
such extension would be to extend such payment into another calendar month, in
which event such payment shall be made on the immediately preceding Eurodollar
Business Day.
2.12 Illegality. Notwithstanding any other provision herein, if any
----------
change after the Closing Date in any Requirement of Law or in the interpretation
or application thereof shall make it unlawful for any Lender or Applicable
Lending Office to make or maintain LIBOR Loans as contemplated by this
Agreement, (a) the commitment of such Lender hereunder to make LIBOR Loans,
continue LIBOR Loans as such and convert Base Rate Loans to LIBOR Loans shall
forthwith be suspended during such period of illegality and (b) the Loans of
such Lender or Applicable Lending Office then outstanding as LIBOR Loans, if
any, shall be converted automatically to Base Rate Loans on the respective last
days of the then current Interest Periods with respect to such Loans or within
such earlier period as required by law. If any such conversion of a LIBOR Loan
occurs on a day which is not the last day of the then current Interest Period
with respect thereto, the Borrowers shall pay to such Lender such amounts, if
any, as may be required pursuant to Section 2.15. To the extent that a Lender's
LIBOR Loans have been converted to Base Rate Loans pursuant to this Section
2.12, all payments and prepayments of principal that otherwise would be applied
to such Lender's LIBOR Loans shall be applied instead to its Base Rate Loans.
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2.13 Increased Costs.
---------------
(a) In the event that any change after the Closing Date in any Requirement
of Law or in the interpretation or application thereof or compliance by any
Lender with any request or directive (whether or not having the force of law
but, if not having the force of law, generally applicable to and complied with
by banks and financial institutions of the same general type as such Lender in
the relevant jurisdiction) from any central bank or other Governmental Authority
made subsequent to the date hereof:
(i) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirements against assets held by,
letters of credit or guarantees issued by, deposits or other liabilities in
or for the account of, advances, loans or other extensions of credit by, or
any other acquisition of funds by, any office of such Lender or Applicable
Lending Office which is not otherwise included in the determination of the
LIBOR Adjusted Rate hereunder; or
(ii) shall impose on such Lender or Applicable Lending Office any
other condition;
and the result of any of the foregoing is to increase the cost to the Agent of
issuing or maintaining any Letter of Credit by an amount which the Agent deems
to be material, or to such Lender or Applicable Lending Office, by an amount
which such Lender deems to be material, of making, converting into, continuing
or maintaining LIBOR Loans, or purchasing or maintaining any participation in a
Letter of Credit, or to reduce any amount receivable hereunder in respect
thereof then, in any such case, the Borrowers shall immediately pay to the
Agent, for its own account or on behalf of such Lender or Applicable Lending
Office, as applicable, upon the demand of the Agent for itself or at the request
of such Lender, as applicable, any additional amounts necessary to compensate
such Lender or the Agent, as applicable, for such increased cost or reduced
amount receivable. If the Agent, any Lender or any Applicable Lending Office
becomes entitled to claim any additional amounts pursuant to this Section, it
shall promptly notify the Borrowers, through the Agent, of the event by reason
of which it has become so entitled. A certificate as to any additional amounts
payable pursuant to this Section submitted by the Agent or such Lender or
Applicable Lending Office, through the Agent, to the Borrowers shall be
conclusive evidence of the accuracy of the information so recorded, absent
manifest error. This covenant shall survive the termination of this Agreement,
expiration of the Letters of Credit and the payment of the Notes and all other
amounts payable hereunder.
(b) If, after the date of this Agreement, the introduction of or any
change in any applicable law, rule, regulation or guideline regarding capital
adequacy, or any change in the interpretation or administration thereof by any
Governmental Authority charged with the interpretation or administration
thereof, affects the amount of capital required or expected to be maintained by
any Lender or any corporation controlling any Lender, and such Lender (taking
into consideration such Lender's or such corporation's policies with respect to
capital adequacy) determines that the amount of capital maintained by such
Lender or such corporation which is attributable to or based upon the Loans, the
Letters of Credit, the Commitments or this Agreement must be increased as a
consequence of such introduction or change by an amount deemed by such Lender to
be material, then, upon demand of the Agent at the request of such
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<PAGE>
Lender, the Borrowers shall immediately pay to the Agent on behalf of such
Lender, additional amounts sufficient to compensate such Lender or such
corporation for the increased costs to such Lender or corporation of such
increased capital. Any such demand shall be accompanied by a certificate of such
Lender setting forth in reasonable detail the computation of any such increased
costs, which certificate shall be conclusive, absent manifest error. This
obligation of the Borrowers under this Section 2.13(b) shall survive repayment
of the Loans, expiration of the Letters of Credit and all other amounts
hereunder in full and the termination of this Agreement.
2.14 Taxes.
-----
(a) All payments made by the Borrowers in respect of the Obligations shall
be made free and clear of, and without deduction or withholding for or on
account of, any present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or hereafter imposed,
levied, collected, withheld or assessed by any Governmental Authority or any
political subdivision or taxing authority thereof or therein, other than
Excluded Taxes (all such non-Excluded Taxes being hereinafter called "Taxes").
If any Taxes are required to be withheld from any amounts payable to the Agent
or any Lender in respect of the Obligations, the amounts so payable to the Agent
or such Lender shall be increased to the extent necessary to yield to the Agent
or such Lender (after payment of all Taxes) interest or any such other amounts
payable hereunder at the rates or in the amounts specified in this Agreement and
the Notes. The Agent or a Lender, as the case may be, shall deliver to the
Borrowers a certificate in good faith setting forth the amount of such Taxes,
the calculation of such Taxes and an explanation of the requirement therefor,
all in reasonable detail and such certificate shall be conclusive, absent
manifest error. Whenever any Taxes are payable by the Borrowers, as promptly as
possible thereafter, the Borrowers shall send to the Agent, for its own account
or for the account of such Lender, as the case may be, a copy of an original
official receipt received by the Borrowers showing payment thereof or such other
evidence of payment reasonably satisfactory to the Agent. If the Borrowers fail
to pay any Taxes when due to the appropriate taxing authority or fail to remit
to the Agent the required receipts or other required documentary evidence, the
Borrowers shall indemnify the Agent and the Lenders for any incremental taxes,
interest or penalties (and related reasonable fees and expenses of counsel) that
may become payable by the Agent or any Lender as a result of any such failure.
The agreements in this Section shall survive the termination of this Agreement,
the expiration of the Letters of Credit and the payment of the Notes and all
other amounts payable hereunder.
(b) Each Lender that is not organized under the laws of the United States
of America or a state thereof agrees that it will deliver to the Borrowers and
the Agent (i) two duly completed copies of United States Internal Revenue
Service Form 1001 or 4224 or successor applicable form, as the case may be, and
(ii) an Internal Revenue Service Form W-8 or W-9 or successor applicable form.
Each such Lender also agrees to deliver to the Borrowers and the Agent two
further copies of the said Form 1001 or 4224 and Form W-8 or W-9, or successor
applicable forms or other manner or certification, as the case may be, on or
before the date that any such form expires or becomes obsolete or after the
occurrence of any event requiring a change in the most recent form previously
delivered by it to the Borrowers and the Agent, and such extensions or renewals
thereof as may reasonably be requested by the Borrowers or the Agent, unless in
any such case an event beyond the control of such Lender (including, without
limitation, any change in treaty, law or regulation) has occurred prior to the
date on which any
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<PAGE>
such delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender so advised the
Borrowers and the Agent. Each such Lender shall certify (i) in the case of a
Form 1001 or 4224, that it is entitled to receive payments under this Agreement
without deduction or withholding of any United States federal income taxes and
(ii) in the case of a Form W-8 or W-9, that it is entitled to an exemption from
United States backup withholding tax.
2.15 Indemnity. The Borrowers agree to indemnify each Lender and to hold
---------
each Lender harmless from and to pay each Lender within 5 Business Days of such
Lender's demand the amount of any liability, loss or expense arising from the
reemployment of funds obtained by it or from fees payable to terminate the
deposits from which such funds were obtained (including reasonable fees and
expenses of counsel) which such Lender may sustain or incur as a consequence of
(a) default by the Borrowers in payment when due of the principal amount of or
interest on any LIBOR Loan, (b) default by the Borrowers in making a borrowing
of, conversion into or continuation of LIBOR Loans after the Borrowers have
given a notice requesting the same in accordance with the provisions of this
Agreement, (c) default by the Borrowers in making any prepayment after the
Borrowers have given a notice thereof in accordance with the provisions of this
Agreement or (d) the making by the Borrowers of a prepayment or conversion of
LIBOR Loans on a day which is not the last day of an Interest Period with
respect thereto. A Lender's certificate as to such liability, loss or expense
shall be deemed conclusive, absent manifest error. This covenant shall survive
the termination of this Agreement and the payment of the Notes and all other
amounts payable hereunder.
2.16 Unused Commitment Fees.
----------------------
(a) The Borrowers agree to pay to the Revolving Loan Lenders an unused
commitment fee to be shared pro rata among the Revolving Loan Lenders with
respect to the Revolving Loan Commitments for the period from and including the
Closing Date to but excluding the Revolving Loan Commitment Expiration Date,
based on the average daily aggregate amount of the unused Aggregate Revolving
Loan Commitment from time to time in effect and computed at the applicable per
annum rate set forth below:
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Maximum Total Commitment
Debt Ratio Fee
------------ ----------
*6.00:1 0.500%
**6.00:1 - *5.00:1 0.375%
**5.00:1 0.250%
Such fee shall be payable quarterly in arrears on the last day of each March,
June, September and December and on the Revolving Loan Commitment Expiration
Date, commencing on the first such date to occur after the Closing Date.
(b) The Borrowers agree to pay to the Incremental Loan Lenders following
activation of the Aggregate Incremental Loan Commitment, an unused commitment
fee to be shared pro rata among the Incremental Loan Lenders with respect to the
Incremental Loan Commitments for the period from and including the Activation
Date to but excluding the Incremental Loan Commitment Expiration Date, based on
the average daily aggregate amount of the unused Aggregate Incremental Loan
Commitment from time to time in effect and computed at the applicable per annum
rate set forth below:
Maximum Total Commitment
Debt Ratio Fee
------------- -----------
*6.00:1 0.500%
**6.00:1 - *5.00:1 0.375%
**5.00:1 0.250%
Such fee shall be payable quarterly in arrears on the last day of each March,
June, September and December and the Incremental Loan Commitment Expiration
Date, commencing on the first such date to occur after the Activation Date.
2.17 Mitigation of Costs. If any Lender, by changing its Applicable
-------------------
Lending Office or taking any other reasonable action, so long as making such
change or taking such other action is not disadvantageous to it in any
financial, regulatory or other respect, can mitigate any adverse effect on the
Borrowers under Section 2.10, 2.12, 2.13, or 2.14, such Lender shall take such
action.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Agreement and to make the Loans
and participate in the Letters of Credit, and to induce the Agent to issue the
Letters of Credit, each Borrower hereby represents and warrants to the Agent and
each Lender that:
3.1 Organization and Good Standing. Each Borrower and each Subsidiary (a)
------------------------------
is duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization, (b) has all requisite power and authority
(corporate, partnership, limited liability company and otherwise) to own its
properties and to conduct its business as now conducted and as currently
proposed to be conducted and (c) is duly qualified to conduct business as a
foreign organization and is currently in good standing in each state and
jurisdiction in which it conducts business.
* greater than or equal to.
** less than.
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Each state and jurisdiction in which any Borrower or any Subsidiary is organized
or is (or should be) qualified to conduct business is listed on Schedule 3.1
hereto.
3.2 Power and Authority. Each Borrower has all requisite power and
-------------------
authority under applicable law and under its Organic Documents to borrow
hereunder. Each Borrower and each Subsidiary has all requisite power and
authority under applicable law and under its Organic Documents to execute,
deliver and perform the obligations under the Loan Documents to which it is a
party. Except as disclosed on Schedule 3.2 hereto, all actions, waivers and
consents (corporate, regulatory and otherwise) necessary or appropriate for each
Borrower and each Subsidiary to execute, deliver and perform the Loan Documents
to which it is a party have been taken and/or received.
3.3 Validity and Legal Effect. This Agreement constitutes, and the other
-------------------------
Loan Documents to which any Borrower or any Subsidiary is a party constitute (or
will constitute when executed and delivered), the legal, valid and binding
obligations of each Borrower (jointly and severally) and each Subsidiary
enforceable against it in accordance with the terms thereof.
3.4 No Violation of Laws or Agreements. The execution, delivery and
----------------------------------
performance of the Loan Documents, (a) will not violate or contravene any
Requirement of Law, (b) will not result in any material breach or violation of,
or constitute a material default under, any agreement or instrument by which any
Borrower, any Subsidiary or any of its respective property may be bound, and (c)
will not result in or require the creation of any Lien (other than pursuant to
the Loan Documents ) upon or with respect to any properties of any Borrower or
any Subsidiary, whether such properties are now owned or hereafter acquired.
3.5 Title to Assets; Existing Encumbrances; Intellectual and Real
-------------------------------------------------------------
Property. Each Borrower and each Subsidiary has good and marketable title to all
- --------
of its real and personal properties and assets, free and clear of any Liens,
except the security interests granted to the Agent for the benefit of the
Lenders under the Loan Documents. Schedule 3.5A hereto lists each trademark,
service mark, copyright, patent, database, customized application software and
systems integration software, trade secret and other intellectual property
owned, licensed, leased, controlled or applied for by any Borrower or any
Subsidiary (the "Intellectual Property"). To the Borrowers' knowledge, no claim
---------------------
has been asserted and is pending by any Person challenging or questioning the
use of any such Intellectual Property or the validity or effectiveness of any
such Intellectual Property, nor do the Borrowers know of any valid basis for any
such claim. To each Borrower's knowledge, the use of such Intellectual Property
by the Borrowers and their Subsidiaries does not infringe on the rights of any
Person, nor, to the Borrowers' knowledge, do the use by other Persons of such
Intellectual Property infringe on the rights of the Borrowers and their
Subsidiaries. Schedule 3.5B hereto lists each real property interest and license
owned, leased or otherwise used by any Borrower or any Subsidiary, together with
relevant identifying information describing, among other things, the location
and use of each such real property interest or license, whether such interest is
owned or leased. Each such property and asset is in good order and repair
(ordinary wear and tear excepted) and is fully covered by the insurance required
under the Loan Documents. Each such property and asset owned by any Borrower is
titled in the current legal name of such Borrower. Each such property and asset
owned by any Subsidiary is titled in the current legal name of such Subsidiary.
No Borrower and no Subsidiary has used (or permitted the filing of any financing
statement under) any legal or operating name at
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any time during the twelve consecutive calendar months immediately preceding the
execution of this Agreement, except as identified on Schedule 3.5C hereto.
3.6 Capital Structure and Equity Ownership. Schedule 3.6 hereto
--------------------------------------
accurately and completely discloses (a) the number of shares and classes of
equity ownership rights and interests of each Borrower (whether existing as
common or preferred stock, general or limited partnership interests, or limited
liability company membership interests, or warrants, options or other
instruments convertible into such equity) and (b) the ownership thereof. All
such shares and interests are validly existing, fully paid and non-assessable.
In addition to the equity interests in the Borrowers set forth on Schedule 3.6,
Univision is entitled to purchase Class A Membership Interests in Entravision by
exercising the Univision Option. If the Univision Option were exercised on the
Closing Date, Univision would be entitled to purchase an approximately 25.86%
interest in Entravision. Pursuant to the terms of the Univision Investment
Documents and the Operating Agreement, such interest may increase or decrease
over time.
3.7 Subsidiaries, Affiliates and Investments. Schedule 3.7 hereto
----------------------------------------
accurately and completely discloses (a) each Subsidiary and Affiliate of each
Borrower (other than its officers and directors) and (b) each investment in or
loan to any other Person by any Borrower.
3.8 Material Contracts. Schedule 3.8 hereto accurately and completely
------------------
discloses each contract and agreement material to the financial condition or
operation of any Borrower or any Subsidiary (each, a "Material Contract," and
-----------------
collectively, the "Material Contracts"). No Borrower and no Subsidiary has
------------------
committed any unwaived breach or default under any Material Contract, and no
Borrower has any knowledge or reason to believe that any other party to any
Material Contract has or might have committed any unwaived breach or default
thereof. For purposes of this Section 3.8, Program Contracts, Affiliation
Agreements, Option Agreements, Material Leases and Program Services Agreements
are "Material Contracts" and each Program Contract, Affiliation Agreement,
Option Agreement, Material Lease and Program Services Agreement to which any
Borrower or any Subsidiary is a party is described on Schedule 1.1 or 3.8, as
applicable. Each of the Material Contracts is a legal, valid and binding
obligation of each Borrower and Subsidiary party thereto, enforceable in
accordance with its terms. The Agent has received a complete and correct copy of
each of the Material Contracts (including in each case all exhibits, schedules
and disclosure letters referred to therein or delivered pursuant thereto, if
any) and all amendments thereto and other side letters or agreements affecting
the terms thereof. The Borrowers represent that the expiration dates for the
Material Leases set forth on Schedule 1.1 are accurate as of the Closing Date.
3.9 Media Licenses. Each Borrower and each Subsidiary possesses all Media
--------------
Licenses necessary or required in the conduct of its businesses and/or the
operation of its properties. Each Media License is valid, binding and
enforceable on, against and by such Borrower or such Subsidiary, as applicable.
Each Media License is subsisting without any defaults thereunder or enforceable
adverse limitations thereon, and no Media License is subject to any proceedings
or claims opposing the issuance, renewal, development or use thereof or
contesting the validity thereof. Schedule 3.9 hereto accurately and completely
lists each material Media License directly or indirectly owned by each Borrower
(including, whether or not otherwise "material", each Media License issued by
the FCC, and further including all pending applications and renewals therefor),
together with relevant identifying information describing
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such Media License. With respect to each FCC license listed on Schedule 3.9
hereto, the description includes, among other things, the call sign, frequency,
location, file number, issuance date (original or most recent renewal), and
expiration date.
3.10 Taxes and Assessments. Except as disclosed on Schedule 3.10 hereto,
---------------------
each Borrower and each Subsidiary has timely filed all required tax returns and
reports (federal, state and local) or has properly filed for extensions of the
time for the filing thereof. No Borrower has knowledge of any deficiency,
penalty or additional assessment due or appropriate in connection with any such
taxes. All taxes (federal, state and local) imposed upon any Borrower or any
Subsidiary or any of its properties, operations or income have been paid and
discharged prior to the date when any interest or penalty would accrue for the
nonpayment thereof, except for those taxes being contested in good faith by
appropriate proceedings diligently prosecuted and with adequate reserves
reflected on the financial statements in accordance with GAAP (all as also
disclosed on Schedule 3.10 hereto). There are no taxes imposed on the Borrowers
or their Subsidiaries by any political subdivision or taxing authority due or
payable either on or by virtue of the execution and delivery by the Borrowers,
the Agent, or the Lenders of this Agreement or any other Loan Document to which
the Borrowers or the Subsidiaries are party, or on any payment to be made by the
Borrowers pursuant hereto or thereto.
3.11 Litigation and Legal Proceedings. Except as disclosed on Schedule
--------------------------------
3.11 hereto, there is no litigation, claim, investigation, administrative
proceeding, labor controversy or similar action that is pending or, to the best
of each Borrower's knowledge and information after due inquiry, threatened (i)
with respect to any Loan Document or the transactions contemplated thereby or
(ii) against any Borrower, any Subsidiary or any Property that, if adversely
resolved, could have a Material Adverse Effect.
3.12 Accuracy of Financial Information.
---------------------------------
(a) All information previously furnished to the Agent and the Lenders
that was prepared by or on behalf of any Borrower concerning the financial
condition and operations of any one or more Borrowers, including (i) the
unaudited combined and combining financial statements of the Borrowers as of
June 30, 1998 for the quarter then ended as well as for the 12 months ended as
of the end of such quarter and (ii) the audited combined and combining financial
statements of each Borrower as of December 31, 1997, (A) have been prepared in
accordance with GAAP consistently applied (except as described in Schedule 3.12
hereto), (B) are true, accurate and complete in all material respects, (C)
fairly present the financial condition of the organizations covered thereby as
of the dates and for the periods covered thereby and (D) disclose all material
liabilities (contingent and otherwise) of each Borrower; provided, that, with
-------- ----
regard to clause (i), to the extent such financial statements relate to an
Acquisition (and to periods prior to the date such Acquisition was consummated
by Entravision), the foregoing representations shall be given to the best of
each Borrower's knowledge.
(b) Since December 31, 1997 there has been no event or condition
resulting in a Material Adverse Effect.
3.13 Accuracy of Other Information. All information contained in any
material application, schedule, report, certificate, or any other document given
to the Agent or any Lender
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<PAGE>
by any Borrower or any other Person in connection with the Loan Documents is in
all material respects true, accurate and complete, and no such Person has
omitted to state therein (or failed to include in any such document) any
material fact or any fact necessary to make such information not misleading. All
projections given to the Agent or any Lender by any Borrower or any other Person
on behalf of any Borrower have been prepared with a reasonable basis and in good
faith making use of such information as was available at the date such
projection was made. The projections and pro forma financial information
contained in such materials are based upon good faith estimates and assumptions
believed by the Borrowers to be reasonable at the time made and as of the
Closing Date, it being recognized that such projections as to future events are
not to be viewed as facts and that actual results during the period or periods
covered by any such projections may differ from the projected results.
3.14 Compliance with Laws Generally. Each Borrower and each Subsidiary is
------------------------------
in compliance in all material respects with all Requirements of Law applicable
to it, its operations and its properties.
3.15 ERISA Compliance.
-----------------
(a) Each Borrower and each Subsidiary is in compliance in all material
respects with all applicable provisions of ERISA, and all rules, regulations and
orders implementing ERISA.
(b) None of the Borrowers, any Subsidiary or any ERISA Affiliate thereof
maintains or contributes to (or has maintained or contributed to) any
Multiemployer Plan under which any Borrower, any Subsidiary or any ERISA
Affiliate thereof could have any withdrawal liability.
(c) None of the Borrowers, any Subsidiary or any ERISA Affiliate thereof
sponsors or maintains any defined benefit pension plan under which there is an
accumulated funding deficiency within the meaning of Section 412 of the Code,
whether or not waived.
(d) The liability for accrued benefits under each defined benefit pension
plan that will be sponsored or maintained by any Borrower, any Subsidiary or any
ERISA Affiliate thereof (determined on the basis of the actuarial assumptions
utilized by the PBGC) does not exceed the aggregate fair market value of the
assets under each such defined benefit pension plan.
(e) The aggregate liability of each Borrower, each Subsidiary and each
ERISA Affiliate thereof arising out of or relating to a failure of any employee
benefit plan within the meaning of Section 3(2) of ERISA to comply with
provisions of ERISA or the Code will not have a Material Adverse Effect.
(f) There does not exist any unfunded liability (determined on the basis
of actuarial assumptions utilized by the actuary for the plan in preparing the
most recent annual report) of any Borrower, any Subsidiary or any ERISA
Affiliate thereof under any plan, program or arrangement providing post-
retirement, life or health benefits.
(g) No Reportable Event and no Prohibited Transaction (as defined in
ERISA) has occurred or is occurring with respect to any plan with which any
Borrower or any Subsidiary is associated.
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<PAGE>
3.16 Environmental Compliance.
------------------------
(a) Each Borrower and each Subsidiary has received all permits and filed
all notifications necessary under and is otherwise in compliance in all material
respects with all federal, state and local laws, rules and regulations governing
the control, removal, storage, transportation, spill, release or discharge of
hazardous or toxic wastes, substances and petroleum products, including, without
limitation, as provided in the provisions of and the regulations under (i) the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended by the Superfund Amendment and Reauthorization Act of 1986, (ii) the
Solid Waste Disposal Act, (iii) the Clean Water Act and the Clean Air Act, (iv)
the Hazardous Materials Transportation Act, (v) the Resource Conservation and
Recovery Act of 1976 and (vi) the Federal Water Pollution Control Act Amendments
of 1972 (all of the foregoing enumerated and non-enumerated statutes, including
without limitation any applicable state or local statutes, all as amended,
collectively, the "Environmental Control Statutes").
------------------------------
(b) No Borrower or Subsidiary has given any written or oral notice to the
Environmental Protection Agency ("EPA") or any state or local agency with regard
---
to any actual or imminently threatened removal, storage, transportation, spill,
release or discharge of hazardous or toxic wastes, substances or petroleum
products either (i) on properties owned or leased by such Borrower or such
Subsidiary or (ii) otherwise in connection with the conduct of its business and
operations.
(c) No Borrower or Subsidiary has received notice that it is potentially
responsible for costs of clean-up of any actual or imminently threatened spill,
release or discharge of hazardous or toxic wastes or substances or petroleum
products pursuant to any Environmental Control Statute.
(d) No judicial proceedings or governmental or administrative action is
pending, or, to the knowledge of the Borrowers, threatened, under any
Environmental Control Statute to which the Borrowers or any of their
Subsidiaries is named as a party with respect to the Properties or the business
conducted at the Properties, nor are there any consent decrees or other decrees,
consent orders, administrative orders or other orders, or other administrative
or judicial requirements outstanding under any Environmental Control Statute
with respect to the Properties or such business.
3.17 Federal Regulations. No Letter of Credit and no part of the proceeds
-------------------
of any Loans are intended to be or will be used, directly or indirectly for any
purpose which violates the provisions of the Regulations of the Board of
Governors of the Federal Reserve System. If requested by any Lender or the
Agent, and in any event upon consummation of any acquisition involving the
purchase of stock by the Borrowers or any Subsidiary, the Borrowers will furnish
to the Agent and each Lender a statement to the foregoing effect in conformity
with the requirements of Form U-1 referred to in Regulation U.
3.18 Fees and Commissions. Except as disclosed on Schedule 3.18 hereto or
--------------------
as required by Section 2.16 hereof or the letter referred to in Section 4.1(f),
no Borrower or Subsidiary owes or will owe any fees or commissions of any kind
in connection with this Agreement or the transactions contemplated hereby
(including any acquisition consummated
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<PAGE>
under Section 6.7(e)), and no Borrower knows of any claim (or any basis for any
claim) for any fees or commissions in connection with this Agreement or such
transactions.
3.19 [Intentionally Omitted].
-----------------------
3.20 Solvency. Immediately prior to and upon the execution of this
--------
Agreement and the funding of the Loans and the issuance of any Letters of Credit
to be funded or issued on the Closing Date, each Borrower and each Guarantor not
an individual was, is and will be Solvent.
3.21 FCC-Related Representations. Without limiting the generality of the
---------------------------
foregoing representations and warranties, each Borrower further represents and
warrants as follows:
(a) Except as described on Schedule 3.21 hereto, there is no outstanding
or unresolved (i) application by any Borrower or any Subsidiary for any Media
License (except for those applications described on Schedule 3.9, if any, for
modifications of facilities or licenses to cover construction permits),
including any renewal of any Media License, (ii) to the best of such Borrower's
knowledge, material complaint to the FCC regarding any Borrower or any
Subsidiary or any Media License, (iii) litigation, investigation or other
inquiry by or before the FCC involving any Borrower, any Subsidiary or any Media
Licenses, or (iv) FCC enforcement proceeding against any Borrower, any
Subsidiary or any Media License, including without limitation, any notice of
violation, any notice of apparent liability for forfeiture, or any forfeiture.
(b) The Media Licenses identified on Schedule 3.9 hereto constitute all
of the Media Licenses required by the Communications Act for the operation of
each Borrower's and each Subsidiary's business as it is currently being
operated. Each such Media License is validly outstanding and effective and has
been renewed by the FCC without condition for a full term in accordance with the
Communications Act. There are no modifications, amendments or revocations
(pending or, to the best knowledge of each Borrower after due inquiry,
threatened) that could materially and adversely affect the operations or
financial condition of any Borrower, any Subsidiary or any Station. After due
inquiry, no Borrower knows of any reason why the FCC would not routinely grant,
for a full term and without condition, the application by such Borrower or such
Subsidiary, as applicable, for the renewal of each such Media License over which
the FCC has jurisdiction, when and as such application shall become due to be
filed with the FCC.
(c) Except as described on Schedule 3.21 hereto, after due inquiry, no
Borrower knows of any application currently pending before, or to be filed with,
the FCC, the grant of which application would result in the authorization of a
new or modified station whose authorized transmissions would materially and
impermissibly interfere with any of the operations, signals, transmission or
receptions of such Borrower or its Subsidiaries (as such impermissible
interference is described in the FCC's rules, regulations and policies,
including, without limitation, the FCC's rules relating to Receiver Induced
Third Order Intermodulation Effect, Blanketing, Antenna Separation, Desired-to-
Undesired Signal Ratios, and Prohibited Contour Overlap).
(d) The execution, delivery and performance of the Univision Investment
Documents, including the exercise of the Univision Option in accordance with the
terms thereof, do not and
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<PAGE>
will not result in a violation of the Communications Act or any rule,
regulation or policy of the FCC; provided that a waiver of the FCC will be
-------- ----
required, prior to exercise of the Univision Option, with regard to the Grade B
contour overlap between KSMS and KDTV(TV) Channel 14, San Francisco, California
("KDTV"), owned and operated by Univision. No Grade A contour overlap exists
----
between KSMS and KDTV and KSMS and KDTV are located in different "Nielsen
DMA's," as defined by the FCC in the Second Further Notice of Proposed Rule
--------------------------------------
Making Docket No. 91-221 et al., FCC 96-438 (released November 7, 1996) (the
- ------
"Second Further Notice") at Paragraph 4, so as to be eligible for waiver
---------------------
pursuant to paragraphs 56-57 of the Second Further Notice.
3.22 Investment Company Act; Other Regulations. None of the Borrowers or
-----------------------------------------
the Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended (the "Investment Company Act").
----------------------
3.23 Copyright Act Requirements. Each Borrower and each Subsidiary has
--------------------------
recorded or deposited with and paid to the United States Copyright Office, the
Registrar of Copyrights, the Patent and Trademark Office, the American Society
of Composers, Authors and Publishers, Broadcast Music, Inc. and/or any other
licensors of copyrighted materials, all notices, statements of account, royalty
fees and other documents and instruments required under the terms and conditions
of any patent, trademark, service mark, trade name and copyright used in the
operation of a Station and/or the Copyright Act of 1976, as amended from time to
time, and the rules and regulations promulgated thereunder and, except as
disclosed in writing to the Agent, is not liable in a material amount to any
Person for copyright infringement under any law, rule, regulation, contract or
license as a result of its business operation.
3.24 Nature of Business. Neither the Borrowers nor any of their
------------------
Subsidiaries is engaged in any material business other than (i) the ownership
and operation of primarily Spanish-language television and radio stations and
translators, (ii) the outdoor advertising business, (iii) the acquisition,
financing, production and exploitation of programming and (iv) the ownership of
stock of or other interests in companies that own and operate such facilities
and businesses.
3.25 Ranking of Loans. This Agreement and the other Loan Documents to
----------------
which the Borrowers are party, when executed, and the Loans, when borrowed are
and will be the direct and general obligations of the Borrowers. The Borrowers
obligations hereunder and thereunder rank and will rank at least pari passu in
---- -----
priority of payment to all other Senior Debt.
3.26 Condemnation. To the Borrowers knowledge, no taking of any of the
------------
Properties or any part thereof through eminent domain, conveyance in lieu
thereof, condemnation or similar proceeding is pending or, to the knowledge of
the Borrowers, threatened by any Governmental Authority.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions to Closing Date. The agreement of each Lender to make the
--------------------------
Loans requested to be made by it on the Closing Date and participate in any
Letters of Credit issued on
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<PAGE>
the Closing Date and the agreement of the Agent to issue any Letters of Credit
requested to be issued on the Closing Date are subject to the satisfaction,
immediately prior to or concurrently with the making of such Loans and/or the
issuance of and participation in such Letters of Credit on the Closing Date, of
the following conditions precedent:
(a) Credit Agreement. The Agent shall have received this Agreement,
----------------
executed and delivered by an officer of each of the Borrowers as of the Closing
Date.
(b) Other Loan Documents. The Agent shall have received the Revolving
--------------------
Notes, the Guarantees, the Guarantor Security Agreements, the Mortgage
Modifications, the Security Agreement, the Univision Subordination Agreement,
such spousal consents as the Agent shall require and all UCC-1 Financing
Statements, amendments to UCC-1 Financing Statements, and other agreements or
instruments required to create or perfect a security interest in the Collateral
executed in connection herewith, in each case executed and delivered by an
officer of the relevant Obligor.
(c) Incumbency Certificates. The Agent shall have received an incumbency
-----------------------
certificate of each Borrower, each corporate or limited liability company
Guarantor and Univision, in each case dated the Closing Date, executed by one of
its Responsible Officers or its Secretary or Assistant Secretary.
(d) Corporate/Limited Liability Company Proceedings. The Agent shall have
-----------------------------------------------
received a copy of the resolutions of the Board of Directors of each of the
corporate Borrowers and Guarantors, and a copy of the resolutions of the
Executive Committee of each limited liability company Borrower and Guarantor,
each dated as of the Closing Date authorizing (i) the execution, delivery and
performance of the Loan Documents to which it is or will be a party, (ii) the
borrowings contemplated hereunder (in the case of the Borrowers), and (iii) the
execution and delivery by the Managing Members on behalf of each Borrower of all
notices, certificates and other documents to be delivered under the Loan
Documents from time to time, in each case certified by the Secretary or an
Assistant Secretary of such Obligor or the Managing Members of such Obligor, as
applicable, as of the Closing Date, which certificate states that such
resolutions thereby certified have not been amended, modified, revoked or
rescinded and are in full force and effect.
(e) Organic Documents. The Agent shall have received copies of the
-----------------
Organic Documents of each Borrower and each corporate or limited liability
company Guarantor, certified as of the Closing Date as complete and correct
copies thereof (or, with respect to copies of Organic Documents which have not
been amended since their delivery to the Agent under the Original Credit
Agreement, a certificate stating that such copies remain complete and correct
and such documents have not been amended) by the Secretary or an Assistant
Secretary of such Obligor.
(f) Fees and Costs. The Agent shall have received payment of all fees,
--------------
costs and expenses, including legal fees (if requested by the Agent) and the
fees set forth in the fee side letter executed by the Borrowers and the Agent in
connection herewith, accrued and unpaid and otherwise due and payable on or
before the Closing Date by the Borrowers in connection with this Agreement.
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<PAGE>
(g) Legal Opinions. The Agent shall have received, with a counterpart for
--------------
each Lender, the following executed legal opinions:
(i) the executed legal opinion of Zevnik Horton Guibord McGovern
Palmer & Fognani, L.L.P., counsel to the Borrowers and the Guarantors, in
form and substance satisfactory to the Agent;
(ii) the executed legal opinion of Thompson, Hine & Flory, LLP,
FCC counsel to the Borrowers and the Guarantors, in form and substance
satisfactory to the Agent; and
(iii) such other legal opinions as the Agent may reasonably
request.
(h) Material Contracts. The Agent shall have received, with a counterpart
------------------
for each Lender, copies of (i) each Affiliation Agreement, each Program Services
Agreement and each Option Agreement, each of which shall have been duly assigned
to the Agent, (ii) each other Material Contract, (iii) each Equityholder
Agreement, (iv) each employment agreement and non-compete agreement between any
Borrower and any director, officer or employee of any Borrower, (v) each written
agreement between any Borrower and any Affiliate of any Borrower and (vi) the
Univision Investment Documents, all of the foregoing in form and substance
satisfactory to the Agent and all as certified as true and correct by a
Responsible Officer of the Borrowers (or, with respect to copies of such
documents which have not been amended since their delivery to the Agent under
the Original Credit Agreement, a certificate stating that such copies remain
complete and correct and such documents have not been amended).
(i) Recording. The Agent shall have received as of the Closing Date
---------
evidence of the recording, or of the provision acceptable to the Agent for the
recording, of each Mortgage Modification and any other documents reasonably
necessary to be recorded in such office or offices as may be necessary or, in
the reasonable opinion of the Agent, desirable to perfect each Lien purported to
be created thereby or to otherwise protect the rights of the Agent and the
Lenders thereunder and evidence of the filing, or of provision acceptable to the
Agent for the filing, of appropriate financing statements on Form UCC-1 naming
the Agent, for the benefit of the Lenders, as secured party, in such office or
offices as may be necessary or, in the reasonable opinion of the Agent,
desirable to perfect the security interests purported to be created by any of
the Collateral Documents or the Guarantor Collateral Documents.
(j) Lien Searches. The Agent shall have received such UCC searches as it
-------------
shall deem necessary.
(k) Stock Certificates; Etc. The Agent shall have received, to the extent
------------------------
not previously delivered to the Agent under the Original Credit Agreement, (i)
original stock certificates representing all outstanding shares of stock of each
corporate Borrower (other than the shares of the Minority Shareholders) and each
corporate Subsidiary, together with an undated stock power for each of such
certificates, duly executed in blank by an authorized officer of the pledgor and
(ii) such Limited Liability Company Notices and Limited Liability Company
Acknowledgments as are required by the Security Agreement.
(l) Good Standing Certificates. With respect to each Borrower and each
--------------------------
corporate and limited liability company Guarantor, the Agent shall have received
a certificate, dated a
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<PAGE>
recent date, of the Secretary of State of the state of formation of such Obligor
and each other jurisdiction where such Obligor is required to be qualified to do
business under such jurisdiction's law, certifying as to the existence and good
standing of, and the payment of taxes by, each Obligor in such state.
(m) Univision Affiliation Agreements. A consent and acknowledgment, in
--------------------------------
form and substance acceptable to the Agent, executed by Univision with regard to
each of its Consents to Assign and Encumber.
(n) No Default/Representations. No Default shall have occurred and be
--------------------------
continuing on the Closing Date or would occur after giving effect to the Loans
requested to be made, or Letters of Credit requested to be issued, on the
Closing Date, and the representations and warranties contained in this Agreement
and each other Loan Document and certificate or other writing delivered to the
Lenders in satisfaction of the conditions set forth in this Section 4.1 prior to
or on the Closing Date shall be correct in all material respects on and as of
the Closing Date, and the Agent shall have received a certificate of the
Borrowers to such effect in the form of Exhibit D, dated as of the Closing Date
and executed by a Responsible Officer of each Borrower.
(o) No Prohibitions. No statute, rule, regulation, order, decree or
---------------
preliminary or permanent injunction of any court or administrative agency or, to
the best knowledge of the Borrowers, any such action threatened by any Person,
shall be in effect that prohibits the Lenders from consummating the transactions
contemplated by this Agreement or any other Loan Document, and the Agent shall
have received a certificate of a Responsible Officer of the Borrowers to such
effect.
(p) Solvency Certificate. The Agent shall have received (i) a certificate
--------------------
of the Chief Financial Officer of each Borrower and each Guarantor not an
individual, to the effect that each Borrower and each such Guarantor is Solvent
after giving effect to the funding of the Loans and the issuance of any Letters
of Credit to be made or issued on the Closing Date, the execution and delivery
of the Guarantees, and the payment of all estimated legal, investment banking,
accounting, and other fees related hereto and thereto and (ii) a certificate of
each individual Guarantor to the effect that such Guarantor is Solvent after
giving effect to the execution and delivery of such Guarantor's Guarantee.
(q) Flood Plain. The Agent shall have received and approved, with respect
-----------
to each Property referred to on Schedule 1.1, evidence whether such Property is
located in an area identified as a flood plain area as defined by the U.S.
Department of Housing and Urban Development pursuant to the Flood Disaster
Protection Act of 1973.
(r) Abstractor's Certificate. The Agent shall have received as of the
------------------------
Closing Date, with respect to the El Paso Headquarters Deed of Trust, an
abstractor's certificate evidencing the continued first-priority Lien of the El
Paso Headquarters Deed of Trust, subject only those exceptions reasonably
acceptable to the Agent.
(s) Insurance Policies. The Agent shall have received evidence that the
------------------
insurance policies provided for in Section 5.5 and in the other Loan Documents
are in full force and effect, certified by the insurance broker therefor,
together with appropriate evidence showing the Agent
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<PAGE>
as an additional named insured or loss payee, as appropriate, for the benefit of
the Lenders, all in form and substance reasonably satisfactory to the Agent.
(t) Operational Consents; FCC Matters. The Agent shall have received
---------------------------------
evidence, in form and substance reasonably satisfactory to the Agent that (i)
the Borrowers and their Subsidiaries have obtained all FCC consents and licenses
required by law or necessary for the operation of the Borrowers and their
Subsidiaries and (ii) the Borrowers and their Subsidiaries have obtained all
other consents and licenses required by law or necessary for the operation of
the Borrowers and their Subsidiaries.
(u) Additional Proceedings. The Agent shall have received such other
----------------------
approvals, opinions and documents as any Lender, through the Agent, may
reasonably request and all legal matters incident to the making of such Loans
and issuance of such Letters of Credit shall be reasonably satisfactory to the
Agent.
4.2 Conditions to Incremental Loans. The agreement of each Incremental
-------------------------------
Loan Lender to make the initial Incremental Loans on or after the Activation
Date shall be subject to the satisfaction, immediately prior to or concurrently
with the making of such Loans of the following conditions precedent (in addition
to such other conditions precedent, including the payment of facility fees, as
shall be mutually agreed to by the Borrowers and the Incremental Loan Lenders
prior to the Activation Date), in each case to the satisfaction of the Agent and
the Majority Incremental Loan Lenders:
(a) Closing Date. The Closing Date shall have occurred.
------------
(b) Incremental Notes. The Agent shall have received, for each Incremental
-----------------
Loan Lender, an Incremental Note duly executed by the Borrowers in favor of such
Lender in a principal amount equal to such Incremental Loan Lender's Incremental
Loan Commitment.
(c) Corporate/Limited Liability Proceedings. The Agent shall have received
---------------------------------------
a copy of the resolutions of the Board of Directors of each of the corporate or
Borrowers and Guarantors and a copy of the resolutions of the Executive
Committee of each of the limited liability company Borrowers and Guarantors,
each dated as of the date of such initial borrowing authorizing the borrowing of
Incremental Loans pursuant to the Incremental Loan Commitments and certified by
the Secretary or an Assistant Secretary, or the Managing Members, of such
Obligor, which certificate states that such resolutions have not been amended,
modified, revoked or rescinded and are in full force and effect.
(d) Omnibus Certificate. The Agent shall have received an Omnibus
-------------------
Certificate of each Borrower and each corporate or limited liability company
Guarantor, dated the date of such borrowing, stating that (i) the Organic
Documents and Incumbency Certificate of such Borrower or Guarantor delivered to
the Agent on the Closing Date remain true and correct and in full force and
effect with no amendments thereto (or, if amended, attaching copies of such
amendments not previously delivered to the Agent), (ii) the copies of the
Material Contracts delivered to the Agent on the Closing Date remain true and
correct and in full force and effect with no amendments thereto (or, if amended,
attaching copies of such amendments not previously delivered to the Agent) and
such Material Contracts, together with the contracts and agreements delivered on
the Closing Date, constitute all contracts and agreements
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<PAGE>
delivered on the Closing Date, constitute all contracts and agreements material
to the financial condition or operation of each Borrower and each Subsidiary and
(iii) no change in such Borrower's financial condition or otherwise has occurred
which would make any financial certificate delivered to the Agent in connection
with the Closing Date incorrect or misleading.
(e) Fees and Costs. The Agent shall have received payment of all fees,
--------------
costs and expenses, including legal fees, accrued and unpaid and otherwise due
and payable on or before such date by the Borrowers in connection with this
Agreement.
(f) Pro Forma Covenant Compliance Certificate. The Agent shall have
-----------------------------------------
received a Covenant Compliance Certificate showing compliance with the covenants
referred to therein, on a pro forma basis, as of such date.
--- -----
(g) No Default/Representations. No Default shall have occurred and be
--------------------------
continuing on such borrowing date or would occur after giving effect to the
Loans requested to be made on such borrowing date and the representations and
warranties contained in this Agreement and each other Loan Document and
certificate or other writing delivered to the Lenders in satisfaction of the
conditions set forth in this Section 4.2 prior to or on such borrowing date
shall be correct in all material respects on and as of such borrowing date, and
the Agent shall have received a certificate of the Borrowers to such effect in
the form of Exhibit D, dated as of such borrowing date and executed by a
Responsible Officer of each Borrower.
(h) Additional Proceedings. The Agent shall have received such other
----------------------
approvals, opinions and documents as any Incremental Loan Lender, through the
Agent, may reasonably request and all legal matters incident to the making of
such Incremental Loans shall be reasonably satisfactory to the Agent.
4.3 Conditions to Each Loan or Letter of Credit. The agreement of each
-------------------------------------------
Lender to make each Loan and to participate in each Letter of Credit, and the
agreement of the Agent to issue each Letter of Credit, requested to be made,
issued or participated in by it is subject to the satisfaction, immediately
prior to or concurrently with the making of such Loan or the issuance or
participation in such Letter of Credit, of the following conditions precedent:
(a) Representations and Warranties; No Default. The following statements
------------------------------------------
shall be true and the Borrowers' acceptance of the proceeds of such Loan or
their delivery of an executed Letter of Credit Request shall be deemed to be a
representation and warranty of each Borrower on the date of such Loan or as of
the date of issuance of such Letter of Credit, as applicable, that:
(i) The representations and warranties contained in this
Agreement and in each other Loan Document and certificate or other writing
delivered to the Lenders prior to, on or after the Closing Date pursuant
hereto and on or prior to the date for such Loan or the issuance of such
Letter of Credit are correct on and as of such date in all material
respects as though made on and as of such date except to the extent that
such representations and warranties expressly relate to an earlier date;
and
(ii) No Default has occurred and is continuing or would result
from the making of the Loan to be made on such date or the issuance of such
Letter of Credit as of such date.
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<PAGE>
(b) Legality. The making of such Loan or the issuance of such Letter of
--------
Credit, as applicable, shall not contravene any law, rule or regulation
applicable to any Lender or the Borrowers or any other Obligor.
(c) Borrowing Notice/Letter of Credit Request. The Agent shall have
-----------------------------------------
received a borrowing notice or Letter of Credit Request, as applicable, pursuant
to the provisions of this Agreement from the Borrowers.
(d) Approvals. With respect to a borrowing in connection with an
---------
Acquisition, the Agent shall have received copies of all FCC and regulatory
approvals and licenses necessary in connection with any such Acquisition (if
such Acquisition shall be of a radio or television station), and all shareholder
approvals necessary in connection with any such acquisition.
(e) Collateral Documentation. With respect to a borrowing in connection
------------------------
with an Acquisition, the Agent shall have received, reviewed and approved all
documents reasonably necessary to insure that the Lenders have a first priority
security interest in, and assignment of, all assets and interests acquired,
unless the Majority Lenders shall otherwise consent with respect to any real
property interests acquired, including consents of third parties if reasonably
requested by the Agent.
4.4 Conditions Subsequent
---------------------
(a) Within 30 days after the Closing Date, the Borrowers shall deliver
to the Agent the following, in each case in form and substance satisfactory to
the Agent:
(i) an executed copy of a Shareholders Agreement among the
Telecorpus shareholders;
(ii) with respect to the Telecorpus stock pledged by Walter F.
Ulloa, an original undated stock power (executed in blank);
(iii) an executed copy of the Univision Affiliation Agreement for
Station KORO, Corpus Chrisi, Texas; and
(iv) UCC Financing Statement amendments executed by the following
entities for filing in the jurisdictions indicated: Cabrillo (California),
Golden Hills (California, Colorado), KSMS (California), Las Tres Palmas
(California), Tierra Alta (California, Nevada) and Entravision Holdings,
L.L.C. (California).
(b) Within 45 days after the Closing Date, the Borrowers shall use best
efforts to deliver to the Agent the following, in each case in form and
substance satisfactory to the Agent:
(i) with respect to The Zevnik-Harvard Fund, a trust formed under
the laws of the State of California, with respect to all membership
interests owed by such trust in Entravision, the documents described in
clauses (A)-(C) of the first sentence of Section 6.14; and
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<PAGE>
(ii) with respect to the Luery Trust, (A) original undated stock power
(executed in blank) with regard to the stock in Telecorpus pledged by the
Luery Trust, (B) original undated stock power (executed in blank) with
regard to the stock in Valley Channel 48 pledged by the Luery Trust, (C) a
UCC Financing Statement amendment for filing in the State of California and
(D) a Solvency Certificate.
SECTION 5. AFFIRMATIVE COVENANTS
Each Borrower hereby agrees that from and after the Closing Date, so long
as any Commitment remains in effect, any Note remains outstanding and unpaid or
any other amount is owing to any Lender or the Agent hereunder, or any Letter of
Credit remains outstanding:
5.1 Financial Statements
--------------------
(a) Within 120 days after the close of each fiscal year, the Borrowers
shall deliver to the Agent, for distribution to the Lenders, a complete set of
audited annual combined and combining financial statements of the Borrowers,
including a balance sheet, an income statement, a cash flow statement and a
reconciliation of consolidated net worth (with accompanying notes and
schedules). Such financial statements (i) must be prepared in accordance with
GAAP consistently applied and (ii) must be certified without qualification by
the Accountants. Together with the audited financial statements, the Agent must
also receive a certificate signed by such Accountants, at the time of the
completion of the annual audit, (A) stating that the financial statements fairly
present the combined and combining financial condition of the Borrowers as of
the date thereof and for the periods covered thereby and (B) that, to the
knowledge of such Accountants, no Default exists under Section 6.1, to the
extent such Section relates to accounting matters. In addition, such financial
statements shall be accompanied by a certificate of a Responsible Officer of
Entravision substantially in the form of Exhibit H hereto setting forth the
calculation of Excess Cash Flow for such fiscal year;
(b) Within 45 days of the end of each fiscal quarter, the Borrowers shall
deliver to the Agent, for distribution to the Lenders, (x) unaudited combined
and combining financial statements of the Borrowers for such quarter and (y)
unaudited combined and combining financial statements for the Borrowers for the
twelve months ended as of the end of such quarter, in each case in form and
substance acceptable to the Agent. Such financial statements shall include,
without limitation, a balance sheet, income statement and operating cash flow
statement (with appropriate notes and schedules). In the case of the financial
statements referred to in clause (x), such financial statements shall include a
comparison of the results of such period with the budgeted results set forth in
the budget referred to in Section 5.2(c)(or, prior to delivery of such budget,
the budget delivered under the Original Credit Agreement), and must be prepared
in accordance with GAAP consistently applied. In the case of the financial
statements referred to in clause (y), such financial statements shall be
prepared in accordance with GAAP consistently applied (except as required by
Section 1.2(e)). Together with the quarterly financial statements, the Agent
must also receive (i) a certificate executed by the Chief Financial Officer of
each Borrower (A) stating that the financial statements fairly present the
financial condition of each Borrower as of the date thereof and for the periods
covered thereby, (B) certifying that as of the date of such certificate such
officer has obtained no knowledge of any Default except as specified in such
certificate and (C) certifying that to the best of such officer's knowledge, no
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Default has occurred and the Borrowers are in compliance with their respective
covenants in the Loan Documents to which they are party and (ii) a Covenant
Compliance Certificate.
(c) Within 30 days of the end of each month, the Borrowers shall deliver
to the Agent, for distribution to the Lenders, an unaudited monthly combined and
combining income statement, along with a comparison of the results of such month
with the budgeted results set forth in the budget referred to in Section
5.2(c)(or, prior to delivery of such budget, the budget delivered under the
Original Credit Agreement), in each case in form and substance acceptable to the
Agent, certified by a Responsible Officer of each Borrower as fairly presenting
the financial condition of each Borrower as of the date thereof and for the
period covered thereby.
(d) Within 45 days of the end of each fiscal quarter, the Borrowers shall
deliver to the Agent, for distribution to the Lenders, a financial report, in
form and substance acceptable to the Agent, relating to the operations of each
Station (and to the outdoor advertising business, if any, operated by
Entravision or any Subsidiary) as at the end of such quarter and the portion of
the fiscal year through the end of such quarter, certified by a Responsible
Officer of each Borrower as fairly presenting the financial condition of each
Station (or such outdoor advertising business) as of the end of such quarter.
5.2 Certificates; Other Information. The Borrowers shall furnish to the
-------------------------------
Agent, for distribution to the Lenders:
(a) within five Business Days after the same are filed, copies of all
financial statements and reports which the Borrowers or any Subsidiary may make
to, or file with, the Securities and Exchange Commission or any successor or
analogous Governmental Authority;
(b) promptly but, in any event, within five Business Days after receipt
thereof, copies of all financial reports (including, without limitation,
management letters), if any, submitted to the Borrowers or any Subsidiary by the
Accountants in connection with any annual or interim audit of the books thereof;
(c) (i) by January 31 of each year, commencing with the fiscal year ending
on December 31, 1999, a copy of the annual operating budget for Entravision and
its Subsidiaries for such fiscal year, in form satisfactory to the Agent
(notwithstanding the foregoing, Entravision shall have until March 31 of such
year to amend the annual operating budget for such year to include the effect of
any Acquisition consummated during the fourth quarter of the prior year); and
(ii), upon the consummation of any Acquisition having a purchase price equal to
or greater than $15,000,000, a summary financial forecast for Entravision (which
forecast shall be based on the budget figures delivered under clause (i), with
such changes as are necessary to reflect such Acquisition on a pro forma basis)
covering the period from consummation of said Acquisition to the Revolving Loan
Commitment Expiration Date;
(d) as soon as possible and in any event within five Business Days after
the occurrence of a Default or, in the good faith determination of a Responsible
Officer of Entravision, a Material Adverse Effect, the written statement by a
Responsible Officer of Entravision, setting forth the details of such Default or
Material Adverse Effect and the action which Entravision proposes to take with
respect thereto;
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<PAGE>
(e) promptly, but in any event within 30 days after any change in the
senior management personnel of Entravision (including any change in the title or
status of Walter F. Ulloa, Philip C. Wilkinson or Jeanette Tully), written
notice of such change;
(f) promptly but, in any event, within five Business Days after the same
become available, copies of all statements, reports and other information which
any Borrower sends to any holder of an equity interest therein;
(g) (A) as soon as possible and in any event within 30 days after any
Borrower knows or has reason to know that any Termination Event with respect to
any Plan has occurred, a statement of a Responsible Officer of such Borrower
describing such Termination Event and the action, if any, which such Borrower
proposes to take with respect thereto, (B) promptly and in any event within ten
days after receipt thereof by any Borrower or any ERISA Affiliate of any
Borrower from the PBGC, copies of each notice received by such Borrower or such
ERISA Affiliate of the PBGC's intention to terminate any Plan or to have a
trustee appointed to administer any Plan, (C) promptly and in any event within
30 days after the filing thereof with the Internal Revenue Service, copies of
each Schedule B (Actuarial Information) to the annual report (Form 5500 Series)
with respect to each Single Employer Plan maintained for or covering employees
of the Borrowers or any Subsidiary if the present value of the accrued benefits
under the Plan exceeds its assets by an amount in excess of $500,000 and (D)
promptly and in any event within ten days after receipt thereof by any Borrower
or any ERISA Affiliate of any Borrower from a sponsor of a Multiemployer Plan or
from the PBGC, a copy of each notice received by such Borrower or such ERISA
Affiliates concerning the imposition or amount of withdrawal liability under
Section 4202 of ERISA or indicating that such Multiemployer Plan may enter
reorganization status under Section 4241 of ERISA;
(h) promptly after the commencement thereof, but in any event not later
than five Business Days after service of process with respect thereto on, or the
obtaining of knowledge by, any Borrower or any Subsidiary, notice of each
material action, suit or proceeding before any Governmental Authority;
(i) promptly after the sending or filing thereof, but in any event not
later than ten Business Days following such sending or filing, copies of (A) all
Ownership Reports on FCC Form 323 (or any similar form which may be adopted by
the FCC from time to time) and any supplements thereto, and (B) all statements,
reports and other information filed by or on behalf of the Borrowers or any
Subsidiary with the FCC;
(j) promptly, but in any event within one Business Day after any period
during which the transmission at any Station or transmission site is interrupted
or curtailed for an aggregate of 12 hours or more (whether or not consecutive),
written notice thereof;
(k) promptly upon receipt thereof, but in any event not later than five
Business Days following such receipt, copies of all notices and other
communications that any Borrower or any Subsidiary shall have received from the
FCC with respect to any FCC hearing, order or dispute (A) directly concerning
the Borrowers, any Subsidiary, any Station or any Media License or (B) that may
have a Material Adverse Effect;
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(l) promptly upon receipt thereof, but in any event not later than ten
Business Days following such receipt, copies of all Nielsen or Arbitron rating
period reports; and
(m) promptly, such additional financial and other information as any
Lender, through the Agent, may from time to time reasonably request.
5.3 Payment of Obligations. Each Borrower shall, and shall cause each of
----------------------
its Subsidiaries to, pay, discharge or otherwise satisfy at or before maturity
or before they become delinquent, as the case may be, all its obligations of
whatever nature, except where the failure to so satisfy such obligations would
not have a Material Adverse Effect or except where the amount or validity
thereof is currently being contested in good faith by appropriate proceedings
and reserves in conformity with GAAP with respect thereto have been provided on
the books of such Borrower or its Subsidiaries, as the case may be.
5.4 Conduct of Business and Maintenance of Existence. Each Borrower shall,
------------------------------------------------
and shall cause each of its Subsidiaries to, continue to engage in business of
the same general type as conducted by such Borrower and its Subsidiaries as of
the Closing Date and preserve, renew and keep in full force and effect its
corporate or limited liability company existence, as applicable, and take all
reasonable action to maintain all rights, registrations, licenses, privileges
and franchises necessary or desirable in the normal conduct of its business, and
comply with all Contractual Obligations and Requirements of Law except to the
extent that failure to comply therewith would not, in the aggregate, have a
Material Adverse Effect.
5.5 Maintenance of Property; Insurance. Each Borrower shall, and shall
----------------------------------
cause each of its Subsidiaries to, keep all property useful or necessary in its
business in good working order and condition (ordinary wear and tear excepted);
maintain with financially sound and reputable insurance companies or
associations insurance on such of its property in at least such amounts and
against such risks as are usually insured against in the same general area by
companies engaged in the same or a similar business (including casualty,
liability, fire, flood, business interruption, earthquake and workers'
compensation); and furnish to the Agent, upon written request, full information
as to the insurance carried. All such policies of insurance on the property of
the Borrowers and the Subsidiaries shall contain an endorsement, in form and
substance reasonably satisfactory to the Agent in its sole discretion, showing
the Agent, on behalf of the Lenders, as additional insured or loss payee, as
appropriate, or as its interests appear. Such endorsement, or an independent
instrument furnished to the Agent, shall provide that the insurance companies
will give the Agent at least 25 days' prior written notice before any such
policy or policies of insurance shall be altered or canceled. All policies of
insurance required to be maintained under this Agreement shall be in customary
form and with insurers reasonably acceptable to the Agent and all such policies
shall be in such amounts as shall be customary for similar companies in the same
or similar business in the same geographical area. Each Borrower shall deliver
to the Agent insurance certificates certified by such Borrower's insurance
brokers, as to the existence and effectiveness of each policy of insurance and
evidence of payment of all premiums then due and payable therefor. In addition,
the Borrowers shall notify the Agent promptly of any occurrence causing a
material loss of any insured Property and the estimated (or actual, if
available) amount of such loss. Further, the Borrowers and their Subsidiaries
shall maintain all insurance required under the other Loan Documents.
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<PAGE>
(i) Each policy for liability insurance shall provide for all
losses to be paid on behalf of the Agent and such Borrower or Subsidiary
(as the case may be), as their respective interests may appear, and each
policy for property damage insurance shall, to the extent applicable to
equipment and inventory, provide for all losses (except for losses of less
than $500,000 per occurrence, which may be paid directly to such Borrower
or such Subsidiary, as applicable) to be paid directly to the Agent.
(ii) Reimbursement under any liability insurance maintained by the
Borrowers or their Subsidiaries pursuant to this Section 5.5 may be paid
directly to the Person who shall have incurred liability covered by such
insurance. In the case of any loss involving damage to equipment or
inventory as to which clause (iii) of this Section 5.5 is not applicable,
the Borrowers will make or cause to be made the necessary repairs to or
replacements of such equipment or inventory, and any proceeds of insurance
maintained by the Borrowers or their Subsidiaries pursuant to this Section
5.5 shall be paid by the Agent to the Borrowers or such Subsidiaries, upon
presentation of invoices and other evidence of obligations, as
reimbursement for the costs of such repairs or replacements.
(iii) Upon the occurrence and during the continuance of a Default,
all insurance proceeds in respect of such equipment or inventory shall be
paid to the Agent and applied in repayment of the Loans, as set forth in
Section 2.5.
