<PAGE>
AS FILED WITH THE SECURITIES EXCHANGE COMMISSION ON FEBRUARY 7, 1996
REGISTRATION NO. 33-64599
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
TELEMUNDO GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 13-3348686
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
2290 WEST 8TH AVENUE, HIALEAH, FLORIDA 33010
(305) 884-8200
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
--------------------------
PETER J. HOUSMAN II
CHIEF FINANCIAL OFFICER
AND TREASURER
TELEMUNDO GROUP, INC.
2290 WEST 8TH AVENUE, HIALEAH, FLORIDA 33010
(305) 884-8200
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
COPIES TO:
<TABLE>
<S> <C>
PATRICK J. DOOLEY, ESQ. ROBERT B. KNAUSS, ESQ.
Akin, Gump, Strauss, Hauer & Feld, L.L.P. Munger, Tolles & Olson
399 Park Avenue 355 South Grand Avenue, 35th Floor
New York, NY 10022 Los Angeles, California 90071-1560
(212) 872-1000 (213) 683-9100
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
--------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
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 Exchange
Act of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, 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, please 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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
$
[LOGO]
TELEMUNDO GROUP, INC.
% SENIOR NOTES DUE 2006
The % Senior Notes Due 2006 (the "Senior Notes") are being issued by
Telemundo Group, Inc. ("Telemundo" or the "Company") and will mature on
, 2006. Interest on the Senior Notes will be paid semi-annually on
and , of each year, commencing , 1996.
The Senior Notes will bear interest at a rate of % per annum on their
principal amount at maturity through and including , 1999, and
after such date until maturity will bear interest at a rate of % per annum on
their principal amount at maturity. The Senior Notes will be issued at a
substantial discount from their principal amount at maturity. The price to the
public of the Senior Notes shown below represents a yield to maturity of %
per annum, computed on the basis of semi-annual compounding of interest. The
Senior Notes may be redeemed at the option of the Company, in whole or in part,
at any time on and after , 2001 at the redemption prices set forth
herein, plus accrued and unpaid interest to the date of redemption. In addition,
the Company may at its option, on one or more occasions, at any time on or
before , 1999, redeem up to % of the aggregate outstanding
principal amount of Senior Notes at the redemption prices set forth herein, plus
accrued and unpaid interest to the date of redemption, with the proceeds of
certain equity issuances provided that at least $ million in aggregate
principal amount at maturity of the Senior Notes remains outstanding immediately
following any such redemption. The Senior Notes do not provide for any sinking
fund.
In the event of a Change of Control (as defined herein), holders of Senior Notes
will have the right, subject to certain conditions, to require the Company to
offer to purchase their Senior Notes (in whole or in part) at 101% of their
Accreted Value (as defined herein), plus accrued and unpaid interest to the date
of purchase. See "Description of the Senior Notes -- Change of Control Offer."
The Senior Notes will be general unsecured obligations of the Company and PARI
PASSU in right of payment with all senior indebtedness and senior in right of
payment to all existing and future subordinated indebtedness of the Company. The
Senior Notes will be effectively subordinated to all secured indebtedness of the
Company and to all indebtedness and other liabilities of the Company's
subsidiaries.
SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C>
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC (1) DISCOUNT COMPANY (1) (2)
Per Senior Note............................. % % %
Total....................................... $ $ $
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</TABLE>
(1) Plus accrued interest and Accreted Value, if any, from , 1996 to
the date of delivery.
(2) Before deducting offering expenses payable by the Company estimated to be
$1,170,000.
The Senior Notes are offered subject to receipt and acceptance by the
Underwriters, to prior sale and to the Underwriters' right to reject any order
in whole or in part and to withdraw, cancel or modify the offer without notice.
It is expected that delivery of the Senior Notes will be made at the office of
Salomon Brothers Inc, Seven World Trade Center, New York, New York or through
the facilities of The Depository Trust Company, on or about , 1996.
SALOMON BROTHERS INC
ALEX. BROWN & SONS
INCORPORATED
BT SECURITIES CORPORATION
The date of this Prospectus is , 1996
<PAGE>
Map of the United States and Puerto Rico entitled "The Telemundo Television
Network" with stars representing the owned and operated full-power stations
(Chicago pending) and circles representing owned and operated low-power stations
and affiliates. The full-power stations' channel numbers and call letters are
set forth next to the appropriate star. The Company's full-power station in
Puerto Rico is indicated on the map.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SENIOR NOTES AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information concerning the Company can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's regional offices at Seven World Trade Center, Suite 1300, New York,
New York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such materials can be obtained from the
Commission at prescribed rates from the Public Reference Section of the
Commission at its principal office at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549.
The Company has filed with the Commission a Registration Statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933 (the "Act"), with
respect to the securities offered hereby. This Prospectus, which constitutes a
part of the Registration Statement, does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is hereby made to the Registration Statement and exhibits
filed as a part thereof and otherwise incorporated therein and which may be
inspected and copied in the manner and at the sources described above.
Statements contained in this Prospectus as to the contents of any document
referred to are not necessarily complete, and in each instance reference is made
to such exhibit for a more complete description and each such statement is
qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which have been filed by the Company with the
Commission are incorporated by reference into this Prospectus:
1. The Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995 as amended by Form 10-Q/A filed November 27, 1995 and by Form
10-Q/A-2 filed January 31, 1996;
2. The Company's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1995 and June 30, 1995;
3. The Company's Current Reports on Form 8-K filed January 13, 1995 and
January 31, 1996;
4. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994; and
5. All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of this Offering shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing
such documents.
Any statement contained herein or in any document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for the purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed to
be incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed to constitute a
part of this Prospectus, except as so modified or superseded. The Company will
provide without charge to each person to whom a copy of this Prospectus is
delivered, upon written or oral request of such person, a copy of any or all of
the information that has been incorporated by reference in this Prospectus
(excluding exhibits to such information which are not specifically incorporated
by reference into such information). Requests for such documents should be
directed to the Company at its principal executive offices, 2290 West 8th
Avenue, Hialeah, Florida 33010, Attention: Shareholder Relations, telephone
(305) 884-8200.
3
<PAGE>
(This page has been left blank intentionally.)
4
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION, FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, AND PRO FORMA
FINANCIAL INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE
INDICATED, (I) ALL REFERENCES TO THE UNITED STATES OR U.S. EXCLUDE PUERTO RICO
AND (II) ALL MARKET RANK, TELEVISION HOUSEHOLD DATA, RANK IN MARKET AND AUDIENCE
SHARE DATA IN THIS DOCUMENT ARE DERIVED FROM A.C. NIELSEN COMPANY, A NATIONAL
MEDIA RATINGS SERVICE ("NIELSEN") EXCEPT FOR INFORMATION WITH RESPECT TO PUERTO
RICO WHICH IS DERIVED FROM MEDIAFAX, INC., A MEDIA RATINGS SERVICE IN PUERTO
RICO. "MARKET AREA" OR "DMA" REFERS TO DESIGNATED MARKET AREA, A TERM DEVELOPED
BY NIELSEN AND USED BY THE TELEVISION INDUSTRY TO DESCRIBE A GEOGRAPHICALLY
DISTINCT TELEVISION MARKET.
THE COMPANY
Telemundo Group, Inc., together with its subsidiaries (collectively,
"Telemundo" or the "Company"), is one of two Spanish-language television
broadcast networks in the United States. The network provides programming
24-hours per day to its owned and operated stations and affiliates, which serve
55 markets in the U.S., including the 32 largest Hispanic markets, and reach
approximately 85% of all U.S. Hispanic households. Hispanics currently
constitute approximately 10% of the U.S. population, or 27 million people,
according to the U.S. Census Bureau, which also projects Hispanics to be the
largest minority group in the United States by the year 2010. The Company also
owns and operates the leading full-power television station and related
production facilities in Puerto Rico. For the twelve months ended September 30,
1995, pro forma revenue and EBITDA (as defined below) for the Company were
$189.7 million and $30.2 million, respectively.
After the pending acquisition (the "Acquisition") of a 74.5% interest in the
Company's Chicago affiliate, WSNS-TV ("WSNS"), Telemundo will own and operate
full power Spanish-language television stations in the seven largest Hispanic
Market Areas in the United States. See "The Acquisition." The following table
sets forth certain information about these stations, the Puerto Rico station and
their Market Areas.
<TABLE>
<CAPTION>
RANKING OF NUMBER OF
APPROXIMATE MARKET AREA OTHER RANKING OF
HISPANIC HISPANICS BY SPANISH-LANGUAGE MARKET AREA BY
TELEVISION AS A NUMBER OF TELEVISION NUMBER OF
HOUSEHOLDS IN PERCENTAGE HISPANIC STATIONS TOTAL
MARKET OF TOTAL TELEVISION OPERATING IN TELEVISION
MARKET AREA SERVED AND STATION AREA(1) POPULATION(1) HOUSEHOLDS(1) MARKET AREA HOUSEHOLDS(2)
- ------------------------------ ------------- ------------ ------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
Los Angeles, CA 1,306,000 37 % 1 2 2
KVEA, Channel 52
New York, NY 913,000 16 % 2 1 1
WNJU, Channel 47
Miami, FL 434,000 37 % 3 3 16
WSCV, Channel 51
Houston, TX 278,000 23 % 4 2 11
KTMD, Channel 48
San Antonio, TX 274,000 51 % 5 2 39
KVDA, Channel 60
San Francisco, CA 272,000 17 % 6 2 5
KSTS, Channel 48
Chicago, IL (Pending) 270,000 12 % 7 1 3
WSNS, Channel 44
San Juan, PR 1,064,000 -- -- 6 --
WKAQ, Channel 2
</TABLE>
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(1) Estimated by Nielsen for January 1, 1996.
(2) Based on 1994-1995 Nielsen data.
5
<PAGE>
The Company also distributes its programming through 13 owned and operated
low-power television stations, 33 affiliated broadcast stations and 88 satellite
direct cable affiliates. The Company's programming is carried on an additional
507 cable systems in markets served by broadcast stations in the Company's
network. In addition, the Company has a 42% interest in TeleNoticias del Mundo,
L.P. ("TeleNoticias"), a 24-hour per day Spanish-language international news
service.
The Hispanic population in the United States, the fifth largest in the
world, is growing at approximately five times the rate of the non-Hispanic U.S.
population. By the year 2010, Hispanics are projected by the U.S. Census Bureau
to account for approximately 13.5% of the total population of the U.S. and would
be the country's largest minority group. A distinguishing characteristic of the
Hispanic market is that Hispanics tend to retain Spanish as their dominant or
only language. The 1995 Nielsen Enumeration Study indicates that approximately
49% of Hispanic households speak mainly or exclusively Spanish. Consequently,
many Hispanics rely on Spanish-language media as an important, and often the
exclusive, source of news and information as well as entertainment.
Management believes that, in addition to the market's growth and the unique
characteristics of the population, several factors make the Hispanic market
attractive to advertisers. First, the Hispanic population is already a large
market segment, with annual purchasing power of approximately $200 billion.