5.6 Inspection of Property; Books and Records; Discussions. Each Borrower
------------------------------------------------------
shall, and shall cause each of its Subsidiaries to, keep proper books of records
and account in which full, true and correct entries in conformity with GAAP and
all Requirements of Law shall be made of all material dealings and transactions
in relation to its business and activities; and upon reasonable notice and at
such reasonable times during usual business hours, permit representatives of any
Lender to visit and inspect any of its properties and examine and make abstracts
from any of its books and records at any reasonable time and as often as may
reasonably be desired and to discuss the business, operations, properties and
financial and other condition of such Borrower and its Subsidiaries with
officers and employees of such Borrower and its Subsidiaries and with its
Accountants.
5.7 Environmental Laws. Each Borrower shall, and shall cause each of its
------------------
Subsidiaries to:
(a) Comply in all material respects with, and ensure compliance by all
tenants and subtenants, if any, with, all applicable Environmental Control
Statutes and obtain and comply in all material respects with any and all
licenses, approvals, notifications, registrations or permits required by
applicable Environmental Control Statutes;
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Control Statutes and promptly comply in all material respects with
all lawful orders and directives of all Governmental Authorities regarding
Environmental Control Statutes except to the extent that the same are being
contested in good faith by appropriate proceedings; and
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(c) Defend, indemnify and hold harmless the Agent and the Lenders, and
their respective employees, agents, officers and directors, from and against any
and all claims, demands, penalties, fines, liabilities, settlements, damages,
costs and expenses of whatever kind or nature known or unknown, contingent or
otherwise, arising out of, or in any way relating to the violation of,
noncompliance with or liability under any Environmental Control Statutes
applicable to the operations of the Borrowers or any of their Subsidiaries, or
the Borrowers' or any of their Subsidiaries' interest in Properties, or any
orders, requirements or demands of Governmental Authorities related thereto,
including, without limitation, attorneys' and consultants' fees, investigation
and laboratory fees, response costs, court costs and litigation expenses, except
to the extent that any of the foregoing arise out of the gross negligence or
willful misconduct of the party seeking indemnification therefor. This indemnity
shall continue in full force and effect regardless of the termination of this
Agreement.
5.8 Use of Proceeds. The Borrowers will use the proceeds of the Loans, and
---------------
any Letters of Credit issued hereunder, as follows:
(i) the Revolving Loans shall be used (A) to finance the El
Centro Radio Stations Acquisition, and other Acquisitions in accordance
with Sections 6.7(e) and 4.3, and expenses associated therewith; (B) to
redeem shareholder interests of Minority Shareholders, (C) for the payment
of fees and expenses associated with the closing of the transaction set
forth in this Agreement, (D) to refinance Indebtedness under the Original
Credit Agreement, (E) for capital expenditures and general corporate
purposes, including the payment of fees and expenses due hereunder from
time to time and (F) to fund Escrow Deposits;
(ii) the Incremental Loans shall be used (A) to finance
Acquisitions in accordance with Sections 6.7(e) and 4.3 and (B) for capital
expenditures and general corporate purposes; and
(iii) any Letters of Credit shall be used for general corporate
purposes and for Escrow Deposits.
Notwithstanding anything herein to the contrary, no Loan or Letter of Credit
will be used for the purchasing or carrying of any Margin Stock.
5.9 Compliance With Laws, Etc. Each Borrower shall comply, and shall cause
-------------------------
each of its Subsidiaries to comply, in all material respects with all applicable
Requirements of Law, such compliance to include, without limitation (i) paying
before the same become delinquent all taxes, assessments and governmental
charges or levies imposed upon it or upon its income or profits or upon any of
its Properties and (ii) paying all lawful claims which if unpaid might become a
Lien upon any of its Properties; provided, however, that neither such Borrower
-------- -------
nor any of such Subsidiaries shall be required to pay and discharge or to cause
to be paid and discharged any such tax, assessment, charge, levy or claim so
long as (A) the validity or applicability thereof is being contested in good
faith by appropriate proceedings or the failure to pay such tax, assessment,
charge, levy or claim would not (in the reasonable judgment of the Majority
Lenders) have a Material Adverse Effect and (B) such Borrower or such Subsidiary
shall, to the extent required by GAAP, have set aside on its books adequate
reserves with respect thereto.
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5.10 Media Licenses. Each Borrower will obtain, maintain and preserve, and
--------------
cause each of its Subsidiaries to obtain, maintain and preserve, all Media
Licenses, including without limitation, by filing with the FCC (i) those of the
Loan Documents required to be filed under the FCC's rules and regulations within
30 days after the Closing Date and (ii) all reports (including Ownership Reports
on FCC Form 323) and other documents required to be filed by the Communications
Act in connection with the transactions contemplated hereby and maintaining
public records and files in accordance with Communications Act and the rules and
regulations of the FCC.
5.11 Guarantees, Etc. Each Borrower will cause each of its Subsidiaries
---------------
hereafter formed or acquired to execute and deliver to the Agent promptly upon
the formation or acquisition thereof (i) a Guarantee in form and substance
satisfactory to the Agent, guaranteeing the Obligations, (ii) a Guarantor
Security Agreement, in form and substance satisfactory to the Agent, granting to
the Agent, for the benefit of the Lenders, a security interest in the tangible
and intangible personal property of such Subsidiary, together with appropriate
Lien searches requested by the Agent indicating the Lenders' first priority Lien
on such personal property and (iii) UCC-1 Financing Statements, duly executed by
such Subsidiary, in form and substance satisfactory to the Agent and, in
connection with such deliveries, cause to be delivered to the Agent (A) the
stock certificates representing the issued and outstanding shares of stock of
such Subsidiaries, together with undated stock powers executed in blank, (B) a
favorable written opinion of counsel satisfactory to the Agent as to such
matters relating thereto as any Lender through the Agent may reasonably request,
in form and substance satisfactory to the Agent and (C) such other agreements,
instruments, approvals or other documents as any Lender through the Agent may
reasonably request.
5.12 License Subsidiaries. Each Borrower will cause each Media License
--------------------
owned by it to be held in the Entravision License Subsidiary at all times until
the Obligations have been paid in full and all Commitments and Letters of Credit
have expired. The Borrowers will not permit the Entravision License Subsidiary
to (i) own any right, franchise or other asset except for Media Licenses (and
FCC files and records with respect thereto) or (ii) engage in any business other
than holding such Media License, files and records.
5.13 Interest Rate Protection. Within 30 days after the Closing Date, the
------------------------
Borrowers will enter into and maintain, for at least a two-year period ending on
the second anniversary of the Closing Date, at any time during which the Maximum
Total Debt Ratio is greater than or equal to 4.50 to 1, Interest Rate
Agreements, each in form and substance reasonably satisfactory to the Agent,
covering a minimum of 50% of the outstanding Loans from time to time (including
Incremental Loans).
5.14 Acquisition of Real Property in Fee Simple.
------------------------------------------
(a) The Borrowers and their Subsidiaries shall submit to the Agent for its
prior approval any documents relating to any fee simple real property interest
to be acquired by the Borrowers or any of their Subsidiaries having a purchase
price (together with the assumption of Indebtedness or purchase money
Indebtedness relating thereto) in excess of $2,000,000. Each such acquisition,
and the documents governing such acquisition, shall be subject to the approval
of the Agent. The Agent may require that any such fee simple property interest
become part of
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the Collateral or the Guarantor Collateral and the Borrowers and their
Subsidiaries shall provide or cause to be provided any and all information
relating to such real property interest and any and all Collateral Documents or
Guarantor Collateral Documents and other documents to be executed in connection
therewith requested by the Agent and provide the Agent with title insurance as a
condition to approval.
(b) Notwithstanding the foregoing, Entravision shall be entitled to
acquire the KNVO Real Property without complying with Section 5.14(a).
5.15 Leases and Licenses. The Borrowers shall or shall cause their
-------------------
Subsidiaries to perform and carry out, in all material respects, all of the
provisions of all of the leases, licenses, permits and any other occupancy
agreements relating to real property or real property interests (the "Occupancy
---------
Agreements") to be performed by the Borrowers or any of their Subsidiaries and
- ----------
shall appear in and defend any action in which the validity of any of the
Occupancy Agreements relating to any real property or real property interests is
at issue and shall commence and maintain any action or proceeding necessary to
establish or maintain the validity of any of such Occupancy Agreements and to
enforce the provisions thereof.
5.16 Lease and License Approvals. The Borrowers and their Subsidiaries
---------------------------
shall submit to the Agent for its prior approval any leases, licenses, permits
or other Occupancy Agreements relating to real property or real property
interests that the Borrowers or any of their Subsidiaries may desire to execute
or obtain which provide for the payment of rent or license fees in excess of
$100,000 in any fiscal year. Each such agreement shall be subject to the
approval of the Agent, such approval not to be unreasonably withheld. The Agent
may require that any lease, license or other similar agreement become part of
the Collateral or the Guarantor Collateral and the Borrowers and their
Subsidiaries shall provide or cause to be provided any and all Collateral
Documents or Guarantor Collateral Documents or other documents to be executed in
connection therewith requested by the Agent and provide the Agent with title
insurance (to the extent applicable) as a condition to approval.
5.17 Notices. The Borrowers will provide, and will cause their Subsidiaries
-------
to provide to the Agent, within 5 Business Days following receipt by any
Borrower or Subsidiary, copies of all notices received by such Borrower or
Subsidiary (i) under any Material Contract or any instrument, document or
agreement relating to any Subordinated Indebtedness, relating to any material
default, any claimed force majeure or any other material provision thereof and
(ii) from the Internal Revenue Service or other taxing authority relating to any
material dispute regarding deductions, audits or any other material matter
which, if adversely determined against the Borrowers or such Subsidiary, would
have a Material Adverse Effect.
5.18 Additional Material Contracts and Media Licenses. Each Borrower (a)
------------------------------------------------
will notify the Agent in writing within 90 calendar days after executing,
entering into, becoming bound by or subject to or otherwise obtaining any
contract, agreement or Media License that should have been listed on Schedule
3.8 hereto or Schedule 3.9 hereto if it had existed as of the Closing Date, (b)
will concurrently update Schedule 3.8 hereto or Schedule 3.9 hereto (as
appropriate) and (c) will, with respect to any replacement or additional
Affiliation Agreements entered into with Univision, cause Univision to execute
and deliver a Consent to Assign, in substantially the form previously delivered
by Univision under the Original Credit Agreement.
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5.19 Status of Certain Borrowers. Each Borrower agrees that (i) each
---------------------------
Borrower (other than Entravision) shall have no assets other than its ownership
interest in Entravision (provided that and (ii) each Borrower (other than
-------- ----
Entravision) shall conduct no operations or business other than the holding of
its ownership interest in Entravision.
5.20 Las Tres Campanas Acquisition. In the event that Entravision (or any
-----------------------------
other Borrower) acquires any stock or assets of Las Tres Campanas Television,
Inc., pursuant to Section 7(e) of the Operating Agreement for Entravision or
otherwise, Entravision (or such other Borrower) will (i) promptly notify the
Agent thereof and (ii) execute all documents reasonably requested by the Agent
to grant to the Agent a perfected security interest in, and pledge of, all such
stock and personal property assets.
5.21 Year 2000. The Borrowers will take, and will cause their Subsidiaries
---------
to take, all those actions reasonably necessary to assure that each Borrower's
and each Subsidiary's computer-based systems are able to operate effectively and
process data effectively, including data composed of or including dates on and
after January 1, 2000. At the request of any Lender, the Borrowers will provide
the Lenders assurances reasonably acceptable to the Agent of the Borrowers' and
each Subsidiary's capacity to deal with the foregoing.
SECTION 6. NEGATIVE COVENANTS
Each Borrower hereby agrees that from and after the Closing Date, so
long as any Commitments remain in effect, any Note remains outstanding and
unpaid or any other amount is owing to any Lender or the Agent hereunder, or any
Letter of Credit remains outstanding:
6.1 Financial Condition Covenants. The Borrowers shall not:
-----------------------------
(a) Maximum Total Debt Ratio. Permit the Maximum Total Debt Ratio as of the
------------------------
end of any fiscal quarter of the Borrowers and their Subsidiaries on a
consolidated basis to exceed the following levels for the periods indicated:
<TABLE>
<CAPTION>
Period Ratio
----- -----
<S> <C>
Closing Date to and including September 30, 1999 7.00:1
October 1, 1999 to and including March 31, 2000 6.50:1
April 1, 2000 to and including September 30, 2000 6.00:1
October 1, 2000 to and including March 31, 2001 5.50:1
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
April 1, 2001 to and including September 30, 2001 5.00:1
October 1, 2001 and thereafter 4.50:1
</TABLE>
(b) Total Interest Coverage Ratio. Permit the Total Interest Coverage Ratio
-----------------------------
as of the end of any fiscal quarter of the Borrowers and their Subsidiaries on a
consolidated basis to be less than the following levels for the periods
indicated:
Period Ratio
------------
Closing Date to and including
December 31, 1999 1.75:1
January 1, 2000 to and including
December 31, 2000 2.00:1
January 1, 2001 and thereafter 2.25:1
(c) Fixed Charge Coverage Ratio. Permit the Fixed Charge Coverage Ratio as
---------------------------
of the end of any fiscal quarter of the Borrowers and their Subsidiaries on a
consolidated basis to be less than 1.05:1.
(d) Maximum Capital Expenditures. Permit Capital Expenditures of the
----------------------------
Borrowers and their Subsidiaries on a consolidated basis for any fiscal year of
the Borrowers to be more than the following levels for the periods indicated:
Period Maximum Amount
------ --------------
Fiscal Year Ending
December 31, 1998 $4,000,000
Fiscal Year Ending
December 31, 1999 $7,500,000
Fiscal Years Ending
December 31, 2000
and thereafter $3,000,000
; provided that, in the event the Borrowers and the Subsidiaries do not, in any
-------- ----
fiscal year, exhaust such amount with respect to such fiscal year, such excess
amount may be used to make, or commit to make, Capital Expenditures in the
immediately following fiscal year (provided no Default has occurred and is
continuing), but not thereafter. Notwithstanding the foregoing,
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expenditures made by Entravision for the purchase of the KNVO Real Property
shall not be included as Capital Expenditures for determining compliance with
this Section 6.1(d).
6.2 Limitation on Indebtedness. The Borrowers shall not create, incur,
--------------------------
assume or suffer to exist any Indebtedness, and shall not permit any of their
Subsidiaries to create, incur, assume or suffer to exist any Indebtedness,
except for:
(a) Indebtedness created hereunder and under the Notes;
(b) Indebtedness of the Borrowers or any of their Subsidiaries secured by
Liens permitted with respect to the Borrowers or their Subsidiaries by Section
6.3;
(c) Indebtedness of Golden Hills and Entravision, in an aggregate
principal amount not exceeding $500,000, to make payments to Teresa E. Romero
under that certain Stock Purchase Agreement dated as of September 30, 1998 among
Entravision, Golden Hills and Teresa E. Romero;
(d) Indebtedness of the Borrowers outstanding on the Closing Date and
listed on Schedule 6.2;
(e) the Subordinated Indebtedness;
(f) Indebtedness (i) under any Interest Rate Agreement required pursuant
to Section 5.13, (ii) evidenced by performance bonds or letters of credit issued
in the ordinary course of business or reimbursement obligations in respect
thereof, (iii) evidenced by a letter of credit facility related to insurance
associated with claims for work-related injuries or (iv) for bank overdrafts
incurred in the ordinary course of business that are promptly repaid;
(g) trade credit incurred to acquire goods, supplies, services and
incurred in the ordinary and normal course of business;
(h) Lease Expenses;
(i) the KNVO Mortgage Indebtedness;
(j) Indebtedness of any Borrower to the Luery Trust, Richard Norton and/or
Irma Rico in connection with the purchase by such Borrower of such minority
shareholder's interests in the Borrowers, provided that (i) the Majority Lenders
-------------
have given their prior written consent (such consent not to be unreasonably
withheld) to such Indebtedness (including, without limitation the principal,
interest, repayment terms and other terms of such Indebtedness) and (ii) such
Indebtedness shall, if requested by the Majority Lenders, be fully subordinated
to the prior payment in full of the Obligations pursuant to a subordination
agreement in form and substance satisfactory to the Majority Lenders; and
(k) other Indebtedness in an amount not exceeding $7,500,000 at any time
outstanding (less the amount of Escrow Deposits under Section 6.7(f)).
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Notwithstanding the foregoing, the License Subsidiaries shall not be permitted,
under any circumstances, to create, incur, assume or suffer to exist any
Indebtedness, other than the Indebtedness created under the Loan Documents.
6.3 Limitation on Liens. The Borrowers shall not, and shall not permit any
-------------------
of their Subsidiaries to, create, incur, assume or suffer to exist any Lien upon
any of its property, assets or revenues, whether now owned or hereafter
acquired, except for:
(a) Liens created hereunder or under any of the other Loan Documents;
(b) Liens existing on any Property at the time of its acquisition and not
created in anticipation of such acquisition;
(c) Liens arising pursuant to any order of attachment, distraint or
similar legal process arising in connection with court proceedings so long as
the execution or other enforcement thereof is effectively stayed and claims
secured thereby are being contested in good faith by appropriate proceedings;
(d) Liens for taxes not yet due or which are being contested in good faith
by appropriate proceedings, provided that adequate reserves with respect thereto
--------
are maintained on the books of the Borrowers or their Subsidiaries, as the case
may be, in conformity with GAAP;
(e) Liens created by operation of law not securing the payment of
Indebtedness for money borrowed or guaranteed, including carriers',
warehousemen's, mechanics', materialmen's, repairmen's or other like Liens
arising in the ordinary course of business which are not overdue for a period of
more than 45 days or which are being contested in good faith by appropriate
proceedings;
(f) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation and deposits
securing liability to insurance carriers under insurance or self-insurance
arrangements;
(g) deposits to secure the performance of bids, trade contracts (other
than for borrowed money), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in the
ordinary course of business;
(h) easements, rights-of-way, restrictions and other similar encumbrances
incurred in the ordinary course of business which, in the aggregate, would not
cause a Material Adverse Effect;
(i) the KNVO Purchase Money Mortgage, provided that (x) it shall secure
only the KNVO Mortgage Indebtedness and (y) it shall not be spread to cover any
other property; and
(j) Liens on Property or assets securing leases referred to in Section
3.5A.
Notwithstanding the foregoing, the License Subsidiaries shall not be permitted,
under any circumstances, to incur any consensual Liens or Liens securing the
payment of Indebtedness for money borrowed or guaranteed, other than Liens
created by the Loan Documents.
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6.4 Limitation on Fundamental Changes. The Borrowers shall not, and shall
---------------------------------
not permit any of their Subsidiaries to, enter into any merger, consolidation or
amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or create or acquire any Subsidiary or Affiliate
(unless the documents required by Section 5.11 are executed and delivered) or
convey, sell, lease, assign, transfer or otherwise dispose of (including by
making any Station subject to any local marketing or similar agreement) all or
substantially all of its property, business or assets, except that, so long as
no Default has occurred and is continuing or would result therefrom, (i) the
Borrowers may consummate the Acquisitions permitted by Section 6.7 and (ii) one
or more Borrowers may merge with one or more other Borrowers (provided that the
-------- ----
Agent receives at least twenty Business Days' prior written notice thereof and
the Borrowers execute and deliver to the Agent such documents as the Agent shall
reasonably request in connection therewith, including but not limited to UCC-1
Financing Statements).
Notwithstanding the foregoing, the License Subsidiaries shall not merge,
consolidate, amalgamate or liquidate, wind up or dissolve or convey, sell,
lease, assign (except pursuant to the Loan Documents), transfer or otherwise
dispose of, all or substantially all of their respective property or assets.
6.5 Limitation on Sale of Assets. The Borrowers shall not, and shall not
----------------------------
permit any of their Subsidiaries to, make any Asset Disposition, unless (i) the
Borrowers make the mandatory prepayment, if any, required in connection
therewith pursuant to Section 2.5(a) and (ii) no Default has occurred and is
continuing or would result from such Asset Disposition. In any case, the
Borrowers may not sell, and will not permit any of their Subsidiaries to sell,
any Station or the ownership interests of any License Subsidiary without the
prior written consent of the Majority Lenders, such consent not to be
unreasonably withheld.
6.6 Limitation on Dividends. No Borrower shall, or shall permit any of its
-----------------------
Subsidiaries to (a) if a corporation, declare or pay any dividend (other than
dividends payable solely in common stock of such Borrower or its Subsidiaries)
on, or make any payment on account of, or set apart assets for a sinking or
other analogous fund for, the purchase, redemption, defeasance, retirement or
other acquisition of, any shares of any class of Capital Stock of such Borrower
or its Subsidiaries or any warrants or options to purchase any such Capital
Stock, whether now or hereafter outstanding, and (b) if a partnership or a
limited liability company, make any distribution with respect to the ownership
interests therein, or, in either case, any other distribution in respect
thereof, either directly or indirectly, whether in cash or property or in
obligations of the Borrowers or any Subsidiary (such declarations, payments,
setting apart, purchases, redemptions, defeasance, retirements, acquisitions and
distributions being herein called "Restricted Payments"), except for Restricted
-------------------
Payments by Entravision to its members, and by each corporate Borrower to its
shareholders, in each case to permit such members and shareholders to pay their
respective income tax liabilities attributable to the income of Entravision or
such corporate Borrower, respectively (provided that no Default has occurred and
-------- ----
is continuing or would result from the making of such Restricted Payment).
6.7 Limitation on Investments, Loans and Advances. The Borrowers shall
---------------------------------------------
not, and shall not permit any of their Subsidiaries to, make any advance, loan,
extension of credit or capital contribution to, or purchase any stock, bonds,
notes, debentures or other securities of or
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any assets constituting a business unit of, or make any other investment in (any
of the foregoing, an "investment"), any Person, except for:
----------
(a) each of the following Acquisitions, provided that (i) no Default has
-------- ----
occurred and is continuing or would result from the consummation of such
Acquisition (and Entravision shall have delivered to the Agent a Covenant
Compliance Certificate showing pro forma calculations assuming such Acquisition
had been consummated), (ii) the Borrowers shall have delivered to the Agent a
certificate of an Authorized Officer of Entravision stating that such investment
does not violate the Univision Investment Documents and (iii) the Agent shall
have received, reviewed and reasonably approved all material documents
reasonably requested by the Agent to insure that the Lenders have a first
priority security interest in, and assignment of, all personal property assets
and interests acquired, including consents of third parties if reasonably
requested: (A) the El Centro Radio Stations Acquisition (provided that the
-------- ----
Consideration therefor does not exceed $2,900,000), (B) the Tecate Acquisition
(provided that the Consideration therefor (including investments therein made
-------- ----
prior to the Closing Date and referred to on Schedule 6.7) does not exceed an
aggregate of $20,500,000), (C) the purchase by Entravision of television station
WBSV, Channel 62, Venice, Florida (provided that the Consideration therefor does
-------- ----
not exceed $17,500,000), (D) the purchase by Entravision of television station
KPMR, Channel 38, Santa Barbara, California (provided that the Consideration
-------- ----
therefor does not exceed $5,250,000) and (E) the purchase by Entravision of
television station KLUZ, Channel 41, Albuquerque, New Mexico (provided that the
-------- ----
Consideration therefor does not exceed $1,000,000 plus the Additional Equity
Rights);
(b) the Borrowers' ownership interest in their Subsidiaries;
(c) investments in marketable securities, liquid investments and other
financial instruments that are acquired for investment purposes and may be
readily sold or otherwise liquidated, that have a value which may be readily
established and which are investment grade;
(d) extensions of trade credit in the ordinary course of business;
(e) Acquisitions (other than those referred to in clause (a) above) having
a maximum Consideration in an aggregate amount during the term of this Agreement
not to exceed the greater of (A) $5,000,000 and (B) ten percent of Net Asset
Value as of the date of consummation of the proposed Acquisition (or such
greater amount as the Majority Lenders may agree to in writing, in their sole
discretion, and provided that such amount is authorized by the Univision
Investment Documents); provided that (i) no Default has occurred and is
-------- ----
continuing or would result from the consummation of such Acquisition (and
Entravision shall have delivered to the Agent a Covenant Compliance Certificate
showing pro forma calculations assuming such Acquisition had been consummated);
--- -----
and (ii) the Agent shall have received, reviewed and approved all documents
reasonably requested by the Agent to insure that the Lenders have a first
priority security interest in, and assignment of, all personal property assets
and interests acquired, including consents of third parties if reasonably
requested;
(f) Escrow Deposits in an aggregate amount not to exceed $7,500,000 during
the term of this Agreement (less Indebtedness outstanding under Section 6.2(k)),
provided that no Default has occurred and is continuing or would result from the
- -------- ----
making of such investment; and
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(g) investments existing on the Closing Date and listed on Schedule 6.7;
Notwithstanding the foregoing, the License Subsidiaries shall not be permitted,
under any circumstances, to make any investments.
6.8 Limitation on Modifications of Certain Documents and Instruments
----------------------------------------------------------------
(a) No Borrower shall, and no Borrower shall permit its Subsidiaries to,
(i) terminate, amend or modify any provision of any document, instrument or
agreement relating to the Subordinated Indebtedness (provided that the Borrowers
may, (A) with the prior written consent of the Majority Lenders, amend the
Tecate Letter Agreement and (B) amend the Univision Investment Documents to
permit the Additional Equity Rights), any Material Contract, any Equityholder
Agreement or any Organic Document or (ii) change its official name, its
operating names or the names under which it executes contracts and conducts
business, in each case without the prior written consent of the Majority
Lenders, which consent shall not be unreasonably withheld.
(b) In furtherance of Section 6.8(a)(i), Entravision will not consent to
any assignment of the Univision Option pursuant to the Note Purchase Agreement,
or consent to any assignment of the Univision Subordinated Note, without the
prior written consent of the Majority Lenders.
6.9 Transactions with Affiliates. The Borrowers shall not, and shall not
----------------------------
permit any of their Subsidiaries to, enter into any transaction, including,
without limitation, any purchase, sale, lease or exchange of property or the
rendering of any service, with any Affiliate or any Subsidiary less than wholly-
owned, directly or indirectly, by the Borrowers, unless such transaction (i) is
otherwise permitted under this Agreement or (ii) is in the ordinary course of
the Borrowers' or such Subsidiary's business and is upon terms no less favorable
to the Borrowers or such Subsidiary, as the case may be, than it would obtain in
a comparable arm's length transaction with a Person not an Affiliate.
6.10 Fiscal Year. No Borrower shall permit its fiscal year or the fiscal
-----------
year of any of its Subsidiaries to end on a day other than December 31.
6.11 Lease Obligations. The Borrowers shall not, and shall not permit any
-----------------
of its Subsidiaries to, sell, assign or otherwise transfer any of its
Properties, rights or assets (whether now owned or hereafter acquired) to any
Person and thereafter directly or indirectly lease back the same or similar
property.
6.12 Unfunded Liabilities. The Borrowers shall not permit unfunded
--------------------
liabilities for any and all Plans maintained for or covering employees of the
Borrowers or any Subsidiary to exceed $500,000 in the aggregate at any time.
6.13 Management Fees. The Borrowers shall not, and shall not permit any of
---------------
their Subsidiaries to, incur any management fees for services rendered; provided
--------
that, if no Default has occurred and is continuing or would result therefrom,
- ----
Entravision may pay management fees (the "Management Fees") to Walter F. Ulloa
---------------
and Philip C. Wilkinson for services rendered to Entravision (which Management
Fees may be paid in the form of bonuses under employment agreements to which
Walter F. Ulloa and Philip C. Wilkinson are party), on an annual basis, in
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an aggregate amount not to exceed 2% of Net Operating Revenue of Entravision for
such fiscal year. The Management Fees shall accrue quarterly but be payable
annually, following the Lenders' receipt of the financial statements (which must
be unqualified) and Covenant Compliance Certificate referred to in Section
5.1(b).
6.14 Equity Offerings. No Borrower shall, or shall permit any of their
----------------
Subsidiaries to, consummate or agree to consummate any Equity Offering unless
(i) such Borrower has given the Agent (who shall promptly give copies of such
notice to the Lenders) 30 days prior written notice thereof and (ii) except as
set forth in the proviso below, each Person becoming an equityholder as a result
of such Equity Offering shall have executed (A) a Nonrecourse Guarantee in form
and substance satisfactory to the Agent, guaranteeing the Obligations, (B) a
Pledge Agreement, in form and substance satisfactory to the Agent, granting to
the Agent, for the benefit of the Lenders, a security interest in such equity
interest and all rights associated therewith, together with appropriate Lien
searches requested by the Agent indicating the Lenders' first priority Lien on
such interests and rights and (C) UCC-1 Financing Statements, duly executed by
such equityholder, in form and substance satisfactory to the Agent and, in
connection with such deliveries, cause to be delivered to the Agent (1) such
stock certificates or limited liability company interest certificates as may
exist with regard to such equity interest, together with undated stock powers
executed in blank, (2) a favorable written opinion of counsel satisfactory to
the Agent as to such matters relating thereto as any Lender through the Agent
may reasonably request, in form and substance satisfactory to the Agent and (3)
such other agreements, instruments, approvals or other documents as any Lender
through the Agent may reasonably request; provided that compliance with the
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foregoing clause (ii) shall not be required with regard to an initial public
offering of equity interests, the issuance of membership interests in
Entravision having no voting power or the Equity Offering to Univision
contemplated by the Univision Option. Notwithstanding any provision in this
Agreement to the contrary, (a) there shall at all times be pledged to the Agent,
for the benefit of the Lenders, pursuant to Nonrecourse Guarantees, Pledge
Agreements and related documentation required by this Agreement, direct or
indirect Voting Control of each Borrower. In addition, the Borrowers shall not
permit the aggregate equity interest of any Minority Shareholder in any Borrower
or any Guarantor to increase, whether through the purchase of shares of stock,
the receipt of shares of stock as dividends, or otherwise, unless such Minority
Shareholder has executed and delivered to the Agent a Nonrecourse Guarantee,
Pledge Agreement and such other documents as the Agent shall reasonably request
in connection therewith; provided that nothing in this sentence shall be
construed to prohibit the exercise of the Univision Option or any increase in
Univision's equity interest in Entravision in accordance with the Univision
Investment Documents and the Operating Agreement.
SECTION 7. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrowers shall fail to pay any principal on any Note when due or
the Borrowers shall fail to pay any interest on any Note, any fee referred to in
Section 2.3(e), Section 2.16 or the letter referred to in Section 4.1(f) within
two Business Days after any such interest or fee becomes due in accordance with
the terms thereof and hereof or the Borrowers shall fail to
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<PAGE>
pay any other amount payable hereunder within five Business Days after written
notice that such other amount is due; or
(b) Any representation or warranty made or deemed made by any Obligor
herein or in any other Loan Document or which is contained in any certificate,
document or financial or other statement furnished at any time under or in
connection with this Agreement or any other Loan Document shall prove to have
been incorrect in any material respect when made or deemed made; provided that
-------- ----
representations and warranties of any Pledgor and any Borrower other than
Entravision shall be limited to those the incorrectness of which could
reasonably be expected to have a Material Adverse Effect; or
(c) The Borrowers shall default in the observance or performance of any
agreement contained in Section 4.4, 5.2(d), 5.3, 5.4, 5.8, 5.9, 5.10, 5.12,
5.13, or any provision of Section 6; or
(d) (i) Any Obligor shall default in the observance or performance of any
other material agreement contained in this Agreement or the other Loan Documents
(other than as provided in paragraphs (a) through (c) of this Section), and such
default shall continue unremedied for a period of 30 days after the earlier of
(y) notice thereof from the Agent to the Borrowers and (z) actual knowledge
thereof by a senior officer of such Obligor (unless such default is of such a
nature that it cannot reasonably be cured within 30 days after the date
described in clause (y) or (z), as applicable, in which case the defaulting
Obligor has not commenced the cure thereof within such 30 day period and/or has
not thereafter diligently pursued the completion of the same), provided that any
-------- ----
default referred to in this clause (i) by a Borrower other than Entravision
shall be limited to those which could reasonably be expected to have a Material
Adverse Effect; or (ii) any material provision of any Loan Document shall at any
time for any reason be declared null and void, or the validity or enforceability
of any Loan Document shall at any time be contested by any Obligor, or a
proceeding shall be commenced by any Obligor, or by any Governmental Authority
or other Person having jurisdiction over any Obligor, seeking to establish the
invalidity or unenforceability thereof, or any Obligor shall deny that it has
any liability or obligation purported to be created under any Loan Document; or
(e) Any Guarantee shall cease, for any reason, to be in full force and
effect, and such occurrence shall have a Material Adverse Effect; or
(f) The Borrowers or any other Obligor shall (i) default in any payment of
principal or interest, regardless of the amount, due in respect of any (A)
Indebtedness (other than the Notes), issued under the same indenture or other
agreement, if the original principal amount of Indebtedness covered by such
indenture or agreement is $500,000 or greater or (B) any Guarantee Obligation
with respect to an amount of $500,000 or greater, beyond the period of grace, if
any, provided in the instrument or agreement under which such Indebtedness or
Guarantee Obligation was created, whether or not such default has been waived by
the holders of such Indebtedness or Guarantee Obligation; or (ii) default in the
observance or performance of any other material agreement or condition relating
to any such Indebtedness or Guarantee Obligation or contained in any instrument
or agreement evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such Indebtedness
or beneficiary or
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beneficiaries of such Guarantee Obligation (or a trustee or agent on behalf of
such holder or holders or beneficiary or beneficiaries) to cause, with the
giving of notice if required, such Indebtedness to become due prior to its
stated maturity or such Guarantee Obligation to become payable or such
Indebtedness to be required to be defeased or purchased; provided that, any
-------- ----
default referred to in this Section 7(f) by a Pledgor or any Borrower other than
Entravision, shall be limited to those which could reasonably be expected to
have a Material Adverse Effect; or
(g) (i) Any Borrower or any other Obligor (other than a Pledgor) shall
commence any case, proceeding or other action (A) under any existing or future
law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an order for
relief entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or its
debts, or (B) seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its assets, or any
Borrower or any other Obligor (other than a Pledgor) shall make a general
assignment for the benefit of its creditors; or (ii) there shall be commenced
against any Borrower or any other Obligor (other than a Pledgor) any case,
proceeding or other action of a nature referred to in clause (i) above which (A)
results in the entry of an order for relief or any such adjudication or
appointment or (B) remains undismissed, undischarged, unstayed or unbonded for a
period of 60 days; or (iii) there shall be commenced against any Borrower or any
other Obligor (other than a Pledgor) any case, proceeding or other action
seeking issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets which results in the
entry of an order for any such relief which shall not have been vacated,
discharged, stayed or bonded pending appeal within 60 days from the entry
thereof; or (iv) any Borrower or any other Obligor (other than a Pledgor) shall
take any action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above;
or (v) any Borrower or any other Obligor (other than a Pledgor) shall generally
not, or shall be unable to, or shall admit in writing its inability to, pay its
debts as they become due or there shall be a general assignment for the benefit
of creditors; or
(h) (i) Any Person shall engage in any non-exempt "prohibited transaction"
(as defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of
ERISA), whether or not waived, shall exist with respect to any Plan, (iii) a
Reportable Event shall occur with respect to, or proceedings shall commence to
have a trustee appointed, or a trustee shall be appointed, to administer or to
terminate any Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee would reasonably be expected to result
in the termination of such Plan for purposes of Title IV of ERISA, (iv) any
Single Employer Plan shall terminate for purposes of Title IV of ERISA (other
than a standard termination) or (v) any Borrower or any Commonly Controlled
Entity would reasonably be expected to incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan;
and in each case regarding clauses (i) through (v) above, such event or
condition, together with all other such events or conditions, if any, would
reasonably be expected to subject such Borrower or any other Obligor to any tax,
penalty or other liabilities in the aggregate to exceed $500,000; or
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(i) One or more judgments or decrees shall be entered against the
Borrowers or any other Obligor (other than a Pledgor) involving in the aggregate
a liability (not paid or fully covered by insurance) of $250,000 or more, and
all such judgments or decrees shall not have been vacated, discharged, stayed or
bonded pending appeal within 60 days from the entry thereof or in any event five
days before the date of any sale pursuant to such judgment or decree or any non-
monetary judgment or order shall be entered against the Borrowers or any other
Obligor (other than a Pledgor) that is reasonably likely to have a Material
Adverse Effect and either (i) enforcement proceedings shall have been commenced
by any Person upon such judgment which has not been stayed pending appeal or
(ii) there shall be any period of 10 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; provided that, judgments and decrees referred
-------- ----
to in this Section 7(i) entered against any Borrower other than Entravision
shall be limited to those which could reasonably be expected to have a Material
Adverse Effect; or
(j) There shall occur any default in the material observance or material
performance of any Material Contract (other than those referred to in Section
7(p)) or any such Material Contract shall terminate or otherwise no longer be in
full force and effect, in each case to the extent such default or termination
could reasonably be expected to have a Material Adverse Effect; or
(k) (A) any designation by any Governmental Authority (including the FCC)
of an evidentiary hearing with regard to any application of any Borrower (or any
Affiliate thereof) requesting any authorization from such Governmental Authority
shall fail to be dismissed within 120 days after such designation and the Agent,
in its reasonable judgment after consultation with its FCC counsel, believes
that it is more likely than not that the result thereof will be the termination,
revocation, suspension, non-renewal or material (and adverse) modification of
any material Media License held by any Borrower (or any Affiliate thereof), or
(B) any Governmental Authority (including the FCC) shall terminate, revoke or
substantially and adversely modify any material Media License of any Borrower
(or any Affiliate thereof), or (C) any action or proceeding commenced by any
Governmental Authority (including the FCC) seeking the termination, suspension,
revocation, non-renewal or substantial and adverse modification of any material
Media License shall fail to be dismissed within 120 days after such commencement
and the Agent, in its reasonable judgment after consultation with its FCC
counsel, believes that such proceeding will more likely than not result in such
termination, suspension, revocation, non-renewal or substantial and adverse
modification, or (D) any material Media License shall expire by its terms and is
not renewed in a timely manner, or any material agreement which is necessary to
the operation of any broadcast facility or transmission site shall expire or is
revoked or terminated and is not replaced by a comparable substitute or a
substitute reasonably acceptable to the Agent. (For purposes of this Section
7(k), a "material" Media License is (1) any Media License (other than a Media
License issued by the FCC), alone or in conjunction with other Media Licenses
then subject to any of the circumstances described in this Section, the loss of
which (in the Agent's reasonable judgment) could have a Material Adverse Effect
and (2) any Media License issued by the FCC. Notwithstanding the foregoing, with
respect to the type of event described in clause (A) or clause (C) above, the
occurrence of such event will not constitute an Event of Default under and for
purposes of clause (A) or clause (C) of this Section 7(k) only, provided that
-------- ----
(and so long as) each of the following conditions is satisfied to the Agent's
satisfaction:
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<PAGE>
(i) the Borrowers provide the Agent with written notice of such
event within five Business Days after being notified by the FCC of such
designation (and also provide a copy of any such notice received from the
FCC), and
(ii) the notice of designation affirmatively indicates that it
relates only to the licenses or applications of a single Station rather
than to the licenses and/or applications of more than one Station, and
(iii) if an adverse ruling in the proceeding would threaten
Entravision's ability to continue providing the same level of underlying
service by such Station as theretofore provided, then (A) the Borrowers
shall make a prepayment of the Loans (within 30 Business Days after
receiving notice of such designation from the FCC) in an amount sufficient
for Borrowers to remain in compliance with each of the financial covenants
under Section 6.1 hereof without including any of the Operating Cash Flow
attributable to such Station and (B) the Borrowers shall thereafter exclude
the Operating Cash Flow attributable to such Station from the calculation
of the Borrowers' consolidated Operating Cash Flow. Any such prepayment and
exclusion from Operating Cash Flow will be permanent unless and until the
FCC proceeding regarding such license or application is finally resolved to
the Agent's satisfaction in a manner favorable to Entravision and without
any divestiture of assets required by the FCC or otherwise voluntarily
accomplished by the Borrowers pursuant to the next sentence. Once the
Borrowers have made such prepayment and exclusion from Operating Cash Flow
under the circumstances contemplated by this clause (iii), then Entravision
may thereafter sell the assets relating to such Station (and only such
Station) pursuant to a transaction with an unrelated third party (i.e., a
----
non-Affiliate) for value received provided that (1) Entravision gives the
-------- ----
Agent written notice of such transaction at least 30 days (but not more
than 60 days) prior to consummation of such transaction, (2) the
representation under Section 3.20 regarding solvency of the Borrowers is
true immediately prior to and following any such disposition, (3) such
transaction does not cause a Material Adverse Effect or otherwise violate
any covenant hereunder or otherwise cause a Default hereunder, (4)
Entravision provides the Agent with a certificate renewing the
representations and warranties in the Loan Documents and (if and to the
extent appropriate) updating the various schedules to the Loan Documents to
make the representations and warranties therein true, accurate and complete
following such transaction and (5) the proceeds of such transaction are
promptly used to prepay the Loans in accordance with the terms of Section
2.5(e); or
(l) Any material provision of any Loan Document, after delivery thereof
pursuant to the provisions hereof, shall, for any reason other than an act or
omission by the Agent, cease to be valid or enforceable in accordance with its
terms and such cessation shall have a Material Adverse Effect, or any security
interest created under any Loan Document shall for any reason other than an act
or omission by the Agent, cease to be a valid and perfected first priority
security interest or Lien (except as otherwise stated or permitted herein or
therein) in any material portion of the Collateral, the Guarantor Collateral or
the property purported to be covered thereby; or
(m) A Change in Control shall have occurred; provided that, the occurrence
-------- ----
of any event which would constitute a Change in Control shall not constitute an
Event of Default under
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this Section 7(m) if such event is by reason of the death or disability of
either or both of Walter F. Ulloa and Philip C. Wilkinson and (i) no other
Default has occurred and is continuing and (ii) there has been presented to the
Lenders within 120 days of such death or disability a plan for reorganization
of, and operation of the business of, the Borrowers (which plan shall include
compliance with the terms of this Agreement) in the absence of such individual
or individuals (as applicable) which is satisfactory to the Majority Lenders in
their reasonable discretion; or
(n) The operations of any Station shall be interrupted or curtailed at any
time for a period in excess of 96 hours (whether or not consecutive) during any
period of seven consecutive days; or
(o) (i) Any Borrower that is organized as a limited liability company
shall lose its qualification for treatment as a partnership for income tax
purposes (i.e., its right to utilize pass-through taxation) or if the Internal
----
Revenue Service or any state revenue service with taxing jurisdiction over such
Borrower otherwise shall make a determination (which is no longer being
diligently contested in good faith) that such Borrower no longer qualifies for
treatment as a partnership for income tax purposes, in each case to the extent
such loss or determination could reasonably be expected to have a Material
Adverse Effect;
(ii) With respect to any Borrower or any other Obligor that is
organized as a limited liability company, any member thereof (A)
experiences an event described in Section 7(g) hereof, (B) dies, dissolves
or otherwise terminates its existence, or (C) withdraws from membership in
such limited liability company. Notwithstanding the foregoing, such event
will not constitute an Event of Default hereunder if (1) within 15 Business
Days of the occurrence such event, the Agent is notified thereof in writing
and (2) within 30 days of the occurrence of such event (or within such
shorter period as may be required by applicable law or the applicable
Organic Documents for such limited liability company), the remaining
members of such limited liability company take all action necessary, if any
(in a manner reasonably acceptable to the Agent) to continue the existence
of such limited liability company as an operating organization liable to
the Agent for its obligations under the Loan Documents; or
(p) (i) Any Univision Affiliation Agreement with respect to any broadcast
facility of any Borrower or any Subsidiary, or any broadcast facility subject to
a Program Services Agreement, is at any time terminated, revoked or not renewed
upon expiration; or (ii) any Affiliation Agreement with a network or programmer
other than Univision which relates to any broadcast facility of any Borrower or
any Subsidiary, or any broadcast facility subject to a Program Services
Agreement, is at any time terminated, revoked or not renewed upon expiration
(and not replaced, within 30 days of such termination, revocation or expiration,
with a new Affiliation Agreement reasonably acceptable to the Majority Lenders),
in either case in this clause (ii) relating to a broadcast facility accounting
for more than 5% of the Borrowers' combined Operating Cash Flow as of the
quarter ending immediately prior to such termination, revocation or non-renewal;
then, and in any such event, (A) if such event is an Event of Default specified
in paragraph (g) above, automatically the Commitments to the Borrowers and the
commitment to issue Letters of Credit shall immediately terminate and the Loans
made to the Borrowers hereunder (with
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accrued interest thereon) and all other Obligations shall immediately become due
and payable, and (B) if such event is any other Event of Default, with the
consent of the Majority Lenders, the Agent may, or upon the request of the
Majority Lenders, the Agent shall, take any or all of the following actions: (i)
by notice to the Borrowers declare the Commitments to the Borrowers and the
commitment to issue Letters of Credit to be terminated forthwith, whereupon such
Commitments and the commitment to issue Letters of Credit shall immediately
terminate; and (ii) by notice of default to the Borrowers, declare the Loans
(with accrued interest thereon) and all other Obligations under this Agreement
and the Notes to be due and payable forthwith, whereupon (x) the same shall
immediately become due and payable and (y) to the extent any Letters of Credit
are then outstanding, the Borrowers shall make a Cash Collateral Deposit in an
amount equal to the aggregate Letter of Credit Amount. In all cases, with the
consent of the Majority Lenders, the Agent may enforce any or all of the Liens
and security interests and other rights and remedies created pursuant to any
Loan Document or available at law or in equity. Except as expressly provided
above in this Section, presentment, demand, protest and all other notices of any
kind are hereby expressly waived by the Borrowers.
SECTION 8. THE AGENT
8.1 Appointment. Each Lender hereby irrevocably designates and appoints
-----------
Union Bank of California, N.A. as Agent of such Lender under this Agreement and
the other Loan Documents, and each such Lender irrevocably authorizes Union Bank
of California, N.A., as the Agent for such Lender, to take such action on its
behalf under the provisions of this Agreement and the other Loan Documents and
to exercise such powers and perform such duties as are expressly delegated to
the Agent by the terms of this Agreement and the other Loan Documents, together
with such other powers as are reasonably incidental thereto. Notwithstanding any
provision to the contrary elsewhere in this Agreement, the Agent shall not have
any duties or responsibilities, except those expressly set forth herein, or any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agent.
8.2 Delegation of Duties. The Agent may execute any of its duties under
--------------------
this Agreement and the other Loan Documents by or through agents or attorneys-
in-fact and shall be entitled to advice of counsel concerning all matters
pertaining to such duties. The Agent shall not be responsible for the negligence
or misconduct of any agents or attorneys-in-fact selected by it with reasonable
care.
8.3 Exculpatory Provisions. Neither the Agent nor any of its officers,
----------------------
directors, employees, agents, attorneys-in-fact or Affiliates shall be (i)
liable for any action lawfully taken or omitted to be taken by it or such Person
under or in connection with this Agreement or any other Loan Document (except
for its or such Person's own gross negligence or willful misconduct) or (ii)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Borrowers, any Subsidiary or any other
Obligor or any officer thereof contained in this Agreement or any other Loan
Document or in any certificate, report, statement or other document referred to
or provided for in, or received by the Agent under or in connection with, this
Agreement or any other Loan Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or the Notes or any
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other Loan Document or for any failure of the Borrowers, any Subsidiary or any
other Obligor to perform its obligations hereunder or thereunder. The Agent
shall not be under any obligation to any Lender to ascertain or to inquire as to
the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of the Borrowers, any Subsidiary or any other
Obligor.
8.4 Reliance by the Agent. The Agent shall be entitled to rely, and shall
---------------------
be fully protected in relying, upon any note, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to the Borrowers), the Accountants and independent
accountants and other experts selected by the Agent. The Agent may deem and
treat the payee of any Note as the owner thereof for all purposes unless a
written notice of assignment, negotiation or transfer thereof shall have been
filed with the Agent. The Agent shall be fully justified in failing or refusing
to take any action under this Agreement or any other Loan Document unless it
shall first receive such advice or concurrence of the Majority Lenders or all
Lenders, as it deems appropriate, or it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense (except to
the extent incurred as a result of the Agent's gross negligence or willful
misconduct) which may be incurred by it by reason of taking or continuing to
take any such action. The Agent shall in all cases be fully protected in acting,
or in refraining from acting, under this Agreement and the Notes and the other
Loan Documents in accordance with a request of the Majority Lenders or all
Lenders, as may be required, and such request and any action taken or failure to
act pursuant thereto shall be binding upon all the Lenders and all future
holders of the Notes.
8.5 Notice of Default. The Agent shall not be deemed to have knowledge or
-----------------
notice of the occurrence of any Default hereunder unless the Agent has received
notice from a Lender or the Borrowers referring to this Agreement, describing
such Default and stating that such notice is a "notice of default". In the event
that the Agent receives such a notice, the Agent shall give notice thereof to
the Lenders. The Agent shall take such action with respect to such Default as
shall be reasonably directed by the Majority Lenders or all Lenders as
appropriate; provided that unless and until the Agent shall have received such
directions, the Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default as it shall deem
advisable in the best interests of the Lenders or as the Agent shall believe
necessary to protect the Lenders' interests in the Collateral or the Guarantor
Collateral.
8.6 Non-Reliance on the Agent and Other Lenders. Each Lender expressly
-------------------------------------------
acknowledges that neither the Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any representations
or warranties to it and that no act by the Agent hereafter taken, including any
review of the affairs of the Borrowers, any Subsidiary or any other Obligor,
shall be deemed to constitute any representation or warranty by the Agent to any
Lender. Each Lender represents to the Agent that it has, independently and
without reliance upon the Agent or any other Lender, and based on such documents
and information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Borrowers, any Subsidiary and the other
Obligors and made its own decision to make its Loans, and participate
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in Letters of Credit, hereunder and enter into this Agreement. Each Lender also
represents that it will, independently and without reliance upon the Agent 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 analysis, appraisals
and decisions in taking or not taking action under this Agreement and the other
Loan Documents, and to make such investigation as it deems necessary to inform
itself as to the business, operations, property, financial and other condition
and creditworthiness of the Borrowers, their Subsidiaries and the other
Obligors. Except for notices, reports and other documents expressly required to
be furnished to the Lenders by the Agent hereunder, the Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, property, condition (financial
or otherwise), prospects or creditworthiness of the Borrowers, any Subsidiary or
any other Obligor which may come into the possession of the Agent or any of its
respective officers, directors, employees, agents, attorneys-in-fact or
Affiliates.
8.7 Indemnification. The Lenders agree to indemnify the Agent in its
---------------
capacity as such (to the extent not reimbursed by the Borrowers, their
Subsidiaries or the other Obligors and without limiting the obligation of such
Persons to do so), ratably according to the respective amounts of their
Commitments, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs (including, without
limitation, the allocated cost of internal counsel), expenses or disbursements
of any kind whatsoever which may at any time (including, without limitation, at
any time following the payment of the Notes) be imposed on, incurred by or
asserted against the Agent, in its capacity as Agent, but not as a Lender
hereunder, in any way relating to or arising out of this Agreement, any of the
other Loan Documents or any documents contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby or any action taken
or omitted by the Agent under or in connection with any of the foregoing;
provided that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements to the extent resulting from the Agent's gross
negligence or willful misconduct. The agreements in this Section shall survive
the payment of the Notes and all other amounts payable hereunder and the
expiration of the Letters of Credit.
8.8 The Agent in Its Individual Capacity. The Agent and its Affiliates
------------------------------------
may make loans to, accept deposits from and generally engage in any kind of
business with the Borrowers, any Subsidiary and the other Obligors as though the
Agent were not the Agent hereunder and under the other Loan Documents. With
respect to the Agent, the Loans made or renewed and the Letters of Credit issued
or participated in by the Agent, and any Note issued to the Agent shall have the
same rights and powers under this Agreement and the other Loan Documents as any
Lender and may exercise the same as though it were not the Agent, and the terms
"Lender" and "Lenders" shall include the Agent in its individual capacity.
8.9 Successor Agent. The Agent may resign as Agent upon 30 days' notice
---------------
to the Lenders. If the Agent shall resign as Agent under this Agreement and the
other Loan Documents, then the Majority Lenders shall appoint from among the
Lenders a successor agent for the Lenders, which successor agent shall be
approved by the Borrowers (which consent shall not be unreasonably withheld),
whereupon such successor agent shall succeed to the rights, powers and duties of
the Agent and the term "Agent" shall mean such successor agent, effective upon
its appointment, and the former Agent's rights, powers and duties as Agent shall
be
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terminated, without any other or further act or deed on the part of such former
Agent or any of the parties to this Agreement or any holders of the Notes. After
any retiring Agent's resignation as Agent, the provisions of this Section shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent under this Agreement and the other Loan Documents. Further, if the
Agent no longer has any Loans, Letter of Credit participations or Commitments
hereunder, the Agent shall immediately resign and shall be replaced, and have
the benefits, as set forth in this Section 8.9. In addition, after the
replacement of an Agent hereunder, the retiring Agent shall remain a party
hereto and shall continue to have all the rights and obligations of an Agent
under this Agreement with respect to Letters of Credit issued by it prior to
such replacement, but shall not be required to issue additional Letters of
Credit.
SECTION 9. MISCELLANEOUS
9.1 Amendments and Waivers. Neither this Agreement, any Note, any other
----------------------
Loan Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this Section. With the
prior written consent of the Majority Lenders and the Borrowers (and, in the
case of any Loan Document other than this Agreement, the relevant Obligor), the
Borrowers may, from time to time, enter into written amendments, supplements or
modifications hereto and to the Notes and the other Loan Documents for the
purposes of adding any provisions to this Agreement or the Notes or the other
Loan Documents or changing in any manner the rights of the Lenders, the
Borrowers or any other Obligor hereunder or thereunder or waiving, on such terms
and conditions as may be specified in such instrument, any of the requirements
of this Agreement or the Notes or the other Loan Documents or any Default and
its consequences; provided, however, that no such waiver and no such amendment,
-------- -------
supplement or modification shall (i) (a) reduce the amount or extend the
maturity of any Note or any installment due thereon, or reduce the rate or
extend the time of payment of interest thereon, or reduce the amount or extend
the time of payment of any fee, indemnity or reimbursement payable to any Lender
hereunder, or change the amount of any Lender's Commitment, or amend, modify or
waive any provision of Section 2.4 or 2.5(e), in each case without the written
consent of the Lender affected thereby; or (b) amend, modify or waive any
provision of this Section 9.1 or reduce the percentage specified in or otherwise
modify the definition of Majority Lenders, or consent to the assignment or
transfer by any Obligor of any of its rights and obligations under this
Agreement and the other Loan Documents (except as permitted under Section 6.4);
or (c) release any Obligor from any liability under its respective Loan
Documents; or (d) release any material portion of the Collateral or any material
portion of the Guarantor Collateral, except for any Asset Disposition or release
of Lien permitted by this Agreement or any other Loan Document; or (e) amend,
modify or waive, directly or indirectly, any of the provisions of Section
2.1(h), 2.2(e) or 2.11; or (f) amend, modify or waive any provision of this
Agreement requiring the consent or approval of all Lenders; or (g) increase the
amount of the Aggregate Commitment, in each case set forth in clauses (i)(b)
through (i)(g) above without the written consent of all the Lenders; or (ii)
amend, modify or waive any provision of Section 4.3 with respect to the making
of a Revolving Loan, or reduce the percentage specified in, or otherwise modify
the definition of, Majority Revolving Loan Lenders, without the written consent
of the Majority Revolving Loan Lenders; or (iii) amend, modify or waive any
provision of Section 4.2 or 4.3 with respect to the making of an Incremental
Loan, or reduce the percentage specified in, or otherwise modify the
determination of, Majority Incremental Loan Lenders, without the written consent
of the Majority Incremental Loan
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Lenders; or (iv) amend, modify or waive any provision of Section 8 without the
written consent of the then Agent, or any provision affecting the rights and
duties of the Agent as the issuer of Letters of Credit without the consent of
the then Agent. Any such waiver and any such amendment, supplement or
modification shall apply equally to each of the Lenders and shall be binding
upon the Borrowers, the other Obligors, the Lenders, the Agent and all future
holders of the Notes. In the case of any waiver, the Borrowers, the other
Obligors, the Lenders and the Agent shall be restored to their former position
and rights hereunder and under the outstanding Notes and any other Loan
Documents, and any Default waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to any subsequent or other Default,
or impair any right consequent thereon.
9.2 Notices. All notices, requests and demands or other communications to
-------
or upon the respective parties hereto to be effective shall be in writing
(including by telecopy), and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made when delivered by hand, or 3 days
after being deposited in the United States mail, certified and postage prepaid
and return receipt requested, or, in the case of telecopy notice, when received,
in each case addressed as follows in the case of the Borrowers and the Agent,
and as set forth on the signature page hereto, or in the Assignment and
Acceptance pursuant to which a Person becomes a party hereto, in the case of the
Lenders, or to such other address as may be hereafter notified by the respective
parties hereto and any future holders of the Notes:
The Borrowers:
Entravision Communications Company, L.L.C.
11900 Olympic Boulevard, Suite 590
Los Angeles, California 90064
Attention: Walter F. Ulloa
Philip C. Wilkinson
Jeanette Tully
Telecopy: (310) 820-2445
With a Copy to (which shall not constitute
notice to the Borrowers):
(i) Thompson Hine & Flory, LLP
1920 N Street, N.W.
Washington, DC 20036-1601
Attention: Barry A. Friedman, Esq.
Telecopy: (202) 331-8330, and
(ii) Zevnik Horton Guibord
McGovern Palmer & Fognani, L.L.P.
101 West Broadway, 17th Floor
San Diego, California 92101
Attention: Kenneth D. Polin, Esq.
Telecopy: (619) 515-9628
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The Agent: Union Bank of California, N.A
445 South Figueroa Street
Los Angeles, California 90071
Attention: Lena M. Bryant
Telecopy: (213) 236-5747
provided that any notice, request or demand to or upon the Agent or the Lenders
- --------
pursuant to Section 2.1, 2.2, 2.3, 2.4 or 2.6 shall not be effective until
received.
9.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in
------------------------------
exercising, on the part of the Agent or any Lender, any right, remedy, power or
privilege hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges herein provided
are cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
9.4 Survival of Representations and Warranties. All representations and
------------------------------------------
warranties made hereunder and in any document, certificate or statement
delivered pursuant hereto or in connection herewith shall survive the execution
and delivery of this Agreement and the Notes.
9.5 Payment of Expenses and Taxes. The Borrowers agree (a) to pay or
-----------------------------
reimburse the Agent for all its reasonable costs and out-of-pocket expenses
(including travel and other expenses incurred by it or its agents in connection
with performing due diligence with regard hereto) incurred in connection with
the development, preparation and execution of, and any amendment, supplement or
modification to, this Agreement and the Notes and the other Loan Documents and
any other documents prepared in connection herewith or therewith, and the
consummation and administration of the transactions contemplated hereby and
thereby (including those contemplated to occur on the Closing Date), including,
without limitation, syndication efforts in connection with this Agreement and
the reasonable fees and disbursements of counsel to the Agent (including special
counsel with regard to FCC matters, special counsel with regard to Collateral or
Guarantor Collateral located outside of California and the allocated costs of
internal counsel to the Agent) and the Agent agrees to provide the Borrowers
with a good faith estimate of such counsel fees, which counsel fees shall be
subject to the approval of the Borrowers, such approval not to be unreasonably
withheld or delayed, (b) after the occurrence and during the continuance of a
Default, to pay or reimburse the Agent and each Lender for all its reasonable
costs and out-of-pocket expenses incurred in connection with the enforcement or
preservation of any rights under this Agreement, the Notes, the other Loan
Documents and any such other documents or in connection with any refinancing or
restructuring of the credit arrangements provided under this Agreement in the
nature of a "work-out" or of any insolvency or bankruptcy proceeding, including,
without limitation, reasonable legal fees and disbursements of counsel to the
Agent and each Lender (including the allocated costs of internal counsel to the
Agent), (c) to pay, and indemnify and hold harmless each Lender and the Agent
from any and all recording and filing fees and any and all liabilities with
respect to, or resulting from any delay in paying, stamp, excise and other
taxes, if any, which may be payable or determined to be payable in connection
with the execution and delivery of, or consummation or administration of any of
the transactions contemplated by, or any amendment, supplement or
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modification of, or any waiver or consent under or in respect of, this
Agreement, the Notes, the other Loan Documents and any such other documents and
(d) to pay, and indemnify and hold harmless each Lender and the Agent from and
against, any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs (including the allocated cost of internal
counsel and the reasonable legal fees and disbursements of outside counsel to
the Lenders and the Agent), expenses or disbursements of any kind or nature
whatsoever with respect to the execution, delivery, enforcement, performance and
administration of this Agreement, the Notes and the other Loan Documents, the
Acquisitions or the use of the proceeds of the Loans or the Letters of Credit
and any such other documents (all the foregoing, collectively, the "indemnified
liabilities"), provided, that the Borrowers shall have no obligation hereunder
--------
to the Agent or any Lender with respect to indemnified liabilities arising from
the gross negligence or willful misconduct of the Agent or such Lender or their
agents or attorneys-in-fact. The agreements in this Section shall survive
repayment of the Notes and all other amounts payable hereunder. The Agent and
the Lenders agree to provide reasonable details and supporting information
concerning any costs and expenses required to be paid by the Borrowers pursuant
to the terms hereof.
9.6 Successors and Assigns; Participations; Purchasing Lenders.
----------------------------------------------------------
(a) This Agreement shall be binding upon and inure to the benefit of the
Borrowers, the Lenders, the Agent, all future holders of the Notes and their
respective successors and assigns, except that the Borrowers may not assign,
transfer or delegate any of their rights or obligations under this Agreement
without the prior written consent of each Lender.
(b) Any Lender may, in the ordinary course of its commercial banking or
finance business and in accordance with applicable law, at any time sell to one
or more banks or other entities ("Participants") participating interests in any
------------
Loan owing to such Lender, any Letter of Credit participated in by such Lender,
any Note held by such Lender, any Commitment of such Lender or any other
interest of such Lender hereunder and under the other Loan Documents; provided
--------
that the holder of any such participation, other than an Affiliate of such
Lender, shall not be entitled to require such Lender to take or omit to take any
action hereunder except action directly affecting the extension of the maturity
of any portion of the principal amount of a Loan or Commitment, the expiration
of a Letter of Credit or any portion of interest or fees related thereto
allocated to such participation or a reduction of the principal amount or
principal payment amount of or the rate of interest payable on the Loans or any
fees related thereto or reduction of the amount to be reimbursed under any
Letter of Credit, or a release of any Obligor or any substantial portion of the
Collateral or the Guarantor Collateral or any increase in participation amounts.
In the event of any such sale by a Lender of participating interests to a
Participant, such Lender's obligations under this Agreement to the other parties
to this Agreement shall remain unchanged, such Lender shall remain solely
responsible for the performance thereof, such Lender shall remain the holder of
any such Note and the participant in any such Letter of Credit for all purposes
under this Agreement and the other Loan Documents, and the Borrowers and the
Agent shall continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under this Agreement and the other
Loan Documents. The Borrowers agree that if amounts outstanding under this
Agreement and the Notes are due or unpaid, or shall have been declared or shall
have become due and payable upon the occurrence of an Event of Default, each
Participant shall be deemed to have the right of
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setoff in respect of its participating interest in amounts owing under this
Agreement and any Note to the same extent as if the amount continuing of its
participating interest were owing directly to it as a Lender under this
Agreement or any Note, provided that such Participant shall only be entitled to
--------
such right of setoff if it shall have agreed in the agreement pursuant to which
it shall have acquired its participating interest to share with the Lenders the
proceeds thereof as provided in Section 9.7. The Borrowers also agree that each
--------
Participant shall be entitled to the benefits of Sections 2.13, 2.14 and 2.15
with respect to its participation in the Commitments and the Loans and the
Letters of Credit outstanding from time to time; provided, that no Participant
shall be entitled to receive any greater amount pursuant to such Sections than
the transferor Lender would have been entitled to receive in respect of the
amount of the participation transferred by such transferor Lender to such
Participant had no such transfer occurred.
(c) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell to any of its
Affiliates or to any Lender, any Affiliate thereof or to one or more additional
lenders or financial institutions, which additional lenders shall be subject to
the consent of the Borrowers, such consent not to be unreasonably withheld and
not to be required if a Default has occurred and is continuing ("Purchasing
----------
Lenders") all or any part of its rights and obligations under this Agreement,
- -------
the Notes and the other Loan Documents pursuant to an Assignment and Acceptance
substantially in the form of Exhibit C, executed by such Purchasing Lender and
such transferor Lender and delivered to the Agent for its acceptance and
recording in the Register (as defined in (d) below), provided, that any such
--------
sale must result in the Purchasing Lender having at least $5,000,000 in
aggregate amount of obligations under this Agreement, the Notes and the other
Loan Documents. Upon such execution, delivery, acceptance and recording, from
and after the transfer effective date determined pursuant to such Assignment and
Acceptance, (x) the Purchasing Lender thereunder shall be a party hereto and, to
the extent provided in such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder with a Commitment as set forth therein, and
(y) the transferor Lender thereunder shall, to the extent of such assigned
portion and as provided in such Assignment and Acceptance, be released from its
obligations under this Agreement and the other Loan Documents (and, in the case
of an Assignment and Acceptance covering all or the remaining portion of a
transferor Lender's rights and obligations under this Agreement, such transferor
Lender shall cease to be a party hereto). Such Assignment and Acceptance shall
be deemed to amend this Agreement to the extent, and only to the extent,
necessary to reflect the addition of such Purchasing Lender and the resulting
adjustment of Commitment Percentages arising from the purchase by such
Purchasing Lender of all or a portion of the rights and obligations of such
transferor Lender under this Agreement, the Notes and the other Loan Documents.
On or prior to the transfer effective date determined pursuant to such
Assignment and Acceptance, the Borrowers, at their own expense, shall execute
and deliver to the Agent in exchange for the surrendered Note or Notes a new
Note or Notes to the order of such Purchasing Lender in an amount equal to the
Commitments assumed by it pursuant to such Assignment and Acceptance, and if the
transferor Lender has retained a Commitment hereunder, new Notes to the order of
the transferor Lender in an amount equal to the Commitments retained by it
hereunder. Such new Notes shall be dated the Closing Date and shall otherwise be
in the form of the Notes replaced thereby. The Notes surrendered by the
transferor Lender shall be returned by the Agent to the Borrowers marked
"canceled."
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(d) The Agent shall maintain at its address referred to in Section 9.2 a
copy of each Assignment and Acceptance delivered to it and a register (the
"Register") for the recordation of the names and addresses of the Lenders and
--------
the Commitments of, and principal amount of the Loans owing to, and, if
applicable, the Letters of Credit participated in by, each Lender from time to
time. The entries in the Register shall be conclusive, in the absence of
manifest error, and the Borrowers, the Agent and the Lenders may treat each
Person whose name is recorded in the Register as the owner of the Loans and the
participant in the Letters of Credit, if applicable, recorded therein for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrowers or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by a
transferor Lender and Purchasing Lender (and, in the case of a Purchasing Lender
that is not then a Lender or an Affiliate thereof, by the Borrowers and the
Agent) together with payment to the Agent (except in the case of a Lender
assigning to its Affiliate) of a registration and processing fee of $2,500, the
Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the
effective date determined pursuant thereto record the information contained
therein in the Register and give notice of such acceptance and recordation to
the Lenders and the Borrowers.
(f) The Borrowers authorize each Lender to disclose to any Participant or
Purchasing Lender (each, a "Transferee") and any prospective Transferee any and
----------
all financial information in such Lender's possession concerning the Borrowers
and their Subsidiaries and Affiliates which has been delivered to such Lender by
or on behalf of the Borrowers pursuant to this Agreement or any other Loan
Document or which has been delivered to such Lender by or on behalf of the
Borrowers in connection with such Lender's credit evaluation of the Borrowers
and their Subsidiaries and Affiliates prior to becoming a party to this
Agreement.
(g) If, pursuant to this Section, any interest in this Agreement, any
Letter of Credit or any Note is transferred to any Transferee which is organized
under the laws of any jurisdiction other than the United States or any state
thereof, the transferor Lender shall cause such Transferee, concurrently with
the effectiveness of such transfer, (i) to represent to the transferor Lender
and the Agent (for the benefit of the transferor Lender, the Agent and the
Borrowers) that under applicable law and treaties no taxes will be required to
be withheld by the Agent, the Borrowers or the transferor Lender with respect to
any payments to be made to such Transferee in respect of the Loans or the
Letters of Credit, (ii) to furnish to the transferor Lender, the Agent and the
Borrowers either U.S. Internal Revenue Service Form 4224 or U.S. Internal
Revenue Service Form 1001 (wherein such Transferee claims entitlement to
complete exemption from U.S. federal withholding tax on all interest payments
hereunder) and (iii) to agree (for the benefit of the transferor Lender, the
Agent and the Borrowers) to provide the transferor Lender, the Agent and the
Borrowers a new Form 4224 or Form 1001 upon the expiration or obsolescence of
any previously delivered form and comparable statements in accordance with
applicable U.S. laws and regulations and amendments duly executed and completed
by such Transferee, and to comply from time to time with all applicable U.S.
laws and regulations with regard to such withholding tax exemption.
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(h) Nothing herein shall prohibit any Lender from pledging or assigning
any of its rights under its Notes, or, if applicable, its participation in any
Letter of Credit, to any Federal Reserve Bank in accordance with applicable law.
9.7 Adjustments; Set-Off.
--------------------
(a) If any Lender (a "benefitted Lender") shall at any time receive any
-----------------
payment of all or part of its Loans, its participations in Letters of Credit, or
interest thereon, or fees, or receive any collateral in respect thereof (whether
voluntarily or involuntarily, by set-off, pursuant to events or proceedings of
the nature referred to in Section 7(g), or otherwise), in a greater proportion
than any such payment to or collateral received by any other Lender, if any, in
respect of such other Lender's Loans, its participations in Letters of Credit,
or interest thereon, or fees, such benefitted Lender shall purchase for cash
from the other Lenders such portion of each such other Lender's Loans,
participations in Letters of Credit, or fees, or shall provide such other
Lenders with the benefits of any such collateral, or the proceeds thereof, as
shall be necessary to cause such benefitted Lender to share the excess payment
or benefits of such collateral or proceeds ratably with each of the Lenders;
provided, however, that if all or any portion of such excess payment or benefits
- -------- -------
is thereafter recovered from such benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest. The Borrowers agree that each Lender so
purchasing a portion of another Lender's Loan or its participations in Letters
of Credit may exercise all rights of payment (including, without limitation,
rights of set-off) with respect to such portion as fully as if such Lender were
the direct holder of such portion.
(b) In addition to any rights and remedies of the Lenders provided by law,
with the prior consent of the Majority Lenders, each Lender shall have the
right, exercisable upon the occurrence and during the continuance of an Event of
Default and acceleration of the Obligations pursuant to Section 7, without prior
notice to the Borrowers, any such notice being expressly waived by the Borrowers
to the extent permitted by applicable law, to set-off and appropriate and apply
against any such Obligations any and all deposits (general or special, time or
demand, provisional or final), in any currency, and any other credits,
indebtedness or claims in any currency, in each case whether direct or indirect,
absolute or contingent, matured or unmatured, at any time held or owing by such
Lender or any branch or agency thereof or bank controlling such Lender to or for
the credit or the account of the Borrowers. Each Lender agrees promptly to
notify the Borrowers after any such set-off and application made by such Lender,
provided that the failure to give such notice shall not affect the validity of
- --------
such set-off and application.
9.8 Counterparts. This Agreement may be executed by one or more of the
------------
parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
9.9 Severability. Any provision of this Agreement which is prohibited or
------------
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any
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such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
9.10 Integration. This Agreement represents the entire agreement of the
-----------
Borrowers, the Agent and the Lenders with respect to the subject matter hereof,
and there are no promises, undertakings, representations or warranties by the
Agent or any Lender relative to the subject matter hereof not expressly set
forth or referred to herein or in the other Loan Documents.
9.11 GOVERNING LAW. THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
CALIFORNIA (WITHOUT REFERENCE TO ITS CHOICE OF LAW RULES).
9.12 Alternative Dispute Resolution.
------------------------------
(a) Claims or Controversies Subject to Arbitration or Judicial Reference.
(i) Any Claim other than a Claim that arises out of or relates to
any obligation under any Loan Document that is secured, in whole or in
part, by an interest in real property shall, at the written request of any
Party, be determined by Arbitration.
(ii) Any Claim that arises out of or relates to any obligation under
any Loan Document that is secured, in whole or in part, by an interest in
real property shall be determined by Arbitration only with the consent of
both, (A) the Obligor party to the Loan Document under which such Claim
arises and (B) the Majority Lenders. If both such Parties do not consent to
the determination of any such Claim by Arbitration, then such Claim shall,
at the written request of either of such Parties, be determined by
Reference.
(iii) The determination as to whether or not a Claim arises out of or
relates to any obligation under any Loan Document that is secured, in whole
or in part, by an interest in real property shall be made at the time the
arbitrator or referee is selected pursuant to Section 9.12(b).
(b) Selection of Arbitrator or Referee. Within thirty (30) days after
----------------------------------
written demand, or within thirty (30) days after commencement by any Party of
any lawsuit subject to this Agreement, the parties shall select a single neutral
arbitrator pursuant to the Commercial Arbitration Rules of the AAA or a single
neutral referee pursuant to the Judicial Reference Procedures of the AAA.
However, the arbitrator or referee selected must be a retired state or federal
court judge with at least five years of judicial experience in civil matters. In
the event that the selection pursuant to such Commercial Arbitration Rules or
Judicial Reference Procedures does not result in the appointment of a single
neutral arbitrator or a single neutral referee within such thirty (30) day
period, any Party may petition the court to appoint a single neutral arbitrator
or a single neutral referee having such qualifications. The Parties shall
equally bear the fees and expenses of the arbitrator or referee unless the
arbitrator or referee otherwise provides in the award or statement of decision.
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(c) Conduct of Arbitration or Reference. The arbitrator shall have the
-----------------------------------
powers provided under Applicable State Law and the Commercial Arbitration Rules
of the AAA, and the referee shall have the powers provided under Applicable
State Law and the Judicial Reference Procedures of the AAA except as provided in
this Agreement, including without limitation the following:
(1) The arbitrator or referee shall determine all challenges to the
legality and/or enforceability of this Agreement.
(2) The arbitrator or referee shall apply the rules of evidence to
the same extent as they would be applied in a court of law.
(3) Subject to the provisions of this Agreement, the arbitrator may
award or the referee may report, a statement of decision providing for any
remedy or relief, including without limitation judicial foreclosure, a
deficiency judgment or equitable relief, and give effect to all legal and
equitable defenses, including without limitation statutes of limitation, the
statute of frauds, waiver and estoppel.
(4) A Party may not conduct discovery unless the arbitrator or
referee grants such party leave to do so upon a showing of good cause. All
discovery shall be completed within 90 days after the appointment of the
arbitrator or referee, except upon a showing of good cause by any Party. The
arbitrator or referee shall limit discovery to non-privileged material that is
relevant to the issues to be determined by the arbitrator or referee.
(5) The referee shall determine the time of the hearing. The hearing
shall take place in Los Angeles, California. The hearing must be commenced
within sixty (60) days after completion of discovery, unless the arbitrator or
referee grants a continuance upon a showing of good cause by any Party. At least
fourteen (14) days before the date set for hearing, the Parties shall exchange
copies of exhibits to be offered as evidence, and lists of witnesses who will
testify, at such hearing. Once commenced, the hearing shall proceed day to day
until completed, unless the arbitrator or the referee grants a continuance upon
a showing of good cause by any Party. Any Party may cause to be prepared, at its
expense, a written transcription or electronic recordation of such hearing.
(6) Any award of the arbitrator or the statement of decision of the
referee shall be supported by written findings of fact and conclusions of law
which the arbitrator or the referee shall concurrently deliver to the Parties.
(7) The arbitrator shall have the power to award or the referee shall
have the power to report a statement of decision providing for reasonable
attorneys' fees and costs (including a reasonable allocation for the costs of
in-house counsel) to the prevailing party.
(8) In the event that punitive damages are permitted under Applicable
State Law, the award of the arbitrator or the statement of decision of the
referee may provide for recovery of punitive damages provided that the
arbitrator or referee first makes written findings of fact that would satisfy
the requirements for recovery of punitive damages under Applicable State Law.
Any such punitive damages shall not exceed a sum equal to three times the amount
of actual damages as determined by the arbitrator or referee.
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(9) In the event that Applicable State Law provides that publications
or communications made in a judicial proceeding are subject to a litigation
privilege, such litigation privilege shall apply to the same extent to
publications or communications made in the Arbitration or Reference.
(d) Provisional Remedies, Self-Help and Foreclosure. No provision of this
-----------------------------------------------
Section 9.12 shall limit the right of any Party (i) to exercise any self-help
remedies or seek specific performance, (ii) to foreclose upon or sell any
collateral, by power of sale or otherwise, or (iii) to obtain or oppose
provisional remedies or necessary procedural orders from a court of competent
jurisdiction, including without limitation appointment of a receiver, before,
after or during the pendency of the Arbitration or Reference. The exercise of,
or opposition to, any such remedy does not waive the right of any Party to
Arbitration or Reference pursuant to this Agreement.
(e) Miscellaneous. Any court of competent jurisdiction shall, upon the
-------------
petition of any Party, confirm the award of the arbitrator and enter judgment in
conformity therewith. Any court of competent jurisdiction shall, upon the filing
of the statement of decision of the referee, enter judgment thereon. Any such
judgment shall be final, binding and non-appealable (subject to vacation or
correction in the amounts set forth, respectively, in California Code of Civil
Procedure Sections 1286.2, 1286.4, 1286.6 and 1286.8). No party shall take any
action to contest such award or judgment except as set forth above. In the event
that multiple claims are asserted, some of which are found not subject to this
Agreement, the Parties agree to stay the proceedings of the claims not subject
to this Agreement until all other claims are resolved in accordance with this
Agreement. In the event that claims are asserted against multiple parties, some
of whom are not subject to this Agreement, the Parties agree to sever the claims
subject to this Agreement and resolve them in accordance with this Agreement. In
the event that any provision of this Section 9.12 is found to be illegal or
unenforceable, the remainder of this Section 9.12 shall remain in full force and
effect. In the event of any challenge to the legality or enforceability of this
Section 9.12, the prevailing Party shall be entitled to recover the costs and
expenses, including reasonable attorneys' fees, incurred by it in connection
therewith. Applicable State Law shall govern the interpretation of this Section
9.12.
(f) Waiver of Right to Trial by Jury. IN CONNECTION WITH ANY ARBITRATION,
--------------------------------
ANY REFERENCE OR ANY OTHER ACTION, PROCEEDING OR COUNTERCLAIM, THE BORROWERS,
THE LENDERS AND THE AGENT HEREBY EXPRESSLY, INTENTIONALLY AND IRREVOCABLY WAIVE
ANY RIGHT THEY MAY OTHERWISE HAVE TO TRIAL BY JURY OF ANY CLAIM.
(g) Defined Terms. As used in this Section 9.12, the following terms
-------------
shall have the respective meanings set forth below:
(i) "AAA" shall mean the American Arbitration Association.
---
(ii) "Applicable State Law" shall mean the law of the State of
--------------------
California; provided, however, that if any Party seeks (A) to exercise
self-help remedies, including without limitation set-off, (B) to foreclose
against or sell any collateral, by power of sale or otherwise or (iii) to
obtain or oppose provisional or ancillary remedies from a court of
competent jurisdiction before, after or during the pendency of the
Arbitration or
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Reference, the law of the state where such collateral is located shall
govern the exercise of or opposition to such rights and remedies.
(iii) "Arbitration" shall mean an arbitration conducted pursuant to
-----------
this Agreement in accordance with Applicable State Law, and under the
Commercial Arbitration Rules of the AAA, as in effect at the time the
arbitrator is selected pursuant to Section 9.12(b).
(iv) "Claim" shall mean any claim, cause of action, action, dispute
-----
or controversy between or among the Parties, including any claim, cause of
action, action, dispute or controversy alleged in or subject to a lawsuit
between or among the Parties, which arises out of or relates to:
(1) any of the Loan Documents,
(2) any negotiations, correspondence or communications relating
to any of the Loan Documents, whether or not incorporated into the Loan
Documents or any indebtedness evidenced thereby,
(3) the administration or management of the Loan Documents or
any indebtedness evidenced thereby or
(4) any alleged agreements, promises, representations or
transactions in connection therewith, including but not limited to any
claim, cause of action, action, dispute or controversy which arises out of
or is based upon an alleged tort or other breach of legal duty.
(v) "Party" shall mean any Obligor, any Lender or the Agent.
-----
(vi) "Reference" shall mean a judicial reference conducted pursuant
---------
to this Agreement in accordance with Applicable State Law and under the
Judicial Reference Procedures of the AAA, as in effect at the time the
referee is selected pursuant to Section 9.12(b) of this Agreement.
9.13 Acknowledgements. The Borrowers hereby acknowledge that:
----------------
(a) they have been advised by counsel in the negotiation, execution and
delivery of this Agreement and the Notes and the other Loan Documents;
(b) neither the Agent nor any Lender has any fiduciary relationship to the
Borrowers solely by virtue of any of the Loan Documents, and the relationship
pursuant to the Loan Documents between the Agent and the Lenders, on one hand,
and the Borrowers on the other hand, is solely that of creditor and debtor; and
(c) no joint venture exists among the Lenders or among the Borrowers, on
one hand and the Lenders, on the other hand.
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9.14 Obligations Absolute. The obligations of each Borrower hereunder
--------------------
(which are joint and several) shall remain in full force and effect without
regard to, and shall not be affected or impaired by the following, any of which
may be taken without the consent of, or notice to, such Borrower (except as
otherwise required by this Agreement), nor shall any of the following give such
Borrower any recourse or right of action against the Agent or any Lender:
(a) Any express or implied amendment, modification, renewal, addition,
supplement, extension (including, without limitation, extensions beyond the
original term) or acceleration of or to any of the Loan Documents;
(b) Any exercise or non-exercise by any Lender of any right or privilege
under any of the Loan Documents;
(c) Any bankruptcy, insolvency, reorganization, composition, adjustment,
dissolution, liquidation or other like proceeding relating to such Borrower, any
Obligor or any other guarantor of the Obligations (which term shall include any
other party at any time directly or contingently liable for any Borrower's
obligations under the Loan Documents) or any Affiliate of any Borrower, or any
action taken with respect to this Agreement by any trustee or receiver, or by
any court, in any such proceeding, whether or not such Borrower shall have had
notice or knowledge of any of the foregoing;
(d) Any release or discharge of any Borrower from its liability under any
of the Loan Documents or any release or discharge of any endorser or guarantor
or of any other party at any time directly or contingently liable for the
Obligations;
(e) Any subordination, compromise, release (by operation of law or
otherwise), discharge, compound, collection or liquidation of any or all of the
Collateral or the Guarantor Collateral described in any of the Loan Documents or
otherwise in any manner, or any substitution with respect thereto;
(f) Any assignment or other transfer of this Agreement in whole or in part
or of any of the Loan Documents;
(g) Any acceptance of partial performance of the Obligations by any
Obligor (and such Borrower waives any and all of its rights under California
Civil Code Section 2822(a));
(h) Any consent to the transfer of the Collateral or the Guarantor
Collateral or any portion thereof; and
(i) Any bid or purchase at any sale of the Collateral or the Guarantor
Collateral.
9.15 Waivers. Each Borrower unconditionally waives any defense to the
-------
enforcement of this Agreement and the other Loan Documents, including, without
limitation:
(a) All presentments, demands for performance, notices of nonperformance,
protests, notices of protest, notices of dishonor, and notices of acceptance of
this Agreement and the other Loan Documents;
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(b) Any right to require the Agent and the Lenders to proceed against any
other Borrower or any guarantor at any time, or to proceed against or exhaust
any security held by the Agent and the Lenders at any time, or to pursue any
other remedy whatsoever at any time;
(c) The defense of any statute of limitations affecting the liability of
such Borrower hereunder, the liability of any other Borrower or any guarantor
under the Loan Documents, or the enforcement thereof, to the extent permitted by
law;
(d) Any defense arising by reason of any invalidity or unenforceability of
any of the Loan Documents or any provision thereof, or any disability of any
other Borrower or any guarantor or of any manner in which the Agent and the
Lenders have exercised their rights and remedies under the Loan Documents, or by
any cessation from any cause whatsoever of the liability of any other Borrower
or any guarantor;
(e) Any defense based upon an election of remedies by the Agent and the
Lenders, including, without limitation, any election to proceed by judicial or
nonjudicial foreclosure of any security, whether real property or personal
property security, or by deed in lieu thereof, and whether or not every aspect
of any foreclosure sale is commercially reasonable, or any election of remedies,
including but not limited to, remedies relating to real property or personal
property security, which destroys or otherwise impairs the subrogation rights of
such Borrower or the rights of such Borrower to proceed against any other
Borrower or any guarantor for reimbursement, or both (including, without
limitation, Code of Civil Procedure Sections 580a, 580b, 580d and 726);
(f) Any right such Borrower may have under Code of Civil Procedure Section
580a including, without limitation, a right to a hearing with respect to the
fair market value of any Collateral or Guarantor Collateral, either before or
after foreclosure, and any right such Borrower may have to require the Agent and
the Lenders to proceed against any Collateral or Guarantor Collateral before
seeking to obtain a judgment against such Borrower hereunder;
(g) Any duty of the Agent or the Lenders to advise such Borrower of any
information known to the Agent or the Lenders regarding the financial condition
of any other Borrower and all other circumstances affecting any other Borrower's
ability to perform its obligations to the Agent and the Lenders, it being agreed
that such Borrower assumes the responsibility for being and keeping informed
regarding such condition or any such circumstances;
(h) Any rights of subrogation, reimbursement, exoneration, contribution
and indemnity, and any rights or claims of any kind or nature against any other
Borrower which arise out of or are caused by this Agreement, and any rights to
enforce any remedy which the Agent or the Lenders now have or may hereafter have
against any other Borrower, and any benefit of, and any right to participate in,
any security now or hereafter held by the Agent or the Lenders;
(i) Any right such Borrower might have, under Section 2815 of the
California Civil Code or otherwise, to revoke its obligations under this
Agreement as to any advances made by the Lenders to or on behalf of any other
Borrower or pursuant to the terms of any of the Loan Documents, it being the
intention of such Borrower that its Obligations under this Agreement remain in
full force and effect and apply to all Obligations whenever incurred; and
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(j) Without limiting the generality of the foregoing or any other
provision hereof, any rights and benefits which might otherwise be available to
such Borrower under California Civil Code Sections 2809, 2810, 2819, 2839, 2845,
2848, 2849, 2850, 2899 and 3433, or any successor sections.
9.16 Headings. Section headings herein are included for convenience of
--------
reference only and shall not constitute a part of this Agreement for any other
purpose.
9.17 Copies of Certificates, Etc. Whenever the Borrowers are required to
---------------------------
deliver notices, certificates, opinions, statements or other information
hereunder to the Agent for delivery to any Lender (including under Article 4),
it shall do so in such number of copies as the Agent shall reasonably specify.
9.18 Publicity. The Agent shall have the right to review and approve, in
---------
advance, any public announcements (in any form) and any filings describing or
quoting from the credit arrangements reflected in this Agreement and the other
Loan Documents, provided, however, that the Borrowers (i) shall be permitted to
-------- -------
file copies of any Loan Document with the FCC or any other governmental agency
as required by law and (ii) shall also be permitted to disclose information
concerning the Loan Documents if the Borrowers' attorneys reasonably believe
that such disclosure is required by law.
9.19 Confidentiality. The Lenders shall take normal and reasonable
---------------
precautions to maintain the confidentiality of all non-public information
obtained pursuant to the requirements of this Agreement which has been
identified as such by the Borrowers, but may, in any event, make disclosures (i)
reasonably required by any bona fide transferee, assignee or participant in
connection with the contemplated transfer or assignment of any of the
Commitments or Loans or participations therein or participations in Letters of
Credit or (ii) as required or requested by any governmental agency or
representative thereof or as required pursuant to legal process or (iii) to its
attorneys and accountants or (iv) as required by law or (v) in connection with
litigation involving any Lender; provided that (a) such transferee, assignee or
participant agrees to comply with the provisions of this Section 9.19 unless
specifically prohibited by applicable law or court order and (b) in no event
shall any Lender be obligated or required to return any materials furnished by
any Borrower or any Subsidiary.
9.20 Certain Powers of Managing Members. Notwithstanding any provision of
----------------------------------
this Agreement to the contrary, each Borrower hereby agrees that (i) at any
time, any notice (including borrowing notices, Letter of Credit Requests,
notices of prepayment and Continuation Notices) to be given by such Borrower, or
an officer of such Borrower (including a Responsible Officer or the Chief
Financial Officer of such Borrower) hereunder or under any other Loan Document
may be executed on behalf of such Borrower or such officer by the Managing
Members and such notice shall have the same force and effect, and be binding on
such Borrower, as if it were executed by an officer of such Borrower; (ii) any
consent, approval or agreement by such Borrower, or any certificate to be given
by such Borrower or by an officer of such Borrower (including a Covenant
Compliance Certificate but excluding a Solvency Certificate), required under the
terms of this Agreement (including pursuant to Sections 8.9, 9.1 and 9.6(c)) or
under any other Loan Document shall be deemed given if executed on behalf of
such Borrower by the Managing Members and such consent, approval, agreement or
certificate shall have the same
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force and effect, and be binding on such Borrower, as if it had been executed by
an officer of such Borrower; and (iii) at any time, any notice or certificate to
be given by the Agent or the Lenders hereunder (including notices of changes in
Applicable Lending Offices and notices under Sections 2.9, 2.10, 2.13 and 2.14)
or under any other Loan Document may be given by the Agent or the Lenders to
Entravision only (such Borrower hereby appointing Entravision to accept and
receive all notices hereunder on its behalf) and the Agent and the Lenders shall
have no obligation to give such notice to any other Borrower hereunder.
9.21 Relationship with Prior Agreements. This Agreement amends and restates
----------------------------------
in its entirety the Original Credit Agreement. This Agreement renews and
continues the Original Credit Agreement without any novation, discharge or
satisfaction of the underlying obligations or indebtedness (or any guaranty or
collateral security therefor), all of which obligations, indebtedness and
security remain outstanding under the Credit Agreement and the Notes.
Notwithstanding anything herein to the contrary, (a) interest and other
obligations under the Original Credit Agreement accrued and payable prior to the
date of amendment and restatement hereof but remaining unpaid shall not be
discharged and shall be due and payable in accordance with the terms of the
Original Credit Agreement, (b) interest and other obligations under the Original
Credit Agreement accrued and payable on or after the date of amendment and
restatement hereof shall be due and payable in accordance with the terms of this
Agreement and (c) Letters of Credit outstanding under the Original Credit
Agreement shall be deemed, on and after the Closing Date, to be outstanding
under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in Los Angeles, California by their proper and duly
authorized officers as of the day and year first above written.
BORROWERS
---------
KSMS-TV, INC.
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: President & Treasurer
TIERRA ALTA BROADCASTING, INC.
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: Vice President & Treasurer
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CABRILLO BROADCASTING CORPORATION
By: /s/ Philip C. Wilkinson
Name: Philip C. Wilkinson
Title: President & Chief Financial Officer
GOLDEN HILLS BROADCASTING CORPORATION
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: President & Treasurer
LAS TRES PALMAS CORPORATION
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: President & Treasurer
VALLEY CHANNEL 48, INC.
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: Chairman & Chief Executive Officer
TELECORPUS, INC.
By: /s/ Walter F. Ulloa
/s/ Philip C. Wilkinson
Name: Walter F. Ulloa Philip C. Wilkinson
Title: Chairman & Chief President & Chief
Executive Officer Operating Officer
ENTRAVISION COMMUNICATIONS COMPANY, L.L.C.
By: /s/ Walter F. Ulloa
Walter F. Ulloa
Managing Member
<PAGE>
By: /s/ Philip C. Wilkinson
Philip C. Wilkinson
Managing Member
AGENT
-----
UNION BANK OF CALIFORNIA, N.A., as Agent
By: /s/ Jenny Dongo
Name: Jenny Dongo
Title: Assistant Vice President
LENDERS
-------
UNION BANK OF CALIFORNIA, N.A.,
as a Lender
By: /s/ Jenny Dongo
Name: Jenny Dongo
Title: Assistant Vice President
Revolving Loan Commitment:
$27,000,000
Address for Notices
-------------------
(a) For Credit:
----------
445 South Figueroa Street
Los Angeles, California 90071
Attention: Lena M. Bryant
Telephone: (213) 236-7535
Facsimile: (213) 236-5747
(b) For Operations:
--------------
445 South Figueroa Street
Los Angeles, California 90071
Attention: Liliane Biermann
Telephone: (213) 236-4054
Facsimile: (213) 236-5276
<PAGE>
Approved Lending Offices
------------------------
Applicable Lending Office for Base Rate Loans:
445 South Figueroa Street
Los Angeles, California 90071
Applicable Lending Office for LIBOR Loans:
445 South Figueroa Street
Los Angeles, California 90071
Applicable Lending Office for Participations
in Letters of Credit:
445 South Figueroa Street
Los Angeles, California 90071
CIBC INC., as a Lender
By: /s/ Harold Birk
Name: Harold Birk
Title: Executive Director CIBC Oppenheimer
Corp., as Agent
Revolving Loan Commitment:
$22,000,000
Address for Notices
-------------------
(a) For Credit:
----------
425 Lexington Avenue
New York, New York 10017
Attention: Pamela Heyer Poutre
Telephone: (212) 856-3536
Facsimile: (212) 856-3991
(b) For Operations/Administration:
-----------------------------
2727 Paces Ferry Road, Suite 1200
2 Paces West, Building 2
Atlanta, Georgia 30339
Attention: Kelly Swift (Operations)
Telephone: (770) 319-4874 (K. Swift)
Facsimile: (770) 319-4950 (K. Swift)
<PAGE>
Attention: Bonnie Harris (Admin.)
Telephone: (770) 319-4850
Facsimile: (770) 319-4950
Approved Lending Offices
------------------------
Applicable Lending Office for Base Rate Loans:
2727 Paces Ferry Road, Suite 1200
2 Paces West, Building 2
Atlanta, Georgia 30339
Applicable Lending Office for LIBOR Loans:
2727 Paces Ferry Road, Suite 1200
2 Paces West, Building 2
Atlanta, Georgia 30339
Applicable Lending Office for Participations in
Letters of Credit:
2727 Paces Ferry Road, Suite 1200
2 Paces West, Building 2
Atlanta, Georgia 30339
ABN-AMRO BANK N.V.,
as a Lender
By: /s/ David C. Carrington
Name: David C. Carrington
Title: Vice President
By: /s/ James Dunleavy
Name: James Dunleavy
Title: Sr. Vice President
Revolving Loan Commitment:
$17,000,000
Address for Notices:
-------------------
500 Park Avenue
New York, New York 10022
Attention: David Carrington
Telephone: (212) 446-4382
Facsimile: (212) 446-4203
<PAGE>
with a copy to:
--------------
135 South LaSalle Street, Suite 2805
Chicago, Illinois 60603
Attention: Credit Administration
Telephone: (312) 904-8835
Facsimile: (312) 904-8840
Approved Lending Offices
------------------------
Applicable Lending Office for Base Rate Loans:
135 South LaSalle Street, Suite 625
Chicago, Illinois 60603
Attention: Loan Administration
Applicable Lending Office for LIBOR Loans:
135 South LaSalle Street, Suite 625
Chicago, Illinois 60603
Attention: Loan Administration
Applicable Lending Office for Participations in
Letters of Credit:
135 South LaSalle Street, Suite 625
Chicago, Illinois 60603
Attention: Loan Administration
THE BANK OF NOVA SCOTIA,
as a Lender
By: /s/ Ian A. Hodgart
Name: Ian A Hodgart
Title: Authorized Signature
Revolving Loan Commitment:
$9,000,000
Address for Notices
-------------------
(a) For Credit:
----------
One Liberty Plaza
New York, New York 10006
Attention: Ian Hodgart
Telephone: (212) 225-5079
Facsimile: (212) 225-5090
<PAGE>
(b) For Operations:
--------------
One Liberty Plaza
New York, New York 10006
Attention: Adriene Mays
Telephone: (212) 225-5047
Facsimile: (212) 225-5145
Approved Lending Offices
------------------------
Applicable Lending Office for Base Rate Loans:
One Liberty Plaza
New York, New York 10006
Applicable Lending Office for LIBOR Loans:
One Liberty Plaza
New York, New York 10006
Applicable Lending Office for Participations in
Letters of Credit:
One Liberty Plaza
New York, New York 10006
THE CIT GROUP/EQUIPMENT FINANCING, INC.,
as a Lender
By: /s/ J.E. Palmer
Name: J.E. Palmer
Title: Assistant Vice President
Revolving Loan Commitment:
$12,000,000
Address for Notices
-------------------
(a) For Credit:
----------
900 Ashwood Parkway, 6th Floor
Atlanta, Georgia 30338
Attention: John Palmer
Telephone: (770) 551-7827
Facsimile: (770) 206-9295
<PAGE>
(b) For Operations:
--------------
900 Ashwood Parkway, 6th Floor
Atlanta, Georgia 30338
Attention: Joe O'Laughlin
Telephone: (770) 677-3471
Facsimile: (770) 551-7867
Approved Lending Offices
------------------------
Applicable Lending Office for Base Rate Loans:
900 Ashwood Parkway, 6th Floor
Atlanta, Georgia 30338
Applicable Lending Office for LIBOR Loans:
900 Ashwood Parkway, 6th Floor
Atlanta, Georgia 30338
Applicable Lending Office for Participations in
Letters of Credit:
900 Ashwood Parkway, 6th Floor
Atlanta, Georgia 30338
CITY NATIONAL BANK,
as a Lender
By: /s/ David C. Burdge
Name: David C. Burdge
Title: Senior Vice President
Revolving Loan Commitment:
$12,000,000
Address for Notices
-------------------
(a) For Credit:
----------
400 North Roxbury Drive
Beverly Hills, California 90210
Attention: David Burdge
Telephone: (310) 888-6154
Facsimile: (310) 888-6564
<PAGE>
(b) For Operations:
--------------
831 South Douglas Street, Suite 100
El Segundo, California 90245
Attention: Lenora Williams
Telephone: (310) 297-8075
Facsimile: (310) 297-8171
Approved Lending Offices
------------------------
Applicable Lending Office for Base Rate Loans:
400 North Roxbury Drive
Beverly Hills, California 90210
Applicable Lending Office for LIBOR Loans:
400 North Roxbury Drive
Beverly Hills, California 90210
Applicable Lending Office for Participations in
Letters of Credit:
400 North Roxbury Drive
Beverly Hills, California 90210
FIRST UNION NATIONAL BANK,
as a Lender
By: /s/ Jim F. Redman
Name: Jim F. Redman
Title: Senior Vice President
Revolving Loan Commitment:
$22,000,000
Address for Notices
-------------------
(a) For Credit:
----------
One First Union Place
301 South College Street, DC-5
Charlotte, North Carolina 28288-0735
Attention: Wendy Klepper
Telephone: (704) 383-4746
Facsimile: (704) 374-4092
<PAGE>
(b) For Operations:
--------------
One First Union Place
301 South College Street, DC-5
Charlotte, North Carolina 28288-0735
Attention: Hilda F. Weathers
Telephone: (704) 374-4897
Facsimile: (704) 383-7201
Approved Lending Offices
------------------------
Applicable Lending Office for Base Rate Loans:
One First Union Place
301 South College Street, DC-5
Charlotte, North Carolina 28288-0735
Applicable Lending Office for LIBOR Loans:
One First Union Place
301 South College Street, DC-5
Charlotte, North Carolina 28288-0735
Applicable Lending Office for Participations in Letters
of Credit:
One First Union Place
301 South College Street, DC-5
Charlotte, North Carolina 28288-0735
FLEET BANK, N.A.,
as a Lender
By: /s/ Garret Komjathy
Name: Garret Komjathy
Title: Vice President
Revolving Loan Commitment:
$17,000,000
<PAGE>
Address for Notices
-------------------
(a) For Credit:
----------
1185 Avenue of the Americas, 16th Fl.
Media & Communications Group
New York, New York 10036
Attention: Garret Komjathy
Telephone: (212) 819-6043
Facsimile: (212) 819-6202
819-6203
(b) For Operations:
--------------
1185 Avenue of the Americas, 16th Fl.
Media & Communications Group
New York, New York 10036
Attention: Yin Kuen Lee
Telephone: (212) 819-6052
Facsimile: (212) 819-6204
Approved Lending Offices
------------------------
Applicable Lending Office for Base Rate Loans:
1185 Avenue of the Americas, 16th Fl.
Media & Communications Group
New York, New York 10036
Applicable Lending Office for LIBOR Loans:
1185 Avenue of the Americas, 16th Fl.
Media & Communications Group
New York, New York 10036
Applicable Lending Office for Participations in Letters
of Credit:
1185 Avenue of the Americas, 16th Fl.
Media & Communications Group
New York, New York 10036
PARIBAS,
as a Lender
By: /s/ Thomas G. Brandt /s/ Todd Rodgers
Name: Thomas G. Brandt/Todd Rodgers
Title: Director/Assistant Vice President
<PAGE>
Revolving Loan Commitment:
$12,000,000
Address for Notices
-------------------
(a) For Credit:
----------
2029 Century Park East, Suite 3900
Los Angeles, California 90067
Attention: Todd Rodgers
Telephone: (310) 551-7370
Facsimile: (310) 556-3762
(b) For Operations:
--------------
2029 Century Park East, Suite 3900
Los Angeles, California 90067
Attention: Shirley Williams
Telephone: (310) 551-7360
Facsimile: (310) 553-1504
Approved Lending Offices
------------------------
Applicable Lending Office for Base Rate Loans:
2029 Century Park East, Suite 3900
Los Angeles, California 90067
Applicable Lending Office for LIBOR Loans:
2029 Century Park East, Suite 3900
Los Angeles, California 90067
Applicable Lending Office for Participations in Letters
of Credit:
2029 Century Park East, Suite 3900
Los Angeles, California 90067
<PAGE>
SCHEDULE 1.1
Existing Mortgages
------------------
<TABLE>
<CAPTION>
Lease Encumbered (If Expiration Date of Lease
--------------------- ------------------------
Instrument General Description Applicable) (If Applicable)
- ---------- ------------------- ----------- ---------------
<S> <C> <C> <C>
1. Leasehold Deed of Transmitter site for Palm Lease dated 10/1/95 between September 30, 2000
Trust, Assignment of Springs/Indio Stations The Michael & Linda Nichols
Rents and Fixture Trust, Ronald & Pamela
Filing dated as of Nichols, and the Bender Moore
12/31/96, as amended Trust, collectively, as
landlord, and KVER-TV, as
tenant (the tenant's interest
under which was assigned to
Entravision)
2. Leasehold Deed of Transmitter site for Las Lease dated 12/20/94 between March 19, 2005
Trust, Assignment of Vegas Station Tower Management, Inc. (as
Rents and Fixture successor in interest to Oak
Filing dated as of Hill Enterprises), as
12/26/96, as amended landlord, and Tierra Alta
Broadcasting, Inc. KZIR, Ch.
15, as tenant (the tenant's
interest under which was
assigned to Entravision)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
3. Leasehold Deed of Transmitter site for Denver Lease and License Agreement October 31, 1999
Trust, Assignment of Station (WGN 10/1/89 Lease) dated 10/1/89 between WGN of
Rents and Fixture Colorado, Inc., as landlord,
Filing dated as of and Golden Hills Broadcasting
12/26/96, as amended Corporation, as tenant (the
tenant's interest under which
was assigned to Entravision)
4. Leasehold Deed of Transmitter site for San Industrial Lease dated 10/1/95 September 30, 2000
Trust, Assignment of Diego Station between Palomar Repeater,
Rents and Fixture Inc., as landlord, and
Filing dated as of Cabrillo Broadcasting
12/31/96, as amended Corporation, as tenant (the
tenant's interest under which
was assigned to Entravision)
5. Leasehold Deed of Hidalgo Lease Lease dated 2/89 between February 28, 1999
Trust, Security Sunland Farms, Inc., as
Agreement, Assignment landlord, and Mundo Vision
of Rents and Fixture Broadcasting Company, as
Filing dated as of tenant (the tenant's interest
1/24/97, as amended under which was assigned to
Valley Channel 48, Inc., then
to Entravision)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
6. Deed of Trust, Security El Paso headquarters N/A N/A
Agreement, Assignment
of Rents and Fixture
Filing dated as of
6/4/97, as amended
7. Leasehold Deed of KINT-TV Tower Site Sublease Agreement dated August 31, 2007
Trust, Security 3/31/82, between KDBC-TV,
Agreement, Assignment Ltd., as sublessor, and Paso
of Rents and Fixture del Norte Broadcasting
Filing dated as of Corporation, as sublessee (the
6/4/97, as amended sublessee's interest under
which was assigned to
Entravision)
8. Leasehold Deed of KINT-FM Radio Station Sublease Sublease Agreement dated March 22, 2003, with one
Trust, Security 9/22/92, between KDBC-TV, 5 1/2 year optional extension
Agreement, Assignment Ltd., as sublessor, and Paso
of Rents and Fixture del Norte Broadcasting
Filing dated as of Corporation, as sublessee (the
9/25/97, as amended sublessee's interest under
which was assigned to
Entravision)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
9. Leasehold Deed of KINT-AM Radio Station Lease Lease Agreement dated 5/26/87, May 26, 2017, with one
Trust, Security between City of El Paso, as 10-year extension
Agreement, Assignment lessor, and Paso del Norte
of Rents and Fixture Communications, Incorporated,
Filing dated as of as lessee (the lessee's
9/25/97, as amended interest under which was
assigned to Entravision)
</TABLE>
<PAGE>
================================================================================
AMENDED AND RESTATED CREDIT AGREEMENT
among
KSMS-TV, INC.
TIERRA ALTA BROADCASTING, INC.
CABRILLO BROADCASTING CORPORATION
GOLDEN HILLS BROADCASTING CORPORATION
LAS TRES PALMAS CORPORATION
VALLEY CHANNEL 48, INC.
TELECORPUS, INC.
ENTRAVISION COMMUNICATIONS COMPANY, L.L.C.
THE LENDERS PARTIES HERETO,
and
UNION BANK OF CALIFORNIA, N.A.
as Agent
Dated as of November 10, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. DEFINITIONS.......................................................... 2
1.1 Defined Terms........................................................ 2
1.2 Other Definitional Provisions........................................ 23
SECTION 2. AMOUNT AND TERMS OF LOANS AND LETTERS OF CREDIT; COMMITMENT AMOUNTS.. 23
2.1 Revolving Loans and Letters of Credit; Revolving Loan
Commitment Amounts................................................... 23
2.2 Incremental Loan Facility............................................ 26
2.3 Issuance of Letters of Credit........................................ 30
2.4 Optional Prepayments................................................. 32
2.5 Mandatory Prepayments................................................ 32
2.6 Conversion and Continuation Options.................................. 34
2.7 Minimum Amounts of Tranches.......................................... 35
2.8 Interest Rates and Payment Dates..................................... 35
2.9 Computation of Interest and Fees..................................... 36
2.10 Inability to Determine Interest Rate................................. 36
2.11 Pro Rata Treatment and Payments...................................... 37
2.12 Illegality........................................................... 37
2.13 Increased Costs...................................................... 38
2.14 Taxes................................................................ 39
2.15 Indemnity............................................................ 40
2.16 Unused Commitment Fees............................................... 40
2.17 Mitigation of Costs.................................................. 41
SECTION 3. REPRESENTATIONS AND WARRANTIES....................................... 41
3.1 Organization and Good Standing....................................... 41
3.2 Power and Authority.................................................. 42
3.3 Validity and Legal Effect............................................ 42
3.4 No Violation of Laws or Agreements................................... 42
3.5 Title to Assets; Existing Encumbrances; Intellectual and Real
Property............................................................. 42
3.6 Capital Structure and Equity Ownership............................... 43
3.7 Subsidiaries, Affiliates and Investments............................. 43
3.8 Material Contracts................................................... 43
3.9 Media Licenses....................................................... 43
3.10 Taxes and Assessments................................................ 44
3.11 Litigation and Legal Proceedings..................................... 44
3.12 Accuracy of Financial Information.................................... 44
3.13 Accuracy of Other Information........................................ 44
3.14 Compliance with Laws Generally....................................... 45
3.15 ERISA Compliance..................................................... 45
3.16 Environmental Compliance............................................. 46
3.17 Federal Regulations.................................................. 46
3.18 Fees and Commissions................................................. 46
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
3.19 [Intentionally Omitted].............................................. 47
3.20 Solvency............................................................. 47
3.21 FCC-Related Representations.......................................... 47
3.22 Investment Company Act; Other Regulations............................ 48
3.23 Copyright Act Requirements........................................... 48
3.24 Nature of Business................................................... 48
3.25 Ranking of Loans..................................................... 48
3.26 Condemnation......................................................... 48
SECTION 4. CONDITIONS PRECEDENT................................................. 48
4.1 Conditions to Closing Date........................................... 48
4.2 Conditions to Incremental Loans...................................... 52
4.3 Conditions to Each Loan or Letter of Credit.......................... 53
4.4 Conditions Subsequent................................................ 54
SECTION 5. AFFIRMATIVE COVENANTS................................................ 55
5.1 Financial Statements................................................. 55
5.2 Certificates; Other Information...................................... 56
5.3 Payment of Obligations............................................... 58
5.4 Conduct of Business and Maintenance of Existence..................... 58
5.5 Maintenance of Property; Insurance................................... 58
5.6 Inspection of Property; Books and Records; Discussions............... 59
5.7 Environmental Laws................................................... 59
5.8 Use of Proceeds...................................................... 60
5.9 Compliance With Laws, Etc............................................ 60
5.10 Media Licenses....................................................... 61
5.11 Guarantees, Etc...................................................... 61
5.12 License Subsidiaries................................................. 61
5.13 Interest Rate Protection............................................. 61
5.14 Acquisition of Real Property in Fee Simple........................... 61
5.15 Leases and Licenses.................................................. 62
5.16 Lease and License Approvals.......................................... 62
5.17 Notices.............................................................. 62
5.18 Additional Material Contracts and Media Licenses..................... 62
5.19 Status of Certain Borrowers.......................................... 63
5.20 Las Tres Campanas Acquisition........................................ 63
5.21 Year 2000............................................................ 63
SECTION 6. NEGATIVE COVENANTS................................................... 63
6.1 Financial Condition Covenants........................................ 63
6.2 Limitation on Indebtedness........................................... 65
6.3 Limitation on Liens.................................................. 66
6.4 Limitation on Fundamental Changes.................................... 67
6.5 Limitation on Sale of Assets......................................... 67
6.6 Limitation on Dividends.............................................. 67
6.7 Limitation on Investments, Loans and Advances........................ 67
6.8 Limitation on Modifications of Certain Documents and Instruments..... 69
6.9 Transactions with Affiliates......................................... 69
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
6.10 Fiscal Year.......................................................... 69
6.11 Lease Obligations.................................................... 69
6.12 Unfunded Liabilities................................................. 69
6.13 Management Fees...................................................... 69
6.14 Equity Offerings..................................................... 70
SECTION 7. EVENTS OF DEFAULT.................................................... 70
SECTION 8. THE AGENT............................................................ 76
8.1 Appointment.......................................................... 76
8.2 Delegation of Duties................................................. 76
8.3 Exculpatory Provisions............................................... 76
8.4 Reliance by the Agent................................................ 77
8.5 Notice of Default.................................................... 77
8.6 Non-Reliance on the Agent and Other Lenders.......................... 77
8.7 Indemnification...................................................... 78
8.8 The Agent in Its Individual Capacity................................. 78
8.9 Successor Agent...................................................... 78
SECTION 9. MISCELLANEOUS........................................................ 79
9.1 Amendments and Waivers............................................... 79
9.2 Notices.............................................................. 80
9.3 No Waiver; Cumulative Remedies....................................... 81
9.4 Survival of Representations and Warranties........................... 81
9.5 Payment of Expenses and Taxes........................................ 81
9.6 Successors and Assigns; Participations; Purchasing Lenders........... 82
9.7 Adjustments; Set-Off................................................. 85
9.8 Counterparts......................................................... 85
9.9 Severability......................................................... 85
9.10 Integration.......................................................... 86
9.11 GOVERNING LAW........................................................ 86
9.12 Alternative Dispute Resolution....................................... 86
9.13 Acknowledgements..................................................... 89
9.14 Obligations Absolute................................................. 90
9.15 Waivers.............................................................. 90
9.16 Headings............................................................. 92
9.17 Copies of Certificates, Etc.......................................... 92
9.18 Publicity............................................................ 92
9.19 Confidentiality...................................................... 92
9.20 Certain Powers of Managing Members................................... 92
9.21 Relationship with Prior Agreements................................... 93
</TABLE>
-iii-
<PAGE>
Exhibits
A Form of Revolving Note
B Form of Incremental Note
C Form of Assignment and Acceptance
D Form of No Default/Representation Certificate
E Form of Covenant Compliance Certificate
F Form of Continuation Notice
G Form of Letter of Credit Request
H Form of Excess Cash Flow Certificate
I Form of Activation Notice
Schedules
1.1 Existing Mortgages
3.1 Good Standing/Foreign Qualification Jurisdictions
3.2 Missing Consents
3.5A Intellectual Property
3.5B Real Property Interests
3.5C Operating Names/Trade Names
3.6 Capital Structure/Equity Ownership
3.7 Subsidiaries, Affiliates and Investments
3.8 Material Contracts
3.9 Media Licenses
3.10 Taxes and Assessments
3.11 Material Litigation
3.12 Deviations from GAAP
3.18 Fees and Commissions
3.21 Pending FCC Matters
6.2 Permitted Additional Indebtedness
6.7 Permitted Additional Investments
The registrant hereby agrees to furnish a copy of any omitted schedule or
exhibit upon request.
-iv-
<PAGE>
EXHIBIT 10.4
FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
--------------------------------------------------------
This FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this
"Amendment") dated as of December 29, 1999, is entered into among (1) KSMS-TV,
---------
INC., a Delaware corporation, TIERRA ALTA BROADCASTING, INC., a Delaware
corporation, CABRILLO BROADCASTING CORPORATION, a California corporation, GOLDEN
HILLS BROADCASTING CORPORATION, a Delaware corporation, LAS TRES PALMAS
CORPORATION, a Delaware corporation, VALLEY CHANNEL 48, INC., a Texas
corporation, and ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. ("Entravision"), a
-----------
Delaware limited liability company (each a "Borrower," and collectively, the
--------
"Borrowers"), (2) the several banks and other financial institutions from time
---------
to time parties to the Credit Agreement referred to below (the "Lenders") and
-------
(3) UNION BANK OF CALIFORNIA, N.A., as agent for the Lenders (in such capacity,
the "Agent").
-----
RECITALS
--------
A. The Borrowers, the Lenders and the Agent previously entered into that
certain Amended and Restated Credit Agreement dated as of November 10, 1998 (the
"Credit Agreement"). Capitalized terms used herein and not defined shall have
----------------
the meanings assigned to them in the Credit Agreement.
B. The Borrowers have requested that the Agent and the Lenders agree to
certain amendments and waivers under the Credit Agreement and the Agent and the
Lenders have agreed, in each case subject to the terms and conditions set forth
below.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
SECTION 1. Amendments to Credit Agreement. The Credit Agreement is,
------------------------------
effective as of the date first set forth above, hereby amended as follows:
(a) The following new definitions are added to Section 1.1 in appropriate
alphabetical order:
"Laredo Mortgage Indebtedness": that certain debt of Entravision to
----------------------------
the Laredo Mortgage Lender, in a principal amount not exceeding
$2,000,000, secured by the Laredo Purchase Money Mortgage.
"Laredo Mortgage Lender": the commercial mortgage lender extending the
----------------------
Laredo Mortgage Indebtedness to Entravision.
"Laredo Purchase Money Mortgage": that certain first-priority mortgage
------------------------------
executed by Entravision in favor of the Laredo Mortgage Lender,
encumbering the Laredo Real Property.
<PAGE>
"Laredo Real Property": that certain real property to be owned by
--------------------
Entravision and located in Laredo, Texas for use in connection with
the operation of KLDO-TV, Laredo, Texas.
(b) Section 5.14(b) is amended in its entirety to read as follows:
"(b) Notwithstanding the foregoing, Entravision shall be entitled to
acquire the KNVO Real Property and the Laredo Real Property without
complying with Section 5.14(a)."
(c) The last sentence of Section 6.1(d) is amended in its entirety to read
as follows:
"Notwithstanding the foregoing, expenditures made by Entravision for the
purchase of the KNVO Real Property and the Laredo Real Property shall not
be included as Capital Expenditures for determining compliance with this
Section 6.1(d)."
(d) Section 6.2(i) is amended in its entirety to read as follows:
"(i) the KNVO Mortgage Indebtedness and the Laredo Mortgage
Indebtedness;"
(e) Section (i) is amended in its entirety to read as follows:
(i) the KNVO Purchase Money Mortgage and the Laredo Purchase
Money Mortgage, provided that each (x) shall secure only the KNVO
Mortgage Indebtedness and the Laredo Mortgage Indebtedness,
respectively, and (y) shall not be spread to cover any other property;
and
(f) Section 6.7(a) is amended by deleting the word "and" before clause
(E), substituting a "," therefor and inserting the following at the end of
clause (E):
"and (F) the purchase by Entravision of Stations KATH(FM) and KOFX(FM), El
Paso, Texas from Magic Media, Inc. (provided that the Consideration does
-------- ----
not exceed an aggregate of $14,000,000, plus closing costs and proration
expenses)"
(g) Section 6.7(f) is amended by deleting "$7,500,000" and substituting
"$15,000,000" therefor.
-2-
<PAGE>
SECTION 2. Waiver. (a) The Borrowers have informed the Agent and the
------
Lenders that they anticipate that the Maximum Total Debt Ratio for the fiscal
quarter ending December 31, 1999 will be exceeded, and have requested that the
Agent and the Lenders waive such requirement. Subject to the fulfillment of the
conditions set forth below, the Agent and the Lenders agree to waive, as of the
date first set forth above, the requirement under Section 6.1(a) that the
Borrowers maintain a Maximum Total Debt Ratio as of the end of the fiscal
quarter ending December 31, 1999 of not more than 6.50:1; provided, however,
-------- -------
that the Borrowers shall not permit the Maximum Total Debt Ratio as of the end
of such fiscal quarter to exceed 7.50:1.
(b) On December 22, 1999 the Borrowers borrowed $7,000,000 in Revolving
Loans for the purpose of making an Escrow Deposit. Such Escrow Deposit was made
by the Borrowers in connection with the anticipated purchase by Entravision of
ten FM radio stations, seven AM radio stations, three FM translator stations, a
Hispanic newspaper and a Hispanic radio network from Latin Communications Group
Inc. (the "LCG Acquisition"). The borrowing of such Revolving Loans caused the
---------------
Borrowers to be in Default of Section 6.1(a), as a result of their
representation upon such borrowing deemed made pursuant to Section 4.3(a).
Subject to the fulfillment of the conditions set forth below, the Agent and the
Lenders agree to waive such Default as of the date first set forth above;
provided, however, that the Borrowers shall not permit the Maximum Total Debt
- -------- -------
Ratio as of the end of the fiscal quarter ending December 31, 1999 to exceed
7.50:1.
(c) The foregoing waivers are given in this instance only. The foregoing
waivers shall not be construed as a waiver of or consent to any violation of, or
deviation from, any other term or condition of the Credit Agreement or any other
Loan Document, nor shall they be construed to evidence the willingness of the
Agent or the Lenders to give any other or additional waiver or consent, whether
in similar or different circumstances. In addition, nothing in this Amendment
shall be construed to constitute the consent by the Agent or the Lenders to the
consummation by the Borrowers of the LCG Acquisition, it being understood by the
Borrowers that such transaction may not be consummated without prior consent in
accordance with the terms of the Credit Agreement.
SECTION 3. Conditions to Effectiveness. This Amendment shall become
---------------------------
effective as of the date first set forth above upon receipt by the Agent of the
following, in each case in form and substance satisfactory to the Agent:
(a) this Amendment, duly executed by the parties hereto; and
(b) evidence of the Guarantors' consent (provided that delivery of the
consent of the Luery Trust shall be on a best efforts basis) to this Amendment
on the signature pages hereto.
SECTION 4. Representations and Warranties. Each Borrower hereby
------------------------------
represents and warrants, for the benefit of the Lenders and the Agent, as
follows: (a) such Borrower has all requisite power and authority to execute,
deliver and perform its obligations under this Amendment, and to perform its
obligations under the Credit Agreement, as
-3-
<PAGE>
amended by this Amendment; (b) all actions, waivers and consents necessary or
appropriate for such Borrower to execute, deliver and perform this Amendment,
and to perform the Credit Agreement, as amended by this Amendment, have been
taken and/or received; (c) this Amendment, and the Credit Agreement as amended
by this Amendment, constitute the legal, valid and binding obligation of such
Borrower (jointly and severally with the other Borrowers) enforceable against it
in accordance with the terms hereof; and (d) the execution, delivery and
performance of this Amendment, and the performance of the Credit Agreement as
amended by this Amendment, will not (i) violate or contravene any material
Requirement of Law, (ii) result in any material breach or violation of, or
constitute a material default under, any agreement or instrument by which such
Borrower or any of its property may be bound, or (iii) result in or require the
creation of any Lien upon or with respect to any properties of such Borrower,
whether such properties are now owned or hereafter acquired.
SECTION 5. Reference to and Effect on the Credit Agreement and the Other
-------------------------------------------------------------
Loan Documents.