Second, Hispanic households on average tend to be larger, younger and spend a
greater percentage of their total household income on consumer products than
non-Hispanic households. Furthermore, the Hispanic population is more
concentrated geographically, with approximately 50% of all Hispanics residing in
the seven largest Hispanic Market Areas.
According to HISPANIC BUSINESS MAGAZINE, an estimated $953 million of total
advertising expenditures were directed towards Spanish-language media in 1994,
representing a 15% increase from 1993, and an estimated $1.1 billion of total
advertising expenditures were directed towards Spanish-language media in 1995,
representing an 11% increase from 1994. Of that amount, nearly half was targeted
to Spanish-language television advertising. More than 80% of Hispanic television
households view Spanish-language television, and aggregate viewing of
Spanish-language television increased by approximately 20% for the quarter ended
September 30, 1995 as compared with the quarter ended September 30, 1993. As a
result, the Company believes that major advertisers such as The Procter & Gamble
Co., AT&T Corp. and Sears, Roebuck & Co. have found that Spanish-language
television advertising is a more cost-efficient means to target this growing
audience than English-language broadcast media.
BACKGROUND
The Company was organized in May 1986 under the laws of Delaware and is the
successor to John Blair & Company, formerly a diversified communications
company. The Company began its United States Spanish-language network with three
television stations in January 1987, providing approximately 18 hours per week
of network programming. The Company entered into bankruptcy in July of 1993 and
emerged from bankruptcy on December 30, 1994. The Company had experienced an
overall decline in ratings from a 40% share of the Spanish-language network
television audience in November 1992 to their lowest point of 20% in February
1995. In March 1995, the Company appointed Roland A. Hernandez as its new
President and Chief Executive Officer.
BUSINESS STRATEGY
The Company's management team, led by Mr. Hernandez, has aggressively
pursued a number of strategies aimed at improving the profitability of the
Company. The Company believes that these strategies have contributed to the
improved results of operations experienced in the second half of 1995 and to the
Company's achievement of a 27% share of the Spanish-language network television
audience in December 1995.
INCREASING SHARE OF AUDIENCE THROUGH ENHANCED NETWORK PROGRAMMING
In March 1995, the network hired a new Executive Vice President for
Programming and Production and immediately implemented several measures aimed at
increasing the Company's audience share.
6
<PAGE>
Specifically, the Company rearranged its prime time schedule to compete more
effectively against programming offered by the competition. The Company also
added production capability in Los Angeles to its production capability in
Miami, enabling Telemundo to produce programs which target U.S. Hispanics of
Mexican origin. While the Company produces approximately 44% of its network
programming in its U.S. production facilities, it also acquires programs from
outside producers to provide a balanced program lineup which will appeal to the
greatest number of Hispanic viewers in the U.S. The Company is exploring
opportunities to co-produce programming with other producers in Mexico and other
Latin American countries.
The Company believes that its ability to produce as well as acquire
programming will allow it to increase its share of the Spanish-language
television audience while controlling its overall programming expenses. See "--
Reducing and Controlling Operating Expenses."
INCREASING REVENUE THROUGH ENHANCED SALES AND MARKETING EFFORTS
The Company devotes significant resources towards providing advertisers with
the data needed to understand better the purchasing habits and preferences of
the Hispanic market. Telemundo, together with the Univision Group ("Univision"),
the Company's major competitor, and Nielsen, developed the Nielsen Hispanic
Television Index, a people-meter based audience measurement service for Spanish-
language television, which became operational at the end of 1992. This service
provided the first broadly accepted information about the Spanish-language
television audience and helped persuade many major general market advertisers
and their agencies of the importance of using Spanish-language television to
reach the expanding Hispanic market. The Company estimates, based on Nielsen
data, that approximately 4% of total television viewing is of Spanish-language
television. However, less than 1.7% of total television advertising expenditures
are currently directed to Spanish-language television. Management believes that
the sophisticated research currently being commissioned by the Company and
Univision, particularly the Nielsen Hispanic Television Index, will help to
narrow this gap.
At the network, as well as at each owned and operated full-power station,
the sales and marketing forces work closely with their clients to increase the
effectiveness of specific advertising campaigns and to increase advertising
spending directed to the Hispanic market and the Company. The Company's sales
force has extensive experience in both the general market and Spanish-language
media businesses. With this diverse background, the sales force is able to
create and implement fully integrated and specifically targeted marketing
campaigns for its clients. Since it produces a significant amount of its own
programming, Telemundo is able to offer its advertising clients opportunities to
integrate their products into particular programs and develop major marketing
events featuring these programs, the network talent and the clients' products.
The Company's top network advertisers include The Procter & Gamble Co., AT&T
Corp., MCI Communications Corp., Sears, Roebuck & Co., Ford Motor Co., Western
Union, The Coca-Cola Company and Sprint Corp.
REDUCING AND CONTROLLING OPERATING EXPENSES
The Company has reduced its operating expenses before depreciation and
amortization by $12.1 million, or 10%, for the nine months ended September 30,
1995 from the comparable period of the prior year. Over $8.4 million of these
reductions have been achieved through the lowering of program acquisition and
production costs. For example, the Company's decision to purchase novelas (soap
operas) from Latin American program suppliers rather than produce such programs
itself, will result in a reduction of more than 50% in the cost of the Company's
prime time novelas for 1995. Other significant cost saving measures included the
relocation of its corporate headquarters and the reduction of employee staff
levels by approximately 7%. After the consummation of the Acquisition, the
Company believes that it will realize cost savings at WSNS through efficiencies
gained by integrating WSNS into the Telemundo owned and operated station group.
The Company intends to continue to closely monitor and identify cost saving
measures throughout its operations.
BUILDING A STRONGER LOCAL PRESENCE
Local news presence and involvement in community events are important
elements in the Company's strategy for each of its owned and operated stations
to achieve a distinct local identity, strengthen
7
<PAGE>
audience loyalty and increase revenue. The Company invites its viewers to be
part of its programming efforts and to participate along with its stations in
community events and other outreach programs. The Company sponsors local
community events such as "Calle Ocho" in Miami, "Cinco de Mayo" in Los Angeles
and the "Hispanic Day Parade" in New York and has developed an award winning
public information campaign, "De Padres a Hijos" ("From Parents to Children").
The campaign awards annual scholarships for Hispanic students and features
nationally televised vignettes on important issues in education. Awards are
granted both on a national and local level with all Telemundo stations
participating in selecting recipients in their respective markets.
CAPITALIZING ON DOMINANT MARKET POSITION IN PUERTO RICO
The Company's station in Puerto Rico, WKAQ-TV ("WKAQ"), is the market leader
in audience share and revenue. Programming produced specifically for that
market, in WKAQ's own production facilities, has consistently ranked among the
top rated programs in Puerto Rico. In December 1995, WKAQ had 8 of the top 10
shows in the market and a 33% share of the overall audience, including a 36%
share in the prime time period. WKAQ has also recently changed its affiliate
covering the western side of the island, resulting in what the Company believes
is better coverage on a more cost-effective basis.
Capitalizing on its strong ratings, production capabilities, association
with most major entertainment events in Puerto Rico and aggressive sales and
marketing efforts, management believes that WKAQ should continue to achieve a
greater share of the market's total advertising dollars than WKAQ's share of the
audience. The Company has also focused on reducing operating costs at the
station and, as a result, expects operating expenses before depreciation and
amortization for 1995 to decline by approximately 4% from the prior year.
Operating synergies and cost efficiencies with the U.S. network will continue to
be explored.
STRENGTHENING THE NETWORK THROUGH SELECTIVE ACQUISITIONS AND CAPITAL
EXPENDITURES
The Company believes that securing distribution through station ownership in
the largest Hispanic Market Areas in the U.S. is an important element in
ensuring the strength of its network. In furtherance of this, the Company has
entered into an agreement to acquire a 74.5% interest in its Chicago affiliate.
See "The Acquisition." A large base of owned and operated stations allows the
network to amortize program investments and other network and corporate expenses
over a larger portfolio of properties and should provide greater leverage with
advertisers and suppliers. While the Company will continue to evaluate
opportunities to enhance its network as they arise, the Company does not
currently have any other agreements to acquire additional stations.
The Company also selectively invests in property and equipment in order to
strengthen signals, improve production capabilities and generate operating
efficiencies. For example, the Los Angeles station, KVEA, is replacing its
transmitter and antenna to improve its signal and provide better service to the
Los Angeles market. The Company was also one of the first broadcasters to use
digital broadcast compression equipment, providing the Company with the ability
to transmit multiple signals from a single satellite transponder. This enables
the network to simultaneously address different time zones and provide
additional live capabilities and interactivity between the stations and network
center on a cost-effective basis.
THE ACQUISITION
On November 8, 1995, the Company entered into an agreement to acquire for
$44.7 million a 74.5% interest in Video 44, an Illinois general partnership
("Video 44"), which holds the license to and operates WSNS in Chicago, currently
the Company's largest affiliated station. The acquisition of WSNS will ensure
the network's long-term distribution in the important Chicago Market Area.
Chicago is the seventh largest Market Area in the U.S. based on Hispanic
television households and the fourth largest Market Area based on Hispanic
television households that speak primarily Spanish. The Hispanic population in
Chicago grew by approximately 60% from 1980 to 1994. The Company believes that
it will realize cost savings at WSNS through efficiencies gained by integrating
WSNS into the Telemundo owned and operated station group.
8
<PAGE>
THE REFINANCING
The Company is implementing a refinancing (the "Refinancing") of certain of
its outstanding indebtedness. The elements of the Refinancing include (i) the
repurchase of up to $116.9 million aggregate principal amount of the Company's
10.25% Senior Notes due December 30, 2001 (the "Old Notes") pursuant to an offer
to purchase, commenced on November 27, 1995 (the "Repurchase Offer") and (ii)
the solicitation (the "Consent Solicitation") of certain consents (the
"Consents") from the holders of the Old Notes to amend the indenture (the "Old
Note Indenture") governing the Old Notes (the "Proposed Amendments") and the
payment of a consent fee (a "Consent Fee") in connection therewith. As of
January 30, 1996, the holders of $116,705,500 principal amount of Old Notes,
representing approximately 99.8% of the aggregate outstanding principal amount
of Old Notes, had tendered their Old Notes and delivered their Consents to the
Proposed Amendments. As of December 12, 1995, the Company had received Consents
from holders of a majority of the aggregate outstanding principal amount of Old
Notes and on that date, the Company and the Trustee under the Old Note Indenture
executed a supplemental indenture to the Old Note Indenture (the "Supplemental
Indenture"). Upon the execution of the Supplemental Indenture, the Proposed
Amendments became effective and binding on all holders of Old Notes, including
those holders who did not submit their Consents, but will not become operative
until the Acceptance Date (as defined below).