- --------------
(a) Upon the effectiveness of this Amendment, each reference in the Credit
Agreement to "this Agreement," "hereunder," "hereof" or words of like import
referring to the Credit Agreement, and each reference in the other Loan
Documents to "the Credit Agreement," "thereunder," "thereof" or words of like
import referring to the Credit Agreement, shall mean and be a reference to the
Credit Agreement, as amended hereby.
(b) Except as specifically amended herein, the Credit Agreement and all
other Loan Documents are and shall continue to be in full force and effect and
are hereby in all respects ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment shall not
operate as a waiver of any right, power or remedy of the Agent or the Lenders
under the Credit Agreement or any other Loan Documents, nor constitute a waiver
of any provision of the Credit Agreement or any other Loan Documents, except as
specifically set forth herein.
SECTION 6. Execution in Counterparts. This Amendment may be executed in
-------------------------
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same agreement.
SECTION 7. Governing Law. This Amendment shall be governed by, and
-------------
construed and interpreted in accordance with, the laws of the State of
California (without reference to its choice of law rules).
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
BORROWERS
---------
KSMS-TV, INC.
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: President
TIERRA ALTA BROADCASTING, INC.
By: /s/ Yrma G. Rico
Name: Yrma G. Rico
Title: President
CABRILLO BROADCASTING CORPORATION
By: /s/ Philip C. Wilkinson
Name: Philip C. Wilkinson
Title: President
GOLDEN HILLS BROADCASTING CORPORATION
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: President
LAS TRES PALMAS CORPORATION
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: President
<PAGE>
VALLEY CHANNEL 48, INC.
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: Chairman and Chief Executive Officer
ENTRAVISION COMMUNICATIONS COMPANY, L.L.C.
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: Chairman, Chief Executive Officer and Managing
Member
By: /s/ Philip C. Wilkinson
Name: Philip C. Wilkinson
Title: President, Chief Operating Officer and Managing
Member
AGENT
-----
UNION BANK OF CALIFORNIA, N.A., as Agent
By: /s/ Lena M. Bryant
Name: Lena M. Bryant
Title: Vice President
LENDERS
-------
UNION BANK OF CALIFORNIA, N.A.,
as a Lender
By: /s/ Lena M. Bryant
Name: Lena M. Bryant
Title: Vice President
CIBC INC., as a Lender
<PAGE>
By: /s/ Harold Birk
Name: Harold Birk
Title: Executive Director CIBC World Markets Corp. As
Agent
FIRST UNION NATIONAL BANK, as a Lender
By: /s/ Wendy E. Klepper
Name: Wendy E. Klepper
Title: VP
ABN-AMRO BANK N.V., as a Lender
By: /s/ David C. Carrington
Name: David C. Carrington
Title: Vice President
By: /s/ Frances O'R. Logan
Name: Frances O'R. Logan
Title: Senior Vice President
FLEET BANK, N.A., as a Lender
By: /s/ Sharon Hawkins
Name: Sharon Hawkins
Title: Assistant Vice President
CITY NATIONAL BANK, as a Lender
By: /s/ David C. Burdge
Name: David C. Burdge
Title: Senior Vice President
<PAGE>
THE CIT GROUP/EQUIPMENT FINANCING, INC.,
as a Lender
By: /s/ J.E. Palmer
Name: J.E. Palmer
Title: Assistant Vice President
PARIBAS, as a Lender
By:________________________________________
Name:______________________________________
Title:_____________________________________
THE BANK OF NOVA SCOTIA, as a Lender
By: /s/ Ian A. Hodgart
Name: Ian A. Hodgart
Title: Authorized Signatory
Each of the undersigned, as a "Guarantor" under the aforementioned Credit
Agreement hereby consents to the foregoing First Amendment to Credit Agreement,
and hereby confirms and agrees that the Loan Documents executed by him, her or
it are and shall continue to be in full force and effect and are hereby ratified
and confirmed in all respects except that, on and after the date first set forth
above, each reference in such Loan Documents to "the Credit Agreement,"
"thereunder," "thereof," "therein" or words of like import referring to the
Credit Agreement shall mean and be a reference to the Credit Agreement as
amended by said First Amendment to Credit Agreement.
/s/ Walter F. Ulloa
- ------------------------------
WALTER F. ULLOA
/s/ Philip C. Wilkinson
- ------------------------------
PHILIP C. WILKINSON
<PAGE>
/s/ Paul A. Zevnik
- ---------------------
PAUL A. ZEVNIK
/s/ Richard D. Norton
- ---------------------
RICHARD D. NORTON
/s/ Yrma G. Rico
- ---------------------
IRMA RICO
KEVIN GRENHAM and STEVE G.
ROWLES, Co-Trustees of THE PAUL
A. ZEVNIK TRUST dated November
2, 1996, a trust formed under the laws
of the District of Columbia
By: /s/ Kevin Grenham
Kevin Grenham, Co-Trustee
By: /s/ Steven G. Rowles
Steve G. Rowles, Co-Trustee
EDITH SEROS, as Trustee of THE
WALTER F. ULLOA TRUST OF
1996, a trust formed under the laws of
the State of California
By: /s/ Edith Seros, Trustee
Edith Seros, Trustee
<PAGE>
PHILIP C. WILKINSON and WENDY K.
WILKINSON, as Trustees of THE 1994
WILKINSON CHILDREN'S GIFT TRUST,
a trust formed under the laws of the
State of California
By: /s/ Philip C. Wilkinson
Philip C. Wilkinson, Trustee
By: /s/ Wendy K. Wilkinson, Trustee
Wendy K. Wilkinson, Trustee
PHILIP C. WILKINSON and WENDY K.
WILKINSON, as Trustees of THE
WILKINSON FAMILY TRUST, a trust
formed under the laws of the State of
California
By: /s/ Philip C. Wilkinson
Philip C. Wilkinson, Trustee
By: /s/ Wendy K. Wilkinson, Trustee
Wendy K. Wilkinson, Trustee
CAROL KRUIDENIER LUERY TTE,
CAROL K. LUERY REVOCABLE
TRUST UA DATED 7/27/98
By: ________________________
Carol Luery, Trustee
ENTRAVISION HOLDINGS, LLC
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: Chairman and Chief Executive Officer
<PAGE>
ENTRAVISION-EL PASO, L.L.C.
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: Chairman and Chief Executive Officer
ENTRAVISION, L.L.C.
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: Chairman and Chief Executive Officer
ENTRAVISION COMMUNICATIONS
OF MIDLAND, LLC
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: Chairman and Chief Executive Officer
ENTRAVISION MIDLAND HOLDINGS, LLC
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: Chairman and Chief Executive Officer
LOS CEREZOS TELEVISION COMPANY
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: Chairman and Chief Executive Officer
COMERCIALIZADORA FRONTERA NORTE,
S.A. DE C.V.
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: Chairman and Chief Executive Officer
<PAGE>
EXHIBIT 10.5
SECOND AMENDMENT TO
--------------------
AMENDED AND RESTATED CREDIT AGREEMENT
-------------------------------------
This SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this
"Amendment") dated as of January 14, 2000, is entered into among (1) KSMS-TV,
---------
INC., a Delaware corporation, TIERRA ALTA BROADCASTING, INC., a Delaware
corporation, CABRILLO BROADCASTING CORPORATION, a California corporation, GOLDEN
HILLS BROADCASTING CORPORATION, a Delaware corporation, LAS TRES PALMAS
CORPORATION, a Delaware corporation, VALLEY CHANNEL 48, INC., a Texas
corporation, TELECORPUS, INC., a Texas corporation, and ENTRAVISION
COMMUNICATIONS COMPANY, L.L.C. ("Entravision"), a Delaware limited liability
-----------
company (each a "Borrower," and collectively, the "Borrowers"), (2) the several
-------- ---------
banks and other financial institutions from time to time parties to the Credit
Agreement referred to below (the "Lenders") and (3) UNION BANK OF CALIFORNIA,
-------
N.A., as agent for the Lenders (in such capacity, the "Agent").
-----
RECITALS
--------
A. The Borrowers, the Lenders and the Agent previously entered into that
certain Amended and Restated Credit Agreement dated as of November 10, 1998 (as
amended by the First Amendment to Amended and Restated Credit Agreement dated as
of December 29, 1999, the "Credit Agreement"). Capitalized terms used herein
----------------
and not defined shall have the meanings assigned to them in the Credit
Agreement.
B. The Borrowers have informed the Agent that they desire to (i) activate
the Incremental Loan facility with an Aggregate Incremental Loan Commitment of
$8,000,000 (such Incremental Loan Commitment to be made available by Union Bank
of California, N.A.), (ii) consummate the purchase of Stations KATH(FM) and
KOFX(FM), El Paso, Texas, from Magic Media, Inc. (the "Magic Media Acquisition")
-----------------------
for a purchase price of $13,500,000 (net of a previously paid escrow deposit)
and (iii) borrow both Revolving Loans and Incremental Loans for the purpose of
consummating the Magic Media Acquisition. In addition, the Borrowers have
requested that the Incremental Loan facility be amended to permit multiple
Activation Notices to be presented thereunder (provided that the Maximum
Incremental Loan Facility Amount of $100,000,000 shall not be exceeded).
C. In connection therewith, the Borrowers have requested that the Agent
and the Lenders agree to certain amendments and waivers under the Credit
Agreement and the Agent and the Lenders have agreed, in each case subject to the
terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
<PAGE>
SECTION 1. Amendments to Credit Agreement. The Credit Agreement is,
------------------------------
effective as of the date first set forth above, hereby amended as follows:
(a) The following definitions in Section 1.1 are amended in the following
manner:
(i) the definition of "Activation Date" is amended is its entirety
to read as follows:
"Activation Date": with respect to any Activation Notice presented
---------------
hereunder, the date set forth therein as the effective date of the
portion of the Aggregate Incremental Loan Commitment to be activated
pursuant thereto, which date must be during the period from and
including the Closing Date to but excluding September 30, 2000.
(ii) the definition of "Aggregate Incremental Loan Commitment" is
amended by deleting the reference to "the Activation Notice" and inserting
the following in its place: "the Activation Notices"; and
(iii) the definition of "Incremental Loan Commitment" is amended by
deleting the reference to "the Activation Notice" and inserting the
following in its place: "the Activation Notices".
(b) Section 2.2 is amended in the following manner:
(i) The first sentence of subsection (a) is amended in its entirety
to read as follows:
"From time to time, the Borrowers, and all or certain of the
Lenders who agree in writing to participate in such facility and who
are selected by the Borrowers may, with the consent of the Agent, such
consent not to be unreasonably withheld, during the period from and
including the Closing Date to but excluding September 30, 2000, agree
that such Lenders shall become Incremental Loan Lenders (or, with
respect to any Lender already an Incremental Loan Lender, increase its
Incremental Loan Commitment) by executing and delivering to the Agent
an Activation Notice specifying the respective Incremental Loan
Commitments (or additional Incremental Loan Commitment, as applicable)
of the Incremental Loan Lenders and the Activation Date, and otherwise
duly completed. Notwithstanding any provision in this Agreement to
the contrary, the Aggregate Incremental Loan Commitment shall not
exceed the Maximum Incremental Loan Facility. Each activation of all
or a portion of the Aggregate Incremental Loan Commitment shall be
subject to the prior satisfaction of the conditions precedent set
forth in Section 4.2."
(ii) The following sentence contained in subsection (a) shall be
deleted: "Only one Activation Notice may be given under this Agreement.";
(iii) in subsection (f), the parenthetical phrase shall be amended in
its entirety to read "(as in effect immediately following the final Activation
Date)";
-2-
<PAGE>
(iv) a new subsection (j) is inserted at the end of subsection (i) to
read as follows:
"(j) Upon the effectiveness of each portion of the Aggregate
Incremental Loan Commitment activated hereunder, each Incremental Loan
Lender shall permit an adjustment (either through prepayment of a
portion of its outstanding Incremental Loans or by allocation of
borrowings of new Incremental Loans) by the Agent of its outstanding
Incremental Loans such that upon such effectiveness, its Incremental
Loans outstanding shall equal its Incremental Loan Commitment
Percentage (as adjusted to reflect the new Aggregate Incremental Loan
Commitment)."
(c) Section 2.16(b) is amended in the following manner:
(i) the reference to "following activation" shall be deleted and the
following inserted in its place: "following initial activation"; and
(ii) each reference to "the Activation Date" shall be deleted and the
following inserted in its place: "the initial Activation Date".
(d) Section 4.2 is amended in the following manner:
(i) the first reference to "the Activation Date" shall be deleted
and the following inserted in its place: "each Activation Date"; and
(ii) the second reference to "the Activation Date" shall be deleted
and the following inserted in its place: "such Activation Date".
(e) Section 5.8 is amended by inserting the following before each
reference to "6.7(e)": "6.7(a),".
SECTION 2. Waiver and Consents.
-------------------
(a) Concurrently herewith Entravision intends to (i) activate the
Incremental Loan facility with an Aggregate Incremental Loan Commitment of
$8,000,000, (ii) consummate the purchase of Stations KATH(FM) and KOFX(FM), El
Paso, Texas, from Magic Media, Inc. (the "Magic Media Acquisition") for a
-----------------------
purchase price of $14,000,000 (net of a previously paid escrow deposit) and
(iii) borrow both Revolving Loans and Incremental Loans for the purpose of
consummating the Magic Media Acquisition. Each of the foregoing actions requires
(pursuant to Sections 4.2(f), 4.2(g), 4.3(a) and 6.7(a)(i)), as a condition
precedent, that no Default exist on a pro forma basis assuming such activation,
consummation or borrowing. The Borrowers have informed the Lenders that upon
making the borrowings necessary to consummate the Magic Media Acquisition, the
Borrowers' Maximum Total Debt Ratio will be 7.10: 1, which is in excess of the
Maximum Total Debt Ratio of 6.50:1 required by Section 6.1(a) of the Credit
Agreement (such Default, the "Leverage Default"). The Borrowers have requested
----------------
that the Lenders waive the Leverage Default for the purpose of permitting such
activation, consummation and borrowing.
-3-
<PAGE>
(b) The Borrowers are requesting that the Lenders agree to waive their
right under Section 4.3 of the Credit Agreement to require the real property
assets (if any) acquired in connection with the Magic Media Acquisition to be
pledged to the Lenders as collateral.
(c) Subject to the fulfillment of the conditions set forth below, the
Agent and the Lenders agree to (i) waive the Leverage Default under Sections
4.2(f), 4.2(g), 4.3(a) and 6.7(a)(i), solely for the purpose of allowing such
activation, consummation and borrowing, it being understood that nothing in this
Amendment shall be construed as waiving the Borrowers' compliance with Section
6.1(a) at any other time, including upon each quarterly testing date therefor,
and (ii) grant a consent under 4.3(e) of the Credit Agreement with respect to
refraining from perfection of the real property interests acquired in connection
with the Magic Media Acquisition. The foregoing waiver and consent are given in
this instance only. The foregoing waiver and consent shall not be construed as a
waiver of or consent to any violation of, or deviation from, any other term or
condition of the Credit Agreement or any other Loan Document, nor shall they be
construed to evidence the willingness of the Agent or the Lenders to give any
other or additional waiver or consent, whether in similar or different
circumstances.
SECTION 3. Conditions to Effectiveness. This Amendment shall become
effective as of the date first set forth above upon receipt by the Agent of the
following, in each case in form and substance satisfactory to the Agent:
(a) this Amendment, duly executed by the parties hereto; and
(b) evidence of the Guarantors' consent (provided that delivery of the
consent of the Luery Trust shall be on a best efforts basis) to this Amendment
on the signature pages hereto.
SECTION 4. Representations and Warranties. Each Borrower hereby
------------------------------
represents and warrants, for the benefit of the Lenders and the Agent, as
follows: (a) such Borrower has all requisite power and authority to execute,
deliver and perform its obligations under this Amendment, and to perform its
obligations under the Credit Agreement, as amended by this Amendment; (b) all
actions, waivers and consents necessary or appropriate for such Borrower to
execute, deliver and perform this Amendment, and to perform the Credit
Agreement, as amended by this Amendment, have been taken and/or received; (c)
this Amendment, and the Credit Agreement as amended by this Amendment,
constitute the legal, valid and binding obligation of such Borrower (jointly and
severally with the other Borrowers) enforceable against it in accordance with
the terms hereof; and (d) the execution, delivery and performance of this
Amendment, and the performance of the Credit Agreement as amended by this
Amendment, will not (i) violate or contravene any material Requirement of Law,
(ii) result in any material breach or violation of, or constitute a material
default under, any agreement or instrument by which such Borrower or any of its
property may be bound, or (iii) result in or require the creation of any Lien
upon or with respect to any properties of such Borrower, whether such properties
are now owned or hereafter acquired.
-4-
<PAGE>
SECTION 5. Reference to and Effect on the Credit Agreement and the Other
-------------------------------------------------------------
Loan Documents.
- --------------
(a) Upon the effectiveness of this Amendment, each reference in the Credit
Agreement to "this Agreement," "hereunder," "hereof" or words of like import
referring to the Credit Agreement, and each reference in the other Loan
Documents to "the Credit Agreement," "thereunder," "thereof" or words of like
import referring to the Credit Agreement, shall mean and be a reference to the
Credit Agreement, as amended hereby.
(b) Except as specifically amended herein, the Credit Agreement and all
other Loan Documents are and shall continue to be in full force and effect and
are hereby in all respects ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment shall not
operate as a waiver of any right, power or remedy of the Agent or the Lenders
under the Credit Agreement or any other Loan Documents, nor constitute a waiver
of any provision of the Credit Agreement or any other Loan Documents, except as
specifically set forth herein.
(d) By execution of this Amendment, Telecorpus, Inc. confirms and agrees
that it shall be bound by the First Amendment to Amended and Restated Credit
Agreement dated as of December 29, 1999 as if it had executed such Amendment.
SECTION 6. Execution in Counterparts. This Amendment may be executed in
-------------------------
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same agreement.
SECTION 7. Governing Law. This Amendment shall be governed by, and
-------------
construed and interpreted in accordance with, the laws of the State of
California (without reference to its choice of law rules).
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
BORROWERS
---------
KSMS-TV, INC.
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: President
TIERRA ALTA BROADCASTING, INC.
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: Vice President and Treasurer
CABRILLO BROADCASTING CORPORATION
By: /s/ Philip C. Wilkinson
Name: Philip C. Wilkinson
Title: President
GOLDEN HILLS BROADCASTING CORPORATION
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: President
LAS TRES PALMAS CORPORATION
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: President
<PAGE>
TELECORPUS, INC.
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: Chairman/CEO
<PAGE>
VALLEY CHANNEL 48, INC.
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: Chairman and Chief Executive Officer
ENTRAVISION COMMUNICATIONS COMPANY, L.L.C.
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: Chairman and Chief Executive Officer and
Managing Member
By: /s/ Philip C. Wilkinson
Name: Philip C. Wilkinson
Title: President, Chief Operating Officer and Managing
Member
AGENT
-----
UNION BANK OF CALIFORNIA, N.A., as Agent
By: /s/ Jenny Dongo
Name: Jenny Dongo
Title: Vice President
LENDERS
-------
UNION BANK OF CALIFORNIA, N.A.,
as a Lender
By: /s/ Jenny Dongo
Name: Jenny Dongo
Title: Vice President
CIBC INC., as a Lender
<PAGE>
By: /s/ Harold Birk
Name: Harold Birk
Title: Executive Director CIBC World Markets Corp. as
Agent
FIRST UNION NATIONAL BANK, as a Lender
By: /s/ Bruce W. Loftin
Name: Bruce W. Loftin
Title: Senior Vice President
ABN-AMRO BANK N.V., as a Lender
By:____________________________________________
Name:__________________________________________
Title:_________________________________________
By:____________________________________________
Name:__________________________________________
Title:_________________________________________
FLEET BANK, N.A., as a Lender
By: /s/ Sharon L. Hawkins
Name: Sharon L. Hawkins
Title: Vice President
CITY NATIONAL BANK, as a Lender
By: /s/ David C. Burdge
Name: David C. Burdge
Title: Senior Vice President
<PAGE>
THE CIT GROUP/EQUIPMENT FINANCING, INC.,
as a Lender
By: /s/ J.E. Palmer
Name: J.E. Palmer
Title: Assistant Vice President
PARIBAS, as a Lender
By:__________________________________________
Name:________________________________________
Title:_______________________________________
THE BANK OF NOVA SCOTIA, as a Lender
By: /s/ Ian A. Hodgart
Name: Ian A. Hodgart
Title: Authorized Signatory
Each of the undersigned, as a "Guarantor" under the aforementioned Credit
Agreement hereby consents to the foregoing Second Amendment to Credit Agreement,
and hereby confirms and agrees that the Loan Documents executed by him, her or
it are and shall continue to be in full force and effect and are hereby ratified
and confirmed in all respects except that, on and after the date first set forth
above, each reference in such Loan Documents to "the Credit Agreement,"
"thereunder," "thereof," "therein" or words of like import referring to the
Credit Agreement shall mean and be a reference to the Credit Agreement as
amended by said Second Amendment to Credit Agreement.
/s/ Walter F. Ulloa
- ---------------------------
WALTER F. ULLOA
/s/ Philip C. Wilkinson
- ---------------------------
PHILIP C. WILKINSON
<PAGE>
/s/ Paul A. Zevnik
- ---------------------------
PAUL A. ZEVNIK
/s/ Richard D. Norton
- ---------------------------
RICHARD D. NORTON
/s/ Yrma G. Rico
- ---------------------------
IRMA RICO
KEVIN GRENHAM and STEVE G.
ROWLES, Co-Trustees of THE PAUL
A. ZEVNIK TRUST dated November
2, 1996, a trust formed under the laws
of the District of Columbia
By: /s/ Kevin Grenham
Kevin Grenham, Co-Trustee
By: /s/ Steven G. Rowles
Steve G. Rowles, Co-Trustee
EDITH SEROS, as Trustee of THE
WALTER F. ULLOA TRUST OF
1996, a trust formed under the laws of
the State of California
By: /s/ Edith Seros, Trustee
Edith Seros, Trustee
<PAGE>
PHILIP C. WILKINSON and WENDY K.
WILKINSON, as Trustees of THE 1994
WILKINSON CHILDREN'S GIFT TRUST,
a trust formed under the laws of the
State of California
By: /s/ Philip C. Wilkinson
Philip C. Wilkinson, Trustee
By: /s/ Wendy K. Wilkinson, TTEE
Wendy K. Wilkinson, Trustee
PHILIP C. WILKINSON and WENDY K.
WILKINSON, as Trustees of THE
WILKINSON FAMILY TRUST, a trust
formed under the laws of the State of
California
By: /s/ Philip C. Wilkinson
Philip C. Wilkinson, Trustee
By: /s/ Wendy K. Wilkinson, TTEE
Wendy K. Wilkinson, Trustee
CAROL KRUIDENIER LUERY TTE,
CAROL K. LUERY REVOCABLE
TRUST UA DATED 7/27/98
By: _________________________
Carol Luery, Trustee
ENTRAVISION HOLDINGS, LLC
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: Chairman and Chief Executive Officer
<PAGE>
ENTRAVISION-EL PASO, L.L.C.
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: Chairman and Chief Executive Officer
ENTRAVISION, L.L.C.
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: Chairman and Chief Executive Officer
ENTRAVISION COMMUNICATIONS
OF MIDLAND, LLC
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: Chairman and Chief Executive Officer
ENTRAVISION MIDLAND HOLDINGS, LLC
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: Chairman and Chief Executive Officer
LOS CEREZOS TELEVISION COMPANY
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: Chairman and Chief Executive Officer
COMERCIALIZADORA FRONTERA NORTE,
S.A. DE C.V.
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: Chairman and Chief Executive Officer
<PAGE>
EXHIBIT 10.7
AMENDED AND RESTATED SECURITY AGREEMENT
---------------------------------------
This SECURITY AGREEMENT, is dated as of November 10, 1998, and made by
KSMS-TV, INC., a Delaware corporation, TIERRA ALTA BROADCASTING, INC., a
Delaware corporation, CABRILLO BROADCASTING CORPORATION, a California
corporation, GOLDEN HILLS BROADCASTING CORPORATION, a Delaware corporation, LAS
TRES PALMAS CORPORATION, a Delaware corporation, VALLEY CHANNEL 48, INC., a
Texas corporation, TELECORPUS, INC., a Texas corporation, and ENTRAVISION
COMMUNICATIONS COMPANY, L.L.C., a Delaware limited liability company (each a
"Grantor", and collectively, the "Grantors"), whose obligations hereunder shall
------- --------
be joint and several, in favor of UNION BANK OF CALIFORNIA, N.A., a national
banking association, as agent (the "Agent") for the Lenders (as defined in the
-----
Credit Agreement referred to below, the "Lenders").
-------
RECITALS
--------
A. Certain Grantors previously executed that certain Security Agreement
dated as of December 31, 1996 in favor of Agent and the lenders referred to
therein (the "Original Security Agreement"). The Original Security Agreement
---------------------------
was executed in connection with that certain Credit Agreement dated as of
December 31, 1996 among such Grantors, such lenders and the Agent, as amended
(the "Original Credit Agreement").
-------------------------
B. In connection herewith, the Original Credit Agreement is being amended
and restated pursuant to an Amended and Restated Credit Agreement dated as of
even date herewith (said Agreement, as it may hereafter be amended, modified or
restated from time to time, being called the "Credit Agreement") among the
----------------
Grantors, the Lenders and the Agent.
C. It is a condition precedent to the extension of credit by the Lenders
under the Credit Agreement that each Grantor shall have executed and delivered
this Agreement.
D. Terms defined in the Credit Agreement and not otherwise defined herein
have the same respective meanings when used herein, and the rules of
interpretation set forth in Section 1.2 of the Credit Agreement are incorporated
herein by reference.
Accordingly, each of the parties hereto agrees that the Original Security
Agreement shall be amended, restated and continued on the following terms:
AGREEMENT
---------
NOW, THEREFORE, in order to induce the Lenders to enter into the Credit
Agreement and for other good and valuable consideration, the receipt and
adequacy of which hereby is acknowledged, each Grantor hereby represents,
warrants, covenants, agrees, assigns and grants as follows:
1. Definitions. Unless the context otherwise requires, terms defined in
-----------
the Uniform Commercial Code of the State of California (the "Uniform Commercial
------------------
Code") and not
- ----
<PAGE>
otherwise defined in this Agreement or in the Credit Agreement shall have
the meanings defined for those terms in the Uniform Commercial Code. In
addition, the following terms shall have the meanings respectively set forth
after each:
"Certificates" means all certificates, instruments and other documents now
------------
or hereafter representing or evidencing any Pledged Securities or any Pledged
Limited Liability Company Interests.
"Collateral" means and includes all present and future right, title and
----------
interest of each Grantor in or to any personal property or assets whatsoever,
whether now owned or existing or hereafter arising or acquired and wheresoever
located, and all rights and powers of each Grantor to transfer any interest in
or to any personal property or assets whatsoever, including, without limitation,
any and all of the following personal property:
(a) All present and future accounts, accounts receivable, agreements,
guarantees, contracts (including without limitation the Material
Contracts), leases, licenses (including without limitation all licenses of
transmitters, transmitter towers and related equipment), contract rights
and rights to payment (collectively, the "Accounts"), together with all
--------
instruments, documents, chattel paper, security agreements, guaranties,
undertakings, surety bonds, insurance policies, notes and drafts, and all
forms of obligations owing to any Grantor or in which any Grantor may have
any interest, however created or arising;
(b) All present and future general intangibles, including without
limitation the proprietary rights of any Grantor in all Media Licenses
(including without limitation the FCC licenses for the Stations described
in Schedule 3.9 attached to the Credit Agreement and including, without
------------
limitation, goodwill, going concern value, all of any Grantor's rights
under or relating to any Media License and the proceeds of any Media
License and the right to receive money or other consideration upon the
sale, assignment or transfer of any Media License; provided, however, that
the Collateral does not include at any time any license granted by the FCC
to the extent, but only to the extent, that a Grantor is prohibited at that
time from granting a security interest therein pursuant to the
Communications Act of 1934, as amended, and the policies and regulations
promulgated thereunder, but includes, to the maximum extent permitted by
law, all rights incident or appurtenant to such Media License and the
rights to receive all proceeds derived from or in connection with the sale,
assignment or transfer of such Media License), all tax refunds of every
kind and nature to which any Grantor now or hereafter may become entitled,
however arising, all other refunds, all commitments to extend financing to
any Grantor, and all deposits, goodwill, choses in action, trade secrets,
computer programs, software, customer lists, trademarks, trade names,
patents, licenses, copyrights, technology, processes, proprietary
information and insurance proceeds, including, without limitation, the
Copyrights, the Patents, the Marks and the Programs, and the goodwill of
each Grantor's business connected with and symbolized by the Marks;
(c) All present and future demand, time, savings, passbook, deposit
and like accounts (general or special) (collectively, the "Deposit
-------
Accounts") in which any Grantor has any interest which are maintained with
--------
any bank, savings and loan association, credit
-2-
<PAGE>
union or like organization, including, without limitation, each account
listed on Schedule D attached hereto and made a part hereof, and all money,
----------
cash and cash equivalents of any Grantor, whether or not deposited in any
Deposit Account;
(d) All present and future books and records, including, without
limitation, books of account and ledgers of every kind and nature, all
electronically recorded data relating to any Grantor or the business
thereof, all receptacles and containers for such records, and all files and
correspondence;
(e) All present and future goods, including, without limitation, all
equipment, machinery, cameras, recording equipment, transmitters,
transmitting towers, broadcasting equipment, videotapes, audio tapes and
other recorded media, tools, molds, dies, furniture, furnishings, fixtures,
trade fixtures, motor vehicles and all other goods used in connection with
or in the conduct of any Grantor's business, including, but not limited to,
all goods as defined in Section 9-109(2) of the Uniform Commercial Code
(collectively, the "Equipment");
---------
(f) All present and future inventory and merchandise, including,
without limitation, all present and future goods held for sale or lease or
to be furnished under a contract of service, all videotapes, audio tapes
and other recorded media, all raw materials, work in process and finished
goods, all packing materials, supplies and containers relating to or used
in connection with any of the foregoing, and all bills of lading, warehouse
receipts and documents of title relating to any of the foregoing
(collectively, the "Inventory");
---------
(g) All present and future stocks, bonds, debentures, securities,
subscription rights, options, warrants, puts, calls, certificates,
partnership interests, limited liability company interests, joint venture
interests and investment and/or brokerage accounts, including without
limitation the Certificates, the Pledged Securities, the Pledged
Partnership Interests and the Pledged Limited Liability Company Interests,
and all rights, preferences, privileges, dividends, distributions (in cash
or in kind), redemption payments or liquidation payments with respect
thereto;
(h) All present and future accessions, appurtenances, components,
repairs, repair parts, spare parts, replacements, substitutions, additions,
issue and/or improvements to or of or with respect to any of the foregoing;
(i) All other tangible and intangible personal property of any
Grantor;
(j) All rights, remedies, powers and/or privileges of any Grantor
with respect to any of the foregoing; and
(k) Any and all proceeds and products of the foregoing, including
without limitation, all money, accounts, general intangibles, deposit
accounts, documents, instruments, chattel paper, goods, insurance proceeds
and any other tangible or intangible property received upon the sale or
disposition of any of the foregoing.
"Copyrights" means all:
----------
-3-
<PAGE>
(i) copyrights, whether or not published or registered under the
Copyright Act of 1976, 17 U.S.C. Section 101 et seq., as the same shall be
amended from time to time, and any predecessor or successor statute thereto
(the "Copyright Act"), and applications for registration of copyrights, and
-------------
all works of authorship and other intellectual property rights therein,
including, without limitation, copyrights for computer programs, source
code and object code data bases and related materials and documentation and
including, without limitation, the registered copyrights and copyright
applications listed on Schedule 3.5A attached to the Credit Agreement (as
-------------
such Schedule may be supplemented from time to time in accordance with the
terms of the Credit Agreement), and (a) all renewals, revisions, derivative
works, enhancements, modifications, updates, new releases and other
revisions thereof, (b) all income, royalties, damages and payments now and
hereafter due and/or payable with respect thereto, including, without
limitation, payments under all licenses entered into in connection
therewith and damages and payments for past or future infringements
thereof, (c) the right to sue for past, present and future infringements
thereof and (d) all of each Grantor's rights corresponding thereto
throughout the world;
(ii) rights under or interests in any copyright license agreements
with any other party, whether such Grantor is a licensee or licensor under
any such license agreement, including, without limitation, the copyright
license agreements listed on Schedule 3.5A attached to the Credit Agreement
-------------
(as such Schedule may be supplemented from time to time in accordance with
the terms of the Credit Agreement), and the right to use the foregoing in
connection with the enforcement of the Lenders' rights under the Loan
Documents; and
(iii) copyrightable materials now or hereafter owned by any Grantor,
including Programs not copyrighted, all tangible property embodying the
copyrights described in clause (i) hereof or such copyrightable materials,
and all tangible property covered by the licenses described in clause (ii)
hereof.
"Entravision" means Entravision Communications Company, L.L.C., a Delaware
-----------
limited liability company.
"Limited Liability Company Acknowledgement" shall have the meaning ascribed
-----------------------------------------
to it in Section 4(b) of this Agreement.
"Limited Liability Company Assets" means all assets, whether tangible or
--------------------------------
intangible and whether real, personal or mixed (including, without limitation,
all limited liability company capital and interests in other limited liability
companies), at any time owned or represented by any Limited Liability Company
Interests.
"Limited Liability Company Interests" means the entire limited liability
-----------------------------------
company interest at any time owned by any Grantor in any Pledged Entity.
"Limited Liability Company Notice" shall have the meaning ascribed to it in
--------------------------------
Section 4(b) of this Agreement.
-4-
<PAGE>
"Marks" means all (i) trademarks, trademark registrations, interests under
-----
trademark license agreements, tradenames, trademark applications, service marks,
business names, trade styles, designs, logos and other source or business
identifiers for which registrations have been issued or applied for in the
United States Patent and Trademark Office or in any other office or with any
other official anywhere in the world or which are used in the United States or
any state, territory or possession thereof, or in any other place, nation or
jurisdiction anywhere in the world including, without limitation, the
trademarks, trademark registrations, applications, service marks, business
names, trade styles, design logos and other source or business identifiers
listed on Schedule 3.5A attached to the Credit Agreement (as such Schedule may
-------------
be supplemented from time to time in accordance with the terms of the Credit
Agreement), (ii) licenses pertaining to any such mark whether a Grantor is
licensor or licensee including, without limitation, the licenses listed on
Schedule 3.5A to the Credit Agreement (as such Schedule may be supplemented from
- -------------
time to time in accordance with the terms of the Credit Agreement), (iii) all
income, royalties, damages and payments now and hereafter due and/or payable
with respect to any such mark or any such license, including, without
limitation, damages and payments for past, present or future infringements
thereof, (iv) rights to sue for past, present and future infringements thereof,
(v) rights corresponding thereto throughout the world, (vi) all product
specification documents and production and quality control manuals used in the
manufacture of products sold under or in connection with such marks, (vii) all
documents that reveal the name and address of all sources of supply of, and all
terms of purchase and delivery for, all materials and components used in the
production of products sold under or in connection with such marks, (viii) all
documents constituting or concerning the then current or proposed advertising
and promotion by any Grantor, its subsidiaries or licensees of products sold
under or in connection with such marks, including, without limitation, all
documents that reveal the media used or to be used and the cost for all such
advertising conducted within the described period or planned for such products
and (ix) renewals and proceeds of any of the foregoing.
"Patents" means all (i) letters patent, design patents, utility patents,
-------
inventions and trade secrets, all patents and patent applications in the United
States Patent and Trademark Office, and interests under patent license
agreements, including, without limitation, the inventions and improvements
described and claimed therein, including, without limitation, those patents
listed on Schedule 3.5A attached to the Credit Agreement (as such Schedule may
-------------
be supplemented from time to time in accordance with the terms of the Credit
Agreement), (ii) licenses pertaining to any patent whether a Grantor is licensor
or licensee, (iii) income, royalties, damages and payments now and hereafter due
and/or payable under and with respect thereto, including, without limitation,
damages and payments for past, present or future infringements thereof, (iv)
rights to sue for past, present and future infringements thereof, (v) rights
corresponding thereto throughout the world in all jurisdictions in which such
patents have been issued or applied for and (vi) the reissues, divisions,
continuations, renewals, extensions and continuations-in-part of any of the
foregoing.
"Pledged Collateral" means the Certificates, the Pledged Securities, the
------------------
Pledged Partnership Interests and the Pledged Limited Liability Interests.
"Pledged Entity" means each limited liability company set forth in Schedule
-------------- --------
A attached hereto, together with any other limited liability company in which
- -
any Grantor may have an interest at any time.
-5-
<PAGE>
"Pledged Limited Liability Company Interests" means all interests in any
-------------------------------------------
Pledged Entities held by any Grantor, including, but not limited to, those
Limited Liability Company Interests identified in Schedule A attached hereto, as
----------
such Schedule may be supplemented from time to time in accordance with the terms
of this Agreement, including, but not limited to, (i) all the capital thereof
and its interest in all profits, losses, Limited Liability Company Assets and
other distributions in respect thereof; (ii) all other payments due or to become
due to such Grantor in respect of such Limited Liability Company Interests;
(iii) all of such Grantor's claims, rights, powers, privileges, authority,
options, security interests, liens and remedies, if any in respect of such
Limited Liability Company Interests; (iv) all of such Grantor's rights to
exercise and enforce every right, power, remedy, authority, option and privilege
relating to such Limited Liability Company Interests; and (v) all other property
hereafter delivered in substitution for or in addition to any of the foregoing
and all certificates and instruments representing or evidencing such other
property received, receivable or otherwise distributed in respect of or in
exchange for any or all thereof.
"Pledged Partnership Interests" means all interests in any partnership or
-----------------------------
joint venture held by any Grantor including but not limited to those
partnerships and/or joint ventures identified in Schedule A attached hereto and
----------
made a part hereof, as such Schedule may be supplemented from time to time in
accordance with the terms of this Agreement, and all dividends, cash,
instruments and other properties from time to time received, to be received or
otherwise distributed in respect of or in exchange for any or all of such
interests.
"Pledged Securities" means all shares of capital stock of any issuer in
------------------
which any Grantor has an interest, including but not limited to, those shares of
stock identified in Schedule A attached hereto, as such Schedule may be
----------
supplemented from time to time in accordance with the terms of this Agreement,
and all dividends, cash, instruments and other properties from time to time
received, to be received or otherwise distributed in respect of or in exchange
for any or all of such shares.
"Programs" means all (a) media broadcasting programs originating from any
--------
Grantor or any Affiliate of any Grantor, all other general intangibles of a like
nature, and all recordings and renewals thereof; and (b) licenses, contracts or
other agreements, whether written or oral, naming any Grantor as licensee or
licensor and providing for the grant of any right to produce, use, sell,
broadcast or rebroadcast any media or broadcasting programs.
"Secured Party" means, collectively, the Agent and the Lenders.
-------------
2. Creation of Security Interest. Each Grantor hereby pledges to the
-----------------------------
Agent for the ratable benefit of the Lenders, and grants to the Agent for the
ratable benefit of the Lenders a security interest in and to, all right, title
and interest of each Grantor in and to all presently existing and hereafter
acquired Collateral. The security interest and pledge created by this Section 2
shall continue in effect so long as any Obligation (as defined below) remains
unpaid or any Commitment remains in effect or any Letter of Credit remains
outstanding.
3. Security for Obligations. This Agreement and the security interests
------------------------
granted herein secure the prompt payment, in full in cash, and full performance
of, all obligations of any Grantor now or hereafter existing under any Loan
Document, whether for principal, interest,
-6-
<PAGE>
fees, expenses or otherwise, including without limitation all obligations of any
Grantor now or hereafter existing under this Agreement, and all interest that
accrues (whether or not allowed) at the then applicable rate (including interest
at the rate for overdue payments described in Section 2.8(c) of the Credit
Agreement) specified in the Credit Agreement on all or any part of any of such
obligations after the filing of any petition or pleading against any Grantor for
a proceeding under any bankruptcy or related law (collectively, the
"Obligations").
-----------
4. Delivery of Pledged Collateral.
------------------------------
(a) Each Certificate shall, on (i) the Closing Date (with respect to
Certificates existing on such date) and (ii) the day on which such Certificate
shall be received or acquired by any Grantor (with respect to Certificates
received or acquired after the Closing Date), be delivered to and held by the
Agent on behalf of the Lenders and shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed undated endorsements,
instruments of transfer or assignment in blank, all in form and substance
reasonably satisfactory to the Agent.
(b) With respect to each Limited Liability Company Interest, on (i) the
Closing Date (with respect to Limited Liability Company Interests existing on
such date) and (ii) the day on which any Limited Liability Company Interest
shall be acquired by any Grantor (with respect to Limited Liability Company
Interests acquired after the Closing Date), a notice in the form set forth in
Schedule F attached hereto (the "Limited Liability Company Notice") shall be
- ---------- --------------------------------
appropriately completed and delivered to each Pledged Entity, notifying each
Pledged Entity of the existence of this Agreement, a certified copy of this
Agreement shall be delivered by each Grantor to the relevant Pledged Entity, and
each such Grantor shall have received and delivered to the Agent a copy of such
Limited Liability Company Notice, along with an acknowledgment in the form set
forth in Schedule F attached hereto (the "Limited Liability Company
---------- -------------------------
Acknowledgment"), duly executed by the relevant Pledged Entity.
- --------------
(c) Subject to any necessary prior approval of the FCC, the Agent shall
have the right, upon the occurrence and during the continuance of an Event of
Default, without notice to any Grantor, to transfer to or to direct any Grantor
or any nominee of any Grantor to register or cause to be registered in the name
of the Agent or any of its nominees any or all of the Pledged Securities or
Pledged Limited Liability Company Interests. In addition, the Agent shall have
the right at any time to exchange certificates or instruments representing or
evidencing Pledged Securities or Pledged Limited Liability Company Interests for
certificates or instruments of smaller or larger denominations.
5. Further Assurances.
------------------
(a) At any time and from time to time at the reasonable written request of
the Agent, each Grantor shall execute and deliver to the Agent, at each
Grantor's expense, all such financing statements and other instruments,
certificates and documents (including notices to financial institutions holding
deposit accounts of each Grantor as to the security interest granted hereby) in
form and substance reasonably satisfactory to the Agent, and perform all such
other acts as shall be necessary or reasonably desirable to fully perfect or
protect or maintain, when filed, recorded, delivered or performed, the Secured
Party's security interests granted pursuant to
-7-
<PAGE>
this Agreement or to enable the Lenders to exercise and enforce their rights and
remedies hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, each Grantor shall: (i) at the request of the
Agent, mark conspicuously each document included in the Inventory and each other
contract relating to the Accounts, and all chattel paper, instruments and other
documents and each of its records pertaining to the Collateral with a legend, in
form and substance satisfactory to the Agent, indicating that such document,
contract, chattel paper, instrument or Collateral is subject to the security
interest granted hereby; (ii) at the request of the Agent, if any Account or
contract or other writing relating thereto shall be evidenced by a promissory
note or other instrument, deliver and pledge to the Agent, for the ratable
benefit of the Lenders, such note or other instrument duly endorsed and
accompanied by duly executed undated instruments of transfer or assignment, all
in form and substance reasonably satisfactory to the Agent; (iii) execute and
file such financing or continuation statements, or amendments thereto, and such
other instruments or notices, as may be necessary or desirable, or as the Agent
may reasonably request, in order to perfect and preserve, with the required
priority, the security interests granted, or purported to be granted hereby;
(iv) upon any Grantor's registration, or application therefor, of any copyright
under the Copyright Act, at the Agent's request execute and deliver to the Agent
for recordation and filing in the United States Copyright Office a copy of this
Agreement or another appropriate copyright mortgage document in form and
substance reasonably satisfactory to the Agent; (v) upon any Grantor's
registration, or application therefor, of any Patent or Mark, execute and
deliver to the Agent for recordation and filing in the United States Patent and
Trademark Office a copy of this Agreement or another appropriate patent or
trademark mortgage document, as applicable, in form and substance reasonably
satisfactory to the Agent; and (vi) with respect to any Material Contract in
which any Grantor now has or hereafter acquires an interest which by its terms
prohibits assignment, each Grantor will use its best efforts to procure the
consent of the counterparty to such contract (a "Consent") in form and substance
-------
reasonably satisfactory to the Agent.
(b) At any time and from time to time, the Agent shall be entitled to file
and/or record any or all such financing statements, instruments and documents
held by it, and any or all such further financing statements, documents and
instruments, relative to the Collateral or any part thereof in each instance,
and to take all such other actions as the Agent may reasonably deem appropriate
to perfect and to maintain perfected the security interests granted herein.
(c) Each Grantor hereby authorizes the Agent to file one or more financing
or continuation statements, and amendments thereto, relative to all or any part
of the Collateral without the signature of any Grantor where permitted by law. A
carbon, photographic or other reproduction of this Agreement or any financing
statement covering the Collateral or any part thereof shall be sufficient as a
financing statement where permitted by law.
(d) Each Grantor shall furnish to the Agent from time to time statements
and schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as the Agent may reasonably request.
Upon a Grantor's publication or registration, or application for registration,
of any copyright under the Copyright Act, such Grantor shall, in addition to all
other acts required to be performed in respect thereof pursuant to this
Agreement, supplement Schedule 3.5A to the Credit Agreement to reflect the
-------------
publication or registration of such copyright or application therefor. Upon a
Grantor's obtaining any rights and interests in any additional Marks, such
Grantor shall, in addition to all other acts required to be
-8-
<PAGE>
performed in respect thereof pursuant to this Agreement, supplement Schedule
--------
3.5A to the Credit Agreement to reflect such additional Marks. Upon a Grantor's
- ----
obtaining any rights and interests in any additional Patents, such Grantor
shall, in addition to all other acts required to be performed in respect thereof
pursuant to this Agreement, supplement Schedule 3.5A to the Credit Agreement to
-------------
reflect such additional Patents. Upon a Grantor's receipt or acquisition of any
additional shares of capital stock of any Person or any additional partnership
interests in any partnership or joint venture, such Grantor shall, in addition
to all other acts required to be performed in respect thereof pursuant to this
Agreement, supplement Schedule A attached hereto to reflect such additional
----------
Pledged Collateral. Upon a Grantor's receipt or acquisition of any additional
Limited Liability Company Interest, such Grantor shall, in addition to all other
acts required to be performed in respect thereof pursuant to this Agreement,
supplement Schedule A attached hereto to reflect such additional Pledged
----------
Collateral and, to the extent such Limited Liability Company Interest is
certificated, deliver to the Agent the certificates therefor, accompanied by
such instruments of transfer as are acceptable to the Agent.
(e) With respect to any Collateral consisting of certificates of title or
the like as to which Secured Party's security interest need be perfected by, or
the priority thereof need be assured by, notation on the certificate of title
pertaining to such Collateral, Grantors will upon demand of the Agent note the
lien on such certificate of title in favor of the Lenders.
(f) With respect to any Collateral consisting of securities, instruments,
partnership or joint venture interests, interests in limited liability
companies, or the like, each Grantor hereby consents and agrees that, upon the
occurrence and during the continuance of an Event of Default, subject to any
necessary prior approval of the FCC, the issuers of, or obligors on, any such
Collateral, or any registrar or transfer agent or trustee for any such
Collateral, shall be entitled to accept the provisions of this Agreement as
conclusive evidence of the right of the Agent to effect any transfer or exercise
any right hereunder or with respect to any such Collateral subject to the terms
hereof, notwithstanding any other notice or direction to the contrary heretofore
or hereafter given by any Grantor or any other Person to such issuers or such
obligors or to any such registrar or transfer agent or trustee.
(g) With respect to any Media Licenses:
(i) The parties acknowledge their intention that, upon the occurrence
of an Event of Default, the Agent and the Lenders shall receive, to the
fullest extent permitted by Requirements of Law (including, without
limitation, the rules and policies of the FCC), all rights necessary or
desirable to obtain, use or sell such Collateral or to have such Collateral
or rights in connection therewith sold for the benefit of the Lenders and,
in connection therewith, to assign the Media Licenses or to have the Media
Licenses assigned, to such purchaser, and to exercise all remedies
available to the Lenders under this Agreement, the other Loan Documents,
the Uniform Commercial Code and other applicable law.
(ii) The parties agree that, in the event of changes in the
Requirement of Law occurring after the date hereof that affect in any
manner the Lenders' rights of access to, or use or sale of, the Media
Licenses, or the procedures necessary to enable the Lenders to obtain such
rights of access, use or sale (including changes allowing greater access),
-9-
<PAGE>
the Lenders and each Grantor, upon request of any of the Lenders or the
Agent, shall amend this Agreement and the other Loan Documents in such
manner as the Lenders or the Agent shall reasonably request, in order to
provide the Lenders with such rights to the greatest extent possible
consistent with then-applicable Requirements of Law.
6. Voting Rights; Dividends; etc. Subject to any necessary prior
-----------------------------
approval from the FCC, so long as no Event of Default shall have occurred and be
continuing:
(a) Voting Rights. Each Grantor shall be entitled to exercise any and all
-------------
voting and other consensual rights pertaining to the Pledged Securities, the
Pledged Partnership Interests and the Pledged Limited Liability Company
Interests (including, but not limited to, all voting, consent, administration,
management and other rights and remedies under any partnership agreement or any
limited liability company agreement or otherwise with respect to the Pledged
Securities, the Pledged Partnership Interests or the Pledged Limited Liability
Company Interests), or any part thereof, for any purpose not inconsistent with
the terms of this Agreement, the Credit Agreement or the other Loan Documents;
provided, however, that no Grantor shall exercise any such right if it would
- -------- -------
result in a Default.
(b) Dividend and Distribution Rights. Subject to the terms of the Credit
--------------------------------
Agreement, each Grantor shall be entitled to receive and to retain and use any
and all dividends or distributions paid in respect of the Pledged Securities,
the Pledged Partnership Interests or the Pledged Limited Liability Company
Interests; provided, however, that any and all
-------- -------
(i) non-cash dividends or distributions in the form of capital
stock, certificated limited liability company interests, instruments or
other property received, receivable or otherwise distributed in respect of,
or in exchange for, any Pledged Securities, Pledged Partnership Interests
or Pledged Limited Liability Company Interests,
(ii) dividends and other distributions paid or payable in cash in
respect of any Pledged Securities, Pledged Partnership Interests or Pledged
Limited Liability Company Interests in connection with a partial or total
liquidation or dissolution or in connection with a reduction of capital,
capital surplus or paid-in-surplus, and
(iii) cash paid, payable or otherwise distributed in redemption of, or
in exchange for, any Pledged Securities, Pledged Partnership Interests or
Pledged Limited Liability Company Interests,
shall, except as otherwise provided for in the Credit Agreement or the other
Loan Documents, forthwith be delivered to the Agent, in the case of (i) above,
to be held as Collateral and shall, if received by any Grantor, be received in
trust for the benefit of Secured Party, be segregated from the other property of
such Grantor and forthwith be delivered to the Agent as Collateral in the same
form as so received (with any necessary endorsements), and in the case of (ii)
and (iii) above, to be applied to the Obligations to the extent permitted by the
Credit Agreement or otherwise to be held as Collateral.
7. Rights as to Pledged Collateral During Event of Default. When an
-------------------------------------------------------
Event of Default has occurred and is continuing, subject to any necessary prior
approval of the FCC:
-10-
<PAGE>
(a) Voting, Dividend and Distribution Rights. At the option of the Agent,
----------------------------------------
all rights of any Grantor to exercise the voting and other consensual rights
which it would otherwise be entitled to exercise pursuant to Section 6(a) above,
and to receive the dividends and distributions which it would otherwise be
authorized to receive and retain pursuant to Section 6(b) above, shall cease,
and all such rights shall thereupon become vested in the Agent who shall
thereupon have the sole right to exercise such voting and other consensual
rights and to receive and to hold as Pledged Collateral such dividends and
distributions during the continuance of such Event of Default.
(b) Dividends and Distributions Held in Trust. All dividends and other
-----------------------------------------
distributions which are received by any Grantor contrary to the provisions of
Section 7(a) of this Agreement shall be received in trust for the benefit of
Secured Party, shall be segregated from other funds of such Grantor and
forthwith shall be paid over to the Agent as Collateral in the same form as so
received (with any necessary endorsements).
8. Irrevocable Proxy. Each Grantor hereby revokes all previous proxies
-----------------
with regard to the Pledged Securities and the Pledged Limited Liability Company
Interests and, subject to any necessary prior approval of the FCC, appoints the
Agent as its proxyholder and attorney-in-fact to (i) attend and vote at any and
all meetings of the shareholders of the corporation(s) which issued the Pledged
Securities (whether or not transferred into the name of the Agent), and any
adjournments thereof, held on or after the date of the giving of this proxy and
prior to the termination of this proxy and to execute any and all written
consents, waivers and ratifications of shareholders of such corporation(s)
executed on or after the date of the giving of this proxy and prior to the
termination of this proxy, with the same effect as if such Grantor had
personally attended the meetings or had personally voted its shares or had
personally signed the written consents, waivers or ratification, and (ii) to
attend and vote at any and all meetings of the members of the Pledged Entities
(whether or not such Pledged Limited Liability Company Interests are transferred
into the name of the Agent), and any adjournments thereof, held on or after the
date of the giving of this proxy and to execute any and all written consents,
waivers and ratifications of the Pledged Entities executed on or after the date
of the giving of this proxy and prior to the termination of this proxy with the
same effect as if such Grantor had personally attended the meetings or had
personally voted on its Limited Liability Company Interests or had personally
signed the consents, waivers or ratifications; provided, however, that the Agent
-------- -------
as proxyholder shall have rights hereunder only upon the occurrence and during
the continuance of an Event of Default and subject to Section 16(j) hereof. Each
Grantor hereby authorizes the Agent to substitute another Person (which Person
shall be a successor to the rights of the Agent hereunder, a nominee appointed
by the Agent to serve as proxyholder, or otherwise as approved by such Grantor
in writing, such approval not to be unreasonably withheld) as the proxyholder
and, upon the occurrence or during the continuance of any Event of Default,
hereby authorizes and directs the proxyholder to file this proxy and the
substitution instrument with the secretary of the appropriate corporation. This
proxy is coupled with an interest and is irrevocable until such time as no part
of any Commitment remains outstanding, all Obligations have been indefeasibly
paid in full and no Letter of Credit remains outstanding.
9. Copyrights.
----------
-11-
<PAGE>
(a) Royalties. Each Grantor hereby agrees that the use by the Agent or
---------
any Lender of the Copyrights as authorized hereunder in connection with the
Agent's or the Lenders' exercise of their rights and remedies hereunder shall be
without any liability for royalties or other related charges from the Agent or
the Lenders to any Grantor.
(b) Restrictions on Future Agreements. Subject to the terms hereof and of
---------------------------------
the Credit Agreement, each Grantor shall be permitted to manage, license and
administer its Copyrights, Patents and Marks in such manner as each Grantor in
its reasonable business judgment deems desirable; provided, however, that no
-------- -------
Grantor will, without the Agent's prior written consent, (a) enter into any
copyright license agreements or (b) take any action, or permit any action to be
taken by others, including, without limitation, licensees, or fail to take any
action, which would customarily be taken by a Person in the same business and in
similar circumstances as such Grantor.
(c) Duties of Grantor. Each Grantor shall have the duty to: (i) prosecute
-----------------
diligently any copyright application included in the Copyrights, (ii) at the
request of the Agent, make application for registration of such uncopyrighted
but copyrightable material owned by such Grantor as the Agent reasonably deems
appropriate, (iii) place notices of copyright on all copyrightable property
produced or owned by such Grantor embodying the Copyrights and use diligent
reasonable efforts to have its licensees do the same and (iv) take all
reasonable action necessary to preserve and maintain all of such Grantor's
rights in the Copyrights that are or shall be necessary in the operation of such
Grantor's business, including, without limitation, making timely filings for
renewals and extensions of registered Copyrights and diligently monitoring
unauthorized use thereof. Any expenses incurred in connection with the foregoing
shall be borne by the Grantors. Neither the Agent nor the Lenders shall have any
duty with respect to the Copyrights other than to act lawfully and without gross
negligence or willful misconduct. Without limiting the generality of the
foregoing, neither the Agent nor the Lenders shall be under any obligation to
take any steps necessary to preserve rights in the Copyrights against any other
parties, but the Agent may do so at its option upon the occurrence and during
the continuance of an Event of Default, and all reasonable expenses incurred in
connection therewith shall be for the account of the Grantors and shall be added
to the Obligations.
10. Patents and Marks.
-----------------
(a) Royalties. Each Grantor hereby agrees that any rights granted
---------
hereunder to the Lenders with respect to Patents and Marks shall be applicable
to all territories in which any Grantor has the right to use such Patents and
Marks, from time to time, and without any liability for royalties or other
related charges from the Lenders to any Grantor.
(b) Restrictions on Future Agreements. No Grantor will, without the
---------------------------------
Agent's prior written consent, abandon any Patent or Mark in which any Grantor
now owns or hereafter acquires any rights or interests or enter into any
agreement, including, without limitation, any license agreement, which is
inconsistent with any Grantor's obligations under this Agreement, and each
Grantor further agrees that it will not take any action, or permit any action to
be taken by others subject to its control, including licensees, or fail to take
any action which would customarily be taken by a Person in the same business and
in similar circumstances as such Grantor.
-12-
<PAGE>
(c) Duties of Grantors. Each Grantor shall have the duty to (i) prosecute
------------------
diligently any patent application or trademark application pending as of the
date hereof or thereafter until the Obligations shall have been indefeasibly
paid in full, no Commitment remains outstanding and no Letter of Credit remains
outstanding, (ii) upon the occurrence and during the continuance of an Event of
Default, make application on unpatented but patentable inventions owned by any
Grantor and on Marks, as the case may be, as the Agent reasonably deem
appropriate, (iii) file and prosecute opposition and cancellation proceedings
and (iv) take all reasonable action necessary to preserve and maintain all
rights in patent applications of the Patents and in applications for
registrations of the Marks. Any expenses incurred in connection with such
applications shall be borne by the Grantors. No Grantor shall abandon any right
to file a Patent application or Mark application without the consent of the
Agent. Each Grantor shall give proper statutory notice in connection with its
use of each such Mark to the extent necessary for the protection of each of the
Marks. Each Grantor shall notify the Agent of any suits it commences to enforce
the Patents and Marks and shall provide the Agent with copies of any documents
reasonably requested by the Agent relating to such suits.
11. Grantor's Representations and Warranties. Each Grantor represents and
----------------------------------------------------------------------
warrants as follows:
- -------------------
(a) (i) The locations listed on Schedule B attached hereto and made a
----------
part hereof constitute all locations at which Inventory and/or Equipment
are located; (ii) the chief executive office of each Grantor, where each
Grantor keeps its records concerning the Collateral and the chattel paper
evidencing the Collateral, is located at the address set forth for each
Grantor on Schedule C attached hereto and made a part hereof; (iii) all
----------
records concerning any Account, any Material Contract and all originals of
all contracts and other writings which evidence any Account are located at
the addresses listed on Schedule C attached hereto; and (iv) the Grantors
----------
have exclusive possession and control of the Equipment and the Inventory.
(b) Each Grantor is the legal and beneficial owner of the Collateral
free and clear of all Liens except for Liens permitted by Section 6.3 of
the Credit Agreement. Each Grantor has the power, authority and legal right
to grant the security interests in the Collateral purported to be granted
hereby, and to execute, deliver and perform this Agreement. The pledge of
the Collateral pursuant to this Agreement creates a valid security interest
in the Collateral. Upon the filing of appropriate financing statements in
the filing offices set forth on Schedule E attached hereto, the recordation
----------
of appropriate documentation with the United States Copyright Office and
the United States Patent and Trademark Office, as applicable, the giving of
a Limited Liability Company Notice to the Pledged Entities and the delivery
to the Agent of the Certificates, as the case may be, the Secured Parties
will have a first-priority (except for any Liens or security interests
permitted under Section 6.3 of the Credit Agreement which have priority by
operation of law) perfected security interest in the Collateral.
(c) The Pledged Securities and the Pledged Limited Liability Company
Interests have been duly authorized and validly issued and are fully paid
and nonassessable.
-13-
<PAGE>
(d) No consent of any Person, including any partner in a partnership
with respect to which any Grantor has pledged its interest as a Pledged
Partnership Interest or any member in a Pledged Entity, is required for the
pledge by any Grantor of the Collateral other than consents required under
the agreements described on Schedule 3.2 to the Credit Agreement.
------------
(e) The Pledged Securities described on Schedule A attached hereto
----------
constitute (i) all of the shares of capital stock of any Person owned by
any Grantor, (ii) that percentage of the issued and outstanding shares of
the respective issuers thereof indicated on Schedule A attached hereto, and
----------
there is no other class of shares issued and outstanding of the respective
issuers thereof except as set forth on Schedule A attached hereto, and
----------
(iii) 100% of the issued and outstanding shares of each corporate Borrower.
The Pledged Partnership Interests described on Schedule A attached hereto
----------
constitute all of the partnerships or joint ventures in which any Grantor
has an interest, and each Grantor's respective percentage interest in each
such partnership or joint venture is as set forth on such Schedule A
----------
attached hereto. The Pledged Limited Liability Company Interests described
on Schedule A attached hereto constitute all of the Limited Liability
----------
Company Interests of each Grantor and each Grantor's respective percentage
interest in each such Pledged Entity is as set forth on Schedule A attached
----------
hereto. The Pledged Limited Liability Company Interests described on
Schedule A constitute (i) 100% of the Limited Liability Company Interests
----------
owned by any Grantor, and (ii) 100% of the Limited Liability Company
interests of each Subsidiary directly owned by any Grantor (other than
Entravision Communications of Midland, LLC, with respect to which such
Pledged Limited Liability Company Interests constitute 80% of the limited
liability company interests thereof).
(f) Subject to Section 16(j) hereof, no authorization, approval or
other action by, and no notice to or filing with, any Governmental
Authority (other than such authorizations, approvals and other actions as
have already been taken and are in full force and effect) is required (A)
for the pledge of the Collateral or the grant of the security interest in
the Collateral by the Grantors hereby or for the execution, delivery or
performance of this Agreement by the Grantors, or (B) for the exercise by
the Agent of the voting rights in the Pledged Securities, the Pledged
Partnership Interests and the Pledged Limited Liability Company Interests
or of any other rights or remedies in respect of the Collateral hereunder
except as may be required in connection with any disposition of Collateral
consisting of securities by laws affecting the offering and sale of
securities generally.
(g) No Grantor now owns, is a licensee of, or has applied for any
Patents. No Grantor owns, is a licensee of, or has applied for any Marks,
other than those set forth on Schedule 3.5A to the Credit Agreement, none
of which have been registered with, or for which an application for
registration has been made with, any Governmental Authority.
(h) No Grantor now owns, is a licensee of, or has applied for any
Copyrights.
(i) The deposit accounts listed on Schedule D attached hereto and
----------
made a part hereof constitute all deposit accounts maintained by any
Grantor (other than any payroll
-14-
<PAGE>
or other operating account having a balance not greater than $250,000 at
any time (and provided that such excluded accounts shall not at any time
have an aggregate balance in excess of $2,000,000).
(j) None of the Material Contracts contains provisions prohibiting
the assignment thereof by Grantor to Lenders which has not been waived by
the counterparty thereto pursuant to a Consent.
12. Grantor's Covenants. In addition to the other covenants and
-------------------
agreements set forth herein and in the other Loan Documents, each Grantor
covenants and agrees as follows:
(a) Each Grantor will pay, prior to delinquency, all taxes, charges,
Liens and assessments against the Collateral owned by it, except those with
respect to which the amount or validity is being contested in good faith by
appropriate proceedings and with respect to which reserves in conformity
with GAAP have been provided on the books of such Grantor.
(b) The Collateral will not be used in violation of any material law,
regulation or ordinance or any Requirement of Law applicable to the Grantor
owning it, nor used in any way that will void or impair any insurance
required to be carried in connection therewith.
(c) Each Grantor will keep the Collateral in reasonably good repair,
working order and operating condition (normal wear and tear excluded), and
from time to time make all necessary and proper repairs, renewals,
replacements, additions and improvements thereto and, as appropriate and
applicable, will otherwise deal with the Collateral in all such ways as are
considered customary practice by owners of like property.
(d) Each Grantor will take all reasonable steps to preserve and
protect the Collateral.
(e) Each Grantor will maintain all insurance coverage required
pursuant to the Loan Documents.
(f) Each Grantor will promptly notify the Agent in writing in the
event of any material damage to the Collateral from any source whatsoever.
(g) None of the Grantors will (i) establish any location of Inventory
or Equipment not listed on Schedule B hereto, (ii) move its principal place
----------
of business, chief executive offices or any other office listed on Schedule
--------
C hereto or (iii) adopt, use or conduct business under any trade name or
-
other corporate or fictitious name not disclosed on Schedule 3.5C to the
-------------
Credit Agreement hereto, except upon not less than 30 days prior notice to
the Agent and each Grantor's prior compliance with all applicable
requirements of Section 5 hereof necessary to perfect the Lender's security
interest hereunder.
(h) No Grantor shall withdraw as a member of any Pledged Entity, or
file or pursue or take any action which may, directly or indirectly, cause
a dissolution or
-15-
<PAGE>
liquidation of or with respect to any Pledged Entity or seek a partition of
any property of any Pledged Entity.
(i) Subject to the provisions of Section 16(j) hereof, each Grantor
agrees to take any action which the Agent may reasonably request in order
to obtain from the FCC such approval as may be necessary to enable the
Lenders to exercise and enjoy the full rights and benefits granted to them
by this Agreement, including the use of each Grantor's best efforts to
assist in obtaining the approval of the FCC for any action or transaction
contemplated by this Agreement for which such approval is required by law.
13. Agent's Rights Regarding Collateral. At any time and from time to
-----------------------------------
time, the Agent (for the benefit of Secured Party) may, to the extent necessary
or desirable to protect the security hereunder, but the Agent shall not be
obligated to: (a) (whether or not a Default has occurred) itself or through its
representatives, at its own expense, upon reasonable notice and at such
reasonable times during usual business hours, visit and inspect any Grantor's
properties and examine and make abstracts from any of its books and records at
any reasonable time and as often as may reasonably be desired and discuss the
business, operations, properties and financial and other condition of any
Grantor and its Subsidiaries with officers and employees of any Grantor and its
Subsidiaries and with its Accountants or (b) if a Default has occurred and is
continuing, at the expense of each Grantor, perform any obligation of such
Grantor under this Agreement. At any time and from time to time, at the expense
of each Grantor, the Agent (for the benefit of Secured Party) may, to the extent
necessary or desirable to protect the security hereunder, but the Agent shall
not be obligated to: (i) notify obligors on the Collateral that the Collateral
has been assigned as security to the Agent for the benefit of Secured Party;
(ii) at any time and from time to time request from obligors on the Collateral,
in the name of each Grantor or in the name of each Secured Party, information
concerning the Collateral and the amounts owing thereon; and (iii) after an
Event of Default has occurred and is continuing, direct obligors under the
contracts included in the Collateral to which any Grantor is party to direct
their performance to the Agent or the Lenders. Each Grantor shall keep proper
books and records and accounts in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all material
dealings and transactions pertaining to the Collateral. The Agent shall at all
reasonable times on reasonable notice have full access to and the right to audit
any and all of any Grantor's books and records pertaining to the Collateral, and
to confirm and verify the value of the Collateral. Neither the Agent nor the
Lenders shall be under any duty or obligation whatsoever to take any action to
preserve any rights of or against any prior or other parties in connection with
the Collateral, to exercise any voting rights or managerial rights with respect
to any Collateral or to make or give any presentments for payment, demands for
performance, notices of non-performance, protests, notices of protest, notices
of dishonor or notices of any other nature whatsoever in connection with the
Collateral or the Obligations. Neither the Agent nor the Lenders shall be under
any duty or obligation whatsoever to take any action to protect or preserve the
Collateral or any rights of any Grantor therein, or to make collections or
enforce payment thereon, or to participate in any foreclosure or other
proceeding in connection therewith. Nothing contained herein or in any Consent
shall constitute an assumption by the Lenders of any of Grantors' obligations
under the contracts assigned hereunder unless the Agent shall have given written
notice to the counterparty to such assigned contract of the Lenders' intention
to assume such contract. Each Grantor shall continue to be liable for
performance of its obligations under such contracts.
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<PAGE>
Nothing contained herein shall be construed to make the Agent or any Lender
liable as a member of any Pledged Entity or partner in any partnership with
respect to which any Grantor has pledged its interest as a Pledged Limited
Liability Company Interest or a Pledged Partnership Interest, and the Agent or
any Lenders by virtue of this Agreement or otherwise (except as referred to in
the following sentence) shall not have any of the duties, obligations or
liabilities of a member of any Pledged Entity or partner in such partnership.
The parties hereto expressly agree that, unless the Agent shall become the
absolute owner of a Pledged Limited Liability Company Interest or Pledged
Partnership Interest pursuant hereto, this Agreement shall not be construed as
creating a partnership or joint venture among the Agent, any Lender and/or any
Grantor. Except as provided in the immediately preceding sentence, the Agent, by
accepting this Agreement, did not intend to become a member of any Pledged
Entity or partner in any partnership with respect to which any Grantor has
pledged its interest as a Pledged Limited Liability Company Interest or a
Pledged Partnership Interest, or otherwise be deemed to be a co-venturer with
respect to any Grantor or any Pledged Entity or partner in any such partnership,
either before or after an Event of Default shall have occurred.
14. Collections on the Collateral. Except as provided to the contrary in
-----------------------------
the Credit Agreement, each Grantor shall have the right to use and to continue
to make collections on and receive dividends and other proceeds of all of the
Collateral in the ordinary course of business so long as no Event of Default
shall have occurred and be continuing. Upon the occurrence and during the
continuance of an Event of Default, at the option of the Agent, each Grantor's
right to make collections on and receive dividends and other proceeds of the
Collateral and to use or dispose of such collections and proceeds shall
terminate, and any and all dividends, proceeds and collections, including all
partial or total prepayments, then held or thereafter received on or on account
of the Collateral will be held or received by each such Grantor in trust for
Secured Party and immediately delivered in kind to the Agent (duly endorsed to
the Agent, if required), to be applied to the Obligations or held as Collateral,
as the Agent shall elect. Upon the occurrence and during the continuance of an
Event of Default, the Agent shall have the right at all times to receive,
receipt for, endorse, assign, deposit and deliver, in the name of the Agent or
the Lenders or in the name of any Grantor, any and all checks, notes, drafts and
other instruments for the payment of money constituting proceeds of or otherwise
relating to the Collateral; and each Grantor hereby authorizes the Agent to
affix, by facsimile signature or otherwise, the general or special endorsement
of any Grantor, in such manner as the Agent shall deem advisable, to any such
instrument in the event the same has been delivered to or obtained by the Agent
without appropriate endorsement, and the Agent and any collecting bank are
hereby authorized to consider such endorsement to be a sufficient, valid and
effective endorsement by such Grantor, to the same extent as though it were
manually executed by the duly authorized representative of such Grantor,
regardless of by whom or under what circumstances or by what authority such
endorsement actually is affixed, without duty of inquiry or responsibility as to
such matters, and each Grantor hereby expressly waives demand, presentment,
protest and notice of protest or dishonor and all other notices of every kind
and nature with respect to any such instrument.
15. Possession of Collateral by Agent. All the Collateral now, heretofore
---------------------------------
or hereafter delivered to the Agent shall be held by the Agent in its
possession, custody and control. Any or all of the Collateral delivered to the
Agent constituting cash or cash equivalents shall, prior to the occurrence of
any Event of Default, be held in an interest-bearing account with one or more of
the Lenders, and shall be, upon request of the Grantor owning it, invested in
investments
-17-
<PAGE>
permitted by Section 6.7(c) of the Credit Agreement. Nothing herein shall
obligate Agent to obtain any particular return thereon. Upon the occurrence and
during the continuance of an Event of Default, whenever any of the Collateral is
in the Agent's possession, custody or control, the Agent may use, operate and
consume the Collateral, whether for the purpose of preserving and/or protecting
the Collateral, or for the purpose of performing any of such Grantor's
obligations with respect thereto, or otherwise, and, subject to the terms of
Section 9.7 of the Credit Agreement, any or all of the Collateral delivered to
the Agent constituting cash or cash equivalents shall be applied by the Agent to
payment of the Obligations to the extent permitted by the terms of the Credit
Agreement or otherwise held as Collateral as the Agent shall elect. The Agent
may at any time deliver or redeliver the Collateral or any part thereof to such
Grantor, and the receipt of any of the same by such Grantor shall be complete
and full acquittance for the Collateral so delivered, and the Agent thereafter
shall be discharged from any liability or responsibility arising after such
delivery to such Grantor. So long as the Agent exercises reasonable care with
respect to any Collateral in its possession, custody or control, neither the
Agent nor the Lenders shall have any liability for any loss of or damage to any
Collateral, and in no event shall the Agent or the Lenders have liability for
any diminution in value of Collateral occasioned by economic or market
conditions or events, absent the gross negligence or willful misconduct of the
Agent or any of the Lenders. The Agent shall be deemed to have exercised
reasonable care within the meaning of the preceding sentence if the Collateral
in the possession, custody or control of the Agent is accorded treatment
substantially equal to that which the Agent accords similar property for its own
account, it being understood that neither the Agent nor the Lenders shall have
any responsibility for (a) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relating to any
Collateral, whether or not the Agent or any Lender has or is deemed to have
knowledge of such matters, or (b) taking any necessary steps to preserve rights
against any Person with respect to any Collateral.
16. Remedies.
--------
(a) Rights Upon Event of Default. Upon the occurrence and during the
----------------------------
continuance of an Event of Default, each Grantor shall be in default hereunder
and the Agent for the benefit of the Secured Party shall have, in any
jurisdiction where enforcement is sought, in addition to all other rights and
remedies that the Agent on behalf of Secured Party may have under this Agreement
and under applicable laws or in equity, all rights and remedies of a secured
party under the Uniform Commercial Code as enacted in any such jurisdiction in
effect at that time, and in addition the following rights and remedies, all of
which may be exercised with or without further notice to any Grantor except such
notice as may be specifically required by applicable law: (a) to foreclose the
Liens and security interests created hereunder or under any other Loan Document
by any available judicial procedure or without judicial process; (b) to enter
any premises where any Collateral may be located for the purpose of securing,
protecting, inventorying, appraising, inspecting, repairing, preserving,
storing, preparing, processing, taking possession of or removing the same; (c)
to sell, assign, lease or otherwise dispose of any Collateral or any part
thereof, either at public or private sale or at any broker's board, in lot or in
bulk, for cash, on credit or otherwise, with or without representations or
warranties and upon such terms as shall be commercially reasonable; (d) to
notify obligors on the Collateral that the Collateral has been assigned to the
Agent for the benefit of Secured Party and that all payments thereon, or
performance with respect thereto, are to be made directly and exclusively to the
Agent for the account of Secured Party; (e) to collect by legal proceedings or
otherwise all
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<PAGE>
dividends, distributions, interest, principal or other sums now or hereafter
payable upon or on account of the Collateral; (f) to enter into any extension,
reorganization, disposition, merger or consolidation agreement, or any other
agreement relating to or affecting the Collateral, and in connection therewith
the Agent may deposit or surrender control of the Collateral and/or accept other
property in exchange for the Collateral as the Agent reasonably deems
appropriate and is commercially reasonable; (g) to settle, compromise or
release, on terms acceptable to the Agent, in whole or in part, any amounts
owing on the Collateral and/or any disputes with respect thereto; (h) to extend
the time of payment, make allowances and adjustments and issue credits in
connection with the Collateral in the name of the Agent for the benefit of
Secured Party or in the name of any Grantor; (i) to enforce payment and
prosecute any action or proceeding with respect to any or all of the Collateral
and take or bring, in the name of Secured Party or in the name of any Grantor,
any and all steps, actions, suits or proceedings deemed necessary or reasonably
desirable by the Agent to effect collection of or to realize upon the
Collateral, including any judicial or nonjudicial foreclosure thereof or
thereon, and each Grantor specifically consents to any nonjudicial foreclosure
of any or all of the Collateral or any other action taken by the Lenders which
may release any obligor from personal liability on any of the Collateral, and
each Grantor waives (such waiver not to affect the Agent's agreement to give
notice of sale in certain circumstances pursuant to Section 16(d)), to the
extent permitted by applicable law, any right to receive notice of any public or
private judicial or nonjudicial sale or foreclosure of any security or any of
the Collateral, and any money or other property received by the Agent in
exchange for or on account of the Collateral, whether representing collections
or proceeds of Collateral, and whether resulting from voluntary payments or
foreclosure proceedings or other legal action taken by Agent or any Grantor may
be applied by the Agent, without notice to any Grantor, to the Obligations in
such order and manner as the Agent in its sole discretion shall determine; (j)
to insure, protect and preserve the Collateral; (k) to exercise all rights,
remedies, powers or privileges provided under any of the Loan Documents; and (l)
to remove, from any premises where the same may be located, the Collateral and
any and all documents, instruments, files and records, and any receptacles and
cabinets containing the same, relating to the Collateral, and the Agent may, at
the cost and expense of each Grantor, use such of its supplies, equipment,
facilities and space at its places of business as may be necessary or
appropriate to properly administer, process, store, control, prepare for sale or
disposition and/or sell or dispose of the Collateral or to properly administer
and control the handling of collections and realizations thereon, and the Agent
shall be deemed to have a rent-free tenancy of any premises of each Grantor for
such purposes and for such periods of time as reasonably required by the Agent.
Each Grantor will, at the Agent's request, assemble the Collateral and make it
available to the Agent at places which the Agent may designate, whether at the
premises of any Grantor or elsewhere, and will make available to the Agent, free
of cost, all premises, equipment and facilities of any Grantor for the purpose
of the Agent's taking possession of the Collateral or storing the same or
removing or putting the Collateral in salable form or selling or disposing of
the same.
Nothing herein contained shall be construed to give the Agent or the
Lenders or any purchaser of the Collateral the right to operate any of the
Stations without the prior consent of the FCC, to the extent required by law or
the terms of any Media License.
(b) Possession by Agent. Upon the occurrence and during the continuance
-------------------
of an Event of Default, the Agent also shall have the right, without notice or
demand (other than any
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<PAGE>
notice required by Section 7 of the Credit Agreement), either in person, by
agent or by a receiver to be appointed by a court in accordance with the
provisions of applicable law (and each Grantor hereby expressly consents, to the
fullest extent permitted by applicable law, upon the occurrence and during the
continuance of an Event of Default to the appointment of such a receiver), and,
to the extent permitted by applicable law, without regard to the adequacy of any
security for the Obligations, to take possession of the Collateral or any part
thereof and to collect and receive the rents, issues, profits, income and
proceeds thereof. The taking possession of the Collateral by the Agent shall not
cure or waive any Event of Default or notice thereof or invalidate any act done
pursuant to such notice. The rights, remedies and powers of any receiver
appointed by a court shall be as ordered by said court.
(c) Sale of Collateral. Any public or private sale or other disposition
------------------
of the Collateral may be held at any office of Agent, or at any Grantor's place
of business, or at any other place permitted by applicable law, and without the
necessity of the Collateral's being within the view of prospective purchasers.
The Agent may direct the order and manner of sale of the Collateral, or portions
thereof, as it in its sole and absolute discretion may determine provided such
sale is commercially reasonable, and each Grantor expressly waives, to the
extent permitted by applicable law, any right to direct the order and manner of
sale of any Collateral. The Agent or any Person acting on the Agent's behalf may
bid and purchase at any such sale or other disposition. In addition to the other
rights of the Agent and the Lenders hereunder, each Grantor hereby grants to the
Agent and the Lenders a license or other right to use, without charge, any
Grantor's labels, copyrights, patents, rights of use of any name, trade names,
trademarks and advertising matter, or any property of a similar nature,
including, without limitation, the Copyrights, the Patents and the Marks in
advertising for sale and selling any Collateral.
(d) Notice of Sale. Unless the Collateral is perishable or threatens to
--------------
decline speedily in value or is of a type customarily sold on a recognized
market, the Agent will give each Grantor reasonable notice of the time and place
of any public sale thereof or of the time on or after which any private sale
thereof is to be made. The requirement of reasonable notice conclusively shall
be met if such notice is mailed, certified mail, postage prepaid, to each
Grantor at its address set forth on the signature page hereto or delivered or
otherwise sent to each Grantor, at least five (5) Business Days before the date
of the sale. Each Grantor expressly waives, to the fullest extent permitted by
applicable law, any right to receive notice of any public or private sale of any
Collateral or other security for the Obligations except as expressly provided
for in this paragraph. The Agent shall not be obligated to make any sale of the
Collateral if it shall determine not to do so regardless of the fact that notice
of sale of the Collateral may have been given. The Agent may, without notice or
publication, except as required by applicable law, adjourn the sale from time to
time by announcement at the time and place fixed for sale, and such sale may,
without further notice (except as required by applicable law), be made at the
time and place to which the same was so adjourned.
(e) Private Sales. With respect to any Collateral consisting of
-------------
securities, partnership interests, membership interests, joint venture interests
or the like, and whether or not any of such Collateral has been effectively
registered under the Securities Act of 1933, as amended, or other applicable
laws, the Agent may, in its sole and absolute discretion, sell all or any part
of such Collateral at private sale in such manner and under such circumstances
as the Agent may deem necessary or advisable in order that the sale may be
lawfully conducted in a commercially
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reasonable manner. Without limiting the foregoing, the Agent may (i) approach
and negotiate with a limited number of potential purchasers, and (ii) restrict
the prospective bidders or purchasers to persons who will represent and agree
that they are purchasing such Collateral for their own account for investment
and not with a view to the distribution or resale thereof. In the event that any
such Collateral is sold at private sale, each Grantor agrees to the extent
permitted by applicable law that if such Collateral is sold for a price which is
commercially reasonable, then (A) none of the Grantors shall be entitled to a
credit against the Obligations in an amount in excess of the purchase price, and
(B) the Lenders shall not incur any liability or responsibility to any Grantor
in connection therewith, notwithstanding the possibility that a substantially
higher price might have been realized at a public sale. Each Grantor recognizes
that a ready market may not exist for such Collateral if it is not regularly
traded on a recognized securities exchange, and that a sale by the Agent of any
such Collateral for an amount less than a pro rata share of the fair market
value of the issuer's assets minus liabilities may be commercially reasonable in
view of the difficulties that may be encountered in attempting to sell a large
amount of such Collateral or Collateral that is privately traded.
(f) Title of Purchasers. Upon consummation of any sale of Collateral
-------------------
hereunder, the Agent on behalf of Secured Party 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 Collateral so sold
absolutely free from any claim or right upon the part of any Grantor or any
other Person claiming through any Grantor, and each Grantor hereby waives (to
the extent permitted by applicable laws) all rights of redemption, stay and
appraisal which it now has or may at any time in the future have under any rule
of law or statute now existing or hereafter enacted. If the sale of all or any
part of the Collateral is made on credit or for future delivery, the Agent shall
not be required to apply any portion of the sale price to the Obligations until
such amount actually is received by the Agent, and any Collateral so sold may be
retained by the Agent until the sale price is paid in full by the purchaser or
purchasers thereof. Secured Party shall not incur any liability in case any such
purchaser or purchasers shall fail to pay for the Collateral so sold, and, in
case of any such failure, the Collateral may be sold again.
(g) Disposition of Proceeds of Sale. The proceeds resulting from the
-------------------------------
collection, liquidation, sale or other disposition of the Collateral shall be
applied, first, to the reasonable costs and expenses (including reasonable
-----
attorneys' fees) of retaking, holding, storing, processing and preparing for
sale, selling, collecting and liquidating the Collateral, and the like; second,
------
to the satisfaction of all Obligations; and third, any surplus remaining after
-----
the satisfaction of all Obligations, provided no Commitment exists and no Letter
of Credit remains outstanding, to be paid over to Grantors or to whomsoever may
be lawfully entitled to receive such surplus.
(h) Certain Waivers. To the extent permitted by applicable law, each
---------------
Grantor waives all claims, damages and demands against the Agent and the Lenders
arising out of the repossession, retention or sale of the Collateral, or any
part or parts thereof, except to the extent any such claims, damages and awards
arise out of the gross negligence or willful misconduct of the Agent or the
Lenders.
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<PAGE>
(i) Remedies Cumulative. The rights and remedies provided under this
-------------------
Agreement are cumulative and may be exercised singly or concurrently, and are
not exclusive of any other rights and remedies provided by law or equity.
(j) Compliance with Communications Act and FCC Rules and Regulations.
----------------------------------------------------------------
(i) Notwithstanding any other provision of this Agreement, any
foreclosure on, sale, transfer or other disposition of, or the exercise of
any right to vote or consent with respect to, any of the Collateral as
provided herein or any other action taken or proposed to be taken by the
Agent hereunder which would affect the operational, voting or other control
of any entity holding a Media License shall be made in accordance with the
Communications Act of 1934, as amended, the terms of each Media License,
and any applicable rules and regulations of the FCC, including, to the
extent applicable under rules and regulations of the FCC in effect at the
time of a Default, any requirement that there be a public or private sale.
(ii) Notwithstanding anything to the contrary contained in this
Agreement, or in the Credit Agreement or the other Loan Documents or in any
other related instrument, the Agent shall not, without first obtaining any
consent or approval of the FCC, take any action pursuant to this Agreement
which would constitute or result in any change of control of a Subsidiary
holding a Media License if any such change in control would require, under
then existing law, the prior approval of the FCC.
(iii) If an Event of Default shall have occurred and be continuing,
each Grantor shall take any action which the Agent may reasonably request
in the exercise of its rights and remedies under this Agreement in order to
transfer and assign to the Agent or to one or more third parties as the
Agent may designate, or to a combination of the foregoing, the Collateral
for the purposes of a public or private sale. To enforce the provisions of
this Section 16, the Agent is empowered to request, and each Grantor agrees
to authorize, the appointment of a receiver or trustee from any court of
competent jurisdiction. Such receiver or trustee shall be instructed to
seek from the FCC (and any other Governmental Authority, if required) its
consent to an involuntary transfer of control or assignment of any Media
License or of any entity whose stock, partnership interests or other
securities are subject to this Agreement, for the purpose of seeking a bona
fide purchaser to whom such Media License or control of such entity
ultimately will be transferred or assigned in connection with a public or
private sale. Each Grantor hereby agrees to authorize (including each
Grantor's execution of any necessary or appropriate applications or other
instruments) such an involuntary transfer of control or assignment upon the
reasonable request of the receiver or trustee so appointed; and, if a
Grantor's approval is required by the court and such Grantor shall refuse
to authorize such transfer or assignment, then, to the extent permitted by
the Communications Act and the rules and regulations of the FCC in effect
at such time and provided that such Grantor has been given 5 Business Days'
prior written notice telecopied to its telecopier number set forth on the
signature page hereof and such Grantor has not responded by executing any
such applications or other instruments, the clerk of the court may execute
in the place of such Grantor any application or other instrument necessary
or appropriate for the obtaining of such consent. Upon the occurrence and
during the continuance of an Event of Default, each
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<PAGE>
Grantor shall further use its best efforts to assist in obtaining the
approval of the FCC (and that required by any other Governmental Authority)
for any action or transaction contemplated by this Agreement, including
without limitation, the preparation, execution and filing with the FCC of
the assignor's or transferor's portion of any application or applications
for consent to the assignment of any Media License or transfer of control
of any entity holding or controlling any Media License as may be necessary
or appropriate under the FCC's rules and regulations for approval of the
transfer or assignment of any portion of the Collateral or any Media
License. Each Grantor further agrees that, because of the unique nature of
its undertaking in this Section 16, the same may be specifically enforced,
and it hereby waives, and agrees to waive, any claim or defense that the
Agent or the Lenders would have an adequate remedy at law for the breach of
this undertaking and any requirement for the posting of bond or other
security. This Section 16 shall not be deemed to limit any other rights of
the Agent and the Lenders available under applicable law and consistent
with the Communications Act of 1934, as amended, and the applicable rules
and regulations of the FCC.
(k) Notice. The Agent shall use reasonable efforts to give each Grantor
------
prior written notice of the exercise of any remedy provided for herein, provided
--------
that the failure to give such notice after reasonable efforts shall not subject
the Agent or any Lender to liability and shall not affect the validity or
exercise of any remedy hereunder.
17. Agent Appointed Attorney-in-Fact. To the full extent permitted by
--------------------------------
applicable law, including the Communications Act and FCC regulations, and
subject to Section 16(j) hereof, each Grantor hereby irrevocably appoints the
Agent as such Grantor's attorney-in-fact, effective upon and during continuance
of an Event of Default, with full authority in the place and stead of such
Grantor, and in the name of such Grantor, or otherwise, from time to time, in
the Agent's sole and absolute discretion to do any of the following acts or
things: (a) to do all acts and things and to execute all documents necessary or
advisable to perfect and continue perfected the security interests created by
this Agreement and to preserve, maintain and protect the Collateral; (b) to do
any and every act which such Grantor is obligated to do under this Agreement;
(c) to prepare, sign, file and record, in such Grantor's name, any financing
statement covering the Collateral; (d) to endorse and transfer the Collateral
upon foreclosure by the Agent; (e) to grant or issue an exclusive or
nonexclusive license under the Copyrights, the Programs, the Patents or the
Marks to anyone upon foreclosure by the Agent; (f) to assign, pledge, convey or
otherwise transfer title in or dispose of the Copyrights, the Programs, the
Patents or the Marks to anyone upon foreclosure by the Agent; and (g) to file
any claims or take any action or institute any proceedings which the Agent may
reasonably deem necessary or desirable for the protection or enforcement of any
of the rights of the Lenders with respect to any of the Copyrights, the
Programs, the Patents and the Marks; provided, however, that the Agent shall be
-------- -------
under no obligation whatsoever to take any of the foregoing actions, and neither
the Agent nor the Lenders shall have any liability or responsibility for any act
or omission (other than the Agent's or the Lenders' own gross negligence or
willful misconduct) taken with respect thereto. Each Grantor hereby agrees to
repay within 10 Business Days after demand all reasonable out-of-pocket costs
and expenses (including attorneys' fees) incurred or expended by the Agent in
exercising any right or taking any action under this Agreement.
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<PAGE>
18. Costs and Expenses. Each Grantor agrees to pay to the Agent all
------------------
reasonable costs and out-of-pocket expenses (including, without limitation,
reasonable attorneys' fees and disbursements) incurred by the Agent in the
enforcement or attempted enforcement of this Agreement, whether or not an action
is filed in connection therewith, and in connection with any waiver or amendment
of any term or provision hereof. All reasonable advances, charges, costs and
expenses, including reasonable attorneys' fees and disbursements, incurred or
paid by the Agent in exercising any right, privilege, power or remedy conferred
by this Agreement (including, without limitation, the right to perform any
Obligation of any Grantor under the Loan Documents), or in the enforcement or
attempted enforcement thereof, shall be secured hereby and shall become a part
of the Obligations and shall be due and payable to the Agent by the Grantors on
demand therefor.
19. Transfers and Other Liens. Each Grantor agrees that, except as
-------------------------
specifically permitted under the Credit Agreement or any other Loan Document, it
will not (i) sell, assign, exchange, transfer or otherwise dispose of, or
contract to sell, assign, exchange, transfer or otherwise dispose of, or grant
any option with respect to, any of the Collateral, or (ii) create or permit to
exist any Lien upon or with respect to any of the Collateral, except for Liens
in favor of the Agent for the benefit of the Lenders or otherwise permitted
under the Credit Agreement or any other Loan Document.
20. Understandings With Respect to Waivers and Consents. Each Grantor
---------------------------------------------------
warrants and agrees that each of the waivers and consents set forth herein are
made with full knowledge of their significance and consequences, with the
understanding that events giving rise to any defense or right waived may
diminish, destroy or otherwise adversely affect rights which a Grantor otherwise
may have against Secured Party or others, or against any Collateral. If any of
the waivers or consents herein are determined to be unenforceable under
applicable law, such waivers and consents shall be effective to the maximum
extent permitted by law.
21. Indemnity. Each Grantor agrees to indemnify the Agent and the Lenders
---------
from and against any and all claims, losses and liabilities growing out of or
resulting from this Agreement (including, without limitation, enforcement of
this Agreement), except to the extent such claims, losses or liabilities result
from the Agent's or the Lenders' gross negligence or willful misconduct.
22. Amendments, Etc. No amendment or waiver of any provision of this
---------------
Agreement nor consent to any departure by any Grantor herefrom (other than
supplements to the Schedules hereto in accordance with the terms of this
Agreement) shall in any event be effective unless the same shall be in writing
and made in accordance with Section 9.1 of the Credit Agreement, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
23. Notices. All notices and other communications provided for hereunder
-------
shall be given in the manner set forth in Section 9.2 of the Credit Agreement,
and if to the Agent, to the address set forth for it in Section 9.2 of the
Credit Agreement and if to any Grantor, to the address set forth for it on the
signature page hereof.
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24. Continuing Security Interest: Transfer of Notes; Termination. (a)
------------------------------------------------------------
This Agreement shall create a continuing security interest in the Collateral and
shall (i) remain in full force and effect until indefeasible payment in full in
cash of the Obligations and the termination or expiration of the Commitments and
the Letters of Credit, (ii) be binding upon each Grantor, its successors and
assigns and (iii) inure, together with the rights and remedies of the Lenders
hereunder, to the benefit of the Agent, any successor Agent and the Lenders,
subject to the terms and conditions of the Credit Agreement. Subject to the
terms of the Credit Agreement, any Lender may assign or otherwise transfer any
Loans, Commitments, participations in Letters of Credit or any rights in
Collateral held by it to any other Person, and such other Person shall thereupon
become vested with all the benefits in respect thereof granted to such Agent or
Lender herein or otherwise. Nothing set forth herein or in any other Loan
Document is intended or shall be construed to give to any other party any right,
remedy or claim under, to or in respect of this Agreement or any other Loan
Document or any Collateral. A Grantor's successors and assigns shall include,
without limitation, a receiver, trustee or debtor-in-possession thereof or
therefor, provided that, except as otherwise permitted under the Credit
-------- ----
Agreement or any other Loan Document, none of the rights or obligations of any
Grantor hereunder may be assigned or otherwise transferred without the prior
written consent of the Lenders.
25. Release of Grantors. (a) This Agreement and all obligations of each
-------------------
Grantor hereunder and all security interests granted hereby shall be released
and terminated when all Obligations have been indefeasibly paid in full in cash
and when all Commitments and all Letters of Credit have expired or have
otherwise been terminated. Upon such release and termination of all Obligations
and such expiration or termination of all Commitments and all Letters of Credit
and the security interest hereunder, all rights in and to the Collateral pledged
or assigned by each Grantor hereunder shall automatically revert to such
Grantor, and the Agent and the Lenders shall return any pledged Collateral in
their possession to such Grantor, or to the Person or Persons legally entitled
thereto, and shall endorse, execute, deliver, record and file all instruments
and documents, and do all other acts and things, reasonably required for the
return of the Collateral to such Grantor, or to the Person or Persons legally
entitled thereto, and to evidence or document the release of the interests of
Secured Party arising under this Agreement, all as reasonably requested by, and
at the sole expense of, each such Grantor.
(b) The Agent agrees that if an Asset Disposition permitted under the
Credit Agreement occurs, the Agent shall release the Collateral that is the
subject of such Asset Disposition to the pledging Grantor free and clear of the
Lien and security interest under this Agreement, provided that so long as any
--------
Obligations remain outstanding under the Credit Agreement or any Commitment or
Letter of Credit remains outstanding, the Agent shall have no obligation to make
such release until arrangements reasonably satisfactory to it have been made for
delivery to it of any Net Proceeds of any Asset Disposition required to be used
to prepay the Loans pursuant to Section 2.5(a) of the Credit Agreement.
26. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA (WITHOUT REFERENCE TO ITS
CHOICE OF LAW PROVISIONS), EXCEPT AS OTHERWISE REQUIRED BY MANDATORY PROVISIONS
OF LAW AND EXCEPT TO THE EXTENT THAT REMEDIES PROVIDED BY THE LAWS OF A
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JURISDICTION OTHER THAN THE STATE OF CALIFORNIA ARE GOVERNED BY THE LAWS OF SUCH
JURISDICTION.
27. Covenant Not to Issue Uncertificated Securities. Each Grantor
-----------------------------------------------
represents and warrants to the Lenders that all of the Pledged Securities are in
certificated form (as contemplated by Article 8 of the Uniform Commercial Code),
and covenants to the Lenders that it will not permit any of its Subsidiaries
which are issuers of Pledged Securities to issue any securities in
uncertificated form or seek to convert all or any part of any Pledged Securities
into uncertificated form (as contemplated by Article 8 of the Uniform Commercial
Code).
28. Covenant Not to Dilute Interests of Secured Party in Securities. Each
---------------------------------------------------------------
Grantor represents, warrants and covenants to Secured Party that it will (i) not
at any time cause or permit any Subsidiary that is an issuer of Pledged
Securities to issue any additional capital stock or any warrant options or other
rights to acquire any additional capital stock, other than to a Grantor or as
otherwise permitted under the Credit Agreement and (ii) pledge to the Agent in
accordance with the terms hereof, immediately upon its acquisition (directly or
indirectly) thereof, any and all additional shares of stock or other securities
of each issuer of the Pledged Securities.
29. Form of Pledged Limited Liability Interests/Covenant Not to Dilute.
------------------------------------------------------------------
Each Grantor represents, warrants and covenants to Secured Party that all of the
Pledged Limited Liability Company Interests are in the form (certificated or
uncertificated) indicated on Schedule A attached hereto (as contemplated by
----------
Article 8 of the Uniform Commercial Code), and covenants to the Lenders that it
will (i) not at any time cause or permit any Pledged Entities to issue any
additional membership interests or any other rights or options to acquire any
additional limited liability company interests, other than to a Grantor or as
otherwise permitted under the Credit Agreement, and (ii) pledge to the Agent in
accordance with the terms hereof, immediately upon its acquisition (directly or
indirectly) thereof, any and all additional Limited Liability Company Interests
of each Pledged Entity.
30. Joint and Several Nature of Grantors' Obligations. Each Grantor
-------------------------------------------------
acknowledges that its obligations hereunder are joint and several. Each Grantor
further acknowledges that upon the occurrence and during the continuance of any
Event of Default caused by any Grantor (including any other Grantor or
Grantors), it will be in default hereunder, and the Agent for the benefit of the
Secured Party will be entitled to exercise its remedies, rights and privileges
set forth herein with respect to all or any part of any Collateral whether or
not such Collateral was pledged hereunder by the Grantor or Grantors causing
such Event of Default. Each Grantor further acknowledges that the Agent will be
entitled to seek from any one or more Grantors or add on to the Obligations all
or any part of the costs stated to be borne by any one or more Grantors
hereunder whether or not such costs were caused to be incurred by such Grantor
or Grantors from which reimbursement is sought.
31. Alternative Dispute Resolution. Section 9.12 of the Credit Agreement
------------------------------
is incorporated herein by this reference.
32. Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties hereto in separate counterparts, each of
which shall be deemed to be an original, but all of which taken together shall
constitute one and the same agreement.
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<PAGE>
33. Copies of Certificates, Etc. Whenever a Grantor is required to
---------------------------
deliver notices, certificates, opinions, statements or other information
hereunder to the Agent for delivery to any Lender, it shall do so in such number
of copies as the Agent shall reasonably specify.
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<PAGE>
IN WITNESS WHEREOF, each Grantor has executed this Agreement by its duly
authorized representative(s) as of the date first written above.
GRANTORS
--------
KSMS-TV, INC.
By: /s/ Walter F. Ulloa
/s/ Philip C. Wilkinson
Name: Walter F. Ulloa/Philip C. Wilkinson
Title: President & Treasurer/Vice President
TIERRA ALTA BROADCASTING, INC.
By: /s/ Walter F .Ulloa
Name: Walter F. Ulloa
Title: Vice President and Treasurer
CABRILLO BROADCASTING CORPORATION
By: /s/ Philip C. Wilkinson
Name: Philip C. Wilkinson
Title: President & Chief Financial Officer
GOLDEN HILLS BROADCASTING CORPORATION
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: President & Treasurer
LAS TRES PALMAS CORPORATION
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: President & Treasurer
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<PAGE>
VALLEY CHANNEL 48, INC.
By: /s/ Walter F. Ulloa
Name: /s/ Walter F. Ulloa
Title: Chairman & Chief Executive Officer
TELECORPUS, INC.
By: /s/ Walter F. Ulloa
/s/ Philip C. Wilkinson
Name: Walter F. Ulloa/Philip C. Wilkinson
Title: Chairman & Chief Executive Officer/President
& Chief Operating Officer
ENTRAVISION COMMUNICATIONS COMPANY, L.L.C.
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: Managing Member
By: /s/ Philip C. Wilkinson
Name: Philip C. Wilkinson
Title: Managing Member
Address for Notices:
Entravision Communications Company, L.L.C.
11900 Olympic Boulevard, Suite 590
Los Angeles, California 90064
Attention Walter F. Ulloa
Jeanette Tully
Telecopy: (310) 820-2445
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<PAGE>
STATE OF CALIFORNIA, )
) ss.
County of Los Angeles )
On October 30, 1998, before me, Elizabeth Sanchez, a Notary Public in
and for the State of California, personally appeared Walter F. Ulloa, personally
known to me (or proved to me on the basis of satisfactory evidence) to be the
person whose name is subscribed to the within instrument, and acknowledged to me
that he or she executed the within instrument in his or her authorized capacity
and that, by his or her signature on the within instrument, the person or entity
upon behalf of which he or she acted executed the within instrument.
WITNESS my hand and official seal.
-------
Signature /s/ Elizabeth Sanchez (Seal)
STATE OF CALIFORNIA, )
) ss.
County of Los Angeles )
On October 30, 1998, before me, Elizabeth Sanchez, a Notary Public in
and for the State of California, personally appeared Philip C. Wilkinson,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within instrument, and
acknowledged to me that he or she executed the within instrument in his or her
authorized capacity and that, by his or her signature on the within instrument,
the person or entity upon behalf of which he or she acted executed the within
instrument.
WITNESS my hand and official seal.
-------
Signature /s/ Elizabeth Sanchez (Seal)
<PAGE>
Schedule A Pledged Collateral
Schedule B Locations of Equipment and Inventory
Schedule C Locations of Books and Records of All Borrowers
Schedule D Deposit Accounts
Schedule E UCC Filing Offices
Schedule F Form of Limited Liability Company Notice
The registrant hereby agrees to furnish a copy of any omitted schedule or
exhibit upon request.
<PAGE>
EXHIBIT 10.8
AMENDED AND RESTATED PLEDGE AGREEMENT
-------------------------------------
This AMENDED AND RESTATED PLEDGE AGREEMENT, is dated as of November 10,
1998, and made by each individual and trust listed on the signature pages hereof
(each a "Pledgor" and collectively, the "Pledgors"), whose obligations hereunder
------- --------
are joint and several, in favor of UNION BANK OF CALIFORNIA, N.A., a national
banking association, as agent (the "Agent") for the Lenders (as defined in the
-----
Credit Agreement referred to below, the "Lenders").
-------
RECITALS
--------
A. Pursuant to a Credit Agreement dated as of December 31, 1996 (said
Agreement, as amended or otherwise modified through the date hereof, herein
referred to as the "Original Credit Agreement") among Entravision Communications
-------------------------
Company, L.L.C., a Delaware limited liability company ("Entravision"), and
-----------
certain other borrowers referred to therein, the Agent and the lenders referred
to therein, each Pledgor has executed a Pledge Agreement as identified in
Schedule D hereto, as amended (each an "Original Pledge Agreement").
-------------------------
B. Concurrently herewith, (a) the Agent, the Lenders and Entravision and
certain other borrowers (the "Borrowers") are entering into an Amended and
---------
Restated Credit Agreement dated as of even date herewith (said Agreement, as it
may hereafter be amended, modified or restated from time to time, herein
referred to as the "Credit Agreement"), which amends and restates the Original
----------------
Credit Agreement, and (b) the Pledgors are entering into an Amended and Restated
Nonrecourse Guarantee dated as of even date herewith in favor of the Agent for
the benefit of the Lenders (said Guarantee, as it may hereafter be amended,
modified or restated from time to time, herein referred to as the "Guarantee").
---------
C. The Credit Agreement requires, and the Pledgors desire, that the
Pledgors' obligations under the Guarantee be secured by this Agreement.
D. Terms defined in the Credit Agreement and not otherwise defined herein
have the same respective meanings when used herein, and the rules of
interpretation set forth in Section 1.2 of the Credit Agreement are incorporated
herein by reference.
Accordingly, each of the parties hereto agrees that each Original Pledge
Agreement shall be amended, restated and continued on the following terms:
<PAGE>
AGREEMENT
---------
NOW, THEREFORE, in order to induce the Lenders to enter into the Credit
Agreement and for other good and valuable consideration, the receipt and
adequacy of which hereby is acknowledged, each Pledgor hereby represents,
warrants, covenants, agrees, assigns and grants as follows:
1. Definitions. Unless the context otherwise requires, terms defined in
-----------
the Uniform Commercial Code of the State of California (the "Uniform Commercial
------------------
Code") and not otherwise defined in this Agreement or in the Credit Agreement
- ----
shall have the meanings defined for those terms in the Uniform Commercial Code.
In addition, the following terms shall have the meanings respectively set forth
after each:
"Certificates" means all certificates, instruments and other documents now
------------
or hereafter representing or evidencing any Pledged Securities or any Pledged
Limited Liability Company Interests.
"Collateral" means and includes all present and future right, title and
----------
interest of each Pledgor in or to, and all rights and powers of each Pledgor to
transfer any interest in or to, any and all of the following property, whether
now owned or existing or hereafter arising or acquired and wheresoever located:
(a) All Certificates, Pledged Securities and Pledged Limited Liability
Company Interests, and all rights, preferences, privileges, dividends,
distributions (in cash or in kind), redemption payments or liquidation payments
with respect thereto (but excluding any dividends, distributions, redemption
payments or liquidation payments to the extent (x) received by such Pledgor and
(y) paid in accordance with the terms of the Credit Agreement);
(b) All rights, remedies, powers and/or privileges of such Pledgor with
respect to any of the foregoing; and
(c) Any and all proceeds and products of the foregoing, including without
limitation, all money, accounts, general intangibles, deposit accounts,
documents, instruments, chattel paper, goods, insurance proceeds and any other
tangible or intangible property received upon the sale or disposition of any of
the foregoing.
"Issuer" means the issuer of any Collateral, including without limitation,
------
any Pledged Company and Pledged Entity.
"Limited Liability Company Acknowledgement" shall have the meaning ascribed
-----------------------------------------
to it in Section 4(b) of this Agreement.
"Limited Liability Company Assets" means all assets, whether tangible or
--------------------------------
intangible and whether real, personal or mixed (including, without limitation,
all limited liability company capital and interests in other limited liability
companies), at any time owned or represented by any Limited Liability Company
Interests.
-2-
<PAGE>
"Limited Liability Company Interests" means the entire limited liability
-----------------------------------
company interest at any time owned by any Pledgor in any Pledged Entity.
"Limited Liability Company Notice" shall have the meaning ascribed to it in
--------------------------------
Section 4(b) of this Agreement.
"Pledged Collateral" means the Certificates, the Pledged Securities and the
------------------
Pledged Limited Liability Interests.
"Pledged Company" means each corporation set forth in Schedule A attached
--------------- ----------
hereto, as such Schedule may be supplemented from time to time in accordance
with the terms of this Agreement.
"Pledged Entity" means each limited liability company set forth in Schedule
-------------- --------
A attached hereto, as such Schedule may be supplemented from time to time in
- -
accordance with the terms of this Agreement.
"Pledged Limited Liability Company Interests" means all interests in any
-------------------------------------------
Pledged Entities held by any Pledgor, including, but not limited to, those
Limited Liability Company Interests identified in Schedule A attached hereto, as
----------
such Schedule may be supplemented from time to time in accordance with the terms
of this Agreement, including, but not limited to, (i) all the capital thereof
and any Pledgor's interest in all profits, losses, Limited Liability Company
Assets and other distributions in respect thereof; (ii) all other payments due
or to become due to any Pledgor in respect of such Limited Liability Company
Interests; (iii) all of any Pledgor's claims, rights, powers, privileges,
authority, options, security interests, liens and remedies, if any in respect of
such Limited Liability Company Interests; (iv) all of any Pledgor's rights to
exercise and enforce every right, power, remedy, authority, option and privilege
relating to such Limited Liability Company Interests; and (v) all other property
hereafter delivered in substitution for or in addition to any of the foregoing
and all certificates and instruments representing or evidencing such other
property received, receivable or otherwise distributed in respect of or in
exchange for any or all thereof.
"Pledged Securities" means all interests in any Pledged Company held by any
------------------
Pledgor, including, but not limited to, those shares of capital stock identified
in Schedule A attached hereto, as such Schedule may be supplemented from time to
----------
time in accordance with the terms of this Agreement, and all dividends, cash,
instruments and other properties from time to time received, to be received or
otherwise distributed in respect of or in exchange for any or all of such
shares.
"Secured Party" means, collectively, the Agent and the Lenders.
-------------
-3-
<PAGE>
2. Creation of Security Interest. Each Pledgor hereby assigns and
-----------------------------
pledges to the Agent for the ratable benefit of the Lenders, and grants to the
Agent for the ratable benefit of the Lenders a security interest in and to, all
right, title and interest of such Pledgor in and to all presently existing and
hereafter acquired Collateral. The security interest and pledge created by this
Section 2 shall continue in effect so long as any Obligation (as defined below)
remains unpaid or any Commitment remains in effect or any Letter of Credit
remains outstanding.
3. Security for Obligations. This Agreement and the security interests
------------------------
granted herein secure the prompt payment, in full in cash, and full performance
of, all obligations of each Pledgor now or hereafter existing under the
Guarantee, and any documents executed by any Pledgor in connection therewith,
whether for principal, interest, fees, expenses or otherwise, including without
limitation all obligations of each Pledgor now or hereafter existing under this
Agreement, and all interest that accrues (whether or not allowed) at the then
applicable rate (including interest at the rate for overdue payments described
in Section 2.8(c) of the Credit Agreement) specified in the Credit Agreement on
all or any part of any of such obligations after the filing of any petition or
pleading against any Borrower or any Pledgor for a proceeding under any
bankruptcy or related law (collectively, the "Obligations").
-----------
4. Delivery of Pledged Collateral.
------------------------------
(a) Each Certificate shall, on (i) the Closing Date (with respect to
Certificates existing on such date) and (ii) the day on which such Certificate
shall be received or acquired by any Pledgor (with respect to Certificates
received or acquired after the Closing Date), be delivered to and held by the
Agent on behalf of the Lenders and shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed undated endorsements,
instruments of transfer or assignment in blank, all in form and substance
reasonably satisfactory to the Agent.
(b) With respect to each Limited Liability Company Interest, on (i) the
Closing Date (with respect to Limited Liability Company Interests existing on
such date) and (ii) the day on which any Limited Liability Company Interest
shall be acquired by any Pledgor (with respect to Limited Liability Company
Interests acquired after the Closing Date), a notice in the form set forth in
Schedule C attached hereto (the "Limited Liability Company Notice") shall be
- ---------- --------------------------------
appropriately completed and delivered to each Pledged Entity, notifying each
Pledged Entity of the existence of this Agreement, a certified copy of this
Agreement shall be delivered by each Pledgor to the relevant Pledged Entity, and
each Pledgor shall have received and delivered to the Agent a copy of such
Limited Liability Company Notice, along with an acknowledgment in the form set
forth in Schedule C attached hereto (the "Limited Liability Company
---------- -------------------------
Acknowledgment"), duly executed by the relevant Pledged Entity.
- --------------
(c) Subject to any necessary prior approval of the FCC, the Agent shall
have the right, upon the occurrence and during the continuance of an Event of
Default, without notice to any Pledgor, to transfer to or to direct any Pledgor
or any nominee of any Pledgor to register or cause to be registered in the name
of the Agent or any of its nominees any or all of the Pledged Securities or
Pledged Limited Liability Company Interests. In addition, the Agent shall have
the right at any time to exchange certificates or instruments representing or
evidencing Pledged
-4-
<PAGE>
Securities or Pledged Limited Liability Company Interests for certificates or
instruments of smaller or larger denominations.
5. Further Assurances.
------------------
(a) At any time and from time to time at the reasonable written request of
the Agent, each Pledgor shall execute and deliver to the Agent, at such
Pledgor's expense, all such financing statements and other instruments,
certificates and documents in form and substance reasonably satisfactory to the
Agent, and perform all such other acts as shall be necessary or reasonably
desirable to fully perfect or protect or maintain, when filed, recorded,
delivered or performed, the Secured Party's security interests granted pursuant
to this Agreement or to enable the Lenders to exercise and enforce their rights
and remedies hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, each Pledgor shall execute and file such financing
or continuation statements, or amendments thereto, and such other instruments or
notices, as may be necessary or desirable, or as the Agent may reasonably
request, in order to perfect and preserve, with the required priority, the
security interests granted, or purported to be granted hereby.
(b) At any time and from time to time, the Agent shall be entitled to file
and/or record any or all such financing statements, instruments and documents
held by it, and any or all such further financing statements, documents and
instruments, relative to the Collateral or any part thereof in each instance,
and to take all such other actions as the Agent may reasonably deem appropriate
to perfect and to maintain perfected the security interests granted herein.
(c) Each Pledgor hereby authorizes the Agent to file one or more financing
or continuation statements, and amendments thereto, relative to all or any part
of the Collateral without the signature of such Pledgor where permitted by law.
A carbon, photographic or other reproduction of this Agreement or any financing
statement covering the Collateral or any part thereof shall be sufficient as a
financing statement where permitted by law.
(d) Each Pledgor shall furnish to the Agent from time to time statements
and schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as the Agent may reasonably request.
Upon any Pledgor's receipt or acquisition of any additional shares of capital
stock of any Pledged Company and any shares of capital stock of any other
corporate Person which becomes a Borrower under the Credit Agreement, such
Pledgor shall, in addition to all other acts required to be performed in respect
thereof pursuant to this Agreement, supplement Schedule A attached hereto to
----------
reflect such additional Pledged Collateral. Upon any Pledgor's receipt or
acquisition of any additional Limited Liability Company Interest, such Pledgor
shall, in addition to all other acts required to be performed in respect thereof
pursuant to this Agreement, supplement Schedule A attached hereto to reflect
----------
such additional Pledged Collateral and, to the extent such Limited Liability
Company Interest is certificated, deliver to the Agent the certificates
therefor, accompanied by such instruments of transfer as are acceptable to the
Agent.
(e) With respect to any Collateral consisting of share certificates of
stock, securities, instruments, interests in limited liability companies, or the
like, each Pledgor hereby consents and agrees that, upon the occurrence and
during the continuance of an Event of Default, subject
-5-
<PAGE>
to any necessary prior approval of the FCC, the Issuers, or obligors on any such
Collateral, or any registrar or transfer agent or trustee for any such
Collateral, shall be entitled to accept the provisions of this Agreement as
conclusive evidence of the right of the Agent to effect any transfer or exercise
any right hereunder or with respect to any such Collateral subject to the terms
hereof, notwithstanding any other notice or direction to the contrary heretofore
or hereafter given by such Pledgor or any other Person to the Issuers or such
obligors or to any such registrar or transfer agent or trustee.
6. Voting Rights; Dividends; etc. Subject to any necessary prior
-----------------------------
approval from the FCC, so long as no Event of Default shall have occurred and be
continuing:
(a) Voting Rights. Each Pledgor shall be entitled to exercise any and all
-------------
voting and other consensual rights pertaining to the Pledged Securities and the
Pledged Limited Liability Company Interests (including, but not limited to, all
voting, consent, administration, management and other rights and remedies under
any stockholder agreement or any limited liability company agreement or
otherwise with respect to the Pledged Securities or the Pledged Limited
Liability Company Interests), or any part thereof, for any purpose not
inconsistent with the terms of this Agreement, the Credit Agreement or the other
Loan Documents; provided, however, that such Pledgor shall not exercise any such
-------- -------
right if it would result in a Default.
(b) Dividend and Distribution Rights. Subject to the terms of the Credit
--------------------------------
Agreement, each Pledgor shall be entitled to receive and to retain and use (and
the Agent and the Lenders shall have no security interest in) any and all
dividends or distributions paid in respect of the Pledged Securities or the
Pledged Limited Liability Company Interests in accordance with the terms of the
Credit Agreement; provided, however, that any and all
-------- -------
(i) non-cash dividends or distributions in the form of capital
stock, certificated limited liability company interests, instruments or
other property received, receivable or otherwise distributed in respect of,
or in exchange for, any Pledged Securities or Pledged Limited Liability
Company Interests,
(ii) dividends and other distributions paid or payable in cash in
respect of any Pledged Securities or Pledged Limited Liability Company
Interests in connection with a partial or total liquidation or dissolution
or in connection with a reduction of capital, capital surplus or paid-in-
surplus, and
(iii) cash paid, payable or otherwise distributed in redemption of, or
in exchange for, any Pledged Securities or Pledged Limited Liability
Company Interests,
shall forthwith be delivered to the Agent, in the case of (i) above, to be held
as Collateral and shall, if received by any Pledgor, be received in trust for
the benefit of Secured Party, be segregated from the other property of such
Pledgor and forthwith be delivered to the Agent as Collateral in the same form
as so received (with any necessary endorsements), and in the case of (ii) and
(iii) above, to be applied to the Obligations to the extent permitted by the
Credit Agreement or otherwise to be held as Collateral.
-6-
<PAGE>
7. Rights as to Pledged Collateral During Event of Default. When an
-------------------------------------------------------
Event of Default has occurred and is continuing, subject to any necessary prior
approval of the FCC:
(a) Voting, Dividend and Distribution Rights. At the option of the Agent,
----------------------------------------
all rights of each Pledgor to exercise the voting and other consensual rights
which it would otherwise be entitled to exercise pursuant to Section 6(a) above,
and to receive the dividends and distributions which it would otherwise be
authorized to receive and retain pursuant to Section 6(b) above, shall cease,
and all such rights shall thereupon become vested in the Agent who shall
thereupon have the sole right to exercise such voting and other consensual
rights and to receive and to hold as Collateral such dividends and distributions
during the continuance of such Event of Default.
(b) Dividends and Distributions Held in Trust. All dividends and other
-----------------------------------------
distributions which are received by any Pledgor contrary to the provisions of
Section 7(a) of this Agreement shall be received in trust for the benefit of
Secured Party, shall be segregated from other funds of such Pledgor and
forthwith shall be paid over to the Agent as Collateral in the same form as so
received (with any necessary endorsements).
-7-
<PAGE>
8. Irrevocable Proxy. Each Pledgor hereby revokes all previous proxies
-----------------
with regard to the Pledged Securities and the Pledged Limited Liability Company
Interests and, subject to any necessary prior approval of the FCC, appoints the
Agent as its proxy-holder and attorney-in-fact to (i) attend and vote at any and
all meetings of the shareholders of the Pledged Company (whether or not such
Pledged Securities are transferred into the name of the Agent), and any
adjournments thereof, held on or after the date of the giving of this proxy and
prior to the termination of this proxy and to execute any and all written
consents, waivers and ratifications of shareholders of such corporation(s)
executed on or after the date of the giving of this proxy and prior to the
termination of this proxy, with the same effect as if such Pledgor had
personally attended the meetings or had personally voted on the Pledged
Securities or had personally signed the written consents, waivers or
ratification, and (ii) to attend and vote at any and all meetings of the members
of the Pledged Entities (whether or not such Pledged Limited Liability Company
Interests are transferred into the name of the Agent), and any adjournments
thereof, held on or after the date of the giving of this proxy and to execute
any and all written consents, waivers and ratifications of the Pledged Entities
executed on or after the date of the giving of this proxy and prior to the
termination of this proxy with the same effect as if such Pledgor had personally
attended the meetings or had personally voted on its Limited Liability Company
Interests or had personally signed the consents, waivers or ratifications;
provided, however, that the Agent as proxy-holder shall have rights hereunder
- -------- -------
only upon the occurrence and during the continuance of an Event of Default and
subject to Section 14(j) hereof. Each Pledgor hereby authorizes the Agent to
substitute another Person (which Person shall be a successor to the rights of
the Agent hereunder, a nominee appointed by the Agent to serve as proxy-holder,
or otherwise as approved by such Pledgor in writing, such approval not to be
unreasonably withheld) as the proxy-holder and, upon the occurrence or during
the continuance of any Event of Default, hereby authorizes and directs the
proxy-holder to file this proxy and the substitution instrument with the
secretary of the appropriate Pledged Company or the appropriate officer of the
Pledged Entity. This proxy is coupled with an interest and is irrevocable until
such time as no part of any Commitment remains outstanding, all Obligations have
been indefeasibly paid in full and no Letter of Credit remains outstanding.
9. Pledgors' Representations and Warranties. Each Pledgor represents and
----------------------------------------
warrants as follows:
(a) Each Pledgor who is an individual and each trustee or co-trustee of a
Pledgor which is a trust resides in the County and the State specified therefor
on the signature pages hereof.
(b) Each Pledgor is the legal and beneficial owner of the Collateral free
and clear of all Liens (other than Liens permitted by Section 6.3 of the Credit
Agreement or Section 17 of this Agreement). Each Pledgor has the legal right to
grant the security interests in the Collateral purported to be granted hereby,
and to execute, deliver and perform this Agreement. The pledge of the Collateral
pursuant to this Agreement creates a valid security interest in the Collateral.