The Refinancing is designed to enhance the Company's operating and financial
flexibility by, among other things, (i) removing the near-term amortization
requirements of the Old Notes and (ii) amending certain covenants contained in
the Old Note Indenture to conform generally to certain covenants contained in
the Senior Note Indenture (as defined below).
The Company intends to issue $175 million gross proceeds of % Senior
Notes (the "Offering") to fund the Acquisition and the Refinancing and, after
related fees and expenses, to use the balance, if any, for general corporate
purposes, which may include the repayment, but without any accompanying
permanent reduction, of certain of the outstanding borrowings under the
Company's credit agreement (the "Credit Facility"). See "Description of Certain
Indebtedness -- Credit Facility." The Acquisition, the Refinancing and the
Offering are defined herein as the "Transactions."
RECENT DEVELOPMENTS
The Company is in the process of preparing its financial statements for the
year ended December 31, 1995 and expects to report that net revenue was
approximately $169.1 million and EBITDA was approximately $26.0 million (see
note 4 to Summary Historical and Pro Forma Consolidated Financial Data),
compared to $183.9 million and $24.0 million, respectively, for the prior year.
For the quarter ended December 31, 1995, the Company expects to report net
revenue of approximately $49.3 million and EBITDA of approximately $15.6
million, compared to $52.1 million and $13.7 million, respectively, for the
corresponding period of the prior year. The Company's audience share declined
throughout 1994, reaching the lowest point in February 1995. The Company's share
of the Spanish-language television network audience increased from 20% in
February 1995 to 27% in December 1995. However, as a result of the lag between a
change in ratings and the resulting impact on revenue, commercial air time sales
in the fourth quarter of 1995 were based on a lower audience share than such
revenue from the comparable period of the prior year. Continued significant
expense savings during the quarter more than offset the approximately 5% decline
in revenue, resulting in the increase in EBITDA in the quarter as compared to
the comparable period of the prior year. Such results are preliminary and have
not been audited. When the actual results of operations are finalized and
audited, it is possible that such results will vary from the amounts set forth
above. The Company does not believe, however, that any such variations will be
material. On a pro forma basis, after giving effect to the Acquisition, net
revenue for 1995 is expected to be approximately $186.8 million and EBITDA,
after minority interest, approximately $31.6 million, compared to $200.3 million
and $30.4 million, respectively, for the prior year.
9
<PAGE>
THE OFFERING
All capitalized terms used in this Prospectus with respect to the Senior
Notes and not otherwise defined herein have the meanings set forth under
"Description of the Senior Notes -- Certain Definitions."
<TABLE>
<S> <C>
Securities Offered..................... $ million principal amount at maturity of %
Senior Notes due 2006 (the "Senior Notes"). The
Senior Notes will be issued at a substantial
discount from their principal amount and will
generate gross proceeds to the Company of
approximately $175 million.
Maturity Date.......................... , 2006.
Interest............................... The Senior Notes bear interest at a rate of %
per annum on their principal amount at maturity
through and including , 1999, and after such
date until maturity will bear interest at a rate of
% per annum on their principal amount at
maturity. Interest will be paid on each and
, commencing . The price to the
public of the Senior Notes represents a yield to
maturity of % per annum, computed on the basis
of semi-annual compounding of interest.
Original Issue Discount; Certain
Federal Income Tax Consequences........ For Federal income tax purposes, each Senior Note
will be issued with "original issue discount." See
"Certain Federal Income Tax Considerations."
Ranking................................ The Senior Notes will be general unsecured
obligations of the Company, and will rank PARI
PASSU in right of payment with all senior
indebtedness and senior in right of payment to all
existing and future subordinated indebtedness of
the Company. The Senior Notes will be effectively
subordinated to all secured indebtedness of the
Company to the extent of the assets securing that
indebtedness and all indebtedness and other
liabilities of the Company's subsidiaries.
Optional Redemption.................... The Senior Notes are redeemable at any time on or
after , 2001, in whole or in part, at
the option of the Company, at the redemption prices
set forth herein plus accrued and unpaid interest
to the redemption date.
Optional Redemption Upon Common Stock
Offering............................... At any time on or before , 1999, the
Company may, at its option, on one or more
occasions, redeem up to % of the aggregate
outstanding principal amount of Senior Notes at the
redemption prices set forth herein plus accrued and
unpaid interest to the redemption date with the
proceeds of a Common Stock Offering; provided that
at least $ million aggregate principal amount at
maturity of Senior Notes remains outstanding
immediately following such redemption.
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
Change of Control...................... Upon the occurrence of a Change of Control, the
Company will be required to make an offer to
purchase all of the Senior Notes at a price equal
to 101% of the Accreted Value thereof plus accrued
and unpaid interest to the date of repurchase.
Sinking Fund........................... None.
Certain Covenants...................... The indenture with respect to the Senior Notes (the
"Senior Note Indenture") contains certain covenants
that, among other things, limit the ability of the
Company to incur debt, make restricted payments,
enter into certain transactions with affiliates,
acquire and dispose of certain assets and engage in
certain mergers and consolidations.
</TABLE>
USE OF PROCEEDS
The proceeds of this Offering will be used to consummate the Acquisition and
the Refinancing and the balance, if any, will be used for general corporate
purposes, which are expected to include repayment of certain amounts outstanding
and related fees under the Credit Facility, but without any accompanying
permanent reduction. See "Use of Proceeds."
RISK FACTORS
Investors should consider carefully certain risk factors relating to an
investment in the Senior Notes. See "Risk Factors."
------------------------
The Company's Series A Common Stock and Warrants to purchase Series A Common
Stock are traded in the over-the-counter market on the Nasdaq National Market
and SmallCap Market, respectively, under the symbols "TLMD" and "TLMDW." The
Company's executive offices are located at 2290 West 8th Avenue, Hialeah,
Florida 33010. The Company's telephone number is (305) 884-8200.
11
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The following presents summary historical consolidated financial data of the
Company for the three years ended December 31, 1994, and for the nine months
ended September 30, 1994 and 1995, which have been derived from the Company's
audited consolidated financial statements for the three years ended December 31,
1994 and the unaudited consolidated financial statements for the nine months
ended September 30, 1994 and 1995.
On December 30, 1994, the Company consummated its financial restructuring
pursuant to a plan of reorganization under Chapter 11 of the Bankruptcy Code
(the "Reorganization"). The periods prior to the Reorganization are presented on
a historical cost basis without giving effect to the Reorganization. The term
"Predecessor" refers to the Company prior to emergence from Reorganization.
The unaudited pro forma consolidated statements of operations data have been
presented as if the Transactions had been effected as of the beginning of each
of the periods presented. The unaudited pro forma consolidated financial data
for the year ended December 31, 1994 and the twelve months ended September 30,
1995 give effect to the Reorganization as if it had occurred on the first day of
each of the respective periods. The pro forma consolidated balance sheet data
have been presented as if the Transactions had been effected on September 30,
1995. The Acquisition has been accounted for under the purchase method of
accounting. The pro forma consolidated financial data do not purport to
represent what the Company's results of operations would have been if such
transactions had been effected at the date indicated and do not purport to
project results of operations of the Company in any future period. The pro forma
adjustments are based upon available information and certain assumptions that
the Company believes are reasonable.
The information in this table should be read in conjunction with "Unaudited
Pro Forma Consolidated Financial Data," "Selected Historical Consolidated
Financial Data," "Management's Discussion and Analysis of Results of Operations
and Financial Condition" and the Financial Statements and the notes thereto for
both the Company and Video 44 included elsewhere herein.
12
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------------------------------
PRO FORMA (1)
PREDECESSOR -------------------------------------
------------------------------------------
NINE MONTHS ENDED NINE MONTHS 12 MONTHS
YEAR ENDED ENDED ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30, DECEMBER SEPTEMBER SEPTEMBER
------------------------------- -------------------- 31, 30, 30,
1992 1993 1994 1994 1995 1994 1995 1995 (2)
--------- --------- --------- --------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue........................ $ 153,572 $ 177,809 $ 183,894 $ 131,807 $ 119,848 $ 200,279 $ 133,105 $ 189,704
--------- --------- --------- --------- --------- ----------- ----------- -----------
Costs and expenses:
Direct operating costs........... 71,211 83,166 90,914 68,734 59,148 93,885 61,857 84,902
Selling, general & administrative
expenses other than network and
corporate....................... 33,225 34,191 35,688 27,107 25,917 40,060 30,028 39,956
Network expenses................. 21,026 26,167 28,501 21,822 20,994 28,501 20,994 27,673
Corporate expenses............... 6,772 6,219 4,811 3,885 3,345 4,931 3,435 4,391
Depreciation and amortization.... 10,515 11,469 10,804 7,899 8,653 15,329 10,069 14,082
--------- --------- --------- --------- --------- ----------- ----------- -----------
Total expenses................. 142,749 161,212 170,718 129,447 118,057 182,706 126,383 171,004
--------- --------- --------- --------- --------- ----------- ----------- -----------
Operating income................... 10,823 16,597 13,176 2,360 1,791 17,573 6,722 18,700
Other income (expense)............. 1,438 (351) (34) (20) (19) (34) (19) (33)
Reorganization items............... 0 (2,543) 76,255 (4,250) 0 76,255 0 80,505
Interest expense -- net of interest
income............................ (35,739) (24,411) (645) (487) (10,756) (20,930) (15,407) (20,730)
Net loss from investment in
TeleNoticias...................... 0 0 (1,314) 0 (4,590) (1,314) (4,590) (5,904)
--------- --------- --------- --------- --------- ----------- ----------- -----------
Income (loss) before income
taxes............................. (23,478) (10,708) 87,438 (2,397) (13,574) 71,550 (13,294) 72,538
Income tax provision............... (3,265) (3,351) (3,389) (2,575) (2,534) (3,389) (2,534) (3,348)
Minority interest.................. 0 0 0 0 0 (2,550) (1,913) (2,550)
--------- --------- --------- --------- --------- ----------- ----------- -----------
Income (loss) before extraordinary
item.............................. (26,743) (14,059) 84,049 (4,972) (16,108) 65,611 (17,741) 66,640
Extraordinary gain (loss) --
extinguishment of debt............ 0 0 130,482 0 0 112,948 (16,419) 112,948
--------- --------- --------- --------- --------- ----------- ----------- -----------
Net income (loss).................. $ (26,743) $ (14,059) $ 214,531 $ (4,972) $ (16,108) $ 178,559 $ (34,160) $ 179,588
--------- --------- --------- --------- --------- ----------- ----------- -----------
--------- --------- --------- --------- --------- ----------- ----------- -----------
Income (loss) before extraordinary
item per Common Share............. $ * $ * $ * $ * $ (1.61) $ * $ (1.77 ) $ *
--------- --------- --------- --------- --------- ----------- ----------- -----------
--------- --------- --------- --------- --------- ----------- ----------- -----------
Number of shares used in per share
calculations...................... * * * * 10,000 * 10,000 *
--------- --------- --------- --------- --------- ----------- ----------- -----------
--------- --------- --------- --------- --------- ----------- ----------- -----------
Ratio of earnings to fixed charges
(3)............................... * * * * -- * -- *
--------- --------- --------- --------- --------- ----------- ----------- -----------
--------- --------- --------- --------- --------- ----------- ----------- -----------
OTHER FINANCIAL DATA:
EBITDA (4)......................... $ 21,338 $ 28,066 $ 23,980 $ 10,259 $ 10,444 $ 30,352 $ 14,878 $ 30,232
EBITDA margin...................... 13.9% 15.8% 13.0% 7.8% 8.7% 15.2% 11.2% 15.9%
Cash interest expense.............. $ 0 $ 405 $ 647 $ 489 $ 6,620 $ 14,894 $ 11,143 $ 14,862
Capital expenditures............... $ 3,992 $ 8,485 $ 12,550 $ 9,688 $ 4,274 $ 12,726 $ 5,150 $ 8,187
Ratio of EBITDA to cash interest
(5)............................... 2.0 2.0
Ratio of EBITDA to interest expense
(5)............................... 1.5 1.5
Ratio of total debt to EBITDA
(5)............................... 6.0
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets....................... $ 232,024 $ 220,599 $ 278,824
Working capital.................... $ 32,325 $ 31,844 $ 32,944
Total debt......................... $ 108,553 $ 113,755 $ 182,416
Stockholders' equity............... $ 70,000 $ 54,231 $ 37,812
</TABLE>
- ----------------------------------
(1) Assumes the consummation of the Transactions.