Upon the filing of appropriate financing statements in the filing offices set
forth on Schedule B attached hereto and the giving of a Limited Liability
----------
Company Notice to the Pledged Entities and the delivery to the Agent of the
Certificates, the Secured Parties will have a first-priority perfected security
interest in the Collateral.
-8-
<PAGE>
(c) The Pledged Securities and the Pledged Limited Liability Company
Interests have been duly authorized and validly issued and are fully paid and
nonassessable.
(d) No consent of any Person, including any member in a Pledged Entity or
any Issuer of the Pledged Securities, is required for the pledge by any Pledgor
of the Collateral.
(e) The Pledged Securities described on Schedule A attached hereto
----------
constitute (i) all of the shares of capital stock issued by any Pledged Company
owned by each Pledgor, and (ii) that percentage of the issued and outstanding
shares of the respective Issuers thereof indicated on Schedule A attached
----------
hereto, and there is no other class of shares issued and outstanding of the
respective Issuers thereof except as set forth on Schedule A attached hereto.
----------
The Pledged Limited Liability Company Interests described on Schedule A attached
----------
hereto constitute all of the Limited Liability Company Interests of each Pledgor
and each Pledgor's respective percentage interest in each such Pledged Entity is
as set forth on Schedule A attached hereto.
----------
(f) Subject to Section 14(j) hereof, no authorization, approval or other
action by, and no notice to or filing with, any Governmental Authority (other
than such authorizations, approvals and other actions as have already been taken
and are in full force and effect) is required (A) for the pledge of the
Collateral or the grant of the security interest in the Collateral by any
Pledgor hereby or for the execution, delivery or performance of this Agreement
by any Pledgor, or (B) for the exercise by the Agent of the voting rights in the
Pledged Securities and the Pledged Limited Liability Company Interests or of any
other rights or remedies in respect of the Collateral hereunder except as may be
required in connection with any disposition of Collateral consisting of
securities by laws affecting the offering and sale of securities generally.
10. Pledgors' Covenants. In addition to the other covenants and
-------------------
agreements set forth herein and in the other Loan Documents, each Pledgor
covenants and agrees as follows:
(a) Each Pledgor will pay, prior to delinquency, all taxes, charges, Liens
and assessments against the Collateral owned by it, except those with respect to
which the amount or validity is being contested in good faith by appropriate
proceedings and with respect to which reserves in conformity with GAAP have been
provided on the books of such Pledgor.
(b) No Pledgor who is an individual, nor any trustee or co-trustee of any
other Pledgor, will move his or her residence from the location set forth on the
signature pages hereof except upon not less than 20 days' prior notice to the
Agent and such Pledgor's prior compliance with all applicable requirements of
Section 5 hereof necessary to perfect the Lenders' security interest hereunder.
(c) No Pledgor shall withdraw as a member of any Pledged Entity, or file
or pursue or take any action which may, directly or indirectly, cause a
dissolution or liquidation of or with respect to any Pledged Entity or seek a
partition of any property of any Pledged Entity.
(d) Subject to the provisions of Section 14(j) hereof, each Pledgor agrees
to take any action which the Agent may reasonably request in order to obtain
from the FCC such approval as may be necessary to enable the Lenders to exercise
and enjoy the full rights and benefits granted to them by this Agreement,
including the use of such Pledgor's best efforts to assist in obtaining
-9-
<PAGE>
the approval of the FCC for any action or transaction contemplated by this
Agreement for which such approval is required by law.
11. Agent's Rights Regarding Collateral. At any time and from time to
-----------------------------------
time, the Agent (for the benefit of Secured Party) may, to the extent necessary
or desirable to protect the security hereunder, but the Agent shall not be
obligated to: (a) (whether or not a Default has occurred) itself or through its
representatives, at its own expense, upon reasonable notice and at such
reasonable times during usual business hours, visit and inspect the properties
of the Issuers and examine and make abstracts from any of the books and records
of those Issuers at any reasonable time and as often as may reasonably be
desired and discuss the business, operations, properties and financial and other
condition of any Issuer or (b) if a Default has occurred and is continuing, at
the expense of the Pledgors, perform any obligation of any Pledgor under this
Agreement. Neither the Agent nor the Lenders shall be under any duty or
obligation whatsoever to take any action to preserve any rights of or against
any prior or other parties in connection with the Collateral, to exercise any
voting rights or managerial rights with respect to any Collateral or to make or
give any presentments for payment, demands for performance, notices of non-
performance, protests, notices of protest, notices of dishonor or notices of any
other nature whatsoever in connection with the Collateral or the Obligations.
Neither the Agent nor the Lenders shall be under any duty or obligation
whatsoever to take any action to protect or preserve the Collateral or any
rights of any Pledgor therein, or to make collections or enforce payment
thereon, or to participate in any foreclosure or other proceeding in connection
therewith.
Nothing contained herein shall be construed to make the Agent or any Lender
liable as a member of any Pledged Entity and the Agent or any Lenders by virtue
of this Agreement or otherwise (except as referred to in the following sentence)
shall not have any of the duties, obligations or liabilities of a member of any
Pledged Entity. The parties hereto expressly agree that, unless the Agent shall
become the absolute owner of a Pledged Limited Liability Company Interest
pursuant hereto, this Agreement shall not be construed as creating a partnership
or joint venture among the Agent, any Lender, any Pledged Entity or Borrower
and/or any Pledgor. Except as provided in the immediately preceding sentence,
the Agent, by accepting this Agreement, did not intend to become a member of any
Pledged Entity or otherwise be deemed to be a co-venturer with respect to any
Pledgor or any Pledged Entity, either before or after an Event of Default shall
have occurred.
12. Collections on the Collateral. Except as provided to the contrary in
-----------------------------
the Credit Agreement, each Pledgor shall have the right to use and to continue
to make collections on and receive dividends and other proceeds of all of the
Collateral in the ordinary course of business so long as no Event of Default
shall have occurred and be continuing. Upon the occurrence and during the
continuance of an Event of Default, at the option of the Agent, each Pledgor's
right to make collections on and receive dividends and other proceeds of the
Collateral and to use or dispose of such collections and proceeds shall
terminate, and any and all dividends, proceeds and collections, including all
partial or total prepayments, then held or thereafter received on or on account
of the Collateral will be held or received by such Pledgor in trust for Secured
Party and immediately delivered in kind to the Agent (duly endorsed to the
Agent, if required), to be applied to the Obligations or held as Collateral, as
the Agent shall elect. Upon the occurrence and during the continuance of an
Event of Default, the Agent shall have the right at all times to
-10-
<PAGE>
receive, receipt for, endorse, assign, deposit and deliver, in the name of the
Agent or the Lenders or in the name of any Pledgor, any and all checks, notes,
drafts and other instruments for the payment of money constituting proceeds of
or otherwise relating to the Collateral; and each Pledgor hereby authorizes the
Agent to affix, by facsimile signature or otherwise, the general or special
endorsement of such Pledgor, in such manner as the Agent shall deem advisable,
to any such instrument in the event the same has been delivered to or obtained
by the Agent without appropriate endorsement, and the Agent and any collecting
bank are hereby authorized to consider such endorsement to be a sufficient,
valid and effective endorsement by such Pledgor, to the same extent as though it
were manually executed by the duly authorized representative of such Pledgor,
regardless of by whom or under what circumstances or by what authority such
endorsement actually is affixed, without duty of inquiry or responsibility as to
such matters, and each Pledgor hereby expressly waives demand, presentment,
protest and notice of protest or dishonor and all other notices of every kind
and nature with respect to any such instrument.
13. Possession of Collateral by Agent. All the Collateral now, heretofore
---------------------------------
or hereafter delivered to the Agent shall be held by the Agent in its
possession, custody and control. Any or all of the Collateral delivered to the
Agent constituting cash or cash equivalents shall, prior to the occurrence of
any Event of Default, be held in an interest-bearing account with one or more of
the Lenders, and shall be, upon request of the Pledgor that has delivered such
Collateral, invested in investments permitted by Section 6.7(c) of the Credit
Agreement. Nothing herein shall obligate Agent to obtain any particular return
thereon. Upon the occurrence and during the continuance of an Event of Default,
whenever any of the Collateral is in the Agent's possession, custody or control,
the Agent may use and consume the Collateral, whether for the purpose of
preserving and/or protecting the Collateral, or for the purpose of performing
any of any Pledgor's obligations with respect thereto, or otherwise, and,
subject to the terms of Section 9.7 of the Credit Agreement, any or all of the
Collateral delivered to the Agent constituting cash or cash equivalents shall be
applied by the Agent to payment of the Obligations to the extent permitted by
the terms of the Credit Agreement or otherwise held as Collateral as the Agent
shall elect. The Agent may at any time deliver or redeliver the Collateral or
any part thereof to the Pledgor that has delivered such Collateral, and the
receipt of any of the same by such Pledgor shall be complete and full
acquittance for the Collateral so delivered, and the Agent thereafter shall be
discharged from any liability or responsibility arising after such delivery to
such Pledgor. So long as the Agent exercises reasonable care with respect to any
Collateral in its possession, custody or control, neither the Agent nor the
Lenders shall have any liability for any loss of or damage to any Collateral,
and in no event shall the Agent or the Lenders have liability for any diminution
in value of Collateral occasioned by economic or market conditions or events,
absent the gross negligence or willful misconduct of the Agent or any of the
Lenders. The Agent shall be deemed to have exercised reasonable care within the
meaning of the preceding sentence if the Collateral in the possession, custody
or control of the Agent is accorded treatment substantially equal to that which
the Agent accords similar property for its own account, it being understood that
neither the Agent nor the Lenders shall have any responsibility for (a)
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relating to any Collateral, whether or not
the Agent or any Lender has or is deemed to have knowledge of such matters, or
(b) taking any necessary steps to preserve rights against any Person with
respect to any Collateral.
14. Remedies.
--------
-11-
<PAGE>
(a) Rights Upon Event of Default. Upon the occurrence and during the
----------------------------
continuance of an Event of Default, each Pledgor shall be in default hereunder
and the Agent for the benefit of the Secured Party shall have, in any
jurisdiction where enforcement is sought, in addition to all other rights and
remedies that the Agent on behalf of Secured Party may have under this Agreement
and under applicable laws or in equity, all rights and remedies of a secured
party under the Uniform Commercial Code as enacted in any such jurisdiction in
effect at that time, and in addition the following rights and remedies, all of
which may be exercised with or without further notice to any Pledgor except such
notice as may be specifically required by applicable law: (a) to foreclose the
Liens and security interests created hereunder or under any other Loan Document
by any available judicial procedure or without judicial process; (b) to sell,
assign or otherwise dispose of any Collateral or any part thereof, either at
public or private sale or at any broker's board, in lot or in bulk, for cash, on
credit or otherwise, with or without representations or warranties and upon such
terms as shall be commercially reasonable; (c) to collect by legal proceedings
or otherwise all dividends, distributions, interest, principal or other sums now
or hereafter payable upon or on account of the Collateral; (d) to enter into any
extension, reorganization, disposition, merger or consolidation agreement, or
any other agreement relating to or affecting the Collateral, and in connection
therewith the Agent may deposit or surrender control of the Collateral and/or
accept other property in exchange for the Collateral as the Agent reasonably
deems appropriate and is commercially reasonable; (e) to settle, compromise or
release, on terms acceptable to the Agent, in whole or in part, any amounts
owing on the Collateral and/or any disputes with respect thereto; (f) to enforce
payment and prosecute any action or proceeding with respect to any or all of the
Collateral and take or bring, in the name of Secured Party or in the name of any
Pledgor, any and all steps, actions, suits or proceedings deemed necessary or
reasonably desirable by the Agent to effect collection of or to realize upon the
Collateral, including any judicial or nonjudicial foreclosure thereof or
thereon, and each Pledgor specifically consents to any nonjudicial foreclosure
of any or all of the Collateral or any other action taken by the Lenders which
may release any obligor from personal liability on any of the Collateral, and
each Pledgor waives (such waiver not to affect the Agent's agreement to give
notice of sale in certain circumstances pursuant to Section 14(d)), to the
extent permitted by applicable law, any right to receive notice of any public or
private judicial or nonjudicial sale or foreclosure of any security or any of
the Collateral, and any money or other property received by the Agent in
exchange for or on account of the Collateral, whether representing collections
or proceeds of Collateral, and whether resulting from voluntary payments or
foreclosure proceedings or other legal action taken by Agent or any Pledgor, may
be applied by the Agent, without notice to any Pledgor, to the Obligations in
such order and manner as the Agent in its sole discretion shall determine; (g)
to insure, protect and preserve the Collateral; (h) to exercise all rights,
remedies, powers or privileges provided under any of the Loan Documents; and (i)
to remove, from any premises where the same may be located, the Collateral and
any and all documents, instruments, files and records, and any receptacles and
cabinets containing the same, relating to the Collateral, and the Agent may, at
the cost and expense of the Pledgors, use such of its supplies, equipment,
facilities and space at its places of business as may be necessary or
appropriate to properly administer, process, store, control, prepare for sale or
disposition and/or sell or dispose of the Collateral or to properly administer
and control the handling of collections and realizations thereon, and the Agent
shall be deemed to have a rent-free tenancy of any premises of the Pledgors for
such purposes and for such periods of time as reasonably required by the Agent.
-12-
<PAGE>
Nothing herein contained shall be construed to give the Agent or the
Lenders or any purchaser of the Collateral the right to operate any of the
Stations without the prior consent of the FCC, to the extent required by law or
the terms of any Media License.
(b) Possession by Agent. Upon the occurrence and during the continuance
-------------------
of an Event of Default, the Agent also shall have the right, without notice or
demand (other than any notice required by Section 7 of the Credit Agreement),
either in person, by agent or by a receiver to be appointed by a court in
accordance with the provisions of applicable law (and each Pledgor hereby
expressly consents, to the fullest extent permitted by applicable law, upon the
occurrence and during the continuance of an Event of Default to the appointment
of such a receiver), and, to the extent permitted by applicable law, without
regard to the adequacy of any security for the Obligations, to take possession
of the Collateral or any part thereof and to collect and receive the rents,
issues, profits, income and proceeds thereof. The taking possession of the
Collateral by the Agent shall not cure or waive any Event of Default or notice
thereof or invalidate any act done pursuant to such notice. The rights, remedies
and powers of any receiver appointed by a court shall be as ordered by said
court.
(c) Sale of Collateral. Any public or private sale or other disposition
------------------
of the Collateral may be held at any office of Agent, or at any Pledgor's place
of business, if any, or at any other place permitted by applicable law, and
without the necessity of the Collateral's being within the view of prospective
purchasers. The Agent may direct the order and manner of sale of the Collateral,
or portions thereof, as it in its sole and absolute discretion may determine
provided such sale is commercially reasonable, and each Pledgor expressly
waives, to the extent permitted by applicable law, any right to direct the order
and manner of sale of any Collateral. The Agent or any Person acting on the
Agent's behalf may bid and purchase at any such sale or other disposition.
(d) Notice of Sale. Unless the Collateral is perishable or threatens to
--------------
decline speedily in value or is of a type customarily sold on a recognized
market, the Agent will give the Pledgor that has pledged such Collateral
reasonable notice of the time and place of any public sale thereof or of the
time on or after which any private sale thereof is to be made. The requirement
of reasonable notice conclusively shall be met if such notice is mailed,
certified mail, postage prepaid, to such Pledgor at its address set forth on the
signature page hereto or delivered or otherwise sent to such Pledgor, at least
five (5) Business Days before the date of the sale. Each Pledgor expressly
waives, to the fullest extent permitted by applicable law, any right to receive
notice of any public or private sale of any Collateral or other security for the
Obligations except as expressly provided for in this paragraph. The Agent shall
not be obligated to make any sale of the Collateral if it shall determine not to
do so regardless of the fact that notice of sale of the Collateral may have been
given. The Agent may, without notice or publication, except as required by
applicable law, adjourn the sale from time to time by announcement at the time
and place fixed for sale, and such sale may, without further notice (except as
required by applicable law), be made at the time and place to which the same was
so adjourned.
(e) Private Sales. Whether or not any Collateral has been effectively
-------------
registered under the Securities Act of 1933, as amended, or other applicable
laws, the Agent may, in its sole and absolute discretion, sell all or any part
of such Collateral at private sale in such manner and under such circumstances
as the Agent may deem necessary or advisable in order that the sale may be
-13-
<PAGE>
lawfully conducted in a commercially reasonable manner. Without limiting the
foregoing, the Agent may (i) approach and negotiate with a limited number of
potential purchasers, and (ii) restrict the prospective bidders or purchasers to
persons who will represent and agree that they are purchasing such Collateral
for their own account for investment and not with a view to the distribution or
resale thereof. In the event that any such Collateral is sold at private sale,
each Pledgor agrees to the extent permitted by applicable law that if such
Collateral is sold for a price which is commercially reasonable, then (A) such
Pledgor shall not be entitled to a credit against the Obligations in an amount
in excess of the purchase price, and (B) the Lenders shall not incur any
liability or responsibility to such Pledgor in connection therewith,
notwithstanding the possibility that a substantially higher price might have
been realized at a public sale. Each Pledgor recognizes that a ready market may
not exist for such Collateral if it is not regularly traded on a recognized
securities exchange, and that a sale by the Agent of any such Collateral for an
amount less than a pro rata share of the fair market value of the Issuer's
assets minus liabilities may be commercially reasonable in view of the
difficulties that may be encountered in attempting to sell a large amount of
such Collateral or Collateral that is privately traded.
(f) Title of Purchasers. Upon consummation of any sale of Collateral
-------------------
hereunder, the Agent on behalf of Secured Party 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 Collateral so sold
absolutely free from any claim or right upon the part of the Pledgor that has
pledged such Collateral or any other Person claiming through such Pledgor, and
each Pledgor hereby waives (to the extent permitted by applicable laws) all
rights of redemption, stay and appraisal which it now has or may at any time in
the future have under any rule of law or statute now existing or hereafter
enacted. If the sale of all or any part of the Collateral is made on credit or
for future delivery, the Agent shall not be required to apply any portion of the
sale price to the Obligations until such amount actually is received by the
Agent, and any Collateral so sold may be retained by the Agent until the sale
price is paid in full by the purchaser or purchasers thereof. Secured Party
shall not incur any liability in case any such purchaser or purchasers shall
fail to pay for the Collateral so sold, and, in case of any such failure, the
Collateral may be sold again.
(g) Disposition of Proceeds of Sale. The proceeds resulting from the
-------------------------------
collection, liquidation, sale or other disposition of the Collateral shall be
applied, first, to the reasonable costs and expenses (including reasonable
-----
attorneys' fees) of retaking, holding, storing, processing and preparing for
sale, selling, collecting and liquidating the Collateral, and the like; second,
------
to the satisfaction of all Obligations; and third, any surplus remaining after
-----
the satisfaction of all Obligations, provided no Commitment exists and no Letter
of Credit remains outstanding, to be paid over to the Pledgor that has pledged
such Collateral or to whomsoever may be lawfully entitled to receive such
surplus.
(h) Certain Waivers. To the extent permitted by applicable law, each
---------------
Pledgor waives all claims, damages and demands against the Agent and the Lenders
arising out of the repossession, retention or sale of the Collateral, or any
part or parts thereof, except to the extent any such claims, damages and awards
arise out of the gross negligence or willful misconduct of the Agent or the
Lenders.
-14-
<PAGE>
(i) Remedies Cumulative. The rights and remedies provided under this
-------------------
Agreement are cumulative and may be exercised singly or concurrently, and are
not exclusive of any other rights and remedies provided by law or equity.
(j) Compliance with Communications Act and FCC Rules and Regulations.
----------------------------------------------------------------
(i) Notwithstanding any other provision of this Agreement, any
foreclosure on, sale, transfer or other disposition of, or the exercise of
any right to vote or consent with respect to, any of the Collateral as
provided herein or any other action taken or proposed to be taken by the
Agent hereunder which would affect the operational, voting or other control
of any entity holding a Media License shall be made in accordance with the
Communications Act of 1934, as amended, the terms of each Media License,
and any applicable rules and regulations of the FCC, including, to the
extent applicable under rules and regulations of the FCC in effect at the
time of a Default, any requirement that there be a public or private sale.
(ii) Notwithstanding anything to the contrary contained in this
Agreement, or in the Credit Agreement or the other Loan Documents or in any
other related instrument, the Agent shall not, without first obtaining any
consent or approval of the FCC, take any action pursuant to this Agreement
which would constitute or result in any change of control of a Subsidiary
holding a Media License if any such change in control would require, under
then existing law, the prior approval of the FCC.
(iii) If an Event of Default shall have occurred and be continuing,
each Pledgor shall take any action which the Agent may reasonably request
in the exercise of its rights and remedies under this Agreement in order to
transfer and assign to the Agent or to one or more third parties as the
Agent may designate, or to a combination of the foregoing, the Collateral
for the purposes of a public or private sale. To enforce the provisions of
this Section 14, the Agent is empowered to request, and each the Pledgor
agrees to authorize, the appointment of a receiver or trustee from any
court of competent jurisdiction. Such receiver or trustee shall be
instructed to seek from the FCC (and any other Governmental Authority, if
required) its consent to an involuntary transfer of control or assignment
of any Media License or of any entity whose stock, limited liability
company interests or other securities are subject to this Agreement, for
the purpose of seeking a bona fide purchaser to whom such Media License or
control of such entity ultimately will be transferred or assigned in
connection with a public or private sale. Each Pledgor hereby agrees to
authorize (including such Pledgor's execution of any necessary or
appropriate applications or other instruments) such an involuntary transfer
of control or assignment upon the reasonable request of the receiver or
trustee so appointed; and, if any Pledgor's approval is required by the
court and such Pledgor shall refuse to authorize such transfer or
assignment, then, to the extent permitted by the Communications Act and the
rules and regulations of the FCC in effect at such time and provided that
such Pledgor has been given 5 Business Days' prior written notice
telecopied to its telecopier number set forth on the signature pages hereof
and such Pledgor has not responded by executing any such applications or
other instruments, the clerk of the court may execute in the place of such
Pledgor any application or other instrument necessary or appropriate for
the obtaining of such consent. Upon the
-15-
<PAGE>
occurrence and during the continuance of an Event of Default, each Pledgor
shall further use its best efforts to assist in obtaining the approval of
the FCC (and that required by any other Governmental Authority) for any
action or transaction contemplated by this Agreement, including without
limitation, the preparation, execution and filing with the FCC of the
assignor's or transferor's portion of any application or applications for
consent to the assignment of any Media License or transfer of control of
any entity holding or controlling any Media License as may be necessary or
appropriate under the FCC's rules and regulations for approval of the
transfer or assignment of any portion of the Collateral or any Media
License. Each Pledgor further agrees that, because of the unique nature of
its undertaking in this Section 14, the same may be specifically enforced,
and it hereby waives, and agrees to waive, any claim or defense that the
Agent or the Lenders would have an adequate remedy at law for the breach of
this undertaking and any requirement for the posting of bond or other
security. This Section 14 shall not be deemed to limit any other rights of
the Agent and the Lenders available under applicable law and consistent
with the Communications Act of 1934, as amended, and the applicable rules
and regulations of the FCC.
(k) Notice. The Agent shall use reasonable efforts to give the relevant
------
Pledgor prior written notice of the exercise of any remedy provided for herein,
provided that the failure to give such notice after reasonable efforts shall not
- --------
subject the Agent or any Lender to liability and shall not affect the validity
or exercise of any remedy hereunder.
15. Agent Appointed Attorney-in-Fact. To the full extent permitted by
--------------------------------
applicable law, including the Communications Act and FCC regulations, and
subject to Section 14(j) hereof, each Pledgor hereby irrevocably appoints the
Agent as such Pledgor's attorney-in-fact, effective upon and during continuance
of an Event of Default, with full authority in the place and stead of such
Pledgor, and in the name of such Pledgor, or otherwise, from time to time, in
the Agent's sole and absolute discretion to do any of the following acts or
things: (a) to do all acts and things and to execute all documents necessary or
advisable to perfect and continue perfected the security interests created by
this Agreement and to preserve, maintain and protect the Collateral; (b) to do
any and every act which such Pledgor is obligated to do under this Agreement;
(c) to prepare, sign, file and record, in such Pledgor's name, any financing
statement covering the Collateral; (d) to endorse and transfer the Collateral
upon foreclosure by the Agent; and (e) to file any claims or take any action or
institute any proceedings which the Agent may reasonably deem necessary or
desirable for the protection or enforcement of any of the rights of the Lenders
with respect to any of the Collateral; provided, however, that the Agent shall
-------- -------
be under no obligation whatsoever to take any of the foregoing actions, and
neither the Agent nor the Lenders shall have any liability or responsibility for
any act or omission (other than the Agent's or the Lenders' own gross negligence
or willful misconduct) taken with respect thereto. Each Pledgor hereby agrees
to repay within 10 Business Days after demand all reasonable out-of-pocket costs
and expenses (including attorneys' fees) incurred or expended by the Agent in
exercising any right or taking any action under this Agreement.
16. Costs and Expenses. Each Pledgor agrees to pay to the Agent all
------------------
reasonable costs and out-of-pocket expenses (including, without limitation,
reasonable attorneys' fees and disbursements) incurred by the Agent in the
enforcement or attempted enforcement of this Agreement, whether or not an action
is filed in connection therewith, and in connection with any
-16-
<PAGE>
waiver or amendment of any term or provision hereof. All reasonable advances,
charges, costs and expenses, including reasonable attorneys' fees and
disbursements, incurred or paid by the Agent in exercising any right, privilege,
power or remedy conferred by this Agreement (including, without limitation, the
right to perform any Obligation of any Pledgor), or in the enforcement or
attempted enforcement thereof, shall be secured hereby and shall become a part
of the Obligations and shall be due and payable to the Agent by each Pledgor on
demand therefor. Notwithstanding the terms of this Section 16, no Pledgor shall
be liable for any expenses or fees covered by this Section 16 unless such
Pledgor has, through such Pledgor's own actions, prevented or attempted to
prevent enforcement of the rights and remedies of the Agent and the Lenders
under this Agreement.
17. Transfers and Other Liens. Each Pledgor agrees that, except as
-------------------------
specifically permitted under the Credit Agreement or any other Loan Document, it
will not (a) sell, assign, exchange, transfer or otherwise dispose of, or
contract to sell, assign, exchange, transfer or otherwise dispose of, or grant
any option with respect to, any of the Collateral, or (b) create or permit to
exist any Lien upon or with respect to any of the Collateral, except for the
following:
(i) Liens in favor of the Agent for the benefit of the Lenders; and
(ii) the Lien on certain Pledged Limited Liability Company Interests
created by that certain Secured Promissory Note and Pledge Agreement (as it
may be amended from time to time), dated October 16, 1996, made by Paul A.
Zevnik in favor of Entravision in the principal amount of $360,366.38.
18. Understandings With Respect to Waivers and Consents. Each Pledgor
---------------------------------------------------
warrants and agrees that each of the waivers and consents set forth herein are
made with full knowledge of their significance and consequences, with the
understanding that events giving rise to any defense or right waived may
diminish, destroy or otherwise adversely affect rights which such Pledgor
otherwise may have against Secured Party or others, or against any Collateral.
If any of the waivers or consents herein are determined to be unenforceable
under applicable law, such waivers and consents shall be effective to the
maximum extent permitted by law.
19. Amendments, Etc. No amendment or waiver of any provision of this
---------------
Agreement nor consent to any departure by any Pledgor herefrom (other than
supplements to the Schedules hereto in accordance with the terms of this
Agreement) shall in any event be effective unless the same shall be in writing
and made in accordance with Section 9.1 of the Credit Agreement, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
20. Notices. All notices and other communications provided for hereunder
-------
shall be given in the manner set forth in Section 9.2 of the Credit Agreement,
and if to the Agent, to the address set forth for it in Section 9.2 of the
Credit Agreement and if to any Pledgor, to the address set forth for it on the
signature pages hereof.
21. Continuing Security Interest: Transfer of Notes; Termination.
------------------------------------------------------------
(a) This Agreement shall create a continuing security interest in the Collateral
and shall (i) remain in full force and effect until indefeasible payment in full
in cash of the Obligations and the termination or
-17-
<PAGE>
expiration of the Commitments and the Letters of Credit, (ii) be binding upon
each Pledgor, its successors and assigns and (iii) inure, together with the
rights and remedies of the Lenders hereunder, to the benefit of the Agent, any
successor Agent and the Lenders, subject to the terms and conditions of the
Credit Agreement. Subject to the terms of the Credit Agreement, any Lender may
assign or otherwise transfer the Guarantee, any Loans, Commitments,
participations in Letters of Credit or any rights in Collateral held by it to
any other Person, and such other Person shall thereupon become vested with all
the benefits in respect thereof granted to such Agent or Lender herein or
otherwise. Nothing set forth herein or in any other Loan Document is intended or
shall be construed to give to any other party any right, remedy or claim under,
to or in respect of this Agreement or any other Loan Document or any Collateral.
Each Pledgor's successors and assigns shall include, without limitation, a
receiver, trustee or debtor-in-possession thereof or therefor, provided that,
-------- ----
none of the rights or obligations of any Pledgor hereunder may be assigned or
otherwise transferred without the prior written consent of the Lenders.
22. Release of Pledgors. This Agreement and all obligations of the
-------------------
Pledgors hereunder and all security interests granted hereby shall be released
and terminated when the following has occurred, as applicable, (i) all
Obligations have been indefeasibly paid in full in cash and when all Commitments
and all Letters of Credit have expired or have otherwise been terminated or (ii)
if the Lenders shall give their prior written consent to the transfer of the
Pledged Securities and Pledged Limited Liability Company Interests, upon the
effectiveness of such consent. Upon such release and termination of all
Obligations and such expiration or termination of all Commitments and all
Letters of Credit and the security interest hereunder, all rights in and to the
Collateral pledged or assigned by each Pledgor hereunder shall automatically
revert to such Pledgor, and the Agent and the Lenders shall return any pledged
Collateral in their possession to such Pledgor, or to the Person or Persons
legally entitled thereto, and shall endorse, execute, deliver, record and file
all instruments and documents, and do all other acts and things, reasonably
required for the return of the Collateral to such Pledgor, or to the Person or
Persons legally entitled thereto, and to evidence or document the release of the
interests of Secured Party arising under this Agreement, all as reasonably
requested by, and at the sole expense of, such Pledgor.
23. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA (WITHOUT REFERENCE TO ITS
CHOICE OF LAW PROVISIONS), EXCEPT AS OTHERWISE REQUIRED BY MANDATORY PROVISIONS
OF LAW AND EXCEPT TO THE EXTENT THAT REMEDIES PROVIDED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF CALIFORNIA ARE GOVERNED BY THE LAWS OF SUCH
JURISDICTION.
24. Covenant Not to Issue Uncertificated Securities. Each Pledgor
-----------------------------------------------
represents and warrants to the Lenders that all of the Pledged Securities are in
certificated form (as contemplated by Article 8 of the Uniform Commercial Code),
and covenants to the Lenders no Pledgor will permit any Pledged Company to issue
any securities in uncertificated form or seek to convert all or any part of any
Pledged Securities into uncertificated form (as contemplated by Article 8 of the
Uniform Commercial Code).
-18-
<PAGE>
25. Covenant Not to Dilute Interests of Secured Party in Securities. Each
---------------------------------------------------------------
Pledgor represents, warrants and covenants to Secured Party such Pledgor will
(i) not at any time cause or permit any Pledged Company to issue any additional
capital stock or any warrant options or other rights to acquire any additional
capital stock, other than to a Pledgor or as otherwise permitted under the
Credit Agreement and (ii) pledge to the Agent in accordance with the terms
hereof, immediately upon and to the extent of such Pledgor's acquisition
(directly or indirectly) thereof, any and all additional shares of stock or
other securities of each Pledged Company.
26. Form of Pledged Limited Liability Interests/Covenant Not to Dilute.
------------------------------------------------------------------
Each Pledgor represents, warrants and covenants to Secured Party that all of the
Pledged Limited Liability Company Interests are in the form (certificated or
uncertificated) indicated on Schedule A attached hereto (as contemplated by
----------
Article 8 of the Uniform Commercial Code), and covenants to the Lenders that it
will (i) not at any time cause or permit any Pledged Entities to issue any
additional membership interests or any other rights or options to acquire any
additional limited liability company interests, other than to a Pledgor or as
otherwise permitted under the Credit Agreement, and (ii) pledge to the Agent in
accordance with the terms hereof, immediately upon and to the extent of such
Pledgor's acquisition (directly or indirectly) thereof, any and all additional
Limited Liability Company Interests of each Pledged Entity.
27. Alternative Dispute Resolution.
------------------------------
(a) Claims or Controversies Subject to Arbitration or Judicial Reference.
--------------------------------------------------------------------
(i) Any Claim other than a Claim that arises out of or relates to any
obligation under this Agreement or any other Loan Document that is secured,
in whole or in part, by an interest in real property shall, at the written
request of any Party, be determined by Arbitration.
(ii) Any Claim that arises out of or relates to any obligation under
this Agreement or any other Loan Document that is secured, in whole or in
part, by an interest in real property shall be determined by Arbitration
only with the consent of both (A) the Obligor party to this Agreement or
such other Loan Document under which such Claim arises and (B) the Agent.
If both such Parties do not consent to the determination of any such Claim
by Arbitration, then such Claim shall, at the written request of either of
such Parties, be determined by Reference.
(iii) The determination as to whether or not a Claim arises out of or
relates to any obligation under any Loan Document that is secured, in whole or
in part, by an interest in real property shall be made at the time the
arbitrator or referee is selected pursuant to Section 27(b).
(b) Selection of Arbitrator or Referee. Within thirty (30) days after
----------------------------------
written demand, or within thirty (30) days after commencement by any Party of
any lawsuit subject to this Agreement, the parties shall select a single neutral
arbitrator pursuant to the Commercial Arbitration Rules of the AAA or a single
neutral referee pursuant to the Judicial Reference Procedures of the AAA.
However, the arbitrator or referee selected must be a retired state or federal
court judge with at least five years of judicial experience in civil matters. In
the event that the selection pursuant to such Commercial Arbitration Rules or
Judicial Reference Procedures does not result in the appointment of a single
neutral arbitrator or a single neutral
-19-
<PAGE>
referee within such thirty (30) day period, any Party may petition the court to
appoint a single neutral arbitrator or a single neutral referee having such
qualifications. The Parties shall equally bear the fees and expenses of the
arbitrator or referee unless the arbitrator or referee otherwise provides in the
award or statement of decision.
(c) Conduct of Arbitration or Reference. The arbitrator shall have the
-----------------------------------
powers provided under Applicable State Law and the Commercial Arbitration Rules
of the AAA, and the referee shall have the powers provided under Applicable
State Law and the Judicial Reference Procedures of the AAA except as provided in
this Agreement, including without limitation the following: (i) The arbitrator
or referee shall determine all challenges to the legality and/or enforceability
of this Agreement.
(ii) The arbitrator or referee shall apply the rules of evidence to
the same extent as they would be applied in a court of law.
(iii) Subject to the provisions of this Agreement, the arbitrator may
award or the referee may report, a statement of decision providing for any
remedy or relief, including without limitation judicial foreclosure, a
deficiency judgment or equitable relief, and give effect to all legal and
equitable defenses, including without limitation statutes of limitation,
the statute of frauds, waiver and estoppel.
(iv) A Party may not conduct discovery unless the arbitrator or
referee grants such party leave to do so upon a showing of good cause. All
discovery shall be completed within 90 days after the appointment of the
arbitrator or referee, except upon a showing of good cause by any Party.
The arbitrator or referee shall limit discovery to non-privileged material
that is relevant to the issues to be determined by the arbitrator or
referee.
(v) The referee shall determine the time of the hearing. The hearing
shall take place in Los Angeles, California. The hearing must be commenced
within sixty (60) days after completion of discovery, unless the arbitrator
or referee grants a continuance upon a showing of good cause by any Party.
At least fourteen (14) days before the date set for hearing, the Parties
shall exchange copies of exhibits to be offered as evidence, and lists of
witnesses who will testify, at such hearing. Once commenced, the hearing
shall proceed day to day until completed, unless the arbitrator or the
referee grants a continuance upon a showing of good cause by any Party. Any
Party may cause to be prepared, at its expense, a written transcription or
electronic recordation of such hearing.
(vi) Any award of the arbitrator or the statement of decision of the
referee shall be supported by written findings of fact and conclusions of
law which the arbitrator or the referee shall concurrently deliver to the
Parties.
(vii) The arbitrator shall have the power to award or the referee
shall have the power to report a statement of decision providing for
reasonable attorneys' fees and costs (including a reasonable allocation for
the costs of in house counsel) to the prevailing party.
-20-
<PAGE>
(viii) In the event that punitive damages are permitted under
Applicable State Law, the award of the arbitrator or the statement of
decision of the referee may provide for recovery of punitive damages
provided that the arbitrator or referee first makes written findings of
fact that would satisfy the requirements for recovery of punitive damages
under Applicable State Law. Any such punitive damages shall not exceed a
sum equal to three times the amount of actual damages as determined by the
arbitrator or referee.
(ix) In the event that Applicable State Law provides that
publications or communications made in a judicial proceeding are subject to
a litigation privilege, such litigation privilege shall apply to the same
extent to publications or communications made in the Arbitration or
Reference.
(d) Provisional Remedies, Self-Help and Foreclosure. No provision of this
-----------------------------------------------
Section 27 shall limit the right of any Party (i) to exercise any self-help
remedies or seek specific performance, (ii) to foreclose upon or sell any
collateral, by power of sale or otherwise, or (iii) to obtain or oppose
provisional remedies or necessary procedural orders from a court of competent
jurisdiction, including without limitation appointment of a receiver, before,
after or during the pendency of the Arbitration or Reference. The exercise of,
or opposition to, any such remedy does not waive the right of any Party to
Arbitration or Reference pursuant to this Agreement.
(e) Miscellaneous. Any court of competent jurisdiction shall, upon the
-------------
petition of any Party, confirm the award of the arbitrator and enter judgment in
conformity therewith. Any court of competent jurisdiction shall, upon the filing
of the statement of decision of the referee, enter judgment thereon. Any such
judgment shall be final, binding and non-appealable (subject to vacation or
correction in the amounts set forth, respectively, in California Code of Civil
Procedure Sections 1286.2, 1286.4, 1286.6 and 1286.8). No Party shall take any
action to contest such award or judgment except as set forth above. In the event
that multiple claims are asserted, some of which are found not subject to this
Agreement, the Parties agree to stay the proceedings of the claims not subject
to this Agreement until all other claims are resolved in accordance with this
Agreement. In the event that claims are asserted against multiple parties, some
of whom are not subject to this Agreement, the Parties agree to sever the claims
subject to this Agreement and resolve them in accordance with this Agreement. In
the event that any provision of this Section 27 is found to be illegal or
unenforceable, the remainder of this Section 27 shall remain in full force and
effect. In the event of any challenge to the legality or enforceability of this
Section 27, the prevailing Party shall be entitled to recover the costs and
expenses, including reasonable attorneys' fees, incurred by it in connection
therewith. Applicable State Law shall govern the interpretation of this Section
27.
(f) Waiver of Right to Trial by Jury. IN CONNECTION WITH ANY ARBITRATION,
--------------------------------
ANY REFERENCE OR ANY OTHER ACTION, PROCEEDING OR COUNTERCLAIM, THE PLEDGORS, THE
LENDERS AND THE AGENT HEREBY EXPRESSLY, INTENTIONALLY AND IRREVOCABLY WAIVE ANY
RIGHT THEY MAY OTHERWISE HAVE TO TRIAL BY JURY OF ANY CLAIM.
(g) Defined Terms. As used in this Section 27, the following terms shall
-------------
have the respective meanings set forth below:
-21-
<PAGE>
(i) "AAA" shall mean the American Arbitration Association.
---
(ii) "Applicable State Law" shall mean the law of the State of
--------------------
California; provided, however, that if any Party seeks (A) to exercise self
-----------------
help remedies, including without limitation set-off, (B) to foreclose
against or sell any collateral, by power of sale or otherwise or (iii) to
obtain or oppose provisional or ancillary remedies from a court of
competent jurisdiction before, after or during the pendency of the
Arbitration or Reference, the law of the state where such collateral is
located shall govern the exercise of or opposition to such rights and
remedies.
(iii) "Arbitration" shall mean an arbitration conducted pursuant to
-----------
this Agreement in accordance with Applicable State Law, and under the
Commercial Arbitration Rules of the AAA, as in effect at the time the
arbitrator is selected pursuant to Section 27(b).
(iv) "Claim" shall mean any claim, cause of action, action, dispute
-----
or controversy between or among the Parties, including any claim, cause of
action, action, dispute or controversy alleged in or subject to a lawsuit
between or among the Parties, which arises out of or relates to:
(A) this Agreement or any of the other Loan Documents,
(B) any negotiations, correspondence or communications
relating to this Agreement or any of the other Loan Documents, whether or not
incorporated into this Agreement or such other Loan Documents or any
indebtedness evidenced thereby,
(C) the administration or management of this Agreement or any
other Loan Documents or any indebtedness evidenced thereby or
(D) any alleged agreements, promises, representations or
transactions in connection therewith, including but not limited to any claim,
cause of action, action, dispute or controversy which arises out of or is based
upon an alleged tort or other breach of legal duty.
(v) "Party" shall mean any Pledgor, any other Obligor, any Lender
-----
or the Agent.
(vi) "Reference" shall mean a judicial reference conducted pursuant
---------
to this Agreement in accordance with Applicable State Law and under the
Judicial Reference Procedures of the AAA, as in effect at the time the
referee is selected pursuant to Section 27(b) of this Agreement.
28. Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties hereto in separate counterparts, each of
which shall be deemed to be an original, but all of which taken together shall
constitute one and the same agreement.
29. Recourse. Notwithstanding any provision of this Agreement to the
--------
contrary, the obligations and liabilities of each Pledgor hereunder shall be
limited to the Collateral and, if an Event of Default and/or a default by any
Pledgor hereunder or under the Guarantee shall occur
-22-
<PAGE>
and be continuing, the Agent's and the Lenders' sole recourse against such
Pledgor shall be to the Collateral.
-23-
<PAGE>
IN WITNESS WHEREOF, each Pledgor has executed this Agreement as of the date
first written above.
PLEDGOR
-------
/s/ Walter F. Ulloa
-------------------
WALTER F. ULLOA, an individual
Residence:
Los Angeles County, California
Address for Notices:
657 Amalfi Drive
Pacific Palisades, CA 90272
Telecopier: 310-454-4983
-24-
<PAGE>
/s/ Philip C. Wilkinson
----------------------------------
PHILIP C. WILKINSON, an individual
Residence:
San Diego County, California
Address for Notices:
P.O. Box 2630
Rancho Santa Fe, CA 92067
Telecopier: 619-756-9438
-B-1-
<PAGE>
/s/ Paul A. Zevnik
---------------------------------
PAUL A. ZEVNIK, an individual
Residence:
County of District of Columbia, District of
Columbia
Address for Notices:
1299 Pennsylvania Avenue N.W.
Ninth Floor
Washington, D.C. 20004
Telecopier: 202-824-0954
<PAGE>
/s/ Richard D. Norton
---------------------------------
RICHARD D. NORTON, an individual
Residence:
Los Angeles County, California
Address for Notices:
1620 26th Street, Suite 200
Santa Monica, CA 90404
Telecopier: 310-___-____
<PAGE>
/s/ Yrma G. Rico
---------------------------------
IRMA (YRMA) RICO, an individual
Residence:
Denver County, Colorado
Address for Notices:
899 Pearl #15
Denver, CO 80203
Telecopier: 303-832-7325
<PAGE>
KEVIN GRENHAM and STEVE G. ROWLES,
Co-Trustees of THE PAUL A. ZEVNIK TRUST
dated November 2, 1996, a trust formed
under the laws of the District of Columbia
By: /s/ Kevin Grenham
KEVIN GRENHAM, Co-Trustee
Residence:
Hartford County, Connecticut
Address for Notices as Co-Trustee:
27 Crestwood Rd.
West Hartford, CT 06107
Telecopier: ___-___-____
By: /s/ Steven G. Rowles
STEVE G. ROWLES, Co-Trustee
Residence:
San Diego County, California
Address for Notices as Co-Trustee:
100 West Broadway, Suite 1750
San Diego, CA 92101
Telecopier: 619-515-9628
<PAGE>
EDITH SEROS, as Trustee of
THE WALTER F. ULLOA TRUST OF 1996,
a trust formed under the laws of the
State of California
By: /s/ Edith Seros
EDITH SEROS, Trustee
Residence:
Los Angeles County, California
Address for Notices as Trustee:
432 16th Street
Santa Monica, CA 90402
Telecopier: 310-___-____
<PAGE>
PHILIP C. WILKINSON and WENDY K. WILKINSON,
as Trustees of THE 1994 WILKINSON CHILDREN'S
GIFT TRUST, a trust formed under the laws of
the State of California
By: /s/ Philip C. Wilkinson, Trustee
PHILIP C. WILKINSON, Trustee
Residence:
San Diego County, California
Address for Notices as Trustee:
P.O. Box 2630
Rancho Santa Fe, CA 92067
Telecopier: 619-756-9438
By: /s/ Wendy K. Wilkinson, Trustee
WENDY K. WILKINSON, Trustee
Residence:
San Diego County, California
Address for Notices as Trustee:
P.O. Box 2630
Rancho Santa Fe, CA 92067
Telecopier: 619-756-9438
<PAGE>
PHILIP C. WILKINSON and WENDY K. WILKINSON,
as Trustee of THE WILKINSON FAMILY TRUST, a
trust formed under the laws of the State of
California
By: /s/ Philip C. Wilkinson, Trustee
PHILIP C. WILKINSON, Trustee
Residence:
San Diego County, California
Address for Notices as Trustee:
P.O. Box 2630
Rancho Santa Fe, CA 92067
Telecopier: 619-756-9438
By: /s/ Wendy K. Wilkinson, Trustee
WENDY K. WILKINSON, Trustee
Residence:
San Diego County, California
Address for Notices as Trustee:
P.O. Box 2630
Rancho Santa Fe, CA 92067
Telecopier: 619-756-9438
<PAGE>
CAROL KRUIDENIER LUERY TTE,
CAROL K. LUERY REVOCABLE TRUST
UA DATED 7/27/98
By: /s/ Carol K. Luery
CAROL LUERY, Trustee
Residence:
Sacramento County, California
Address for Notices:
4139 Los Coches Way
Sacramento, CA 95864
Telecopier: 916-446-1696
(Telecopier No. for Charles S. Farmon, Esq.)
<PAGE>
Acknowledged and agreed to
as of this 10th day of
November, 1998
KSMS-TV, INC.
By: /s/ Philip C. Wilkinson /s/ Walter F. Ulloa
Name: Philip C. Wilkinson/Walter F. Ulloa
Title: Vice President/President and Treasurer
TIERRA ALTA BROADCASTING, INC.
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: Vice President and Treasurer
CABRILLO BROADCASTING CORPORATION
By: /s/ Philip C. Wilkinson
Name: Philip C. Wilkinson
Title: President and Chief Financial Officer
GOLDEN HILLS BROADCASTING CORPORATION
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: President and Treasurer
LAS TRES PALMAS CORPORATION
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: President and Treasurer
<PAGE>
VALLEY CHANNEL 48, INC.
By: /s/ Philip C. Wilkinson /s/ Walter F. Ulloa
Name: Philip C. Wilkinson/Walter F. Ulloa
Title: President and Chief Operating Officer/ Chairman and Chief Executive
Officer
TELECORPUS, INC.
By: /s/ Philip C. Wilkinson /s/ Walter F. Ulloa
Name: Philip C. Wilkinson/Walter F. Ulloa
Title: President and Chief Operating Officer/Chairman and Chief Executive
Officer
ENTRAVISION COMMUNICATIONS COMPANY, L.L.C.
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: Managing Member
By: /s/ Philip C. Wilkinson
Name: Philip C. Wilkinson
Title: Managing Member
<PAGE>
CONSENT OF SPOUSE
-----------------
I, Alexandra Seros, am the spouse of WALTER F. ULLOA (the "Pledgor")
-------
who is a party to the foregoing Amended and Restated Pledge Agreement (such
Agreement, as it may hereafter be amended, modified or restated from time to
time, herein referred to as the "Pledge Agreement") dated as of November 10,
----------------
1998 by the Pledgor and the other pledgors party thereto in favor of Union Bank
of California, N.A., a national banking association, as Agent for the Lenders
referred to therein. (Terms defined in the Pledge Agreement or the definitions
of which are incorporated in the Pledge Agreement and not otherwise defined
herein have the same respective meanings when used herein.)
I acknowledge that I have read, know and understand the contents of
the Pledge Agreement and the effects thereof. I hereby consent to the execution
and delivery of, and approve of and agree to be bound by the terms, conditions
and provisions of the Pledge Agreement, all Schedules attached thereto and all
other agreements which are contemplated by or attached thereto as exhibits or
schedules to the Pledge Agreement to which my spouse is or will become a party,
whether entered into before or after the date of this Consent, to the same
extent as if I were a party thereto, and consent to the performance by my spouse
of his obligations thereunder.
I agree that my interest, if any, in the Collateral (including any
community property interest therein) will be irrevocably subject to and bound by
the Pledge Agreement.
I am aware that I have a right to seek independent professional
guidance and independent legal counsel with respect to this Consent. I have
either sought such guidance or counsel or determined after reviewing the Pledge
Agreement carefully that I waive such right.
Dated: November 1, 1998.
/s/ Alexandra Seros
-------------------------------
Print Name: Alexandra Seros
<PAGE>
CONSENT OF SPOUSE
-----------------
I, Wendy K. Wilkinson, am the spouse of PHILIP C. WILKINSON (the
"Pledgor") who is a party to the foregoing Amended and Restated Pledge Agreement
- --------
(such Agreement, as it may hereafter be amended, modified or restated from time
to time, herein referred to as the "Pledge Agreement") dated as of November 10,
----------------
1998 by the Pledgor and the other pledgors party thereto in favor of Union Bank
of California, N.A., a national banking association, as Agent for the Lenders
referred to therein. (Terms defined in the Pledge Agreement or the definitions
of which are incorporated in the Pledge Agreement and not otherwise defined
herein have the same respective meanings when used herein.)
I acknowledge that I have read, know and understand the contents of
the Pledge Agreement and the effects thereof. I hereby consent to the execution
and delivery of, and approve of and agree to be bound by the terms, conditions
and provisions of the Pledge Agreement, all Schedules attached thereto and all
other agreements which are contemplated by or attached thereto as exhibits or
schedules to the Pledge Agreement to which my spouse is or will become a party,
whether entered into before or after the date of this Consent, to the same
extent as if I were a party thereto, and consent to the performance by my spouse
of his obligations thereunder.
I agree that my interest, if any, in the Collateral (including any
community property interest therein) will be irrevocably subject to and bound by
the Pledge Agreement.
I am aware that I have a right to seek independent professional
guidance and independent legal counsel with respect to this Consent. I have
either sought such guidance or counsel or determined after reviewing the Pledge
Agreement carefully that I waive such right.
Dated: November 10, 1998.
/s/ Wendy K. Wilkinson
----------------------------------
Print Name: Wendy K. Wilkinson
<PAGE>
CONSENT OF SPOUSE
-----------------
I, Stephanie P. Rasines, am the spouse of RICHARD D. NORTON (the
"Pledgor") who is a party to the foregoing Amended and Restated Pledge Agreement
- --------
(such Agreement, as it may hereafter be amended, modified or restated from time
to time, herein referred to as the "Pledge Agreement") dated as of November 10,
----------------
1998 by the Pledgor and the other pledgors party thereto in favor of Union Bank
of California, N.A., a national banking association, as Agent for the Lenders
referred to therein. (Terms defined in the Pledge Agreement or the definitions
of which are incorporated in the Pledge Agreement and not otherwise defined
herein have the same respective meanings when used herein.)
I acknowledge that I have read, know and understand the contents of
the Pledge Agreement and the effects thereof. I hereby consent to the execution
and delivery of, and approve of and agree to be bound by the terms, conditions
and provisions of the Pledge Agreement, all Schedules attached thereto and all
other agreements which are contemplated by or attached thereto as exhibits or
schedules to the Pledge Agreement to which my spouse is or will become a party,
whether entered into before or after the date of this Consent, to the same
extent as if I were a party thereto, and consent to the performance by my spouse
of his obligations thereunder.
I agree that my interest, if any, in the Collateral (including any
community property interest therein) will be irrevocably subject to and bound by
the Pledge Agreement.
I am aware that I have a right to seek independent professional
guidance and independent legal counsel with respect to this Consent. I have
either sought such guidance or counsel or determined after reviewing the Pledge
Agreement carefully that I waive such right.
Dated: November 10, 1998.
/s/ Stephanie P. Rasines
--------------------------------
Print Name: Stephanie P. Rasines
<PAGE>
Schedule A Pledged Collateral
Schedule B UCC Filing Offices
Schedule C Form of Limited Liability Company Notice
Schedule D Prior Pledge Agreements
The registrant hereby agrees to furnish a copy of any omitted schedule or
exhibit upon request.
<PAGE>
EXHIBIT 10.12
UNIVISION ROLL-UP AGREEMENT
---------------------------
This Univision Roll-Up Agreement (the "Agreement") is dated March 2, 2000
by and between Univision Communications Inc., a Delaware corporation
("Univision"), and Entravision Communications Company, L.L.C., a Delaware
limited liability company (the "Company"), with respect to the following facts:
WHEREAS, the Company has previously executed that certain Non-Negotiable
Subordinated Note dated December 30, 1996 in the principal amount of $10,000,000
in favor of Univision, a copy of which is attached hereto as Exhibit "A" and
-----------
incorporated herein by this reference (the "Original Note").
WHEREAS, the parties hereto have entered into that certain First Amended
and Restated Non-Negotiable Promissory Note of even date herewith, a copy of
which is attached hereto as Exhibit "B" and incorporated herein by this
-----------
reference (the "First Amended Original Note"), in order to, among other things,
increase the principal amount of the Original Note by $110,000,000, from
$10,000,000 to $120,000,000.
WHEREAS, the parties hereto have previously entered into that certain
Amended and Restated Subordinated Note Purchase and Option Agreement dated as of
December 30, 1996, a copy of which is attached hereto as Exhibit "C" and
-----------
incorporated herein by this reference (the "Original Note Purchase Agreement"),
pursuant to which, among other things, Univision was granted the Univision
Option to acquire an equity interest in the Company (adjusted to 25.55%) for an
aggregate exercise price of $10,000,000.
WHEREAS, the parties hereto have previously entered into that certain First
Amendment to Amended and Restated Subordinated Note Purchase and Option
Agreement dated as of March 31, 1999, a copy of which is attached hereto as
Exhibit "D" and incorporated herein by this reference (the "First Amendment to
- -----------
Original Note Purchase Agreement"), pursuant to which, among other things, the
Univision Option was increased to an option to acquire a 27.90% equity interest
in the Company for an aggregate exercise price of $10,000,000.
WHEREAS, the parties hereto have entered into that certain Second Amendment
to Amended and Restated Note Purchase Agreement of even date herewith, a copy of
which is attached hereto as Exhibit "E" and incorporated herein by this
-----------
reference (the "Second Amendment to Original Note Purchase Agreement"), in order
to, among other things, increase the percentage of the Univision Option to 40%
(as computed in Section 3 of the Second Amendment to Original Note Purchase
Agreement), and as computed prior to any potential issuance of shares in the Z-
Spanish Acquisition or the IPO (each as defined below).
WHEREAS, the Company, in consultation with Univision, has negotiated a
letter of intent by the Company to potentially acquire all of the outstanding
capital stock of Z-Spanish Media Corporation, a Delaware corporation ("Z-
Spanish"), and may potentially consummate a
<PAGE>
financing with TSG Capital Fund III, L.P., an affiliate of a stockholder of Z-
Spanish, in the amount of $90,000,000 (the "Z-Spanish Acquisition"),
substantially in accordance with the terms of the draft letter of intent
attached hereto as Exhibit "F" and incorporated herein by this reference (the
-----------
"Z-Spanish Letter of Intent").
WHEREAS, the Company has formed Entravision Communications Corporation, a
Delaware corporation with no shares of capital stock issued and outstanding as
of the date hereof ("Entravision"), for the purpose of effecting an exchange
transaction contemplated by the Company in which (i) each of the individual and
trust members in the Company (the "Exchanging Members") shall transfer to the
Company his or its respective direct membership interests in the Company in
exchange for newly-issued shares of Entravision Class A Common Stock and (ii)
each of the individual and trust stockholders of the corporate members of the
Company (the "Exchanging Stockholders") shall transfer his, her or its
respective stockholdings in such corporate members in exchange for newly-issued
shares of Entravision Class A Common Stock (collectively, the "Exchange"), all
pursuant to the terms and conditions of an Exchange Agreement to be entered into
by and among Entravision, the Company, the Exchanging Members, the Exchanging
Stockholders and Univision (the "Exchange Agreement").
WHEREAS, Entravision is preparing to file with the Securities and Exchange
Commission a Registration Statement with respect to an underwritten initial
public offering of its Class A Common Stock (the "IPO").
WHEREAS, the parties hereto intend that Univision will contribute to the
Company its entire interest in and to the Original Note, the First Amended
Original Note, the Original Note Purchase Agreement, the First Amendment to
Original Note Purchase Agreement and the Second Amendment to Original Note
Purchase Agreement in exchange for newly-issued shares of the Entravision Class
C Common Stock representing a 40% equity ownership interest in Entravision (as
computed in Section 3 of the Second Amendment to Original Note Purchase
Agreement) and as computed prior to the Z-Spanish Acquisition and IPO (the
"Univision Conversion"), all in pursuant to the terms and conditions of the
Exchange Agreement (the Exchange and the Univision Conversion are collectively
referred to herein as the "Roll-Up Transaction").
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and for other good and valuable consideration, the receipt and sufficiency of
which are acknowledged by each signatory hereto, it is agreed as follows:
1. First Amended Original Note. Concurrently with the execution of this
---------------------------
Agreement, (i) Univision and the Company shall execute the First Amended
Original Note, pursuant to which, among other things, the principal amount of
the Original Note shall be increased by $110,000,000, from $10,000,000 to
$120,000,000, (ii) the Company shall deliver to Univision the original of the
First Amended Original Note and (iii) Univision shall deliver to the Company (a)
the Original Note marked "cancelled" and (b) the sum of $110,000,000 via wire
transfer pursuant to wire transfer instructions provided to Univision by the
Company.
-2-
<PAGE>
2. Second Amendment to Note Purchase Agreement. Concurrently with the
-------------------------------------------
execution of this Agreement, Univision and Entravision shall execute the Second
Amendment to Note Purchase Agreement, pursuant to which, among other things, the
percentage of the Univision Option shall be increased to 40% (as computed in
Section 3 of the Second Amendment to Original Note Purchase Agreement) and as
computed prior to the Z-Spanish Acquisition and the IPO.
3. Roll-Up Transaction. Upon consummation of the Roll-Up Transaction:
-------------------
(a) the Restated Certificate of Incorporation of Entravision shall be
substantially in the form attached hereto as Exhibit "G" and incorporated by
-----------
this reference, subject to such other changes as are reasonably agreed to by the
parties to accommodate any changes to the participants and/or ultimate structure
of the Roll-Up Transaction, the Z-Spanish Acquisition and/or the IPO;
(b) the Bylaws of Entravision shall be substantially in the form
attached hereto as Exhibit "H" and incorporated herein by this reference,
-----------
subject to such other changes as are reasonably agreed to by the parties hereto
in order to accommodate any changes to the participants and/or ultimate
structure of the Roll-Up Transaction, the Z-Spanish Acquisition and/or the IPO;
and
(c) each of Walter F. Ulloa, Philip C. Wilkinson and Paul A. Zevnik
hereby covenant to, and agree to cause the Company to, execute and deliver that
certain Voting Agreement, substantially in the form attached hereto as Exhibit
-------
"I" and incorporated by this reference.
- ---
The parties acknowledge and agree that the Roll-Up Transaction shall be
consummated upon the terms and conditions set forth in the Exchange Agreement,
which Exchange Agreement shall be subject to the reasonable review and approval
of Univision.
4. Z-Spanish Acquisition. Univision hereby acknowledges and agrees that
---------------------
it is in the best interests of the Company and Entravision to pursue the Z-
Spanish Acquisition and Univision hereby approves the potential consummation of
the Z-Spanish Acquisition (and its related terms) in accordance with the terms
of the Z-Spanish Letter of Intent, with such non-material changes as are
reasonably approved in good faith by the officers of the Company and
Entravision.
5. General Provisions.
------------------
(a) Entire Agreement. This Agreement, the exhibits and schedules
----------------
hereto and any other document to be furnished pursuant to the provisions hereof
embody the entire agreement and full understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, inducements, representations, warranties, covenants
-3-
<PAGE>
or undertakings other than those expressly set forth or referred to in such
documents. This Agreement and such other documents supersede all prior
negotiations, agreements and understandings, both written and oral, among the
parties with respect to such subject matter.