(2) Pro forma data for the twelve months ended September 30, 1995 is presented
by adding the pro forma data calculated for the three months ended December
31, 1994 to the pro forma data for the nine months ended September 30,
1995.
(3) For purposes of computing the ratio of earnings to fixed charges, "fixed
charges" consists of interest expense - net, which includes interest on
capital leases and amortization of deferred financing fees, and "earnings"
consists of net income (loss), before extraordinary items, income taxes,
net loss from investment in TeleNoticias and fixed charges. Earnings were
insufficient to cover fixed charges by approximately $9.0 million and $10.9
million, respectively, for the nine months ended September 30, 1995 and the
related pro forma period.
(4) EBITDA represents net income (loss), before extraordinary gain (loss) on
extinguishment of debt, income tax provision, net loss from investment in
TeleNoticias, interest expense - net, reorganization items, other income
(expense) and depreciation and amortization. Although EBITDA is not
intended to represent cash flow or any other measure of financial
performance under generally accepted accounting principles ("GAAP"), the
Company believes it is helpful in understanding cash flow generated from
operations that is available for debt service, taxes and capital
expenditures. The use of the term "EBITDA" is materially consistent with
the use of the same term in the Senior Note Indenture. EBITDA has been
reduced by the minority interest which represents the minimum distribution
payable to the 25.5% minority partner of Video 44.
(5) Due to seasonality, EBITDA ratios for periods less than one year are not
applicable. See "Business -- Seasonality of Business."
* As a result of the effects of the Reorganization, net loss per share,
number of shares used in per share calculations and ratio of earnings to
fixed charges are not applicable for 1994 and prior periods.
13
<PAGE>
RISK FACTORS
PROSPECTIVE INVESTORS IN THE SENIOR NOTES SHOULD CAREFULLY CONSIDER THE
FOLLOWING MATTERS IN ADDITION TO THE OTHER INFORMATION SET FORTH IN THIS
PROSPECTUS.
HISTORY OF LOSSES; BANKRUPTCY
On December 30, 1994, the Company emerged from bankruptcy. Although the
Company has reported operating income for each of the three years ended December
31, 1994 and for the nine months ended September 30, 1995, the Company has a
history of net losses. The net income reported for the year ended December 31,
1994 was as a result of the effect of items related to the Reorganization. Net
losses before reorganization items and income taxes of approximately $23.5
million, $8.2 million and $13.6 million were reported for the years ended
December 31, 1992 and 1993 and for the nine months ended September 30, 1995,
respectively. For a discussion of the results of the Reorganization on the
Company's Statement of Operations, see "Management's Discussion and Analysis of
Results of Operations and Financial Condition." There can be no assurance that
the Company will achieve or sustain profitability in the future. See "Business
- -- Legal Proceedings."
The Company does not, as a matter of policy, publish projections covering
future performance. However, in connection with the consummation of the
Reorganization, the Company was required by law to include certain projections
in its disclosure statement to establish the viability of the Reorganization.
Those projections were filed on April 29, 1994. As a result of a number of
factors, including the overall decline in the Company's share of the
Spanish-language audience, the Company did not meet its projections for the year
ended December 31, 1995 and the projections for future periods should not be
relied upon.
SUBSTANTIAL LEVERAGE; RESTRICTIVE COVENANTS
After giving effect to the Transactions, the Company will remain highly
leveraged. At September 30, 1995, the Company had outstanding total debt in an
aggregate principal amount of approximately $129.0 million ($113.8 million
recorded in the Company's financial statements for book value purposes) and
total stockholders' equity of approximately $54.2 million. After giving pro
forma effect to the Transactions, the Company's aggregate principal amount of
total debt at September 30, 1995 would have been $200.6 million ($182.4 million
recorded in the Company's financial statements for book value purposes) and
total stockholders' equity at September 30, 1995 would have been approximately
$37.8 million.
On a pro forma basis after giving effect to the Transactions, earnings would
be insufficient to cover fixed charges by $10.9 million for the nine months
ended September 30, 1995.
The degree to which the Company is leveraged could have important
consequences to holders of the Senior Notes including, but not limited to, the
following: (i) the Company's ability to obtain additional financing in the
future for working capital, capital expenditures, acquisitions, general
corporate or other purposes may be limited; (ii) a substantial portion of the
Company's cash flow from operations will be dedicated to the payment of interest
on, and the principal of, its debt; (iii) the agreements governing the Company's
indebtedness will contain certain restrictive financial and operating covenants
which could limit the Company's ability to compete and expand; and (iv) the
Company's substantial leverage may make it more vulnerable to economic
downturns, limit its ability to withstand competitive pressures and reduce its
flexibility in responding to changing business and economic conditions. Certain
of the Company's competitors currently operate on a less leveraged basis and
have significantly greater operating and financial flexibility than the Company.
If the Company is unable to generate sufficient cash flow to meet its debt
obligations, which could be affected by factors beyond the Company's control,
the Company may be required to renegotiate the terms of the instruments relating
to its indebtedness or to refinance all or a portion of its indebtedness.
However, there can be no assurance that the Company will be able to successfully
renegotiate such terms or refinance its indebtedness, or, if the Company were
able to do so, that the terms available would be favorable to it. In the event
that the Company were unable to refinance its indebtedness or obtain new
14
<PAGE>
financing under these circumstances, the Company likely would have to consider
various other options such as the sale of certain assets to meet its required
debt service. See "Management's Discussion and Analysis of Results of Operations
and Financial Condition -- Liquidity and Capital Resources."
In the event of a default under the Credit Facility, the indebtedness
outstanding at such time may become immediately due and payable which could
result in a default under all of the Company's indebtedness, including the
Senior Notes. The Credit Facility and Old Note Indenture contain, and the Senior
Note Indenture, will contain certain restrictive covenants that, among other
things limit the Company's ability to incur additional indebtedness, create
liens, and make investments and capital expenditures. The Credit Facility
requires the Company to comply with certain financial ratios and tests, under
which the Company will be required to achieve certain financial and operating
results. The lender under the Credit Facility has consented to the Transactions.
See "Description of Certain Indebtedness" and "Description of the Senior Notes."
HOLDING COMPANY STRUCTURE
The Company is a holding company which derives substantially all of its
operating income from its subsidiaries. The Company's subsidiaries will have no
obligation, contingent or otherwise, to pay interest or principal on the
Company's indebtedness or make any funds available to the Company. The Company
must rely upon cash flow from its subsidiaries to generate the funds necessary
to meet its obligations, including the payment of principal of and interest on
the Senior Notes and other indebtedness. The ability of the Company's
subsidiaries to make such payments will be subject to, among other things,
applicable state laws, claims of creditors of the Company's subsidiaries,
including trade creditors, and will generally have priority as to the assets of
such subsidiaries over the claims of the Company and the holders of the
Company's indebtedness, including the Senior Notes. The holders of any
indebtedness of the Company's subsidiaries will be entitled to payment of their
indebtedness prior to the holders of any general unsecured obligations of the
Company, including the Senior Notes and other indebtedness. The Senior Notes are
not secured by any of the assets of the Company or its subsidiaries. Certain
subsidiaries of the Company are, however, jointly and severally obligated under
the Credit Facility. There can be no assurance that the Company will obtain
sufficient funds from its subsidiaries in order to make payments on its
indebtedness, including the Senior Notes. See "Description of the Senior Notes."
COMPETITION
The broadcasting industry has become increasingly competitive in recent
years. The Company's owned and operated television stations and affiliates face
competition for advertising revenue from other Spanish-language and
English-language television broadcasters. The Company's competitors also include
cable television operators, Spanish-language and English-language radio
broadcasters, and other media including newspapers, magazines, movies and other
forms of entertainment. Many of the Company's competitors are better capitalized
and have greater financial resources and flexibility than the Company.
In each of the markets in which the Company owns and operates full-power
stations, except Puerto Rico, the Company's station competes directly with a
full-power Univision station. The Univision stations and the Univision network
affiliates together reach a larger percentage of Hispanic viewers in the U.S.
than the Company's stations and affiliates and have attracted as much as 80% of
the Spanish-language network television viewing audience. Generally, the
competing Univision stations have been operating in their markets longer than
have the Company's stations. In addition, Univision entered into an agreement
with one of its owners, Televisa, to manage the Galavision cable network
("Galavision") and has also obtained an option to acquire Galavision in 1996.
Galavision, which has operated primarily as a Spanish-language cable television
network since 1980 and serves approximately 1.6 million subscribers, also
competes with the Company. Both Televisa and Corporacion Venezolana de
Television, C.A. ("Venevision"), which is also one of Univision's owners, have
entered into long-term contracts to supply Spanish-language programming to the
Univision and Galavision networks. Televisa is the largest supplier of
Spanish-language programs in the world. Through these program license
agreements, Univision has
15
<PAGE>
the right of first refusal for 25 years to air in the U.S. all Spanish-language
programming produced by Televisa and Venevision. These supply contracts
currently provide Univision with a competitive advantage in obtaining
programming originating from Mexico and in targeting Hispanics of Mexican
origin, who account for approximately 64% of the U.S. Hispanic market. The
Company's stations, especially in Puerto Rico and Los Angeles, also face
competition from various independent Spanish-language television stations. See
"Business -- Competition."
The Company also competes with English-language broadcasters for Hispanic
viewers. There can be no assurance that current Spanish-language television
viewers will continue to watch the Company's or any other Spanish-language
broadcasters' programming rather than English-language programming.