(b) Incorporation by Reference. The recitals set forth above, and all
--------------------------
exhibits and schedules attached hereto, are hereby incorporated by reference
into this Agreement.
(c) Amendments. Subject to applicable law, this Agreement and any
----------
exhibit or schedule attached hereto may only be amended by the parties hereto
pursuant to an amendment in writing executed by all parties hereto.
(d) Successors and Assigns. Except as otherwise provided herein, the
----------------------
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors, assigns, heirs, legatees, legal
representatives, executors and administrators of all the parties hereto.
Nothing in this Agreement, express or implied, is intended to or shall be
construed to confer upon or give to any person, entity or other party (other
than the parties hereto or their respective successors and assigns) any rights,
remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
(e) Counterparts; Facsimile. This Agreement may be executed in any
-----------------------
number of counterparts, each of which shall be an original and shall not need to
contain the signature of more than one party, but all of which together when
fully-executed and delivered by the parties hereto shall constitute one and the
same instrument, binding on all of the parties. To the maximum extent permitted
by applicable law or any applicable governmental authority, each counterpart
signature page delivered to via facsimile shall be deemed to be an original and
may be relied on by the parties hereto as such.
(f) Assignment. No party hereto shall have the right to assign all or
----------
any portion of its rights and interests under this Agreement or to delegate all
or any portion of its duties under this Agreement without the prior written
consent of each other party hereto.
(g) Notices. All notices, requests, demands, waivers and other
-------
communications to be given by either party hereunder shall be in writing and
shall be (i) mailed by first-class, registered or certified mail, postage
prepaid, (ii) sent by hand delivery or reputable overnight delivery service or
(iii) transmitted by facsimile or electronic mail (provided that a copy is also
sent by reputable overnight delivery service) addressed to the parties at the
respective addresses for such parties as reflected on the signature page hereto,
or to such other address as may be specified in writing to the other parties
hereto. All such notices, requests, demands, waivers and other communications
shall be deemed to have been given and received (a) if by personal delivery,
facsimile or electronic mail, on the day of such delivery, (b) if by first-
class, registered or certified mail, on the fifth (5th) business day after the
mailing thereof or (c) if by reputable overnight delivery service, on the day
delivered.
-4-
<PAGE>
(h) Governing Law; Venue. Notwithstanding the place where the
--------------------
Agreement may be executed by any of the parties hereto, this Agreement, and the
rights and obligations of the parties hereto, and any disputes relating thereto,
shall in all respects be governed by and construed in accordance with the laws
of the State of California, without regard to principles of conflicts of laws.
The exclusive venue for any controversy arising out of the terms of this
Agreement or the breach thereof shall be the Superior Court of California for
the County of Los Angeles or the United States District Court for the Central
District of California.
(i) Capitalized Terms. All capitalized terms used in this Amendment
-----------------
and not otherwise defined shall have the meaning assigned such term in the
Original Note or the Original Note Purchase Agreement, as the case may be.
[Remainder of Page Intentionally Left Blank]
-5-
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first written above.
Univision UNIVISION COMMUNICATIONS INC.,
a Delaware corporation
By: /s/ Andrew W. Hobson
---------------------------------------------
Name: Andrew W. Hobson
-------------------------------------------
Title:EVP
-------------------------------------------
Address: 1999 Avenue of the Stars, Suite 3050
Los Angeles, California 90067
Company ENTRAVISION COMMUNICATIONS COMPANY, L.L.C.,
a Delaware limited liability company
By: /s/ Walter F. Ulloa
---------------------------------------------
Walter F. Ulloa, Chairman, Chief Executive
Officer and Managing Member
By: /s/ Philip C. Wilkinson
---------------------------------------------
Philip C. Wilkinson, President, Chief
Operating Officer
and Managing Member
Address: 2425 Olympic Boulevard, Suite 6000 West
Santa Monica, California 90404
/s/ Walter F. Ulloa
-------------------------------------------------
Walter F. Ulloa, individually
/s/ Philip C. Wilkinson
-------------------------------------------------
Philip C. Wilkinson, individually
/s/ Paul A. Zevnik
-------------------------------------------------
Paul A. Zevnik, individually
[Signature Page to Univision Roll-Up Agreement]
<PAGE>
Exhibit A Original Note
Exhibit B First Amended Original Note
Exhibit C Original Note Purchase Agreement
Exhibit D First Amendment to Original Note Purchase Agreement
Exhibit E Second Amendment to Original Note Purchase Agreement
Exhibit F Z-Spanish Letter of Intent
Exhibit G Form of Restated Certificate of Incorporation
Exhibit H Form of Bylaws
Exhibit I Form of Voting Agreement
The registrant hereby agrees to furnish a copy of any omitted schedule or
exhibit upon request.
<PAGE>
EXHIBIT 10.13
FIRST AMENDED AND RESTATED
NON-NEGOTIABLE SUBORDINATED NOTE
--------------------------------
THIS SUBORDINATED NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
("STATE ACT"). THE SECURITIES EVIDENCED BY THIS NOTE MAY NOT BE OFFERED, SOLD
OR TRANSFERRED FOR VALUE, DIRECTLY OR INDIRECTLY, IN THE ABSENCE OF SUCH
REGISTRATION UNDER THE ACT AND QUALIFICATION UNDER APPLICABLE STATE ACTS, OR
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND QUALIFICATION UNDER
APPLICABLE STATE ACTS, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE
REASONABLE SATISFACTION OF ENTRAVISION COMMUNICATIONS COMPANY, L.L.C.
ENTRAVISION COMMUNICATIONS COMPANY, L.L.C.
Subordinated Note Due December 30, 2021
$120,000,000 Los Angeles, California
March 2, 2000
------------------
Entravision Communications Company, L.L.C., a Delaware limited liability
company (the "Company"), for value received, hereby promises to pay to Univision
Communications Inc., a Delaware corporation ("Univision"), at 1999 Avenue of the
Stars, Suite 3050, Los Angeles, California 90067, the principal sum of One
Hundred Twenty Million Dollars ($120,000,000) together with interest (computed
on the basis of a 360-day year) from the date of this Note, (the "Commencement
Date") on the unpaid balance of such principal amount at 7.01% (the "Interest
Rate"). Principal and interest under this Note shall be payable as follows:
Interest on this Note shall be due and payable semi-annually, as it accrues,
beginning six (6) months after the Commencement Date and continuing regularly
and semi-annually thereafter each calendar year until December 30, 2021, when
the outstanding principal balance of this Note, together with all accrued and
unpaid interest thereon, shall be due and payable in full. Reference is made to
the Company's First Amended and Restated Operating Agreement dated as of
December 30, 1996 (as amended from time to time, the "Operating Agreement").
Capitalized terms not defined herein shall have the meaning given to such terms
in the Operating Agreement. This Note amends, restates and supersedes that
certain Non-Negotiable Subordinated Note dated December 30, 1996 in the
principal amount of $10,000,000 executed by the Company in favor of Univision.
1. Subordination.
-------------
a. Subordination to Senior Indebtedness. The indebtedness evidenced
------------------------------------
by this Note, and the payment of the principal hereof and any interest hereon,
is wholly subordinated,
<PAGE>
junior and subject in right of payment, to the extent and in the manner
hereinafter provided, to the prior payment of all Senior Indebtedness (as
hereinafter defined) of the Company now outstanding or hereafter incurred.
"Senior Indebtedness" means the principal of and interest on, together with all
other payment obligations under (i) all indebtedness of the Company to banks,
trust companies, insurance companies and other financial institutions, including
commercial paper and accounts receivable sold or assigned by the Company to such
institutions; (ii) obligations of the Company as lessee under leases of real or
personal property; (iii) any indebtedness of the Company issued or incurred in
connection with the acquisition of an equity interest in a business or with the
assets of a business; (iv) shareholder and/or member loans, junk bond debt,
trade debt incurred in the ordinary course of business and other unsecured debt;
(v) deferrals, renewals, extensions and refunding of and modifications to any
such indebtedness or obligations described in (i), (ii), (iii) and (iv) above;
and (vi) any other indebtedness of the Company which the Company and Univision
may hereafter from time to time expressly and specifically agree in writing.
b. Payment Upon Dissolution, Etc. Upon payment or distribution of
------------------------------
assets of the Company of any kind or character, whether in cash, property or
securities, to creditors upon any dissolution or winding-up or total or partial
liquidation or reorganization of the Company, whether voluntary or involuntary,
in bankruptcy, insolvency, receivership or other proceedings, all principal and
interest, together with all other payment obligations under, due upon any Senior
Indebtedness shall first be paid in full, or payment thereof in full duly
provided for, before Univision shall be entitled to receive or, if received, to
retain any payment or distribution on account of this Note; and upon any such
dissolution or winding-up or liquidation or reorganization, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, to which Univision would be entitled except for the
provisions of this Section 1 shall be paid by the Company or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other person making such
payment or distribution, or by Univision if it shall have received such payment
or distribution, directly to the holders of the Senior Indebtedness (pro rata to
--- ----
each such holder on the basis of the respective amounts of such Senior
Indebtedness held by such holder) or their representatives to the extent
necessary to pay all such Senior Indebtedness in full after giving effect to any
concurrent payment or distribution to or for the holders of such Senior
Indebtedness, before any payment or distribution is made to Univision. In the
event of any such dissolution, winding-up, liquidation or reorganization of the
Company, Univision shall be entitled to be paid one hundred percent (100%) of
the outstanding principal amount hereof and accrued interest hereon before any
distribution of assets shall be made among the holders of any class of
Membership Units of the Company in their capacities as holders of such
Membership Units.
For purposes of this paragraph (b), the words "assets" and "cash,
property or securities" shall not be deemed to include Membership Units of the
Company as reorganized or readjusted, or Membership Units of the Company or any
other person provided for by a plan of reorganization or readjustment, the
payment of which is subordinated at least to the extent provided in this Section
1 with respect to this Note to the payment of all Senior Indebtedness which may
at the time be outstanding; provided that (i) the Senior Indebtedness is
--------
assumed by the new person, if any, resulting from any such reorganization or
readjustment, and (ii) the rights
-2-
<PAGE>
of the holders of Senior Indebtedness are not, without the consent of such
holders, altered by such reorganization or readjustment.
c. Subrogation. Subject to payment in full of all Senior
-----------
Indebtedness, Univision shall be subrogated to the rights of the holders of
Senior Indebtedness to receive payments or distributions of the assets of the
Company made on such Senior Indebtedness until all principal and interest on
this Note shall be paid in full; and, for purposes of such subrogation, no
payments or distributions to the holders of Senior Indebtedness of any cash,
property or securities to which Univision would be entitled except for the
subordination provisions of this Section 1 shall, as between Univision and the
Company and/or its creditors other than the holders of the Senior Indebtedness,
be deemed to be a payment on account of the Senior Indebtedness.
d. Rights of Holder Unimpaired. The provisions of this Section 1 are
---------------------------
and are intended solely for the purposes of defining the relative rights of
Univision and the holders of Senior Indebtedness; and nothing in this Section 1
shall impair, as between the Company and Univision, the obligation of the
Company, which is unconditional and absolute, to pay to Univision the principal
hereof and interest hereon, in accordance with the terms of this Note; nor shall
anything herein prevent Univision from exercising all remedies otherwise
permitted by applicable law or hereunder upon default, subject to the rights set
forth above of holders of Senior Indebtedness to receive cash, property or
securities otherwise payable or deliverable to Univision.
e. Holders of Senior Indebtedness. These provisions regarding
------------------------------
subordination will constitute a continuing offer to all persons who, in reliance
upon such provisions, become holders of, or continue to hold, Senior
Indebtedness; such provisions are made for the benefit of the holders of Senior
Indebtedness, and such holders are hereby made obligees under such provisions to
the same extent as if they were named herein, and they or any of them may
proceed to enforce such subordination. Univision shall execute and deliver to
any holder of Senior Indebtedness (i) any such instrument as such holder of
Senior Indebtedness may request in order to confirm the subordination of this
Note to such Senior Indebtedness upon the terms set forth in this Note, and (ii)
any powers of attorney specifically confirming the rights of holders of Senior
Indebtedness to enforce such subordination and all such proofs of claim,
assignments of claim and other instruments as may be requested by the holders of
Senior Indebtedness or their representatives to enforce all claims upon or in
respect of this Note.
f. Payments on Subordinated Note. Subject to the terms of this
-----------------------------
Section 1, the Company may make payments of the principal of, and any interest
on, this Note, if at the time of payment, and immediately after giving effect
thereto, (i) there exists no default in any payment with respect to any Senior
Indebtedness and (ii) there shall not have occurred an event of default (other
than a default in the payment of amounts due thereon) with respect to any Senior
Indebtedness, as defined in the instrument under which the same is outstanding,
permitting the holders thereof to accelerate the maturity thereof, other than an
event of default which shall have been cured or waived or shall have ceased to
exist. All payments of principal and interest with respect to this Note and all
other Subordinated Notes of the Company due at the
-3-
<PAGE>
time of said payment shall be made ratably in proportion to the aggregate amount
outstanding with respect to each of the Notes.
2. Prepayment. The principal and interest indebtedness represented by
----------
this Note may be prepaid to Univision, in whole or in part, without penalty, any
time upon thirty (30) days' prior written notice from Company to Univision.
3. Univision Rights.
----------------
a. Matters Requiring Univision Approval. The following matters
------------------------------------
shall require Univision's approval, which shall not be unreasonably withheld,
except as otherwise specified:
i. Acquisition of assets by the Company for a purchase price
equal to or greater than the greater of (a) Five Million Dollars ($5,000,000) or
(b) ten percent (10%) of the Company's "Net Asset Value." Net Asset Value shall
be defined to mean the most recent four (4) quarters of EBITDA (excluding
"Additional Compensation" as that term is defined in that certain Letter
Agreement between Univision and the Company dated December 30, 1996), times
eight (8), less outstanding indebtedness, other than the Subordinated Note.
ii. Incurrence of debt (excluding the Subordinated Note and debt
under the Credit Facility) if, on a pro forma basis, the debt to EBITDA ratio
would exceed the ratio set forth below for the applicable EBITDA of the Company:
<TABLE>
<CAPTION>
EBITDA LEVERAGE RATIO
------- --------------
<S> <C>
Up to $5 million 4.00 : 1
$5.0 to less than $6.5 million 4.25 : 1
$6.5 to less than $8.0 million 4.50 : 1
$8.0 to less than $10.0 million 4.75 : 1
$10 million or greater 5.00 : 1
</TABLE>
iii. Any transaction involving the direct or indirect transfer or
sale of any FCC License, (including the sale of Membership Units) in which case,
except as provided below, Univision's consent may be withheld in its sole
discretion; provided, however, in connection with a transfer of Membership
Interests subject to the provisions of Section 26(d) of the Operating Agreement,
the Managing Members may submit to Univision a list of potential transferees
prior to the right of first offer pursuant to said Section 26(d) of the
Operating Agreement and such potential transferees may be approved by Univision,
which approval shall not be unreasonably withheld. If such transferee is
approved in such a manner, an indirect transfer of an FCC License as a result of
such transfer of Membership Interests to such transferee that complies with
Section 26(d) of the Operating Agreement, shall be deemed approved hereunder;
provided, further, that Univision agrees to not unreasonably withhold its
approval of other potential transferees under Section 26(d) of the Operating
Agreement.
-4-
<PAGE>
iv. Distributions to Members in excess of quarterly tax
distributions (calculated at the highest applicable federal and state income tax
rates, taking into account the deduction of state income taxes for federal
income tax purposes). The Company shall be permitted to make additional
distributions in amounts in excess of reasonable working capital and reserve
requirements if concurrent with such distribution the Company makes a prepayment
of principal on this Subordinated Note in an amount equal to the "Prepayment
Amount" (as defined below). The "Prepayment Amount" shall be determined as
follows:
A = B (C + A)
A equals the amount to be prepaid on this Subordinated Note;
B equals Univision's then existing Option Percentage (as defined
in Exhibit "D" to the Operating Agreement);
C equals the total distributions proposed to be made to the
Members of the Company;
v. Transactions with any Member in excess of $50,000 or not at
arm's length (except for existing management contracts, employment agreements,
and loans existing at the date hereof and scheduled in the Credit Facility
between the Company, among others, and Union Bank of California, N.A., as agent
for various banks).
vi. Amendments to the Operating Agreement that would adversely
affect the Class A Non-Managing Membership Units or Univision with respect to
its rights under the Operating Agreement.
vii. The merger or consolidation of the Company with a third
party or the sale of all, or substantially all, the assets of the Company, in
which case Univision may withhold its consent, in its sole discretion.
viii. The issuance of additional Membership Units in the Company
pursuant to Section 7(c)(iii) of the Operating Agreement.
ix. The dissolution and liquidation of the Company, in which
case Univision may withhold its consent, in its sole discretion.
x. Any other action by the Company that, assuming full exercise
of the rights of Univision under that certain Amended and Restated Subordinated
Note Purchase and Option Agreement dated December 30, 1996 between and among the
Company, Univision, et al., as amended from time to time, would require
Univision's approval under the Operating Agreement.
The foregoing approval rights shall terminate upon repayment of the Note or upon
the closing of Univision's sale of a majority of the principal amount of this
Note to a third party.
b. Inspection Rights; Reports. So long as this Note remains
--------------------------
outstanding, Univision shall (i) have the inspection rights of a Member of the
Company set forth in the
-5-
<PAGE>
Operating Agreement and (ii) shall be entitled to receive all financial reports
provided to the Members of the Company pursuant to the Operating Agreement.
4. [Intentionally omitted.]
5. No Assignment. This Note may be transferred, assigned or encumbered
-------------
only with the consent of the Company which consent the Company may withhold in
its sole discretion.
6. Default. Subject to the terms, provisions and conditions any time
-------
contained in any Subordination Agreement by and between Univision and the
holder(s) of any Senior Indebtedness, Univision can require that the entire
unpaid principal of this Note and the interest then accrued on this Note shall
become and be immediately due and payable upon written demand of Univision,
without any other notice or demand of any kind or any presentment or protest, if
any one of the following events (an "Event of Default") shall occur and be
continuing at the time of such demand, whether voluntarily or involuntarily, or,
without limitation, occurring or brought about by operation of law or pursuant
to or in compliance with any judgment, decree or order of any court or any
order, rule or regulation of any governmental body:
a. The failure to pay any principal and/or interest amount when due
hereunder;
b. If the Company (i) makes a general assignment for the benefit of
creditors; (ii) applies for, consents to, acquiesces in, files a petition or an
answer seeking, or admits (by answer, default or otherwise) the material
allegations of a petition filed against it seeking the appointment of a trustee,
receiver, liquidator or assignee in bankruptcy or insolvency of itself or of all
or a substantial portion of its assets, or a reorganization, arrangement with
creditors or other remedy, relief or adjudication available to or against a
bankrupt, insolvent or debtor under any bankruptcy or insolvency law or any law
relating to relief of debtors; or (iii) admits in writing its inability to pay
its debts generally as they become due; or
c. If a decree, order or judgment shall have been entered adjudging
the company a bankrupt or insolvent, or appointing a receiver, liquidator,
trustee or assignee in bankruptcy or insolvency for it or for all or a
substantial portion of its assets or approving a petition seeking a
reorganization, arrangement or the winding-up or liquidation of its affairs on
the grounds of insolvency or nonpayment of debts, and such decree, order or
judgment shall remain undischarged and unstayed for a period of sixty (60) days;
or if any substantial part of the property of the Company is sequestered or
attached and shall not be returned to the possession of the Company or such
subsidiary or released from such attachment within sixty (60) days.
d. A material breach of the terms of this Note which goes uncured for
a period of thirty (30) days from written notice from Univision to the Company;
provided that if such breach is not curable within thirty (30) days, the Company
shall have such longer period as may be reasonably necessary to cure such breach
so long as it diligently continues to pursue such cure.
-6-
<PAGE>
7. General.
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a. Successors and Assigns. Subject to the restrictions on
----------------------
assignment/transfer contained in Section 5 of this Note, this Note, and the
obligations and rights of the Company hereunder, shall be binding upon and inure
to the benefit of the Company, Univision and their respective heirs, successors
and assigns.
b. Recourse. This Note is unsecured. Recourse under this Note shall
--------
be to the general unsecured assets of the Company only and in no event to the
Managing Members, officers, or Members of the Company.
c. Changes. Changes in or additions to this Note may be made or
-------
compliance with any term, covenant, agreement, condition or provision set forth
herein may be omitted or waived (either generally or in a particular instance
and either retroactively or prospectively), upon written consent of the Company
and Univision.
d. Currency. All payments shall be made in such coin or currency of
--------
the United States of America as at the time of payment shall be legal tender
therein for the payment of public and private debts.
e. Notices. All notices, requests, consents and demands shall be
-------
made in writing and shall be mailed postage prepaid, or delivered by hand at the
addresses set forth below or to such other address as may be furnished in
writing to the other party hereto:
Univision:
Univision Communications Inc.
1999 Avenue of the Stars, Suite 3050
Los Angeles, California 90067
Telephone No.: (310) 556-7600
The Company:
Entravision Communications Company, L.L.C.
Attention: Walter F. Ulloa and Philip C. Wilkinson
2425 Olympic Boulevard, Suite 6000 West
Santa Monica, California 90404
Telephone No.: (310) 447-3870
Facsimile No.: (310) 447-3899
f. Saturdays, Sundays, Holidays. If any date that may at any time be
----------------------------
specified in this Note as a date for the making of any payment of principal or
interest under this Note shall fall on Saturday, Sunday or on a day which in the
State of California shall be a legal holiday, then the date for the making of
that payment shall be the next subsequent day which is not a Saturday, Sunday or
legal holiday.
-7-
<PAGE>
g. Governing Law. This Note shall be construed and enforced in
-------------
accordance with, and the rights of the parties shall be governed by, the laws of
the State of California, without giving effect to any conflicts of laws
principles.
h. Definitions. Any capitalized, but undefined, terms used in this
-----------
Note shall have the same meaning set forth in the Operating Agreement.
[Remainder of Page Intentionally Left Blank]
-8-
<PAGE>
IN WITNESS WHEREOF, this Note has been executed and delivered on the date
first above written by the Managing Members of the Company.
ENTRAVISION COMMUNICATIONS COMPANY, L.L.C.,
a Delaware limited liability company
By:/s/ Walter F. Ulloa
-------------------
Walter F. Ulloa, Chairman, Chief Executive Officer and
Managing Member
By:/s/ Philip C. Wilkinson
-----------------------
Philip C. Wilkinson, President, Chief Operating Officer
and Managing Member
Acknowledged and Agreed:
UNIVISION COMMUNICATIONS INC.
By:/s/ Andrew W. Hobson
--------------------
Name: Andrew W. Hobson
----------------
Title: EVP
---
[Signature Page to First Amended and Restated
Non-Negotiable Subordinated Note]
-9-
<PAGE>
EXHIBIT 10.14
AMENDED AND RESTATED
--------------------
SUBORDINATED NOTE PURCHASE AND OPTION AGREEMENT
-----------------------------------------------
THIS AMENDED AND RESTATED SUBORDINATED NOTE PURCHASE AND OPTION
AGREEMENT (this "Agreement") is made and entered as of December 30, 1996, by and
among Univision Communications Inc., a Delaware corporation ("Univision"),
Entravision Communications Company, L.L.C., a Delaware limited liability company
(the "Company"), KSMS-TV, Inc. ("KSMS"), a Delaware corporation, Tierra Alta
Broadcasting, Inc. ("Tierra Alta"), a Delaware corporation, Cabrillo
Broadcasting Corporation ("Cabrillo"), a California corporation, Golden Hills
Broadcasting Corporation ("Golden"), a Delaware corporation, Las Tres Palmas
Corporation ("Las Tres"), a Delaware corporation, Entravision Merger Corp.,
("Merger Corp."), a Delaware corporation (each of the Company, KSMS, Tierra
Alta, Cabrillo, Golden, Las Tres and Merger Corp. a "Borrower", and
collectively, the "Borrowers"), and Walter F. Ulloa, an individual and Philip C.
Wilkinson, an individual, as the managing members (the "Managing Members"), and
amends and restates in its entirety the SUBORDINATED NOTE PURCHASE AND OPTION
AGREEMENT made and entered as of December 30, 1996 (the "Effective Date") among
the parties hereto with reference to the following:
RECITALS
--------
A. Univision has made a Loan to the Company in the principal amount
of $3,000,000 which is evidenced by a Subordinated Promissory Note due August
19, 1997 (the "Prior Note").
B. Univision is to purchase a Non-Negotiable Subordinated Note from
the Company in the principal amount of $10,000,000.
C. The Company desires to sell the Non-Negotiable Subordinated Note
to Univision and grant to Univision an option to acquire an equity interest in
the Company.
D. In order to induce Univision to purchase the Non-Negotiable
Subordinated Note, the Borrowers wish to make certain representations and
warranties to Univision and agree to perform covenants for the benefit of
Univision.
E. In order to induce Univision to purchase the Subordinated Note,
the Managing Members of the Company wish to grant to Univision an option to
acquire an equity interest in the Borrowers.
AGREEMENT
---------
In consideration of the promises, the mutual covenants and the
agreements hereinafter set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
covenant and agree as follows:
<PAGE>
1. Purchase of Subordinated Note.
-----------------------------
1.1 Authorization of Subordinated Note. Pursuant to the terms
----------------------------------
and conditions contained herein, the Company has authorized the issuance to
Univision of a Non-Negotiable Subordinated Note in the form of Exhibit A
attached hereto (the "Subordinated Note").
1.2 Purchase and Sale.
-----------------
(a) Subject to the terms and conditions hereof, the Company
hereby issues and sells to Univision and Univision hereby purchases from the
Company, the Subordinated Note for the Purchase Price described in Section
1.2(b).
(b) The aggregate purchase price of the Subordinated Note
shall equal $7,000,000 and the delivery to the Company for cancellation of the
Prior Note (the "Purchase Price").
2. Representations and Warranties. The Subordinated Note has
------------------------------
been authorized by all necessary actions on the part of the Company, and is the
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms. This Agreement has been authorized by the Company and
each of the Borrowers and is a valid and binding obligation of the Company, each
of the Borrowers and each of the Managing Members enforceable against such party
in accordance with its terms. As inducement for Univision entering into this
agreement and purchasing the Subordinated Note each of the Company and the
Borrowers hereby restates and adopt in favor of and for the benefit of Univision
the representations and warranties set forth in Section 3 of the Credit
Agreement among Union Bank of California, as agent for the Banks who are parties
thereto, the Company and the Borrowers dated as of the date hereof, a copy of
which is attached hereto as Exhibit B (the "Credit Agreement") and agrees that,
until the closing of Reorganization (as hereinafter defined) to not engage in
any of the acts or activities described in Section 3 of the Subordinated Note
without the consent of Univision in accordance with the terms thereof.
3. Univision Option/Anti-Dilution Protection.
-----------------------------------------
For the purposes of this Section 3 capitalized terms not defined
herein shall have the meaning given to such terms in the Amended and Restated
Operating Agreement of the Company, a copy of which is attached hereto as
Exhibit C (the "Operating Agreement").
3.1 Univision Option. Univision is hereby granted a right to
----------------
acquire an equity interest in the Company (as calculated in Section 3.2 below)
through the acquisition of Class A Non-Managing Membership Units for a total
exercise price of Ten Million Dollars ($10,000,000) reduced but not below $1, by
the payment to Univision of any amounts distributed pursuant to Section 3(a)(iv)
of the Subordinated Note as a Prepayment Amount (as defined in the Subordinated
Note) (the "Univision Option"). The Univision Option is exercisable only in its
entirety. In light of the unique relationship between Univision and the Company
and the special nature of the Univision Option, the Univision Option is not
assignable to any third party without
2
<PAGE>
the consent of the Company, which the Company may withhold in its sole
unqualified discretion. The Univision Option is exercisable for a period of
twenty-five (25) years from the date hereof (i) at the sole option of Univision
or (ii) automatically and mandatorily at any time upon a change of FCC's rules
that would permit such conversion without attribution to Univision.
Notwithstanding anything to the contrary herein, Univision shall not exercise
any of its rights under this provision should such action constitute or result
in a change of control of a broadcast station licensee, if such change of
control would require, under then existing law, the prior approval of the
Federal Communications Commission. In such event, Univision shall only exercise
its rights upon the prior consent of the Federal Communications Commission to a
request filed with it for transfer of control of the broadcast station licensee.
The Option is exercisable only in its entirety, unless the then applicable FCC
attribution rules and regulations permit Univision to acquire a lesser percent.
Univision shall be permitted to credit the principal sum due under the
Subordinated Note to pay the Purchase Price upon Univision's exercise of the
Univision Option. This Univision Option shall expire upon the exercise of the
Borrower Option, as defined below.
3.2 Option Percentage. Upon exercise, the Univision Option shall
-----------------
entitle Univision to acquire 25.55% of the sum of (i) the Class A and Class C
Non-Managing Membership Units currently issued plus (ii) the Class A and Class C
Non-Managing Membership Units to be issued upon the Reorganization (as defined
below) plus (iii) the Class A Non-Managing Membership Units to be issued to
Univision on exercise of the Univision Option (the "Option Percentage"),
including those to be issued to Valley Channel in accordance with the Operating
Agreement. Univision's Option Percentage shall also proportionately increase
upon purchase by the Company of any Class A Non-Managing Membership Units
outstanding on the Effective Date or the non-issuance of any Class A Non-
Managing Membership Units contemplated to be issued in the Reorganization which
are not so issued. There shall be no adjustment related to the option to
acquire 11,965 units held by Dr. Armando Navarro.
3.3 Anti-Dilution Protection. Univision shall have a right of first
------------------------
refusal to purchase any new issuance of Membership Units in the Company pursuant
to Section 7(c)(iii) of the Operating Agreement in order to maintain its
percentage interest in profits, losses and rights; except for the issuance of
non-voting Class D Membership Units to certain managers and employees
representing up to a five percent (5%) interest in profits and losses of the
Company on a fully diluted basis. Any such additional issuances of equity shall
be evidenced by Class B Membership Units pursuant to Section 7(c)(iii) of the
Operating Agreement. In connection with any such additional issuance, so long
as the Univision Option is outstanding, Univision shall have the right to make
an additional long term loan to the Company (the "Additional Loan") in a
Proportionate Amount (as hereinafter defined), which Additional Loan shall be on
the same terms and conditions as the Subordinated Note and shall be accompanied
by additional options to acquire Class B Membership Units (the "Additional
Option"), in an amount sufficient to allow Univision to maintain an ownership
interest in the Company equal to the then Option Percentage. For purposes of
this Section 3.3, "Proportionate Amount" means a principal amount determined by
multiplying (i) the amount to be raised by the Company by (ii) Univision's then
existing Option Percentage. To the extent that Univision exercises its right to
make an Additional Loan, the amount to be raised from the sale of Class B
Membership Units shall be decreased by the amount of such Additional Loan. Such
rights of first refusal and right to make Additional Loans shall terminate upon
a public offering of the Company.
3
<PAGE>
3.4 Manner of Exercising Option. Upon the exercise of the Univision
---------------------------
Option pursuant to Section 3.1 above, Univision shall take the following
actions:
(a) Execute and deliver to the Company an agreement agreeing to
be bound by all of the terms and provisions of the then Operating Agreement of
the Company in a form reasonably satisfactory to the Company's attorneys;
(b) Furnish to the Company appropriate documentation that the
person or persons exercising the Univision Option on behalf of Univision have
the authority to exercise the Univision Option; and
(c) Deliver the original of the Note marked "cancelled" and "paid
in full."
As soon thereafter as practical, the Company shall mail or deliver to Univision,
if the Company's membership units are then certificated, a certificate
representing the Membership Units so purchased by Univision.
4. Borrower Option.
---------------
4.1 Borrower Option. As inducement for Univision entering into this
---------------
agreement and purchasing the Subordinated Note each of the Managing Members
hereby grant to Univision the right to purchase the same percentage of the
Capital Stock of each of the Borrowers as Univision may from time to time be
entitled to purchase from the Company pursuant to Section 3 above (the "Borrower
Option"). The Borrower Option is exercisable only in its entirety. In light of
the unique relationship between Univision and the Company and the special nature
of the Borrower Option, the Borrower Option is not assignable to any third party
without the consent of the Company, which the Company may withhold in its sole
unqualified discretion. The Borrower Option is exercisable for a period of
twenty-five (25) years from the Effective Date at the sole option of Univision
and shall expire upon the earlier to occur of (i) the consummation of the
transactions contemplated by the Amended and Restated Formation Agreement among
the Company and the Borrowers dated as of December 30, 1996 (the
"Reorganization") or (ii) the exercise of the Univision Option contained in
Section 3 hereof.
4.2 Manner of Exercising Borrower Option. Upon the exercise of the
------------------------------------
Borrower Option pursuant to Section 4.1 above, Univision shall take the
following actions:
(a) Furnish to the Company appropriate documentation that the
person or persons exercising the Borrower Option on behalf of Univision have the
authority to exercise the Borrower Option; and
(b) Deliver the original of the Subordinated Note.
4
<PAGE>
As soon thereafter as practical, the Managing Members shall deliver to Univision
securities representing the interests so purchased by Univision.
Notwithstanding the generality of the foregoing, Univision agrees to
cooperate with the Managing Members and the Borrowers in replacing the Borrower
Option with options directly from the Borrowers for newly issued securities of
Borrowers which would give Univision the same percentage interest in each of the
Borrowers after giving effect to the exercise of such options as Univision would
have if it exercised its option from the Borrower Option.
5. Miscellaneous.
-------------
5.1 Further Assurances. Each party agrees to cooperate fully with
------------------
the other parties and to execute such further instruments, documents and
agreements and to give such further written assurances, as may be reasonably
requested by any other party to evidence and reflect the transactions described
herein and contemplated hereby, and to carry into effect the intents and
purposes of this Agreement.
5.2 Rights Cumulative. Each and all of the various rights, powers
-----------------
and remedies of the parties hereto shall be considered to be cumulative with and
in addition to any other rights, powers and remedies which such parties may have
at law or in equity in the event of the breach of any of the terms of this
Agreement. The exercise or partial exercise of any right, power or remedy shall
neither constitute the exclusive election thereof nor the waiver of any other
right, power or remedy available to such party.
5.3 Notices. All Notices, demands and requests required by this
-------
Agreement shall be in writing and shall be deemed to have been given for all
purposes (i) upon personal delivery, (ii) one day after being sent, when sent by
professional overnight courier service from and to locations within the
continental United States, (iii) five days after posting when sent by registered
or certified mail, or (iv) on the date of transmission when sent by telegram,
telegraph, telex or facsimile transmission, addressed to the parties hereto at
the addresses set forth on the signature pages hereto. Any party hereto may
from time to time by notice in writing served upon the others as provided
herein, designate a different mailing address or a different person to which
such notices or demands are thereafter to be address or delivered.
5.4 Captions. Captions are provided herein for convenience only and
--------
they are not to serve as a basis for interpretation or construction of this
Agreement, nor as evidence of the intention of the parties hereto.
5.5 Severability. If any clause, provision or section of this
------------
Agreement is ruled invalid by any court of competent jurisdiction, the
invalidity of such clause, provision or section shall not affect any of the
remaining provisions hereof. The parties further agree to replace such void or
unenforceable provisions of this Agreement with valid and enforceable provisions
which will achieve, to the extent possible, the economic, business and other
purposes of the void or unenforceable provisions.
5
<PAGE>
5.6 Governing Law. This Agreement shall be governed, interpreted,
-------------
construed and enforced in accordance with the laws of the State of California.
5.7 Entire Agreement. This writing is the complete and exclusive
----------------
statement of the agreement between the parties with respect to the transactions
contemplated hereby and supersedes any prior proposal, agreement or
communication relating to the subject matter of this Agreement, and may not be
modified except by writing signed by all of the parties hereto.
5.8 Waiver of Breach. The failure of any party hereto at any time to
----------------
require performance by the other shall in no way affect their right thereafter
to enforce the same, nor shall the waiver by either party hereto of any breach
of any provision(s) hereof be taken or held to be a waiver of any succeeding
breach or as a waiver of the provision itself.
5.9 Successors and Assigns. Except as otherwise provided herein, the
----------------------
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
Except as provided in Section 3.1 herein and above, which shall be controlling,
Univision may transfer or assign its rights and obligations hereunder.
5.10 Attorneys' Fees. If any action is brought to enforce the terms
---------------
of this Agreement, the prevailing party shall be entitled to reasonable
attorneys' fees, costs, and disbursements in addition to any other relief to
which the party may be entitled.
5.11 Survival. Except as otherwise provided in this Agreement, none
--------
of the terms, provisions, agreements or representations contained in this
Agreement shall survive the termination of this Agreement.
5.12 Counterparts. This Agreement may be executed simultaneously in
------------
multiple counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
6
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the Effective Date and, as applicable in their respective
corporate names by their duly authorized officers.
UNIVISION COMMUNICATIONS INC.,
a Delaware corporation
By: /s/ Andrew W. Hobson
Name:___________________________
Title:__________________________
________________________________
________________________________
ENTRAVISION COMMUNICATIONS
COMPANY, L.L.C.,
a Delaware limited liability company
By: /s/ Walter F. Ulloa /s/ Philip C. Wilkinson
Name:___________________________
Title:__________________________
________________________________
________________________________
BORROWERS
KSMS-TV, INC.
By: /s/ Walter F. Ulloa
Name: __________________________
Title: _________________________
11900 Olympic Boulevard, Suite 590
Los Angeles, California 90064
Fax No.: (310) 979-8804
TIERRA ALTA BROADCASTING, INC.
By: /s/ Walter F. Ulloa
Name: __________________________
Title: _________________________
22 Commerce Center Way
Henderson, Nevada 89015
Fax No.: (702) _____________
7
<PAGE>
CABRILLO BROADCASTING
CORPORATION
By: /s/ Philip C. Wilkinson
Name: ____________________________________
Title: ___________________________________
KBNT-TV, Channel 19
5764 Pacific Center Boulevard, Suite 110
San Diego, California 92121
Fax No.: (619) 597-1909
GOLDEN HILLS BROADCASTING
CORPORATION
By: /s/ Walter F. Ulloa
Name: ____________________________________
Title: ___________________________________
KCEC
777 Grant Street, Suite 110
Denver, Colorado 80203
Fax No.: (303) 832-3410
LAS TRES PALMAS CORPORATION
By: /s/ Walter F. Ulloa
Name: ____________________________________
Title: ___________________________________
KVER-TV
41601 Corporate Way
Palm Desert, California 92260-1904
Fax No.: (619) 341-0951
MANAGING MEMBERS
WALTER E. ULLOA
/s/ Walter F. Ulloa
PHILIP C. WILKINSON
/s/ Philip C. Wilkinson
8
<PAGE>
EXHIBITS
Exhibit A Non-Negotiable Subordinated Note and Option Agreement
Exhibit B Credit Agreement
Exhibit C Operating Agreement
The registrant hereby agrees to furnish a copy of any omitted schedule or
exhibit upon request.
9
<PAGE>
EXHIBIT 10.15
FIRST AMENDMENT TO
AMENDED AND RESTATED
SUBORDINATED NOTE PURCHASE AND OPTION AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED SUBORDINATED NOTE
PURCHASE AND OPTION AGREEMENT (this "Amendment") is made and entered as of
March 31, 1999 (the "Effective Date"), by and among Univision Communications
Inc., a Delaware corporation ("Univision"), Entravision Communications Company,
L.L.C., a Delaware limited liability company (the "Company"), KSMS-TV, Inc.
("KSMS"), a Delaware corporation, Tierra Alta Broadcasting, Inc. ("Tierra
Alta"), a Delaware corporation, Cabrillo Broadcasting Corporation ("Cabrillo"),
a California corporation, Golden Hills Broadcasting Corporation ("Golden"), a
Delaware corporation, Las Tres Palmas Corporation ("Las Tres"), a Delaware
corporation, Valley Channel 48, Inc., a Texas corporation ("Valley Channel") and
successor-in-interest by merger to Entravision Merger Corp. (each of the
Company, KSMS, Tierra Alta, Cabrillo, Golden, Las Tres and Valley Channel a
"Borrower", and collectively, the "Borrowers"), and Walter F. Ulloa, an
individual and Philip C. Wilkinson, an individual, as the managing members (the
"Managing Members"), and amends the AMENDED AND RESTATED SUBORDINATED NOTE
PURCHASE AND OPTION AGREEMENT made and entered as of December 30, 1996 (the
"Subordinated Note Purchase Agreement") among the parties hereto with reference
to the following:
RECITALS
--------
A. Univision has made a Loan to the Company in the principal amount
of $3,000,000 which is evidenced by a Subordinated Promissory Note due August
19, 1997.
B. Univision has purchased a Non-Negotiable Subordinated Note from
the Company in the principal amount of $10,000,000.
C. The Company has sold the Non-Negotiable Subordinated Note to
Univision and has granted to Univision an option to acquire 25.55% fully diluted
ownership interest in the Company.
D. Univision Television Group, Inc. ("UTG"), an indirect wholly owned
subsidiary of Univision, KLUZ License Partnership ("License Partnership") and
the Company have entered into an Asset Purchase Agreement pursuant to which UTG
and License Partnership have agreed to sell to the Company certain assets used
in connection with the operation of the television broadcast station KLUZ (TV),
Channel 41 in Albuquerque, New Mexico.
E. In partial consideration of the Asset Purchase Agreement, the
Managing Members of the Company hereby grant to Univision an option to acquire
an additional 2% fully diluted ownership interest in the Company.
<PAGE>
AGREEMENT
---------
In consideration of the promises, the mutual covenants and the
agreements hereinafter set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
covenant and agree as follows:
Section 1. AMENDMENTS TO THE SUBORDINATED NOTE PURCHASE AGREEMENT
Section 3.2 of the Subordinated Note Purchase Agreement is hereby
deleted and a new Section 3.2 is substituted therefor reading in its entirety as
follows:
"3.2 Option Percentage. Upon exercise, the Univision Option
-----------------
shall entitle Univision to acquire [27.55%] of the sum of (i) the Class A
and Class C Non-Managing Membership Units currently issued plus (ii) the
Class A and Class C Non-Managing Membership Units to be issued upon the
Reorganization (as defined below) plus (iii) the Class A Non-Managing
Membership Units to be issued to Univision on exercise of the Univision
Option (the "Option Percentage"), including those to be issued to Valley
Channel in accordance with the Operating Agreement. Univision's Option
Percentage shall also proportionately increase upon purchase by the Company
of any Class A Non-Managing Membership Units outstanding on the Effective
Date or the non-issuance of any Class A Non-Managing Membership Units
contemplated to be issued in the Reorganization which are not so issued.
There shall be no adjustment related to the option to acquire 11,965 units
held by Dr. Armando Navarro."
Section 2. CONDITIONS TO EFFECTIVENESS
Section 1 of this Amendment shall become effective only upon the
satisfaction of all of the following conditions precedent:
A. On or before the Effective Date, the Company and Univision shall
deliver to one another, executed copies of this Amendment.
B. On or before the Effective Date, all corporate and other
proceedings taken or to be taken in connection with the transactions
contemplated hereby shall be completed by the parties hereto.
Section 3. REPRESENTATIONS AND WARRANTIES
The Subordinated Note Purchase Agreement as amended by this Amendment
(the "Amended Agreement") has been authorized by the Company and each of the
Borrowers and is a valid and binding obligation of the Company, each of the
Borrowers and each of the Managing Members enforceable against such party in
accordance with its terms.
2
<PAGE>
Section 4. MISCELLANEOUS
A. On and after the Effective Date, each reference in the Subordinated
Note Purchase Agreement to "this Agreement", "hereunder", "hereof", "herein" or
words of like import referring to the Subordinated Note Purchase Agreement,
shall mean and be a reference to the Amended Agreement.
B. Except as specifically amended by this Amendment, the Subordinated
Note Purchase Agreement shall remain in full force and effect and are hereby
ratified and confirmed.
C. Without limiting the generality of the provisions in the
Subordinated Note Purchase Agreement, and nothing in this Amendment shall be
deemed to constitute a waiver of any other provision of, or operate as a waiver
of any right, power or remedy of Univision or the Company under any other
provision of Subordinated the Note Purchase Agreement.
3
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed as of the Effective Date and, as applicable in their respective
corporate names by their duly authorized officers.
UNIVISION COMMUNICATIONS INC.,
a Delaware corporation
By:/s/ Robert V. Cahill
Name: Robert V. Cahill
Title: Secretary/V.P.
________________________________
________________________________
ENTRAVISION COMMUNICATIONS
COMPANY, L.L.C.,
a Delaware limited liability company
By: /s/ Walter F. Ulloa
Walter F. Ulloa, Managing Member
By: /s/ Philip Wilkinson
Philip Wilkinson, Managing Member
11900 Olympic Boulevard, Suite 590
Los Angeles, California 90064
Fax No.: (310) 979-8804
BORROWERS
KSMS-TV, INC.
By: /s/ Walter F. Ulloa /s/ Philip C. Wilkinson
Name: Walter F. Ulloa
Title: President
11900 Olympic Boulevard, Suite 590
Los Angeles, California 90064
Fax No.: (310) 979-8804
S-1
<PAGE>
TIERRA ALTA BROADCASTING, INC.
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: Vice President
22 Commerce Center Way
Henderson, Nevada 89015
Fax No.: (702) _____________
CABRILLO BROADCASTING
CORPORATION
By: /s/ Philip Wilkinson
Name: Philip C. Wilkinson
Title: President
KBNT-TV, Channel 19
5764 Pacific Center Boulevard, Suite 110
San Diego, California 92121
Fax No.: (619) 597-1909
GOLDEN HILLS BROADCASTING
CORPORATION
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: President
KCEC
777 Grant Street, Suite 110
Denver, Colorado 80203
Fax No.: (303) 832-3410
LAS TRES PALMAS CORPORATION
By: /s/ Walter F. Ulloa
Name: Walter F. Ulloa
Title: President
KVER-TV
41601 Corporate Way
Palm Desert, California 92260-1904
Fax No.: (619) 341-0951
S-2
<PAGE>
MANAGING MEMBERS
WALTER E. ULLOA
/s/ Walter F. Ulloa
PHILIP C. WILKINSON
/s/ Philip Wilkinson
S-3
<PAGE>
EXHIBIT 10.16
SECOND AMENDMENT
TO
AMENDED AND RESTATED
SUBORDINATED NOTE PURCHASE AND OPTION AGREEMENT
-----------------------------------------------
This Second Amendment to Amended and Restated Subordinated Note Purchase
and Option Agreement (the "Second Amendment") is dated March 2, 2000 by and
among Univision Communications Inc., a Delaware corporation ("Univision"),
Entravision Communications Company, L.L.C., a Delaware limited liability company
(the "Company"), KSMS-TV, Inc., a Delaware corporation, Tierra Alta
Broadcasting, Inc., a Delaware corporation, Cabrillo Broadcasting Corporation, a
California corporation, Golden Hills Broadcasting Corporation, a Delaware
corporation, Las Tres Palmas Corporation, a Delaware corporation, Valley Channel
48, Inc., a Texas corporation and successor-in-interest to Entravision Merger
Corp., Walter F. Ulloa, an individual, and Philip C. Wilkinson, an individual,
with respect to the following facts:
WHEREAS, the parties hereto have previously entered into that certain
Amended and Restated Subordinated Note Purchase and Option Agreement dated as of
December 30, 1996 (the "Original Agreement"), pursuant to which, among other
things, Univision was granted the Univision Option to acquire an equity interest
in the Company (adjusted to 25.55%) for an aggregate exercise price of
$10,000,000.
WHEREAS, the parties hereto have previously entered into that certain First
Amendment to Amended and Restated Subordinated Note Purchase and Option
Agreement dated as of March 31, 1999 (the "First Amendment"), pursuant to which,
among other things, the Univision Option was increased to an option to acquire a
27.90% equity interest in the Company for an aggregate exercise price of
$10,000,000.
WHEREAS, in connection with the Original Agreement, the Company has
previously executed that certain Non-Negotiable Subordinated Note dated December
30, 1996 in the principal amount of $10,000,000 in favor of Univision (the
"Original Note").
WHEREAS, Univision and the Company are entering into that certain First
Amended and Restated Non-Negotiable Promissory Note of even date herewith, in
order to, among other things, increase the principal amount of the Original Note
by $110,000,000, from $10,000,000 to $120,000,000.
WHEREAS, the parties hereto now desire to amend the Original Agreement, as
amended by the First Amendment, as set forth herein in order to, among other
things, increase the percentage of the Univision Option to 40% (as computed in
Section 3 of this Second Amendment).
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and for other good and valuable consideration, the receipt and sufficiency of
which are acknowledged by each signatory hereto, it is agreed as follows:
<PAGE>
1. The reference in the Section 3 of the Original Agreement to the
defined term "Operating Agreement" shall refer to the First Amended and Restated
Operating Agreement of the Company dated effective December 30, 1996, as amended
through the date hereof.
2. The first sentence of Section 3.1 of the Original Agreement shall be
amended and restated in its entirety to read as follows:
"Univision is hereby granted a right to acquire an equity interest in
the Company (as calculated in Section 3.2 below) through the acquisition of
Class A Non-Managing Membership Units for a total exercise price of One Hundred
Twenty Million Dollars ($120,000,000) reduced but not below $1, by the payment
to Univision of any amounts distributed pursuant to Section 3(a)(iv) of the
Subordinated Note as a Prepayment Amount (as defined in the Subordinated Note)
(the "Univision Option")."
3. The first sentence of Section 3.2 of the Original Agreement shall be
amended and restated in its entirety to read as follows:
"Upon exercise, the Univision Option shall entitle Univision to
acquire 40% of the sum of (i) the Class A, Class C, Class E and Class F Non-
Managing Membership Units currently issued plus (ii) the Class D Units issued or
promised to be issued as of the date hereof (but expressly excluding any future
issuances of Class D Units by the Company up to an aggregate maximum for all
Class D Units equal to five percent (5%) of the fully diluted interests in the
Company assuming the exercise of the Univision Option) plus (iii) the Class A
Non-Managing Membership Units to be issued to Univision on exercise of the
Univision Option (the "Option Percentage"). The parties hereto acknowledge and
agree that the pro forma capitalization table of the Company attached hereto as
Schedule "A" and incorporated herein by this reference is true and correct as of
- ------------
the date hereof."
4. Section 3.4(c) of the Original Agreement is hereby amended and
restated in its entirety to read as follows:
"(c) Deliver the original of the Subordinated Note (and any amendments
thereto) marked "cancelled" and "paid in full.""
5. The parties hereto acknowledge and agree that the address, telephone
number and facsimile number of the Company, each Borrower and each Managing
Member for purposes of Section 5.3 shall be: 2425 Olympic Boulevard, Suite 6000
West, Santa Monica, California 90404, telephone number (310) 447-3870, facsimile
number (310) 447-3899.
6. All capitalized terms used in this Second Amendment and not otherwise
defined shall have the meaning assigned such term in the Original Agreement and
the First Amendment. Except as expressly amended hereby, all other terms and
conditions of the Original Agreement and the First Amendment shall remain in
full force and effect.
-2-
<PAGE>
7. This Second Amendment may be executed in one or more counterparts, all
of which when fully executed and delivered by all parties hereto and taken
together shall constitute a single agreement, binding against each of the
parties. To the maximum extent permitted by law or by any applicable
governmental authority, any document may be signed and transmitted by facsimile
with the same validity as if it were an ink-signed document. Each signatory
below represents and warrants by his or her signature that he or she is duly
authorized (on behalf of the respective entity for which such signatory has
acted) to execute and deliver this instrument and any other document related to
this transaction, thereby fully binding each such respective entity.
[Remainder of Page Intentionally Left Blank]
-3-
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Second Amendment as
of the date first written above.
Univision UNIVISION COMMUNICATIONS INC.,
a Delaware corporation
By: /s/ Andrew W. Hobson
------------------------------------------------------------
Name: Andrew W. Hobson
----------------------------------------------------------
Title: EVP
--------------------------------------------------------
Entravision ENTRAVISION COMMUNICATIONS COMPANY, L.L.C.,
a Delaware limited liability company
By: /s/ Walter F. Ulloa
------------------------------------------------------------
Walter F. Ulloa, Chairman, Chief Executive Officer
and Managing Member
By: /s/ Philip C. Wilkinson
------------------------------------------------------------
Philip C. Wilkinson, President, Chief Operating Officer
and Managing Member
KSMS-TV, INC.,
a Delaware corporation
By: /s/ Walter F. Ulloa
------------------------------------------------------------
Walter F. Ulloa, Chief Executive Officer
TIERRA ALTA BROADCASTING, INC.,
a Delaware corporation
By: /s/ Walter F. Ulloa
------------------------------------------------------------
Walter F. Ulloa, Chief Executive Officer
[Signature Page No. 1 to Second Amendment to
Amended and Restated Subordinated Note Purchase and Option Agreement]
<PAGE>
CABRILLO BROADCASTING CORPORATION,
a California corporation
By: /s/ Philip C. Wilkinson
----------------------------------------------------------
Philip C. Wilkinson, President
GOLDEN HILLS BROADCASTING CORPORATION,
a Delaware corporation
By: /s/ Walter F. Ulloa
----------------------------------------------------------
Walter F. Ulloa, President
LAS TRES PALMAS CORPORATION,
a Delaware corporation
By: /s/ Walter F. Ulloa
----------------------------------------------------------
Walter F. Ulloa, President
VALLEY CHANNEL 48, INC.,
a Texas corporation and successor-in-interest to Entravision
Merger Corp.
By: /s/ Walter F. Ulloa
----------------------------------------------------------
Walter F. Ulloa, Chief Executive Officer
/s/ Walter F. Ulloa
-------------------------------------------------------------
Walter F. Ulloa, an individual
/s/ Philip C. Wilkinson
-------------------------------------------------------------
Philip C. Wilkinson, an individual
[Signature Page No. 2 to Second Amendment to
Amended and Restated Subordinated Note Purchase and Option Agreement]
<PAGE>
Schedule "A" Pro Forma Capitalization Table
The registrant hereby agrees to furnish a copy of any omitted schedule or
exhibit upon request.
<PAGE>
EXHIBIT 10.17
SECURED PROMISSORY NOTE AND PLEDGE AGREEMENT
--------------------------------------------
$360,366.38 October 16, 1996
Los Angeles, California
FOR VALUE RECEIVED, the undersigned Paul A. Zevnik (the "Maker") promises
to pay to the order of Entravision Communications Company, L.L.C., a Delaware
limited liability company (the "Holder"), or order, at 11900 Olympic Boulevard,
Suite 590, Los Angeles, California 90064, or at such other place as may be
designated in writing by the Holder of this Promissory Note and Pledge Agreement
(the "Note and Pledge Agreement"), the principal sum of Three Hundred Sixty
Thousand Three Hundred Sixty-Six and 38/100 Dollars ($360,366.38), together with
interest on the unpaid balance at the rate of 5.625% per annum commencing on the
date first set forth above. Interest payable hereunder shall be calculated on
the basis of a three hundred and sixty-five (365) day year.
Subject to the provisions for acceleration herein, all principal and
interest due hereunder shall be due and payable in one (1) installment of
principal and all accrued interest on October 16, 2001. The foregoing sentence
notwithstanding, in the event that (i) Holder sells all or substantially all of
its assets and elects to liquidate and dissolve in connection with such sale or
(ii) Maker sells all or substantially all of its interest in Holder, then all
outstanding principal and all accrued but unpaid interest at such time shall be
immediately due and payable to Holder.
Maker may prepay, at any time, all or part of the principal balance due
under this Note and Pledge Agreement, without premium or penalty; provided,
however, that with each prepayment, Maker shall also pay the interest accrued on
the principal amount, to and including the date of such prepayment. All
principal and interest due hereunder is payable in lawful money of the United
States of America.
Interest not paid when due shall bear interest at the same rate as unpaid
principal, provided that in no event shall such interest exceed the maximum rate
permitted by law.
This Note and Pledge Agreement and all transactions hereunder shall be
governed by, construed under and enforced in accordance with the laws of the
State of Delaware as applied without reference to the principles of conflicts of
law.
Maker hereby delivers, pledges and grants a first priority security
interest to Holder in 18,029 Class A Units of the Holder (the "Units") and in
all rights or other distributions issued as an addition to, in substitution or
in exchange for, or on account of, the Units (collectively the "Rights"), and
all proceeds of the foregoing, now or hereafter acquired by Maker. Maker hereby
gives Holder the right to file financing statements in the State of California
and the District of
<PAGE>
Columbia and to perform any other action necessary to perfect or protect such
security interest. The Units and the Rights and the proceeds of each of the
foregoing, are hereinafter collectively referred to as the "Collateral."
The security interest pursuant to this Note and Pledge Agreement is given
as security for the full and timely payment, performance and satisfaction of any
and all of Maker's obligations and liabilities owing to Holder pursuant to this
Note and Pledge Agreement, including all interest due under this Note and Pledge
Agreement and extensions, modifications and renewals hereof. All such
obligations and liabilities of Maker are hereafter collectively referred to as
the "Obligations." The Obligations shall include, without limitation, any and
all amounts expended by Holder in accordance with the terms of this Note and
Pledge Agreement, including reasonable attorneys' fees and costs.
Maker hereby appoints Holder as its attorney-in-fact to arrange, at any
time during the existence of, or after the occurrence of, a Default, and
pursuant to the exercise of Holder's remedies under the California Uniform
Commercial Code for the transfer of the Collateral on the books of Entravision
Communications Company, L.L.C., a Delaware limited liability company, to the
name of Holder or to the name of Holder's nominee.
In the event Maker shall become entitled to receive, or shall receive, in
connection with any of the Collateral, (i) any membership unit certificate,
including any certificate representing a membership unit dividend or any
certificate in connection with any increase or reduction of capital,
reclassification, merger, consolidation, sale of assets, combination of
membership unit, membership unit split or spin-off, (ii) any option, warrant or
right, whether as an addition to or in substitution of any of the Collateral, or
otherwise, (iii) any dividend or distribution payable in property, including
securities issued as a dividend on the Collateral, or (iv) any other
distributions of any kind whatsoever, Maker shall accept same as encumbered by
the security interest created hereby, and shall deliver same forthwith to Holder
in the exact form received, including as appropriate, Maker's endorsement of
appropriate membership unit powers duly executed in blank, to be held as a part
of the Collateral, subject to the terms hereof, or, in the case of a cash
dividend payable with respect to the Units, to be applied as a payment of
principal due under this Note and Pledge Agreement; provided, however, that for
so long as no Default (defined below) is in existence and there is no condition
or event in existence which, with notice or lapse of time, or both, would become
a Default, Maker shall have sole voting rights with respect to the Collateral.
Maker warrants and represents to Holder that (a) Maker has power and
authority to enter into this Note and Pledge Agreement and to pledge the Units
for the purposes described herein, (b) Maker is the legal record and beneficial
owner of all of the Units, (c) except as set forth in that certain Pledge
Agreement dated as of December 31, 1996 between Maker and Union Bank of
California, N.A. ("Union Bank") (the "Union Bank Pledge Agreement"), all of the
Units are owned by Maker free of any pledge, mortgage, lien or security interest
of any kind, except as created hereby or other junior liens consented to in
writing by Holder, (d) the execution and delivery by Maker of this Note and
Pledge Agreement, and subject to the Union Bank Pledge
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<PAGE>
Agreement, the performance of its terms, will not result in any violation or
default under the terms of any agreement or instrument, or any law or
governmental rule or regulation applicable to Maker or the Units, including,
without limitation, securities registration, securities disclosure or similar
laws, (e) upon execution and delivery by Maker of this Note and Pledge Agreement
and upon the filing of financing statements in the State of California and the
District of Columbia (which financing statements may be filed only after Union
Bank files its financing statements pursuant to the Union Bank Pledge
Agreement), this Note and Pledge Agreement shall create a valid and perfected
first priority security interest (subject to the rights of Union Bank under the
Union Bank Pledge Agreement) in the Units and the proceeds thereof, subject to
no other prior or subordinate security interest and (f) there are no
restrictions upon the rights or affecting the transfer of any of the Collateral
except for junior liens consented to in writing by Holder and the rights of
Union Bank under the Union Bank Pledge Agreement.
Maker hereby covenants that, until such time as the Obligations have been
fully paid, performed and satisfied: (a) except as set forth in the Union Bank
Pledge Agreement, Maker will not sell, convey or otherwise dispose of any of the
Collateral or any interest therein, or create, incur or permit to exist any
pledge, mortgage, lien, charge, encumbrance or any security interest whatsoever
in or with respect to any of the Collateral, or the proceeds thereof, other than
the security interest created hereby and junior liens consented to in writing by
Holder; (b) Maker will defend Holder's right, title and security interest in and
to the Collateral (subject to the rights of Union Bank under the Union Bank
Pledge Agreement) against the claims of any person or entity; (c) Maker will
promptly deliver to Holder a copy of all written notices or correspondence
received by Maker with respect to the Collateral; and (d) Maker shall, at
Maker's own expense, promptly execute, acknowledge and deliver all such
instruments and take all such actions as Holder from time to time may reasonably
request in order to ensure to Holder the benefits of the lien in and to the
Units intended to be created by this Note and Pledge Agreement.