THE ACQUISITION
The consummation of the Acquisition, which is anticipated to occur prior to
February 29, 1996, is subject to certain conditions, including receipt of
approval of the Federal Communications Commission (the "FCC") to the transfer of
control of Video 44, the licensee of WSNS. There can be no assurance that the
closing conditions will be satisfied or waived.
The transfer of control application was granted by the FCC on February 2,
1996. The Company presently intends to, though reserves the right not to,
consummate the Acquisition prior to the time such approval becomes "final" (that
is, during the time a third party could file a petition for reconsideration of
such approval or the FCC could on its own motion reconsider its initial approval
of the Acquisition). If any such petition is filed, or if the FCC reconsiders
its initial approval on its own motion, or if the FCC approval is ultimately
appealed to the courts, the FCC may, under certain circumstances, modify or
reverse the approval of the Acquisition. Under these circumstances, the FCC may
impose a variety of remedies, including, among other things, requiring the
Company to divest its interest in WSNS.
If the Acquisition is consummated, management will be required to devote
significant time to the integration of WSNS into the Company. Upon consummation
of the Acquisition, overall management and control of the business and affairs
of Video 44 shall be vested exclusively in a wholly-owned subsidiary of the
Company, subject to certain approval rights of the minority partner with respect
to certain specified major decisions. In addition, the minority partner will be
entitled to a minimum annual preferred distribution from Video 44 and, to the
extent Video 44 is unable to make such distributions, the Company's subsidiaries
that are partners in Video 44 shall contribute additional capital to permit such
payments to be made. See "The Acquisition -- The Purchase Agreement."
In January 1995, Univision acquired an owned and operated station in
Chicago. Since then, Univision's shares of the Chicago Hispanic audience and
advertising revenue have increased, while WSNS's respective shares have
significantly decreased. Although the Company believes that part of WSNS's
market share decrease is attributable to a new audience measurement system in
Chicago, there can be no assurance that the Company's share of the Hispanic
audience in Chicago will not continue to decline. In addition, there can be no
assurance that the Company will successfully integrate WSNS or that the Company
will be able to achieve its anticipated cost savings.
IMPACT OF NEW TECHNOLOGIES
In recent years, the FCC has adopted policies providing for authorization of
new technologies and a more favorable operating environment for certain existing
technologies that have the potential to provide additional competition for
television stations. Further advances in technology such as video compression,
direct broadcast satellites and programming delivered through fiber optic
telephone lines could lower entry barriers for new channels and encourage the
development of increasingly specialized "niche" programming. Each of these
factors could adversely affect the Company's operations. The Company is unable
to predict the effect that technological changes will have on the broadcast
television industry or on the future results of the Company's operations. See
"Business -- Competition" and "-- FCC Regulation."
16
<PAGE>
NETWORK DEPENDENCE ON PROGRAMMING AND DISTRIBUTION SYSTEM
The Spanish-language television market shares for the network and its
stations are dependent upon the Company's ability to produce, acquire and
distribute programming which attracts a significant national audience. If the
Company's programming fails to attract viewers, the Company's ability to attract
advertisers and generate revenues and profits would be impaired. Although the
Company makes significant investments in programming, there can be no assurance
that the Company's programming will achieve or maintain satisfactory viewership
levels in the future.
The Company currently provides programming to 122 broadcast stations and
satellite direct cable affiliates which, including the Chicago Market Area,
represent approximately 38% of the Company's coverage of the U.S. Hispanic
market. The Company provides its affiliates with programming transmitted by the
Telemundo network and in exchange receives the right to sell generally between
50% and 60% of the commercial advertising time available during such
programming. The ability of the Company to cost-effectively renew its
affiliations or attract new affiliates depends in part on the ability of the
Company to provide programming that will attract a satisfactory viewing
audience. The Company also competes with other broadcasters for relationships
with affiliates. Although the Company expects to continue to be able to renew
its affiliation agreements, no assurance can be given that such renewals will be
obtained on a cost-effective basis. No affiliate accounts for more than 3.1% of
the Company's coverage of the U.S. Hispanic market, other than the Company's
Chicago affiliate, in which the Company has agreed to acquire a majority
interest.
The Company broadcasts its programs to its owned and operated stations and
affiliates by means of satellite. Although the Company's satellite lease
agreement provides for the use, subject to availability, of other satellites in
the event of a failure, there can be no assurance that such other satellites
would be available to the Company, or if available, whether the use of such
other satellites could be obtained on favorable terms. The operation of the
satellite is outside the control of the Company and a disruption of the
transmissions could have a material adverse effect on the Company. See "Business
- -- The Telemundo Network and Broadcast Operations" and "The Acquisition."
INDUSTRY AND ECONOMIC CONDITIONS; SEASONALITY
The Company's profitability may be affected by numerous factors, including
changes in audience tastes, priorities of advertisers, new laws and governmental
regulations and policies, changes in broadcast technical requirements,
technological advances, proposals to eliminate the tax deductibility of certain
advertising expenses incurred by advertisers and changes in the willingness of
financial institutions and other lenders to finance television station
acquisitions and operations. The Company cannot predict which, if any, of these
or other factors might have a significant impact on the television broadcasting
industry in the future, nor can it predict what impact, if any, the occurrence
of these or other events might have on the Company's operations.
Historically, advertising in most forms of media has correlated with the
general condition of the economy. Television broadcasters are also exposed to
the general economic conditions of the local regions in which they operate. Due
to the concentration of revenues from WKAQ in Puerto Rico, the Company may be
adversely affected more than other broadcasters by an economic downturn in
Puerto Rico.
Seasonal revenue fluctuations are common in the television broadcasting
industry and the Company's revenue reflects seasonal patterns with respect to
advertiser expenditures. Increased advertising during the holiday season results
in increases in advertising revenue for the fourth quarter, particularly in
Puerto Rico. As a result, the Company experiences seasonal fluctuations in its
revenue to a greater degree than its direct competitors and the broadcasting
industry in general. Because costs are more ratably spread throughout the year,
the impact of this seasonality on operating income may be pronounced. See "--
Concentration of Revenue from WKAQ in Puerto Rico."
17
<PAGE>
CONCENTRATION OF REVENUE FROM WKAQ IN PUERTO RICO
The Company's owned and operated station in Puerto Rico, WKAQ, accounted for
approximately 22.6% of the Company's net commercial air time sales for the year
ended December 31, 1994. A significant decline in the revenue of WKAQ could have
a material adverse effect on the Company's results of operations and cash flow.
See "Management's Discussion and Analysis of Results of Operations and Financial
Condition."
GOVERNMENT REGULATION
The television broadcasting industry is subject to extensive and changing
regulation. Among other things, the Communications Act of 1934, as amended (the
"Communications Act") and FCC rules and policies require that each television
broadcaster must operate in compliance with a license issued by the FCC. Each of
the Company's television stations operates pursuant to one or more licenses
issued by the FCC that expire at different times. The Company must apply to
renew these licenses, and third parties may challenge those applications.
Although the Company has no reason to believe that its licenses will not be
renewed in the ordinary course, there can be no assurance that its licenses will
be renewed.
Congress and the FCC currently have under consideration and may in the
future adopt new laws or modify existing laws and regulations and policies
regarding a wide variety of matters, including the adoption of attribution rules
which would further restrict broadcast station ownership, that could directly or
indirectly adversely affect the ownership and operation of the Company's
broadcast properties, as well as the Company's business strategies. For example,
the repeal of the "must-carry" provisions under the 1992 Cable Act (as defined
below) could have a material adverse effect on the Company.
The adoption of various measures could accelerate the existing trend toward
vertical integration in the media and home entertainment industries and cause
the Company to face more formidable competition in the future. For example, such
measures could include (and, in the case of certain legislation passed by
Congress and awaiting the signature of the President of the United States (the
"Telcom Bill"), do include) the elimination or modification of restrictions on
the offering of multiple network services by the existing major television
networks, the removal or modification of restrictions on the participation by
the regional telephone operating companies in cable television and other
direct-to-home video technologies, and the removal or modification of certain
restrictions on broadcast station ownership. The President has announced his
intention to sign the Telcom Bill into law, but there is no assurance that he
will do so. The Company is unable to predict whether these or other potential
changes in the current regulatory environment could restrict or curtail the
ability of the Company to acquire, operate and dispose of stations or, in
general, to compete profitably with other operators of television stations and
other media properties.
Low-power television stations ("LPTVs") and "translator" stations that
rebroadcast a station's signal operate on a secondary basis and are subject to
displacement by a licensed full-power station and have limited cable carriage
rights under FCC rules. The network's largest LPTV, which is an affiliated
station, represents approximately 2.4% of the Company's coverage of the U.S.
Hispanic market. See "Business -- FCC Regulation."
CHANGE OF CONTROL
In the event of a change of control (as defined in each of the Old Note
Indenture and the Senior Note Indenture), the Company will be required to offer
to purchase all of the outstanding Old Notes and Senior Notes at 101% of the
principal amount of the Old Notes or 101% of the Accreted Value of the Senior
Notes plus any accrued and unpaid interest thereon to the date of purchase.
Events triggering a change of control under the Senior Notes may be different
than events triggering a change of control under the Old Notes. A change of
control under either indenture results in a default under the Credit Facility.
The exercise by the holders of Old Notes or Senior Notes of their respective
rights to require the Company to offer to purchase Old Notes or Senior Notes
upon a change of control could also cause a default under other indebtedness of
the Company, even if the change of control itself does not, because of the
financial effect of such repurchase on the Company. To the extent that change of
control provisions have not been
18
<PAGE>
triggered with respect to one, but not both, of the Old Notes and the Senior
Notes, the ability of the Company to make scheduled payments under notes which
are not repurchased because the change of control provision is not triggered may
be affected by the payment of amounts pursuant to any change of control
provision which has been triggered. The Company's ability to pay cash to any of
the holders of Old Notes or Senior Notes upon a repurchase may be limited by the
Company's then existing capital resources. There can be no assurance that in the
event of a change of control, the Company will have, or will have access to,
sufficient funds or will be contractually permitted under the terms of
outstanding indebtedness to pay the required purchase price for any Old Notes or
Senior Notes. See "Description of the Senior Notes."
OWNERSHIP BY MAJOR STOCKHOLDERS
The Major Stockholders (as defined below) beneficially own an aggregate of
917,930 shares of Series A Common Stock constituting approximately 15.4% of the
Series A Common Stock outstanding and 3,083,154 shares of Series B Common Stock
constituting approximately 76.3% of the Series B Common Stock outstanding and
approximately 40.0% of the total Common Stock outstanding. The Series B Common
Stock is entitled to elect a majority of the Board of Directors of the Company.
The Major Stockholders have entered into a Shareholders Agreement dated as of
December 20, 1994, as amended as of July 20, 1995 (the "Shareholders
Agreement"), pursuant to which each of them has agreed, subject to the
provisions of the Shareholders Agreement, among other things, that all of the
shares of Common Stock owned by each of them will be voted by a voting
committee. As a result, the voting committee is entitled to elect a majority of
the Company's directors (and to vote all shares of Common Stock subject to the
Shareholders Agreement for certain nominees specified by the Major Stockholders)
and this may have the effect of facilitating or making more difficult certain
types of material transactions, including a change of control of the Company.
The Shareholders Agreement (other than provisions relating to certain
shareholder's rights to participate in certain sales of Common Stock by TLMD
Partners II, L.L.C. ("TLMD Partners")) will terminate on the earlier of the date
when no shares of Series B Common Stock are outstanding (which will occur no
later than December 30, 1999) or the date when TLMD Partners ceases to own at
least 245,003 shares of Series B Common Stock. The Shareholders Agreement (other
than such sale participation rights) may also be terminated as of the date
specified by TLMD Partners subject to the receipt of any requisite regulatory
approvals. See "Principal Stockholders."
TELENOTICIAS
On October 16, 1995, Telemundo News Network, Inc. ("TNNI"), a wholly-owned
subsidiary of the Company which holds partnership interests in TeleNoticias,
filed an action in New York Supreme Court, New York County against its partners
to address certain corporate governance issues affecting TeleNoticias. In its
complaint, TNNI asserts a cause of action for breach of a stockholders
agreement, a cause of action for a declaration that TNNI has the right to
nominate the President of TeleNoticias, a cause of action for a declaration that
certain "board" resolutions are invalid, and a cause of action for breach of
fiduciary duty. Certain of the defendants have asserted counterclaims against
TNNI for injunctive and declaratory relief as well as for damages in an
unliquidated amount. In an order issued January 11, 1996, the court denied the
cross motions seeking injunctive relief and directed that all discovery be
completed within 60 days of the date of the order.
In December, 1994, TeleNoticias assumed production of the Company's network
news programs for a six year period at an initial cost of $5 million per year,
increasing by $500,000 each year. If news programming is unavailable from
TeleNoticias, the Company believes that alternative sources of news programming
will be available, although there can be no assurance as to the cost of such
programming.
The Company is required to make cash contributions of up to $10 million
through TeleNoticias' sixth year of operations, which ends on September 16,
2000. The Company has made cash contributions totalling $8.2 million through
December 31, 1995, and anticipates the remaining $1.8 million will be required
during 1996. Losses of $1.3 million in 1994 and $4.6 million for the first nine
months of 1995
19
<PAGE>
were realized on the Company's investment in TeleNoticias and it is expected
that losses will continue. There can be no assurance that once the Company and
its partners have made all required capital contributions to TeleNoticias, that
TeleNoticias will have sufficient capital or operating income to continue its
business in its present form.
The partners of TeleNoticias are engaged in discussions in connection with
seeking a resolution of their disagreements regarding TeleNoticias. Such
discussions have included a number of possible alternatives, including a
resolution of the dispute regarding management of TeleNoticias, a winding up of
the partnership, and a purchase by one or more of the partners of the interests
of the other partners. In connection with these discussions, the Company has had
conversations with a number of organizations with respect to replacing some or
all of the other TeleNoticias partners. The Company does not contemplate
entering into any transaction relating to the replacement of any of the partners
of TeleNoticias if, as a result, the Company would have materially greater
financial commitments to TeleNoticias than it presently has with respect
thereto. The Company believes, but there can be no assurance, that the outcome
of the litigation, or the impact of any restructuring or winding up of
TeleNoticias, will not result in a material adverse effect on the Company or its
ability to acquire quality news programming.
RELIANCE ON KEY PERSONNEL
The Company believes that its success will continue to be dependent upon its
ability to attract and retain skilled managers and other personnel, including
its present officers and network talent. The loss of the services of any of its
key personnel may have a material adverse effect on the operations of the
Company. The Company presently does not maintain any key man life insurance
policies on any of its personnel. The Company generally has employment
agreements with its key personnel which contain non-competition covenants. See
"Management."
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF SENIOR NOTE PRICE
There will be no public market for the Senior Notes, and there can be no
assurance that an active trading market for the Senior Notes will develop or be
sustained. If such a market were to develop, the Senior Notes could trade at
prices that may be higher or lower than their initial offering price depending
upon many factors, including prevailing interest rates, the Company's operating
results and the markets for similar securities. Although the Underwriters have
advised the Company that they currently intend to make a market in the Senior
Notes, they are not obligated to do so and any market making may be discontinued
at any time. Historically, the market for non-investment grade debt has been
subject to disruptions that have caused substantial volatility in the prices of
securities similar to the Senior Notes. There can be no assurance that the
market for the Senior Notes will not be subject to similar disruptions. The
Company does not intend to list the Senior Notes on any national securities
exchange or to arrange for their quotation on Nasdaq.
20
<PAGE>
USE OF PROCEEDS
The gross proceeds of the Offering will be used (i) to consummate the
Acquisition, (ii) to repurchase up to $116.9 million aggregate principal amount
of Old Notes pursuant to the Repurchase Offer commenced on November 27, 1995,
(iii) to pay Consent Fees in connection with the Consent Solicitation (iv) to
pay fees and expenses related to the Transactions and (v) for general corporate
purposes, which may include the repayment of certain amounts outstanding and
related fees under the Credit Facility, but without any permanent reduction. To
the extent that less than all of the Old Notes are purchased in the Repurchase
Offer, the amount of funds required for such purposes will be less and the
proceeds not used to repurchase Old Notes will be used for general corporate
purposes.
Assuming that all of the Old Notes are purchased in the Repurchase Offer and
that all holders of Old Notes submit Consents, the uses of the gross proceeds of
the Offering are expected to be as follows (dollars in thousands):
<TABLE>
<S> <C>
The Acquisition (1)...................................... $ 44,700
Repurchase of the Old Notes (2).......................... 116,889
Consent Fees (3)......................................... 1,169
Transaction fees and expenses (4)........................ 7,000
General corporate purposes and Credit Facility (5)....... 5,242
---------
Total................................................ $ 175,000
---------
---------
</TABLE>
- ------------------------
(1) For a detailed description of the Acquisition, see "The Acquisition."
(2) Represents a payment in connection with the repurchase of all of the
aggregate principal amount of the Old Notes, at 100% of face value,
outstanding prior to the Repurchase Offer. The Old Notes were issued in
connection with the Reorganization. Accrued interest on the Old Notes to the
date of retirement will be paid from the Company's available cash. The Old
Notes bear interest at 10.25% per annum on the aggregate principal amount
outstanding.
(3) Represents a payment equal to 1.0% of the aggregate principal amount of Old
Notes outstanding assuming Consents from all holders of Old Notes in
connection with the Proposed Amendments.
(4) Includes underwriting discount and other fees and expenses in connection
with the Transactions, including costs associated with the Acquisition.
(5) Includes repayment of up to approximately $5.2 million of the approximately
$5.9 million outstanding under the Credit Facility as of December 31, 1995.
The Credit Facility bears interest at the rate of prime plus 1.75%, which
rate was 10.25% per annum as of December 31, 1995.
21
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited capitalization of the Company
as of September 30, 1995, on an actual basis and on a pro forma basis as
adjusted to give effect to the Transactions. See "Use of Proceeds." This table
should be read in conjunction with the detailed information and financial
statements and related notes appearing elsewhere in this Prospectus (dollars in
thousands).
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
------------------------
ACTUAL PRO FORMA
----------- -----------
<S> <C> <C>
Total debt:
Credit Facility (1)............................................... $ 4,700 $ 0
Capital lease obligations (including current portion)............. 7,416 7,416
Old Notes (2)..................................................... 101,639 0
Senior Notes (3).................................................. 0 175,000
----------- -----------
Total debt...................................................... 113,755 182,416
Minority interest (4)............................................... 0 5,340
Stockholders' equity (5)............................................ 54,231 37,812
----------- -----------
Total capitalization............................................ $ 167,986 $ 225,568
----------- -----------
----------- -----------
</TABLE>
- ------------------------
(1) The Company had approximately $5.9 million outstanding under the Credit
Facility as of December 31, 1995. On a pro forma basis, approximately
$700,000 would remain outstanding at December 31, 1995.
(2) The Old Notes were issued for an aggregate principal amount of $116.9
million. The Old Notes were recorded at their fair value on December 31,
1994 of $100.5 million, in conformity with SOP 90-7 (as defined below) based
upon market trading activity at the time of consummation of the
Reorganization.
(3) Net of approximately $18.2 million of original issuance discount.
(4) Represents the 25.5% minority interest that will be outstanding in Video 44.
(5) Reflects an extraordinary loss of approximately $16.4 million as a result of
the early extinguishment of debt relating to the Old Notes.
22
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following presents unaudited pro forma consolidated financial data of
the Company and Video 44 as of and for the nine months ended September 30, 1995
and for the year ended December 31, 1994 which have been derived from the
Company's and Video 44's unaudited financial statements as of and for the nine
months ended September 30, 1995 and from the audited financial statements for
the year ended December 31, 1994 included elsewhere herein. In the opinion of
management, the unaudited financial statements of the Company and of Video 44
have been prepared on the same basis as the audited financial statements and
include all adjustments (consisting of normal recurring accruals only) necessary
to present fairly such information.
The unaudited pro forma consolidated statements of operations data have been
presented as if the Transactions had been effected as of the beginning of each
of the periods presented. The pro forma consolidated balance sheet data have
been presented as if the Transactions had been effected on September 30, 1995.
The Acquisition has been accounted for under the purchase method of accounting.
The pro forma consolidated financial data do not purport to represent what the
Company's results of operations would have been if such transactions had been
effected at the date indicated and do not purport to project results of
operations of the Company in any future period. The pro forma adjustments are
based upon available information and certain assumptions that the Company
believes are reasonable.
On December 30, 1994, the Company consummated the Reorganization. The
unaudited pro forma consolidated financial data for the year ended December 31,
1994 give effect to the Reorganization as if it had occurred as of January 1,
1994.
The information in these tables should be read in conjunction with "Summary
Historical and Pro Forma Consolidated Financial Data," "Selected Historical
Consolidated Financial Data," "Management's Discussion and Analysis of Results
of Operations and Financial Condition" and the Financial Statements and the
notes thereto for both the Company and Video 44 included elsewhere herein.