As used herein, the term "Default" shall mean the occurrence of any one or
more of the following events or conditions: (a) the failure of full and timely
payment, or full and timely performance and satisfaction, whether by
acceleration or otherwise, of any of the Obligations in accordance with their
terms; (b) Maker admits in writing its inability to pay its debts as they become
due or makes a general assignment for the benefit of creditors or files any
petition or action for relief under any bankruptcy, reorganization, insolvency
or moratorium law, or any other law or laws for the relief of, or relating to,
debtors; or (c) an involuntary petition is filed against Maker under any
bankruptcy, reorganization, insolvency or moratorium law, or any other law or
laws for the relief of, or relating to, debtors unless such petition shall be
dismissed or vacated within sixty (60) days of the date thereof.
Upon the occurrence or existence of a Default, Holder shall have, in
addition to any other rights given by law or the rights hereunder (subject to
the rights of Union Bank under the Union Bank Pledge Agreement) (a) the right to
declare immediately due and payable the entire unpaid principal amount of this
Note and Pledge Agreement, together with all interest thereon, plus any other
amounts payable at the time of such declaration pursuant to this Note and Pledge
Agreement,
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<PAGE>
and (b) all of the rights and remedies with respect to the Collateral of a
secured party under the California Uniform Commercial Code. Holder's rights
shall include, without limitation, the right to proceed immediately to have any
or all of the Collateral registered in Holder's name or in the name of a
nominee, to exercise all voting rights with respect to the Collateral and all
other corporate rights, privileges or options pertaining thereto as if Holder
were the absolute owner thereof, and to receive any, and to continue to apply,
all cash dividends against the Obligations. In addition, with respect to the
Collateral, or any part thereof, which shall then be or shall thereafter come
into the possession or custody of Holder, Holder may sell or cause the same to
be sold at any broker's board or at public or private sale, in one or more sales
or lots, at such price as Holder may deem best, and for cash or on credit or for
future delivery, without assumption of any credit risk, and the purchaser of any
or all of the Collateral so sold shall thereafter hold the same absolutely, free
from any claim, encumbrance or right of any kind whatsoever. Unless the
Collateral threatens to decline speedily in value or becomes of a type sold on a
recognized market, Holder will give Maker reasonable notice of the time and
place of any public sale thereof, or of the time after which any private sale or
other intended disposition is to be made. Any sale of the Collateral conducted
in conformity with reasonable commercial practices of banks, insurance companies
or other financial institutions disposing of property similar to the Collateral,
whether conducted solely by Holder or in concert with other creditors of Maker,
shall be deemed to be commercially reasonable. Any requirements of reasonable
notice shall be met if such notice is mailed to Maker, at 1299 Pennsylvania Ave.
N.W., Suite 990, Washington, D.C. 20004, at least ten (10) days before the time
of the sale or disposition. Any other requirement of notice, demand or
advertisement for sale, is, to the extent permitted by law, hereby waived by
Maker. Holder may, in its own name, or in the name of a designee or nominee, buy
the Collateral at any public sale of the Collateral. Maker will pay to Holder
all expenses (including court costs and reasonable attorneys' fees and expenses)
of, or incident to, the enforcement of any of the provisions hereof. In
connection with any sale of Collateral by Holder, Holder shall have the right to
execute any document or form, in its name or the name of Maker, which may be
necessary or desirable in connection with such sale. Upon the occurrence or
existence of any event of Default and all times thereafter, Holder shall be
entitled to receive and retain for its own account any and all dividends at any
time declared upon any of the Collateral.
In view of the fact that federal and state securities laws may impose
certain restrictions on the method by which a sale of the Collateral may be
effected after an event of Default and prohibit or prevent the advertising for
sale of all or any part of the Collateral as required by the California Uniform
Commercial Code, Maker agrees that upon the occurrence or existence of a
Default, Holder may, from time to time, attempt to sell all or any part of the
Collateral by one or more private placements or sales restricting the bidder and
prospective purchasers to those who will represent and agree that they are
purchasing for investment only and not for distribution or resale. In so doing,
Holder may solicit offers to buy the Collateral, or any part of it for cash,
from a limited number of investors deemed by Holder, in its reasonable judgment,
to be respectable parties who might be interested in purchasing the Collateral,
and if Holder solicits such offers from not less than four (4) such investors,
then the acceptance by Holder of the highest offer
-4-
<PAGE>
obtained therefrom shall be deemed to be a commercially reasonable method of
disposition of such Collateral.
The proceeds of any disposition of all or any part of the Collateral, as
provided above, shall be applied as follows: (i) first, to the costs and
expenses incurred in connection therewith or incidental thereto, including
reasonable attorneys' fees and legal expenses; (ii) second, to the satisfaction
of the Obligations; (iii) third, to the payment of any other amounts required by
applicable law; (iv) fourth, to satisfy any amounts owing which are secured by
junior liens consented to in writing by Holder; and (v) fifth, to Maker to the
extent of any surplus remaining.
Upon full payment and performance of all of the Obligations by Maker and
upon payment of all additional costs and expenses provided herein, this Note and
Pledge Agreement shall terminate and Holder shall deliver to Maker, at Maker's
expense, such of the Units as shall not have been sold, or otherwise disposed of
pursuant to this Note and Pledge Agreement.
If an action is instituted for collection of this Note and Pledge
Agreement, the Maker agrees to pay court costs and reasonable attorneys' fees
incurred by the Holder.
This Note and Pledge Agreement may be changed, modified, amended or
terminated only by a written instrument duly executed by Holder and Maker,
except as expressly provided to the contrary herein.
Except as expressly provided herein, Maker of this Promissory Note and
Pledge Agreement waive diligence, presentment, protest and demand and also
notice of protest, demand, dishonor and nonpayment of this Promissory Note and
Pledge Agreement, and expressly agree that this Promissory Note and Pledge
Agreement, or any payment hereunder, may be extended from time to time and
consent to the acceptance of security, if any, or the release of security, if
any, from this Promissory Note and Pledge Agreement, all without in any way
affecting the liability of the Maker and endorsers or guarantors hereof, if any.
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<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Note and Pledge
Agreement to be duly executed, effective the day and year first above written.
"MAKER" /s/ Paul A. Zevnik
----------------------------------
Paul A. Zevnik
ACKNOWLEDGED AND AGREED TO:
Entravision Communications Company, L.L.C.,
a Delaware limited liability company
By:/s/ Walter F. Ulloa
------------------------------------
Print Name:____________________________
Title:_________________________________
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<PAGE>
EXHIBIT 10.24
NETWORK AFFILIATION AGREEMENT
-----------------------------
This Network Affiliation Agreement is entered into this ____ day of
_______________, 2000, by and between [____________________________________] and
UNIVISION NETWORK LIMITED PARTNERSHIP.
WHEREAS, AFFILIATE, as licensee of the Station pursuant to an
authorization issued by the FCC, intends to offer a full time Spanish language
television program service using the facilities of the Station;
WHEREAS, UNIVISION operates the UNIVISION Network, which provides
Spanish language television programming on a national, interconnected basis; and
WHEREAS, AFFILIATE desires to affiliate with the UNIVISION Network,
and to appoint UNIVISION as the Station's exclusive national and regional sales
representative.
NOW, THEREFORE, in consideration of the mutual covenants,
undertakings, agreements, and representations herein contained, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties, it is hereby agreed as follows:
1. Definitions. In computing compliance with time periods specified
-----------
in this Agreement, calendar days shall be utilized rather than business days.
For the purposes of this Agreement, the following terms shall have the following
meanings:
AFFILIATE, first used in the preamble to this Agreement, means
[________________________________________].
Agreement, first used in Section 1 hereof, means the instant
Network Affiliation Agreement.
Authorized Preemption, first used in Section 23(y) below, means a
failure by AFFILIATE to broadcast any UNIVISION Program (i) pursuant to Section
5(a) of this Agreement, (ii) due to force majeure as provided for in Section 11
of this Agreement, or (iii) for which AFFILIATE has obtained the written consent
of UNIVISION.
Commencement Date has the meaning established in Section 2
hereof.
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Commercial Availability, first used in Section 23(q) hereof, means a
unit of time of whatever length available for the broadcast of commercial
advertising announcements, promotional announcements, and/or station
identification announcements.
FCC, first used in the preamble to this Agreement, means the Federal
Communications Commission or any successor agency.
Force Majeure Event, first used in Section 11 hereof, means 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 the control of
UNIVISION or AFFILIATE, as the case may be. Nothwithstanding the foregoing, with
regard to AFFILIATE, Force Majeure Event shall not include Year 2000 Failure.
Local Availability, first used in Section 6(b) hereof, means a
Commercial Availability designated by UNIVISION pursuant to this Agreement for
broadcast of a commercial advertisement by the Station and not by other
UNIVISION affiliates on an interconnected or delayed telecast basis.
Local Programming first used in Section 5(b) hereof, means
collectively, all local and syndicated programs, public service announcements,
promotional announcements, station identifications and other interstitial
material which are originated and broadcast by Station.
Local Programming Window, first used in Section 4(b) hereof, means a
time period indicated on the attached Schedule A as being occupied by Local
Programming.
Local Sale, first used in Section 6(f) hereof, means a Sale of
advertising for broadcast on AFFILIATE's Station, and not for broadcast on the
UNIVISION Network generally, made by the local sales staff of AFFILIATE.
National Sale, first used in Section 6(f) hereof, means a Sale of
advertising for broadcast on AFFILIATE's Station, and not for broadcast on the
UNIVISION Network generally, made by UNIVISION as the national and regional
sales representative of AFFILIATE, and any other Sale which is of a type
normally considered within the broadcast industry to be a national or a regional
advertising sale.
Net Allocated Network Sales, first used in Section 7(c) hereof, means
that portion of all Net Network Sales computed by multiplying the total amount
of Net Network Sales by the Net Allocated Network Sales Percentage.
Net Allocated Network Sales Percentage, first used in Section 24(m)
hereof, means [___]%.
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<PAGE>
Net National Sale, first used in Section 7(a) hereof, means a National
Sale of advertising net only of agency commission.
Net Network Sale, first used in Section 6(h) hereof, means a Network
Sale of advertising net only of agency commission.
Network Availability, first used in Section 4(b)(ii) hereof, means a
Commercial Availability designated by UNIVISION pursuant to this Agreement for
the simultaneous broadcast of a commercial announcement by multiple UNIVISION
affiliates on an interconnected basis, including delayed telecasts pursuant to
Section 10 of this Agreement.
Network Exclusivity Zone, first used in Section 4(k) hereof, means the
applicable area as set forth in by Section 76.92 through 76.97 of the FCC's
rules.
Network Sale, first used in Section 6(e) hereof, means a Sale of
advertising for broadcast on the UNIVISION Network.
Network Time, first used in Section 6 hereof, means the entire clock
hour or half-hour during which a UNIVISION Program is broadcast including
Station breaks and adjacencies. (E.g., for a one-hour UNIVISION Program
broadcast during the 7:00 and 8:00 time period, all commercials sold between
7:00 and 8:00 are within Network Time, even if the program actually began a
minute or two after 7:00 and ended a minute or two before 8:00.)
Non-Network Programming, first used in Section 8 hereof, means
programs, program series, and programming of any nature or kind, including, but
not limited to, special sports programs and special events programs, such as
political conventions, election coverage, presidential inaugurations, parades,
and pageants, and other programs and program series, which are not then
regularly scheduled by UNIVISION for broadcast on an interconnected basis by
affiliates of the UNIVISION Network during those hours that then comprise the
UNIVISION Network Programming Schedule.
Sale, first used in Section 6(f) hereof, means a sale of advertising.
Station, first used in the preamble to this Agreement, means
television Station [_________, _________,___________].
Terms Sheet, first used in Section 8 hereof, means a writing setting
forth the principal terms and conditions on which UNIVISION offers a non-network
program or program series to AFFILIATE, including, but not limited to, the time
permitted for acceptance of said offer by AFFILIATE.
Unauthorized Preemption, first used in Section 9 hereof, means any
preemption or failure to broadcast any UNIVISION Program, in whole or in part,
other than an Authorized Preemption.
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<PAGE>
UNIVISION, first used in the preamble to this Agreement, means
UNIVISION NETWORK LIMITED PARTNERSHIP.
UNIVISION Network, first used in the preamble to this Agreement, means
a program service distributed by or on behalf of UNIVISION on an interconnected
basis to affiliates for broadcast to the public.
UNIVISION Network Program Schedule, first used in Section 4(b) hereof,
means the programming provided by UNIVISION to its affiliates on a regular basis
for broadcast during a UNIVISION Network Time Period, including, but not limited
to, all UNIVISION Network Programming, commercial announcements, UNIVISION
identification announcements, UNIVISION promotional announcements, public
service announcements, credits and cross promotional announcements for any of
UNIVISION's other networks, or any other network or program service owned or
operated by, or under common ownership or control with, UNIVISION, including but
not limited to cable programming networks such as Galavision and Telehit, and
other interstitial material distributed by UNIVISION to AFFILIATE.
UNIVISION Network Programming, first used in Section 1 hereof, means,
collectively, all UNIVISION Programs, public service announcements, promotional
announcements, network identifications and other interstitial material which are
distributed to affiliates of the UNIVISION Network.
UNIVISION Network Time Period, first used in Section 24(bb) hereof,
means the time periods indicated on the attached Schedule A as being occupied by
Univision Network Programming.
UNIVISION Program, first used in Section 4 hereof, means a television
program distributed by or on behalf of UNIVISION for broadcast on an
interconnected basis by affiliates of the UNIVISION Network.
2. Programming. UNIVISION shall deliver to Station for free over the air
-----------
television broadcasting on Station, all UNIVISION Network Programming which
UNIVISION makes available to be broadcast on the UNIVISION Network on a
television network basis in the community in which the Station is located,
except as hereinafter provided. Subject to the limitations set forth in this
Agreement, AFFILIATE is hereby authorized to broadcast during the term of this
Agreement the UNIVISION Network Programming over the facilities of the Station.
AFFILIATE shall not and shall not authorize others to broadcast, rebroadcast, or
otherwise use any program (or part thereof) or other material supplied by
UNIVISION except as specified in this Agreement or specifically authorized in
writing by UNIVISION.
3. Term. The initial term of this Agreement shall commence on
----
[________________ ___, 199__] (the "Commencement Date"), and, subject to the
early termination provisions set forth herein, shall terminate at 11:59 p.m. on
_______________ ___,
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<PAGE>
_____ ("Initial Term"). After the Initial Term, the term of this Agreement
may be extended for additional successive terms of two (2) years each by
UNIVISION, in its sole discretion, giving written notice of such extension and
the terms and conditions upon which such extension is offered to AFFILIATE at
least ninety (90) days prior to the expiration of the then current term;
provided, however, that if, within thirty (30) days of the AFFILIATE's receipt
of an extension notice from UNIVISION, AFFILIATE, in its sole discretion, gives
UNIVISION written notice that AFFILIATE rejects such extension on such terms and
conditions, then the extension notice shall not be effective and this Agreement
shall terminate upon expiration of the then-current period. UNIVISION shall have
no obligation, whether express or implied, to extend this Agreement beyond its
initial term or to continue the affiliation of the Station with UNIVISION or the
UNIVISION Network, whether or not on terms or conditions equivalent to those set
forth in this Agreement, beyond the termination hereof. Any presently existing
Network Affiliation Agreements between UNIVISION and AFFILIATE shall be deemed
terminated as of the commencement of this Agreement. Upon the termination or
expiration of the term of this Agreement, all of AFFILIATE's and Station's
rights to broadcast or otherwise use any UNIVISION Network Programming or any
trademark, logo, or other material or item hereunder shall immediately cease and
neither AFFILIATE nor Station shall have any further rights whatsoever with
respect to such program, material, or item.
4. Distribution. UNIVISION shall transmit the UNIVISION Network
------------
Programming via satellite, and the UNIVISION Network Programming shall be deemed
delivered to AFFILIATE when transmitted to the satellite. The choice of
satellite to be used to transmit the UNIVISION Network Programming shall solely
be within the discretion of UNIVISION, and UNIVISION may, from time to time, at
its sole discretion, change the satellite being used for said transmissions, in
which case it shall, to the extent feasible, give prior notice to AFFILIATE. All
costs and expenses of transmitting the UNIVISION Network Programming by
satellite, including the maintenance of a network operations center, satellite
transmission facilities and satellite transponder time, shall be borne by
UNIVISION. Any and all costs of whatever kind or nature incurred with respect
to the reception or pickup of the UNIVISION Network Programming from the
satellite, and its rebroadcast by the Station, shall be borne by and shall be
the sole responsibility of AFFILIATE. Where, in the sole opinion of UNIVISION,
it is impracticable or undesirable to furnish the UNIVISION Network Programming
over satellite facilities, UNIVISION may deliver the program to Station by any
other means, including, but not limited to private or common carrier microwave,
fiber optic links, film, video tape or other form of recording in sufficient
time for Station to broadcast the UNIVISION Network Programming at the time
scheduled by UNIVISION. Prior to instituting a change in the method of program
delivery to AFFILIATE, UNIVISION shall, if practicable, consult with AFFILIATE
and give consideration to increased program delivery costs to be incurred by
AFFILIATE as a result of such a change. If UNIVISION Network Programming is
supplied via recordings of any kind, they shall be used by AFFILIATE only for a
single television broadcast over the Station, and AFFILIATE shall comply with
all UNIVISION instructions concerning the disposition to be made of each such
recording received by Station hereunder.
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<PAGE>
5. Additional Terms and Conditions Regarding Programming. Except as
-----------------------------------------------------
contemplated in Section 5, below, AFFILIATE's broadcast of UNIVISION Network
Programming and UNIVISION Programs pursuant to this Agreement shall be subject
to the following terms and conditions:
(a) The selection, scheduling, substitution, cancellation and
withdrawal of any UNIVISION Network Programming or portion thereof shall at all
times remain within the sole discretion and control of UNIVISION. UNIVISION
reserves the right to obtain programming from any source whatsoever, including
but not limited to obtaining all or a portion of the UNIVISION Network
Programming from one or more program suppliers.
(b) Schedule A hereto sets forth the current schedule of hours which
constitute the UNIVISION Network Program Schedule, as well as the current
schedule of segments which constitute the Local Programming Windows. Local
Programming Windows may be changed by UNIVISION, at any time in its sole
discretion. UNIVISION will provide written notification of such change in the
Local Programming Window at least ten (10) days prior to implementation, when
such Local Programming Window change is permanent. However, where UNIVISION
cannot provide ten days advance notice, UNIVISION will provide as much advance
notice as practicable of such Local Programming Window. The selection,
scheduling, substitution, cancellation, preemption and withdrawal of UNIVISION
Network Programming scheduled for broadcast by affiliates of UNIVISION Network
during those hours constituting the UNIVISION Network Program Schedule shall at
all times remain within the sole discretion and control of UNIVISION. AFFILIATE
agrees to broadcast over the facilities of the Station the complete UNIVISION
Network Program Schedule in its entirety without unauthorized interruption,
editing, modification, addition or deletion, on the dates and at the times
scheduled by UNIVISION; provided, however, that AFFILIATE may delete:
(i) such words, phrases or scenes as AFFILIATE, in the
reasonable exercise of its judgment, determines it would not be in the public
interest to broadcast over the AFFILIATE's Station; or
(ii) any Network Availabilities released by UNIVISION to the
Stations.
(c) AFFILIATE agrees to carry network commercials at the time
delivered by UNIVISION and in the same commercial positions as determined by
UNIVISION.
(d) AFFILIATE shall not broadcast any UNIVISION Network Programming
except pursuant to the terms of this Agreement or pursuant to other written
authorization from UNIVISION.
(e) AFFILIATE shall not authorize, cause, or enable anything to be
done whereby any UNIVISION Network Programming supplied herein is used for any
purpose other than broadcasting by AFFILIATE in the geographic area that
AFFILIATE's Station is authorized
6
<PAGE>
to serve, which broadcast is intended for reception by the general public in
places to which no admission is charged.
(f) AFFILIATE shall not insert or superimpose any crawls, split
screens, graphics, logos, trademarks, call letters, insignia, voice overs or
other material over any portion of any UNIVISION Network Programming, or alter
the length, size or aspect ratio or squeeze down any UNIVISION Network
Programming, without the prior written consent of UNIVISION, except in the case
of live coverage of fast-breaking news events.
(g) AFFILIATE shall abide by any and all restrictions of which
UNIVISION advises AFFILIATE pertaining to the promotion of UNIVISION Network
Programming, including, but not limited to, on-the-air promotion, billboards,
cable advertisements, and newspaper, shopper, or other printed advertisements,
announcements or promotions. This provision shall not prohibit AFFILIATE from
providing date and time information regarding UNIVISION Network Programming to
newspapers, TV Guide, cable guides, and other program listing services.
UNIVISION shall, from time to time, provide AFFILIATE with written guidelines
regarding promotional restrictions, which, as amended or supplemented in writing
from time to time, shall govern Station's promotional activities until
superseded by replacement guidelines supplied by UNIVISION.
(h) Except with UNIVISION's prior written consent and except upon
such terms and conditions as UNIVISION may impose, AFFILIATE shall not
authorize, cause, permit or enable anything to be done whereby a recording on
film, tape or otherwise is made of UNIVISION Network Programming, provided,
however, AFFILIATE may record UNIVISION Network Programming for:
(i) delayed telecasts permitted by this Agreement;
(ii) promotion of the UNIVISION Network, or UNIVISION Network
Programming, in programs or promotional announcements broadcast on AFFILIATE's
Station which UNIVISION has had the opportunity to preview and for which
UNIVISION has given its prior written consent; or
(iii) sales presentations.
(i) AFFILIATE agrees that its local news sets, local promotional
announcements, and local identifications will conform to the UNIVISION Network's
graphic standards as established, and modified from time-to-time, by UNIVISION
and provided in writing to AFFILIATE.
(j) Subject to the provisions of this Agreement, with respect to any
UNIVISION Program broadcast by Station and as to which UNIVISION controls the
distribution rights with respect to the repeat broadcast of such program on
United States broadcast television stations, UNIVISION agrees that, during the
Exclusivity Period for such UNIVISION Program,
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<PAGE>
it shall not provide the same UNIVISION Program to any television station
licensed to serve the community of license of the Station. As used herein,
"Exclusivity Period" with respect to any UNIVISION Program shall mean a period
commencing with UNIVISION's first broadcast of such UNIVISION Program and ending
on the earlier of (i) the end of the broadcast season in which such UNIVISION
Program is first provided to the Station or (ii) thirty (30) days after such
UNIVISION'S broadcast of such UNIVISION Program. Nothwithstanding the foregoing,
UNIVISION may make available to any other station any UNIVISION Program which
(i) AFFILIATE has preempted, rejected or refused, or not taken for any reason
whatsoever, or which UNIVISION has withdrawn from AFFILIATE pursuant to Section
9(b) hereof; (ii) UNIVISION may be legally required to make available; or (iii)
which, in UNIVISION's sole discretion, is believed to be of overriding public
importance.
(k) AFFILIATE shall be entitled to exercise, within the Station's
Network Exclusivity Zone, the protection against duplication of network
programming, as provided by Sections 76.92 through 76.97 of the FCC's rules,
with respect to a UNIVISION Program during the same broadcast day on which such
UNIVISION Program is delivered by UNIVISION to Station, provided, however, (1)
that such right shall extend only as to UNIVISION Programs broadcast over
Station in accordance with this Agreement at the time scheduled for such
broadcast by UNIVISION and that such protection shall not extend to any pre-
empted programs or program series; (2) that nothing herein shall be deemed to
preclude UNIVISION from granting to any other broadcast television station
licensed to any other community similar non-duplication rights within that
Station's Network Exclusivity Zone and AFFILIATE's right of network non-
duplication shall not apply with respect to the transmission of the programs of
another AFFILIATE of the UNIVISION Network (current or future) by a "community
unit," as that term is defined by the rules of the FCC, located wholly or
partially within the area in which the Station's Network Exclusivity Zone
overlaps the Network Exclusivity Zone of such other UNIVISION affiliates; and
(3) that AFFILIATE's network non-duplication rights pursuant to this Section
shall be subject to cancellation by UNIVISION on six (6) months written notice
to AFFILIATE, which cancellation shall not affect any of the other rights and
obligations of the parties under this Agreement. Nothing contained in this
Agreement shall limit UNIVISION'S right, at its sole discretion, to distribute
the UNIVISION Network and/or UNIVISION Network Programming directly to, and to
authorize the retransmission of the UNIVISION Network and/or UNIVISION Network
Programming by, any other distribution form, methodology, or medium, including
but not limited to broadcast, television, cable television, direct broadcast
satellite (DBS), MDS, MMSA, or SMATV systems or facilities in any area.
6. Preemption and Substitution.
---------------------------
(a) With respect to programs or commercial matter offered or already
contracted for pursuant to this Agreement, nothing herein contained shall
prevent or hinder AFFILIATE from:
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<PAGE>
(i) rejecting or refusing any UNIVISION Program or commercial
matter which AFFILIATE reasonably believes to be unsatisfactory or unsuitable or
contrary to the public interest, or
(ii) substituting a program which, in AFFILIATE's opinion, is of
greater local or national importance.
(b) AFFILIATE shall give UNIVISION written notice of each such
rejection, refusal or substitution, the identity and length of the programming
(the "Substitute Programming") to be substituted for a UNIVISION Program and the
justification therefor, not later than seventy-two (72) hours after receiving
notice of the UNIVISION Program, or as soon thereafter as possible (including an
explanation of the cause for any lesser notice). In the case of proposed
program substitution based on greater local or national importance, AFFILIATE
shall also indicate why the programming could not reasonably be substituted for
Local Programming or carried in a Local Programming Window. UNIVISION reserves
the right to direct AFFILIATE to broadcast said UNIVISION Program in an
alternate time period normally occupied by other UNIVISION Network Programming,
or to provide such alternative UNIVISION Network Programming as may be
appropriate in the circumstances (which, subject only to the terms of Sections 5
and 9 hereunder, shall be cleared in preference to the Substitute Programming).
(c) AFFILIATE may deem UNIVISION Network Programming to be
unsatisfactory or unsuitable only if such programming:
(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 or content from UNIVISION
Network Programming which AFFILIATE has broadcast previously and which Affiliate
reasonably believes would not meet prevailing contemporary standards of good
taste in its community of license.
(d) AFFILIATE confirms that no UNIVISION Network Programming shall be
deemed to be unsatisfactory, unsuitable or contrary to the public interest based
on programming performance or ratings, advertiser reactions or the availability
of alternative programming (including but not limited to sporting events,
program length commercials and infomercials) which AFFILIATE believes to be more
profitable or more attractive.
(e) Except in those circumstances requiring live coverage of fast-
breaking news events, AFFILIATE shall make all reasonable efforts to substitute
programming of high local or national importance for Local Programming or to
carry such programming in time slots not scheduled to be occupied by UNIVISION
Network Programming.
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(f) AFFILIATE confirms that, in its judgment, the public interest is
best served by carriage of Spanish language programming by the Station. Any
programming substituted by AFFILIATE for UNIVISION Network Programming shall be
exclusively in the Spanish language.
7. Commercial Scheduling in Network Time.
-------------------------------------
(a) UNIVISION shall determine the number and length of Commercial
Availabilities within Network Time.(b) Subject to the provisions of Sections
6(c) and (d) hereof, the time available within Network Time to AFFILIATE for the
carriage of Local Availabilities during regularly scheduled programming only
shall be:
Program Daypart Time Period Time Available to AFFILIATE
- --------------- ----------------- ---------------------------
Children's Programming: Weekends, As Scheduled 5 Minutes per Hour (or 50% of
all Commercial Availabilities
should FCC regulations permit
less than 10 1/2 minutes of
Commercial Availabilities per
hour)
Children's Programming: Weekdays, As Scheduled 6 Minutes per Hour (or 50% of
all Commercial Availabilities
should FCC regulations permit
less than 12 minutes of
Commercial Availabilities per
hour)
Morning: 08:00 A.M.-12:00 Noon 6 Minutes per Hour
Day Time: 12:00 Noon- 04:00 P.M. 6 Minutes per Hour
Early Fringe: 04:00 P.M.-06:00 P.M. 6 Minutes per Hour
Network News: 06:30 P.M.-07:00 P.M. 0 Minutes per Half Hour
Prime Time: 07:00 P.M.-11: 00 P.M. 6 Minutes per Hour
-All Other Network Time Periods: 6 Minutes per Hour
(c) UNIVISION may, from time to time, and upon at least sixty (60)
days notice to AFFILIATE, determine the exact schedule and number of minutes
available within Network Time to AFFILIATE for the carriage of Commercial
Availabilities during regularly scheduled programming; provided, however, that
in no event shall less than four (4) minutes per hour be made available within
Network Time to AFFILIATE for the carriage of Commercial
10
<PAGE>
Availabilities during regularly scheduled programming (except for Children's
Programming and Network News).
(d) In the event that any UNIVISION Program contains less than twelve
(12) minutes per hour of Commercial Availabilities, UNIVISION shall, within its
sole discretion, determine the exact schedule and number of minutes of
Commercial Availabilities within each hour of Network Time that shall be
occupied by Local Availabilities. In no event, however, shall the number of
minutes of Local Availabilities scheduled by UNIVISION within an hour containing
less than twelve (12) minutes of Commercial Availabilities (except for
Children's Programming and Network News) be less than twenty percent (20.0%) of
the total number of Commercial Availabilities scheduled by UNIVISION within that
hour, rounded to the next higher commercial unit.
(e) All Commercial Availabilities not allocated to AFFILIATE may be
used by UNIVISION for Network Availabilities. The proceeds from advertising
broadcast during those Network Availabilities shall be allocated to Network
Sales. UNIVISION shall be solely responsible for determining the advertising
rates at which such Network Availabilities shall be offered and sold. The time
allocated to UNIVISION for Network Availabilities shall not be covered or
dropped or used for any purpose whatsoever by AFFILIATE without the express
prior written consent of UNIVISION.
(f) The time allocated to AFFILIATE shall be used for Local
Availabilities. Sales of Local Availabilities shall be allocated to Local Sales
or to National Sales, as the case may be. AFFILIATE shall be solely responsible
for determining the advertising rates at which Local Availabilities shall be
offered and sold.
(g) UNIVISION may, at its discretion, free a portion of Network
Availabilities to AFFILIATE for sale by AFFILIATE, and AFFILIATE may, at its
discretion, free a portion of Local Availabilities for sale by UNIVISION, with
the mutual objective of maximizing the effective use of total Commercial
Availabilities in Network Time; provided, however, that AFFILIATE grants
UNIVISION the option to purchase from AFFILIATE, at UNIVISION's sole discretion,
not more than two (2) minutes of Local Availabilities per hour of network time,
for which UNIVISION shall reimburse AFFILIATE at the lowest average unit rate
prevailing during the previous ninety (90) days for local commercial
advertisements of the same or most comparable class, daypart, and length
actually broadcast by Station. Said option shall take precedence over other
sales of Local Availabilities by AFFILIATE.
(h) Each party may use up to one (1) minute of its Commercial
Availabilities within each hour of Network Time for the scheduling of
commercials for which no cash compensation is charged and/or received. The use
of this time by UNIVISION shall be restricted to company or related company
advertising, promotional announcements, and non-cash barter transactions
involving the exchange of goods and/or services for time. No amount shall be
included in Net Network Sales as the result of such use, or the non-cash
transactions related thereto. The use of this time by AFFILIATE shall be
restricted to promotional announcements
11
<PAGE>
and non-cash barter transactions involving the exchange of goods and/or services
for time. Station identification announcements are not included within the scope
of this subsection.
8. Compensation. Subject to all other relevant provisions of this
------------
Agreement, the compensation due AFFILIATE and UNIVISION pursuant to this
Agreement shall be governed by the following provisions:
(a) As consideration for UNIVISION's services as national and
regional sales representative for AFFILIATE, AFFILIATE shall pay to UNIVISION
fifteen percent (15%) of all Net National Sales of the Station.
(b) In the event AFFILIATE packages any Sales which would be included
in Net National Sales with other advertising sales which would not be included
in Net National Sales, including, but not limited to, a sale in other media such
as radio or print by AFFILIATE or any company affiliated with, controlled by,
controlling or under common control with AFFILIATE, either directly or
indirectly, such package sales will be allocated pro rata to Net National Sales
and to other sales on the basis that the rate card values of each bears to the
rate card value for the entire package.
(c) Without limitation to any provision of this Agreement, in the
event that AFFILIATE, for any reason, fails to broadcast or advises UNIVISION
that it will not broadcast any UNIVISION Network Programming as provided herein,
then, in each such case, AFFILIATE will "make good" the UNIVISION Network
commercial announcements contained therein during a time period(s) which shall
be of quality and rating value comparable to that of the time period(s) at which
such programming was not broadcast. Pursuant to the provisions contained
herein, these "make goods" will not be included as Net Allocated Network Sales.
(d) AFFILIATE and UNIVISION agree that responsibility for billing and
collection of accounts shall be divided as follows:
(i) UNIVISION shall be responsible for the billing and collection
of all Network Sales.
(ii) AFFILIATE shall be responsible for the billing and
collection of all National Sales and Local Sales.
(e) AFFILIATE shall provide UNIVISION an accurate accounting of all
time Sales from all sources on or before the 15th of the month following the
month of performance of said Sales.
(f) The amounts payable from AFFILIATE to UNIVISION, pursuant to
Section 7(a), shall be paid monthly no later than the fifteenth (15th) of each
month for all Sales made during the previous broadcast month. Payments from
AFFILIATE to UNIVISION shall be accompanied by statements setting forth the name
of each advertiser, amounts of time Sales for
12
<PAGE>
which payments were received, the amount of commissions due thereon, the net
proceeds from such time Sales, and the percentage due UNIVISION.
9. Non-Network Programs. UNIVISION shall retain the right, within its
--------------------
sole discretion, to produce and/or to distribute, by means other than the
UNIVISION Network, Non-Network Programming of every nature and kind. UNIVISION
may, but is not required to, offer such Non-Network Programming to AFFILIATE.
In the event that UNIVISION chooses to offer such Non-Network Programming to
AFFILIATE, it shall do so by providing a Terms Sheet to AFFILIATE which shall
specify the time period in which AFFILIATE may accept such Non-Network
Programming on the terms proposed by UNIVISION. In the event of a timely
acceptance by AFFILIATE, the compensation and carriage for such Non-Network
Programming shall be on the terms as agreed between the parties, and the
provisions of this Agreement shall not govern the distribution or broadcast of
such Non-Network Programming. In the event that AFFILIATE does not accept
UNIVISION's offer or terms within the time period specified in the Terms Sheet,
it shall be assumed that AFFILIATE has rejected the Non-Network Programming, and
UNIVISION shall be free, within its sole discretion, to offer the Non-Network
Programming to any other station or medium on any terms whatsoever.
10. Unauthorized Preemptions. Without limiting any other rights of
------------------------
UNIVISION under this Agreement or otherwise, if within any twelve (12) month
period during the term of this Agreement, AFFILIATE makes three (3) or more
Unauthorized Preemptions of any UNIVISION Network Programming (or AFFILIATE or
Station states, either in general or specific terms, that Station intends to
make such Unauthorized Preemptions or UNIVISION reasonably concludes, based upon
AFFILIATE's or Station's actions or otherwise, that such Unauthorized
Preemptions shall occur), UNIVISION may, upon thirty (30) days prior written
notice to AFFILIATE:
(a) terminate AFFILIATE's right to broadcast any one or more series
or other UNIVISION Network Programming, as UNIVISION shall elect, and, to the
extent and for the period(s) that UNIVISION elects, thereafter license the
broadcast to the applicable series or other UNIVISION Network Programming to any
other television Station or Stations, low power television Station or Stations,
or cable television system or systems located in the community of license of the
Station or elsewhere; or
(b) terminate this Agreement without any obligation, monetary or
otherwise, to AFFILIATE and/or its employees, agents, or customers, or to any
other person or entity.
11. Delayed Telecasts. [Except for UNIVISION Network Programming
-----------------
designated to be carried live, AFFILIATE shall broadcast the entire UNIVISION
Network program schedule on a three hour delayed basis. By way of example, a
UNIVISION Program transmitted to AFFILIATE via satellite at 7:00 p.m. EST shall
be delayed by AFFILIATE and broadcast over the Station at 7:00 p.m. PST.
AFFILIATE shall not delay the telecast of any UNIVISION Program by more or less
than three hours, nor change the order of the UNIVISION Network Programming
schedule, without the express written consent of UNIVISION.] AFFILIATE is
13
<PAGE>
hereby authorized to record UNIVISION Network Programming to the extent
necessary to permit such delayed telecast, provided however, that AFFILIATE
shall erase, destroy, or return to UNIVISION at AFFILIATE's expense such
recording within seventy-two (72) hours of the broadcast of the recorded
material. [In the event, however, that UNIVISION establishes a direct Pacific
Time Zone satellite feed, then AFFILIATE shall broadcast the UNIVISION Network
Programming at the times delivered by that feed, without any delay or
recording.]
12. Force Majeure. UNIVISION shall not be liable to AFFILIATE nor shall
-------------
it incur any liability hereunder for failure to deliver UNIVISION Network
Programming or any part thereof, nor shall AFFILIATE be liable to UNIVISION nor
shall it incur any liability hereunder for failure to broadcast any UNIVISION
Network Programming or any part thereof, by reason of a Force Majeure Event.
13. Written Reports. AFFILIATE shall promptly upon UNIVISION's
---------------
request submit to UNIVISION in writing, upon forms approved by UNIVISION, such
reports as UNIVISION may request regarding the broadcast by AFFILIATE's Station
of UNIVISION Network Programming and commercial announcements.
14. Performing Rights Licenses. All UNIVISION Network Programming
--------------------------
shall, to the extent possible, be (a) cleared at the source, (b) within the
repertoire of ASCAP, BMI, SESAC, or another performing rights society from which
UNIVISION has obtained a performance license, or (c) in the public domain.
15. Indemnification.
---------------
(a) UNIVISION shall indemnify, defend and hold AFFILIATE, its
affiliates, successors and assigns, and the respective owners, officers,
directors, agents, and employees of each, harmless against and from all direct
claims, damages, liabilities, costs and expenses (including reasonable
attorneys' fees) asserted by third parties alleging that the UNIVISION Network
Programming violates or infringes upon the trade name, trademark, copyright,
literary or dramatic right, or right of privacy or publicity of any party, or
constitute a libel or slander of any party; provided, however, that the
foregoing indemnification shall not apply: (i) to public performance rights in
music, (ii) to any material furnished or added by any party other than UNIVISION
after delivery of the UNIVISION Network Programming to AFFILIATE or the Station,
(iii) to the extent such UNIVISION Network Programming is changed or otherwise
affected by insertion or deletion of any material by any party other than
UNIVISION after delivery of the UNIVISION Network Programming to the Station,
(iv) to compliance with the Communications Act of 1934 or to any rules or
regulations adopted thereunder by the FCC or any successor agency, or (v) unless
AFFILIATE promptly notifies UNIVISION of any claim or litigation to which this
indemnity shall apply, and that AFFILIATE cooperates fully with UNIVISION in the
defense or settlement of such claim or litigation. The foregoing indemnity
shall not apply to any claim by AFFILIATE or the Station for lost revenue, lost
profits or other consequential damages, if any, regardless of whether such
alleged damages are or were
14
<PAGE>
foreseeable. UNIVISION makes no representations, warranties or indemnities,
express or implied, except as expressly set forth in this Section 14(a).
(b) AFFILIATE shall indemnify, defend and hold UNIVISION, its
affiliates, successors and assigns, and the respective owners, officers,
directors, agents, and employees of each, harmless against and from all direct
claims, damages, liabilities, costs and expenses (including reasonable
attorneys' fees) caused by or arising out of matters relating (i) to public
performance rights in music, (ii) to any material furnished or added by any
party other than UNIVISION after delivery of the UNIVISION Network Programming
to AFFILIATE or the Station, (iii) to the extent such UNIVISION Network
Programming is changed or otherwise affected by insertion or deletion of any
material by any party other than UNIVISION after delivery of the UNIVISION
Network Programming to the Station, (iv) any breach of any of AFFILIATE's
representations, warranties, covenants or agreements hereunder, (v) any
programming broadcast by Station other than UNIVISION Network Programming
provided by UNIVISION to AFFILIATE and the Station pursuant to the terms of this
Agreement, (vi) from any actions or claims by customers, agents, or employees of
Station pursuant to a termination of this Agreement pursuant to Section 15
hereof or otherwise, or (vii) any other action on the part of AFFILIATE and/or
Station; provided, however, that the foregoing indemnification shall not apply
unless UNIVISION promptly notifies AFFILIATE in writing of any claim or
litigation to which this indemnity shall apply, and UNIVISION cooperates fully
with AFFILIATE in the defense or settlement of such claim or litigation. The
foregoing indemnity shall not apply to any claim by UNIVISION for lost revenue,
lost profits or other consequential damages, if any, regardless of whether such
alleged damages are or were foreseeable.
16. Termination. This Agreement shall terminate under the following
-----------
conditions:
(a) The term of this Agreement shall expire without extension
pursuant to Section 2 hereof;
(b) At option of UNIVISION, in its sole discretion, upon the
occurrence of any of the following events:
(i) Upon not less than thirty (30) days? written notice to
AFFILIATE in the event of a material breach by AFFILIATE by any of its material
covenants, representations, warranties, duties, or obligations pursuant to this
Agreement, or any other material term or condition hereof, which AFFILIATE has
not cured within ten (10) days of written notice of default from UNIVISION; or
such longer period if AFFILIATE has commenced such cure within said 10 days and
thereafter continues to diligently pursue such cure to the reasonable
satisfaction of UNIVISION.
(ii) Pursuant to Section 9(b) hereof;
(iii) Immediately upon written notice to AFFILIATE in the event
(a) AFFILIATE files a petition seeking relief under Title 7 or 11 of the United
States Code or under
15
<PAGE>
any other Federal or state bankruptcy, reorganization, insolvency, readjustment
of debt, dissolution or liquidation law or statute, or an answer or consent
admitting the material allegations of a petition filed against in any proceeding
under any such law, or (b) of entry against AFFILIATE of any order of relief
under Title 7 or 11 of the United States Code, or entry of any other order,
judgment or decree against AFFILIATE by any court of competent jurisdiction,
approving a petition seeking bankruptcy, reorganization, readjustment of debt,
dissolution, liquidation, or winding up of AFFILIATE, or (c) of appointment of a
receiver, trustee or liquidator of AFFILIATE or of all or substantially all of
the assets of AFFILIATE, or (d) if any petition seeking an order of relief under
Title 7 or 11 of the States Code or any other such petition is filed against
AFFILIATE and is not stayed or dismissed within one hundred twenty (120) days
after the date of such filing, or (e) AFFILIATE makes a general assignment of
its assets, or transfers a controlling interest, to creditors or other persons
or entities;
(iv) Pursuant to Section 17 hereof;
(v) Upon not less than six (6) months written notice to
AFFILIATE in the event UNIVISION, in its sole and voluntary discretion, chooses
to cease to operate the UNIVISION Network, or to cease to provide UNIVISION
Network Programming to television stations licensed to the community to which
the Station is licensed, provided, however, that in the event UNIVISION is
required to cease to operate the UNIVISION Network or to cease to provide
UNIVISION Network Programming to television stations licensed to the community
to which the Station is licensed due to circumstances reasonably beyond its
control, including, but not limited to, force majeure events and court or
government orders or decrees, and the circumstances preclude, or effectively
preclude, UNIVISION from giving six (6) months notice of termination, UNIVISION
shall give AFFILIATE as much notice as is reasonably possible under the
circumstances;
(vi) Intentionally deleted.
(vii) Upon not less than thirty (30) days written notice to
AFFILIATE in the event that Station becomes substantially less valuable to
UNIVISION as an affiliate than it is at the time of execution of this Agreement
as a result of a materially adverse change affecting the transmitter location,
power, frequency, or hours or mode of operation of Station, or a materially
adverse change in the business practices or public reputation or image of
Station, AFFILIATE, or their owners and/or management;
(viii) Pursuant to Section 20(a) hereof;
(ix) Pursuant to Section 21 hereof;
(x) Pursuant to Section 25(a)(iv) hereof; or
(xi) Pursuant to Section 29 hereof.
16
<PAGE>
(xii) Immediately, upon written notice to AFFILIATE, for a
material breach of this Agreement due to a Year 2000 Failure.
(c) At option of AFFILIATE, in its sole discretion upon thirty (30)
days written notice to UNIVISION in the event of a material breach by UNIVISION
in any of its covenants, representations, warranties, duties, or obligations
pursuant to this Agreement, or any other term or condition hereof, which
UNIVISION has not cured within ten (10) days of written notice of default from
AFFILIATE.
17. Exclusive Representation. AFFILIATE and UNIVISION agree that
------------------------
UNIVISION shall be the exclusive representative of AFFILIATE for the sale of all
national and regional advertising throughout the United States and the world.
AFFILIATE agrees to refer requests by any potential national or regional
advertisers to UNIVISION, which shall be responsible for servicing such
accounts. In any event, all revenues received from national or regional
advertising accounts, whether or not serviced by UNIVISION, shall be included in
Net National Sales for the purpose of computing the commission due UNIVISION as
national and regional sales representative pursuant to Section 7(a) hereof.
UNIVISION, in its role of exclusive national sales representative for AFFILIATE,
shall have no obligation to market, sell, or administer the sale of any
commercial announcement, infomercial, program, or other product which would
conflict with any UNIVISION Network Programming or commercial announcement
scheduled by UNIVISION for broadcast over the Station.
18. Assignment.
----------
(a) This Agreement shall not be assigned, in whole or in part, by
AFFILIATE, directly or indirectly (by operation of law, transfer of stock,
merger or otherwise) without the prior written consent of UNIVISION. The
decision to grant or not grant such consent shall be at the sole discretion of
UNIVISION. Any purported assignment by AFFILIATE in the absence of UNIVISION's
prior written consent shall be null and void and not enforceable against
UNIVISION. In the event of an attempted unconsented assignment or transfer,
UNIVISION may, in its sole discretion, terminate this Agreement effective upon
thirty (30) days notice to AFFILIATE and the purported assignee. Any
assignment or transfer consented to by UNIVISION shall not relieve AFFILIATE of
its obligations hereunder.
(b) AFFILIATE shall immediately notify UNIVISION in writing of any
application tendered to the FCC pertaining to an assignment of AFFILIATE's
license for the Station or a transfer of control of AFFILIATE. Except as to
"short form" assignments of license or transfers of control made pursuant to
Section 73.3540(f) of the Rules and Regulations of the FCC, UNIVISION shall have
the right to terminate this Agreement, effective upon thirty (30) days notice to
AFFILIATE and the transferee or assignee of such termination, which notice may
be given at any time within ninety (90) days after the later occurring of: (i)
the date on which UNIVISION learns of such assignment or transfer, or (ii) the
date on which UNIVISION receives written notice of such assignment or transfer.
Upon UNIVISION's request, AFFILIATE shall procure and deliver to UNIVISION, in
form satisfactory to UNIVISION, the
17
<PAGE>
agreement of the proposed assignee or transferee that, upon consummation of the
assignment or transfer of control of the Station's authorization, the assignee
or transferee will assume and perform this Agreement in its entirety without
limitation of any kind. The failure of AFFILIATE to notify UNIVISION of the
proposed assignment or transfer of control of Station's authorization, or to
procure the agreement of the proposed assignee or transferee in accordance with
this Section, shall be deemed a material breach of this Agreement, and in such
event UNIVISION may, in its sole discretion and without limitation to any other
remedies available to it, terminate this Agreement by giving notice of such
termination, which termination shall be effective on the date specified in said
notice of termination.
(c) Subject to the foregoing, this Agreement shall be binding upon
and inure to the benefit of the parties hereto, their successors and assigns.
AFFILIATE confirms that UNIVISION has no obligation, whether express or implied,
to consent to the assignment of AFFILIATE's rights, duties, benefits or
obligations pursuant to this Agreement to any other person or entity, and that
the grant of such consent shall be within the sole discretion of UNIVISION.
AFFILIATE further confirms that UNIVISION shall have no obligation, whether
express or implied, to continue the affiliation of the Station with UNIVISION or
the UNIVISION Network, whether or not on terms or conditions equivalent to those
set forth in this Agreement, in the event of an assignment of the Station's
license or a transfer of control of AFFILIATE.
19. Affirmative UNIVISION Rights. Nothing in this Agreement shall
----------------------------
preclude UNIVISION from taking any action not specifically prohibited herein,
including, but not limited to:
(a) Establishing additional interconnected networks, including but
not limited to, television or audio broadcasting networks and cable programming
networks.
(b) Affiliating the UNIVISION Network with any international network
on the terms and conditions determined solely by UNIVISION.
(c) Transferring any UNIVISION Programs from the UNIVISION Network to
any other networks, whether established by UNIVISION or any other entity.
20. Audit Rights. UNIVISION shall have the right to perform periodic
------------
audits of AFFILIATE and the Station to insure compliance with the provisions of
this Agreement. AFFILIATE shall provide UNIVISION with access to the pertinent
books and records of AFFILIATE and the Station so that UNIVISION's auditors may
verify the accuracy and validity of the time Sales reported to UNIVISION by
AFFILIATE as well as all other aspects of compliance with the provisions of this
Agreement, including, but not limited to, Sections 4, 5, 6, 7, 9, 10, 13, 16,
17, 23, and 24 hereof. The cost of any such audit shall be borne by UNIVISION;
provided, however, that in the event such an audit reveals AFFILIATE to be in
material breach of, or in default under, this Agreement, that AFFILIATE has
failed to pay UNIVISION all amounts due to UNIVISION pursuant to Section 7(a)
hereof, or that
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<PAGE>
AFFILIATE has made more than three Unauthorized Preemptions of UNIVISION Network
Programming during the preceding twelve (12) month period, the costs of said
audit shall be borne by AFFILIATE.
21. Termination.
------------
(a) AFFILIATE represents and warrants to UNIVISION that Schedule B
accurately sets forth the facilities authorized for, and utilized by, the
Station. In the event that the transmitter location, antenna height above
average terrain, effective radiated power, or frequency or hours of operation as
set forth on Schedule B are changed at any time so as to (i) reduce the number
of Hispanic Households within the Station's Grade B contour or (ii) to reduce
the number of hours of Spanish language programming, UNIVISION, in its sole
discretion, shall have the right to terminate this Agreement upon 30 days
advance written notice. The above operating hours provision shall not apply to
the extent that the reduction in AFFILIATE's hours of operation is in response
to a reduction in programming provided to AFFILIATE by UNIVISION.
(b) UNIVISION may, from time to time at its sole discretion,
establish minimum standards governing matters that, in UNIVISION's sole
judgment, require standardization and uniformity among affiliates of the
UNIVISION Network, including but not limited to (i) specifications and layout
(including form, color, number, location and size) of signage, billboards, and
print and other advertising relating to UNIVISION or any UNIVISION Program or
Programming; (ii) the design, color, appearance and maintenance of exterior and
public portions of studios and other facilities utilized by the Station; and
(iii) technical standards relating to commercial announcements, public service
announcements, and Local Programming of the Station.
22. Retransmission Consent. Should AFFILIATE be accorded the right under
----------------------
any local, state or federal rule, regulation or law to elect (a) to require any
cable television system or other distribution system to obtain AFFILIATE'S
consent to such system's transmission or retransmission of the Station's
broadcast of any UNIVISION Network Programming, or is given any similar rights
(a "Retransmission Consent Election") or (b) to require any shcy system to
comply with any "must carry" rule, regulations or laws (a "Must Carry
Election"), then AFFILIATE shall notify UNIVISION at least sixty (60) days in
advance of any such election by AFFILIATE and UNIVISION shall negotiate in good
faith, for a period of no less than sixty (60) days, regarding (x) whether
AFFILIATE shall make a Retransmission Consent Election or a Must Carry Election
and (y) in the event that AFFILIATE determines to make a Retransmission Consent
Election, to which systems such consent is to be given, and I so, the terms
under which it is to be given (including without limitations, the amount of
compensation to be paid by any such system for such consent and the division of
that compensation between AFFILIATE and UNIVISION). If AFFILIATE and UNIVISION
do not reach agreement with respect to all of the foregoing matters, then
without limitation to any of UNIVISION'S rights under this Agreement, UNIVISION
shall have the right to terminate this Agreement upon thirty (30) days written
notice to AFFILIATE. Without limiting the generality of the foregoing,
AFFILIATE acknowledges and agrees that in no event shall AFFILIATE grant
retransmission consent or otherwise permit
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any retransmission of the Station's broadcast of any UNIVISION Network
Programming without the prior written consent of UNIVISION.
23. Severability. Should any part of this Agreement become
------------
inconsistentwith the rules or policies of the FCC or the agreed upon governing
law and the parties not to be the beneficiaries of an appropriate waiver, that
part of the Agreement shall terminate upon the date that such an inconsistency
would otherwise exist, but all other parts of the Agreement shall remain in full
force and effect. In such event, the parties shall use their best efforts to
modify this Agreement so as to conform it with the applicable FCC rule, policy,
or law, if possible, while achieving their respective objectives under this
Agreement.
24. No Implied Waiver. Except as expressly provided for herein, no
-----------------
failure or delay on the part of the parties hereto to exercise any right, power
or privilege hereunder or under any instrument executed pursuant hereto shall
operate as a waiver; nor shall any single or partial exercise or any right,
power or privilege preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. All rights and remedies granted
herein shall be in addition to other rights and remedies to which the parties
may be entitled at law or in equity
25. Broadcaster's Liability Insurance.
---------------------------------
(a) AFFILIATE shall procure and maintain in force during the term
hereof Broadcaster's liability insurance for the Station, including broad form
errors and omissions coverage, with minimum limits of liability of $5,000,000.00
or more for each occurrence.
(i) Said coverage shall be on an occurrence form, primary and
not contributing, with respect to:
a. any material furnished or added by any party other than
UNIVISION after delivery of UNIVISION Network Programming to AFFILIATE or the
Station;
b. to the extent any such UNIVISION Network Programming is
changed, altered or otherwise affected by insertion or deletion of any material
by any party other than UNIVISION; and
c. any programming broadcast the Station other than
UNIVISION Network Programming provided by UNIVISION to the Station.
(ii) Prior to use of UNIVISION Network Programming, AFFILIATE
shall cause its broadcaster[_]s liability insurance carrier(s) to add
[_]Univision Network Limited Partnership, Univision Television Group, Inc.,
their parent companies, affiliates, officers, directors, employees, successors
and assignees[_] as additional insured parties. All such
20
<PAGE>
policies shall be issued by companies of recognized responsibility, having a
Bests Key Rating Guide of not less than A, Class VII, licensed to do business in
the state where each Station is located.
(iii) An original certificate of insurance and notarized copies
of the insurance policy endorsement(s) naming UNIVISION, Univision Television
Group, Inc., their parent companies, affiliates, officers, directors, employees,
successors and assignees as additional insured parties shall be delivered to
UNIVISION by AFFILIATE within ten (10) days of the execution of this Agreement.
Each such certificate and endorsement must be signed by an authorized agent of
the insurance company issuing such coverage, and shall provide that thirty (30)
days notice of cancellation shall be given to UNIVISION prior to termination,
cancellation, or non-renewal thereof. No action or inaction by UNIVISION,
including, without limitation, failure to demand such documentation or continued
provision of programming in the absence of such policy, certificate, and/or
endorsement(s), shall be construed as a waiver by UNIVISION of AFFILIATE?s
obligation to provide the insurance coverage specified herein.
(iv) In the event AFFILIATE or the Station fails to comply with
the provisions of this Section 25(a), UNIVISION may, in its sole discretion,
terminate this Agreement upon thirty (30) days written notice to AFFILIATE.
26. Governing Law. This Agreement and the rights and obligations of the
-------------
parties, including without limitation the validity, construction,
interpretation, performance and termination of this Agreement, shall be governed
by and construed by the laws of the State of New York applicable to contracts
between New York parties made and performed in that state, without regard to
conflicts of law principles.
27. Notices. Any notice required or permitted to be given hereunder shall
-------
be in writing and shall be deemed duly given if delivered on the date of
personal delivery or on the date of receipt if mailed by registered or certified
mail, postage prepaid and return receipt requested, and shall be deemed to have
been received on the date of personal delivery or on the date set forth on the
return receipt, to the following addresses, or to such other address as any
party may request in writing to the other party:
Notices to AFFILIATE shall be sent to:
[___________________
____________________
____________________]
Notices to UNIVISION shall be sent to:
Director, Affiliate Relations
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Univision Network Limited Partnership
9405 NW 41st Street
Miami, FL 33178
with a copy, which shall not constitute notice, to:
General Counsel
Univision Network, L.P.
6701 Center Drive West
Fifteenth Floor
Los Angeles, CA 90045
28. Limitations of Damages. The parties to this Agreement
----------------------
expressly agree that in the event of termination or breach of this Agreement,
neither party shall be liable to the other for any lost revenue, lost profits or
other consequential damages allegedly resulting from such termination or breach,
including, but not limited to, any expenditures, investments, leases or
commitments made in anticipation of the continuance of this Agreement,
regardless of whether such alleged lost revenue, lost profits or other
consequential damages are foreseeable.
29. Confidentiality. In its capacity as an affiliate of UNIVISION
---------------
pursuant to this Agreement, AFFILIATE may acquire or receive information
relating to UNIVISION and its affiliates which is of a confidential and
proprietary nature. Such information may include, but is not limited to,
financial information, business and marketing plans, advertising rates and
practices, viewer mailing lists, and plans related to programming and special
promotional events. AFFILIATE shall at all times, both during and after the term
of this Agreement, maintain in the strictest confidence and trust all of such
confidential and proprietary information and shall not directly or indirectly
disclose the same to any other person or entity, whether during the term of this
Agreement or thereafter. AFFILIATE acknowledges that a breach of this paragraph
may subject UNIVISION to immediate and irreparable harm for which damages may
not be an adequate remedy and, accordingly, AFFILIATE acknowledges and agrees
that UNIVISION may enforce the provisions hereof by means of injunctive or other
equitable relief. Any breach of this Section shall constitute a material breach
of this Agreement and shall entitle UNIVISION to immediately terminate this
Agreement. The provisions of this Section shall survive the expiration and
termination of this Agreement.
30. No Joint Venture or Partnership. Nothing contained in this
-------------------------------
Agreement shall create any partnership, association, joint venture, fiduciary or
agency relationship between UNIVISION and AFFILIATE. Except as otherwise
specifically set forth herein, neither UNIVISION or AFFILIATE shall be
authorized or empowered to make any representation or commitment or to perform
any act which shall be binding on the other unless expressly authorized or
empowered in writing.
31. Entire Agreement. This Agreement contains all of the terms agreed
----------------
upon by the parties with respect to the subject matter hereof; it incorporates
and merges any and all previous
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<PAGE>
communications and understandings, oral and written, and cannot be amended or
changed except in a writing executed by the parties hereto.
32. Counterparts. This Agreement may be signed in any number of
------------
counterparts with the same effect as if the signatures to each such counterpart
were upon the same instrument.
UNIVISION NETWORK
LIMITED PARTNERSHIP
Signature: ___________________________________
Name: ___________________________________
Title: ___________________________________
Date: ___________________________________
AGREED AND ACCEPTED:
[____________________________________________ ]
Signature: _____________________________________
Name: _____________________________________
Title: _____________________________________
Date: _____________________________________
23
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SCHEDULE A
<PAGE>
SCHEDULE B:
Station:
Community of License:
Television Channel or Frequency:
Transmitter Location:
Antenna Height Above Average Terrain:
Mean Sea Level:
Maximum Effective Radiated Power:
Minimum Hours of Operation:
<PAGE>
The registrant has entered into Network Affiliation Agreements for the following
stations:
Station K19BN, San Diego, California December 30, 1996
Station KVER-LP, Palm Springs, California December 30, 1996
Station KSMS-TV, Monterey, California December 30, 1996
Station KNVO-TV, McAllen, Texas December 30, 1996
Station KINC-TV, Las Vegas, Nevada December 30, 1996
Station KINV-TV, El Paso, Texas December 30, 1996
Station KCEC-TV, Denver, Colorado December 30, 1996
Station KAJB (TV), Calipatria, California December 30, 1996
Station KLDO, Laredo, Texas August 1, 1997
Station KORO-TV, Corpus Christi, Texas April 21, 1998
Station KLUZ-TV, Albuquerque, New Mexico December, 1998
Station WMDO, Washington, D.C. April, 1999
Station WVEA-LP, Tampa, Florida April, 1999
Station WVEN-LP, Orlando, Florida April, 1999