23
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL PRO FORMA ADJUSTMENTS COMPANY AT
------------------------ ---------------------------------- 100%
COMPANY VIDEO 44 ACQUISITION (A) REFINANCING (C) REPURCHASE
----------- ----------- ---------------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets, other than accounts
receivable.................................. $ 28,335 $ 1,298 $ (967)(b) $ 542(c) $ 29,208
Accounts receivable, net..................... 37,938 3,376 (2,515)(b) -- 38,799
Property & equipment, net.................... 60,086 4,075 689(a) -- 64,850
Other assets................................. 3,392 -- -- 6,000(c) 9,392
Broadcast licenses and other intangible
assets...................................... 90,848 14,707 31,020(a) -- 136,575
----------- ----------- ---------------- ---------------- ------------
Total assets............................. $ 220,599 $ 23,456 $ 28,227 $ 6,542 $ 278,824
----------- ----------- ---------------- ---------------- ------------
----------- ----------- ---------------- ---------------- ------------
<CAPTION>
LIABILITIES AND EQUITY
<S> <C> <C> <C> <C> <C>
Current liabilities (excluding current
portion of Capital Lease Obligations)....... $ 33,820 $ 3,422 $ (2,779)(b) $ 0 $ 34,463
1,000(a) (1,000)(c) --
Credit Facility.............................. 4,700 -- -- (4,700)(c) --
Capital Lease Obligations.................... 7,416 -- -- -- 7,416
Old Notes.................................... 101,639 -- -- (101,639)(c) --
Senior Notes................................. -- -- 44,700(c) 130,300(c) 175,000
Other long-term liabilities.................. 18,793 -- -- -- 18,793
----------- ----------- ---------------- ---------------- ------------
Total liabilities........................ 166,368 3,422 42,921 22,961 235,672
----------- ----------- ---------------- ---------------- ------------
Minority interest............................ -- -- 5,340 -- 5,340
----------- ----------- ---------------- ---------------- ------------
STOCKHOLDERS' EQUITY......................... 54,231 -- -- (16,419)(d) 37,812
PARTNERS' EQUITY............................. -- 20,034 (20,034)(a) -- --
----------- ----------- ---------------- ---------------- ------------
Total equity............................. 54,231 20,034 (20,034) (16,419) 37,812
----------- ----------- ---------------- ---------------- ------------
Total liabilities & equity............... $ 220,599 $ 23,456 $ 28,227 $ 6,542 $ 278,824
----------- ----------- ---------------- ---------------- ------------
----------- ----------- ---------------- ---------------- ------------
</TABLE>
See notes to Unaudited Pro Forma Consolidated Financial Statements.
24
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS PRO FORMA
HISTORICAL ------------------------------- COMPANY AT
--------------------- ACQUISITION 100%
COMPANY VIDEO 44 (A) REFINANCING (C) REPURCHASE
---------- --------- -------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Net revenue.............................. $ 119,848 $ 13,257 $ 133,105
---------- --------- ------------
Direct operating costs................... 59,148 2,934 $ (225)(g) -- 61,857
Selling, general & administrative
expenses other than network and
corporate............................... 25,917 4,241 (130)(g) -- 30,028
Network expenses......................... 20,994 -- 20,994
Corporate expenses....................... 3,345 300 (210)(g) -- 3,435
Depreciation and amortization............ 8,653 1,414 2(h) -- 10,069
---------- --------- -------------- ------------
Total expenses....................... 118,057 8,889 (563) 126,383
---------- --------- -------------- ------------
Operating income......................... 1,791 4,368 563 -- 6,722
Other expense............................ (19) -- -- -- (19)
Interest expense -- net of interest
income.................................. (10,756) (117) -- $ (4,534)(f) (15,407)
Net loss from investment in
TeleNoticias............................ (4,590) -- -- -- (4,590)
---------- --------- -------------- --------------- ------------
Income (loss) before income taxes........ (13,574) 4,251 563 (4,534) (13,294)
Income tax provision (e)................. (2,534) -- (2,534)
Minority interest........................ -- -- (1,913)(i) -- (1,913)
---------- --------- -------------- --------------- ------------
Income (loss) before extraordinary
item.................................... (16,108) 4,251 (1,350) (4,534) (17,741)
Extraordinary gain (loss) --
extinguishment of debt.................. -- -- -- (16,419)(d) (16,419)
---------- --------- -------------- --------------- ------------
Net income (loss)........................ $ (16,108) $ 4,251 $ (1,350) $ (20,953) $ (34,160)
---------- --------- -------------- --------------- ------------
---------- --------- -------------- --------------- ------------
Income (loss) before extraordinary item
per Common Share........................ $ (1.77)
------------
------------
Number of shares used in per share
calculations............................ 10,000
------------
------------
Other Financial Data:
EBITDA (j)............................. $ 10,444 $ 5,782 $ 14,878
---------- --------- ------------
---------- --------- ------------
EBITDA margin.......................... 8.7% 43.6% 11.2%
---------- --------- ------------
---------- --------- ------------
Capital expenditures................... $ 4,274 $ 876 $ 5,150
---------- --------- ------------
---------- --------- ------------
</TABLE>
See notes to Unaudited Pro Forma Consolidated Financial Statements.
25
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS PRO FORMA
HISTORICAL ------------------------------- COMPANY
--------------------- ACQUISITION AT 100%
COMPANY VIDEO 44 (A) REFINANCING(C) REPURCHASE
---------- --------- -------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Net revenue.............................. $ 183,894 $ 16,385 $ 200,279
---------- --------- ------------
Direct operating costs................... 90,914 3,271 $ (300)(g) 93,885
Selling, general & administrative
expenses other than network and
corporate............................... 35,688 4,596 (224)(g) 40,060
Network expenses......................... 28,501 -- 28,501
Corporate expenses....................... 4,811 400 (280)(g) 4,931
Depreciation and amortization............ 10,804 1,852 2,673(h) 15,329
---------- --------- -------------- ------------
Total expenses....................... 170,718 10,119 1,869 182,706
---------- --------- -------------- ------------
Operating income......................... 13,176 6,266 (1,869) 17,573
Other expense............................ (34) -- (34)
Reorganization items..................... 76,255 -- 76,255
Interest expense -- net of interest
income.................................. (645) (415) $ (19,870)(f) (20,930)
Net loss from investment in
TeleNoticias............................ (1,314) -- (1,314)
---------- --------- -------------- --------------- ------------
Income (loss) before income taxes........ 87,438 5,851 (1,869) (19,870) 71,550
Income tax provision (e)................. (3,389) -- (3,389)
Minority interest........................ -- -- (2,550)(i) (2,550)
---------- --------- -------------- --------------- ------------
Income (loss) before extraordinary
item.................................... 84,049 5,851 (4,419) (19,870) 65,611
Extraordinary gain (loss) --
extinguishment of debt.................. 130,482 -- (17,534)(d) 112,948
---------- --------- -------------- --------------- ------------
Net income (loss)........................ $ 214,531 $ 5,851 $ (4,419) $ (37,404) $ 178,559
---------- --------- -------------- --------------- ------------
---------- --------- -------------- --------------- ------------
Other Financial Data:
EBITDA (j)............................. $ 23,980 $ 8,118 $ 30,352
---------- --------- ------------
---------- --------- ------------
EBITDA margin.......................... 13.0% 49.5% 15.2%
---------- --------- ------------
---------- --------- ------------
Capital expenditures................... $ 12,550 $ 176 $ 12,726
---------- --------- ------------
---------- --------- ------------
</TABLE>
See notes to Unaudited Pro Forma Consolidated Financial Statements.
26
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
a) Reflects the acquisition of a 74.5% interest in Video 44 for cash of $44.7
million and $1.0 million of costs and other liabilities associated with the
Acquisition. The allocation of the $45.7 million between property and
equipment and broadcast licenses and other intangible assets is an estimate.
Appraisals will be performed to establish the allocation to be used under
the purchase method of accounting for the 74.5% interest being acquired. The
remaining minority interest will be carried at the proportionate historical
book value after adjusting for certain debt not assumed as part of the
Acquisition. The purchase price has been allocated as follows (dollars in
thousands):
<TABLE>
<CAPTION>
74.5%
HISTORICAL
BOOK VALUE OF
PURCHASE PRICE VIDEO 44'S PRO FORMA
ALLOCATION ASSETS ADJUSTMENT
--------------- -------------- -----------
<S> <C> <C> <C>
Property and equipment......................... $ 3,725 ($ 3,036) $ 689
Broadcast licenses and other intangible
assets........................................ 41,975 (10,955) 31,020
--------------- -------------- -----------
Total.................................... $ 45,700 ($ 13,991) $ 31,709
--------------- -------------- -----------
--------------- -------------- -----------
</TABLE>
b) Eliminates the 74.5% of Video 44's working capital accounts which the
sellers are retaining and $900,000 in debt not assumed by the Company.
c) Reflects the Transactions. Assumes that all Old Notes are repurchased at
100% of their aggregate principal amount (dollars in thousands):
<TABLE>
<S> <C>
Source:
Gross Proceeds from the Senior Notes.................... $ 175,000
---------
---------
Uses:
The Acquisition......................................... $ 44,700
Costs associated with the Acquisition................... 1,000
---------
Total purchase price.................................. 45,700
Repurchase of Old Notes at 100%......................... 116,889
Consent Fee at 1% of Old Notes.......................... 1,169
General corporate purposes; repay portion of Credit
Facility............................................... 5,242
Underwriting fees and other debt issuance costs......... 6,000
---------
$ 175,000
---------
---------
</TABLE>
d) Reflects extraordinary loss on extinguishment of debt (dollars in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1994 1995
---------------- ----------------
<S> <C> <C>
Repurchase of Old Notes at 100%.................. $ 116,889 $ 116,889
Consent Fee...................................... 1,169 1,169
---------------- ----------------
118,058 118,058
Net book value of the Old Notes.................. (100,524) (101,639)
---------------- ----------------
$ 17,534 $ 16,419
---------------- ----------------
---------------- ----------------
</TABLE>
27
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
e) No income tax benefits have been included in the pro forma adjustments
pursuant to FASB Statement #109 "Accounting for Income Taxes" as their
realization cannot be assured.
f) The components of the pro forma interest adjustment are computed as follows
(dollars in thousands):
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1994 1995
-------------- --------------
<S> <C> <C>
Senior Notes................................................. $ 18,956 $ 14,119
Amortization of debt issue costs............................. 600 450
Credit Facility.............................................. 727 545
Capital lease obligations.................................... 647 457
-------------- --------------
Pro forma interest expense............................. 20,930 15,571
Less: Interest Income.................................. 0 (164)
-------------- --------------
Pro forma interest expense, net........................ 20,930 15,407
Company historical interest expense.......................... (645) (10,756)
Video 44 historical interest expense......................... (415) (117)
-------------- --------------
Pro forma adjustment................................... $ 19,870 $ 4,534
-------------- --------------
-------------- --------------
</TABLE>
g) Adjustment to reflect the reduction of management fees and the efficiencies
to be realized by operating WSNS as part of the Company's station group, as
follows (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1994 1995
--------------- -----------------
<S> <C> <C>
Management fees.............................................. $ 280 $ 210
Integration efficiencies..................................... 524 355
----- -----
$ 804 $ 565
----- -----
----- -----
Allocated as follows:
Direct operating costs..................................... 300 225
Selling, general and administrative expenses............... 224 130
Corporate expenses......................................... 280 210
----- -----
$ 804 $ 565
----- -----
----- -----
</TABLE>
h) Reflects the impact on depreciation and amortization (i) from the
application of the purchase method of accounting for the Acquisition and
(ii) in the case of 1994, the assumption that the Reorganization had been
consummated and "fresh-start" reporting had been implemented at January 1,
1994. The impact of depreciation and amortization is summarized as follows
(dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
CLASSIFICATION 1994 1995
- ------------------------------------------------------------- --------------- ---------------
<S> <C> <C>
Property and equipment....................................... $ 670 $ 464
Intangible assets -- Reorganization.......................... 2,578 0
Intangible assets -- Video 44................................ 1,277 952
------- -------
4,525 1,416
Historical Depreciation of Video 44.......................... (1,852) (1,414)
------- -------
$ 2,673 $ 2
------- -------
------- -------
</TABLE>
i) Reflects minority partner interest which is the "minimum annual preferred
distribution" (see "The Acquisition").
j) See footnote (4) in "Summary Historical and Pro Forma Consolidated Financial
Data."
28
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following presents selected historical consolidated financial data of
the Company for the five years ended December 31, 1994, which have been derived
from the Company's audited consolidated financial statements. On December 30,
1994, the Company consummated its financial restructuring pursuant to the
Reorganization. The periods prior to the Reorganization are presented on a
historical cost basis without giving effect to the Reorganization. The term
"Predecessor" refers to the Company prior to emergence from Reorganization. The
historical consolidated financial data of the Company for the nine months ended
September 30, 1994 and 1995 have been derived from the Company's unaudited
consolidated financial statements which, in the opinion of management of the
Company, have been prepared on the same basis as the audited consolidated
financial statements and include all adjustments (consisting of normal recurring
accruals only) necessary to present fairly such information.
The information in this table should be read in conjunction with "Summary
Historical and Pro Forma Consolidated Financial Data," "Management's Discussion
and Analysis of Results of Operations and Financial Condition" and the
Consolidated Financial Statements and the notes thereto for the Company included
elsewhere herein.
<TABLE>
<CAPTION>
PREDECESSOR
------------------------------------------------------------------
-----------
<S> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
----------------------------------------------------- ------------------------
1990 1991 1992 1993 1994 1994 1995
--------- --------- --------- --------- --------- ----------- -----------
STATEMENT OF OPERATIONS DATA:
Net revenue..................... $ 127,831 $ 134,258 $ 153,572 $ 177,809 $ 183,894 $ 131,807 $ 119,848
--------- --------- --------- --------- --------- ----------- -----------
Costs and expenses:
Direct operating costs........ 62,369 66,788 71,211 83,166 90,914 68,734 59,148
Selling, general &
administrative expenses other
than network and corporate... 31,133 32,095 33,225 34,191 35,688 27,107 25,917
Network expenses.............. 13,544 15,934 21,026 26,167 28,501 21,822 20,994
Corporate expenses............ 6,151 6,230 6,772 6,219 4,811 3,885 3,345
Depreciation and
amortization................. 15,579 9,433 10,515 11,469 10,804 7,899 8,653
Write-off of broadcast
licenses..................... 0 245,225 0 0 0 0 0
--------- --------- --------- --------- --------- ----------- -----------
Total expenses.............. 128,776 375,705 142,749 161,212 170,718 129,447 118,057
--------- --------- --------- --------- --------- ----------- -----------
Operating income (loss)......... (945) (241,447) 10,823 16,597 13,176 2,360 1,791
Other income (expense).......... 0 0 1,438 (351) (34) (20) (19)
Reorganization items............ 0 0 0 (2,543) 76,255 (4,250) 0
Interest expense -- net of
interest income................ (33,798) (31,534) (35,739) (24,411) (645) (487) (10,756)
Net loss from investment in
TeleNoticias................... 0 0 0 0 (1,314) 0 (4,590)
--------- --------- --------- --------- --------- ----------- -----------
Income (loss) before income
taxes.......................... (34,743) (272,981) (23,478) (10,708) 87,438 (2,397) (13,574)
Income tax provision............ (3,075) (3,065) (3,265) (3,351) (3,389) (2,575) (2,534)
--------- --------- --------- --------- --------- ----------- -----------
Income (loss) before
extraordinary item............. (37,818) (276,046) (26,743) (14,059) 84,049 (4,972) (16,108)
Extraordinary gain --
extinguishment of debt......... 25,871 1,045 0 0 130,482 0 0
--------- --------- --------- --------- --------- ----------- -----------
Net income (loss)............... $ (11,947) $(275,001) $ (26,743) $ (14,059) $ 214,531 $ (4,972) $ (16,108)
--------- --------- --------- --------- --------- ----------- -----------
--------- --------- --------- --------- --------- ----------- -----------
Income (loss) before
extraordinary item per Common
Share.......................... $ * $ * $ * $ * $ * $ * $ (1.61)
--------- --------- --------- --------- --------- ----------- -----------
--------- --------- --------- --------- --------- ----------- -----------
Number of shares used in per
share calculations............. * * * * * * 10,000
--------- --------- --------- --------- --------- ----------- -----------
--------- --------- --------- --------- --------- ----------- -----------
Ratio of earnings to fixed
charges (1).................... * * * * * * --
--------- --------- --------- --------- --------- ----------- -----------
--------- --------- --------- --------- --------- ----------- -----------
OTHER FINANCIAL DATA:
EBITDA (2)...................... $ 14,634 $ 13,211 $ 21,338 $ 28,066 $ 23,980 $ 10,259 $ 10,444
EBITDA margin................... 11.4% 9.8% 13.9% 15.8% 13.0% 7.8% 8.7%
Capital expenditures............ $ 6,244 $ 6,059 $ 3,992 $ 8,485 $ 12,550 $ 9,688 $ 4,274
BALANCE SHEET DATA (AT END OF
PERIOD):
Total assets.................... $ 398,775 $ 149,044 $ 148,564 $ 169,657 $ 232,024 $ 160,026 $ 220,599
Working capital................. $ 36,252 $ 38,795 $ 51,657 $ 65,691 $ 32,325 $ 47,017 $ 31,844
Total debt...................... $ 243,195 $ 267,827 $ 304,183 $ 335,207 $ 108,553 $ 327,746 $ 113,755
Stockholders' equity
(deficiency)................... $ 100,987 $(174,014) $(200,757) $(214,816) $ 70,000 $ (219,788 ) $ 54,231
</TABLE>
- ------------------------
(1) See footnote (3) in "Summary Historical and Pro Forma Consolidated
Financial Data."
(2) See footnote (4) in "Summary Historical and Pro Forma Consolidated
Financial Data."
* As a result of the effects of the Reorganization, net loss per share,
number of shares used in per share calculation and ratio of earnings to
fixed charges are not applicable for 1994 and prior periods.
29
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
GENERAL
The following discussion and analysis of results of operations and financial
condition should be read in conjunction with the Company's consolidated
financial statements and related notes.
On December 30, 1994, Telemundo consummated its financial restructuring
through the Reorganization. Pursuant to the provisions of the American Institute
of Certified Public Accountants Statement of Position 90-7 entitled "Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-7"),
the Company adjusted its assets and liabilities to their estimated fair values
upon consummation of the Reorganization. The adjustments to reflect the
consummation of the Reorganization, including the gain on debt discharge and the
adjustment to record assets and liabilities at their fair values, have been
reflected in the accompanying financial statements. The balance sheet at
December 31, 1993 is presented on a historical cost basis without giving effect
to the Reorganization. Therefore, the Company's consolidated balance sheet as of
December 31, 1994 is generally not comparable to prior periods. The term
"Predecessor" refers to the Company prior to the Reorganization.
Seasonal revenue fluctuations are common in the television broadcasting
industry and the Company's revenue reflects seasonal patterns with respect to
advertiser expenditures. Increased advertising during the holiday season results
in increases in advertising revenue for the fourth quarter, particularly in
Puerto Rico. As a result, the Company experiences seasonal fluctuations to a
greater degree than its direct competitors and the broadcasting industry in
general. Because costs are more ratably spread throughout the year, the impact
of this seasonality on operating income is more pronounced.
RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
Net revenue for the three and nine months ended September 30, 1995 as
compared to the corresponding periods of 1994 were as follows (dollars in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
----------------------------- ------------------------------
PREDECESSOR PREDECESSOR
1994 1995 CHANGE 1994 1995 CHANGE
----------- ------- ------ ----------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Net Commercial Air Time:
Continental U.S.:
Network and National
Spot................ $18,713 $16,099 (14)% $ 59,291 $ 48,768 (18)%
Local................ 11,165 9,403 (16)% 32,631 27,801 (15)%
----------- ------- ----------- --------
29,878 25,502 (15)% 91,922 76,569 (17)%
Puerto Rico............ 8,954 9,364 5% 24,186 25,008 3%
----------- ------- ----------- --------
38,832 34,866 (10)% 116,108 101,577 (13)%
Other Revenue............ 5,907 6,547 11% 15,699 18,271 16%
----------- ------- ----------- --------
Net Revenue........ $44,739 $41,413 (7)% $131,807 $119,848 (9)%
----------- ------- ----------- --------
----------- ------- ----------- --------
</TABLE>
The decrease in U.S. commercial air time revenue for the three and nine
month periods from the comparable periods of the prior year is the result of the
impact of an overall decline in audience share throughout 1994, which continued
through February 1995. A change in audience share typically has a delayed impact
on revenue. The impact of the decline in audience share was in part offset by
the growth in the overall Spanish-language television advertising market. In
March 1995, the Company's President and Chief Executive Officer resigned and a
new President and Chief Executive Officer was elected. In addition, the network
hired a new Executive Vice President for Programming and Production. To
counteract the audience share decline, the Company's new management has
implemented several measures, including rearranging the Company's network
program schedule, introducing new programs, and
30
<PAGE>
forming a Los Angeles-based production unit that began producing certain new
network programs in late April. The Company expects that these measures will
address specifically the interests and culture of the largest cross-section of
Hispanics in the United States.
Reflective of these initiatives, the Company's share of the Spanish-language
network television audience increased from 20% in February 1995 to 26% in
September 1995. The share of the Spanish-language network television audience
was 27% in September 1994. As a result of the delay noted above, the full impact
of the changes in audience share will not be reflected in revenue in 1995.
The decline in local revenue for the three and nine months is the result of
the ratings decline, which most significantly impacted KVEA (Los Angeles).
The increase in commercial air time revenue in Puerto Rico is the result of
WKAQ's dominant audience share in a growing market.
Other revenue increased for the three and nine month periods primarily due
to increased sales of blocks of broadcast time during non-network programming
hours to independent programmers ('block time programmers"), offset in part by a
decrease in international program sales.
Direct operating costs decreased by $4.1 million, or 18%, and by $9.6
million, or 14%, for the three and nine month periods ended September 30, 1995,
respectively, from the corresponding periods of the prior year. A reduction in
the cost of programming in certain time periods, including network news,
primarily accounted for the decrease.
Network and corporate expenses, which represent costs associated with the
network operations center as well as sales, marketing and other network and
corporate costs not allocated to specific television stations, decreased by
$907,000, or 11%, and by $1.4 million, or 5%, respectively, from the
corresponding three and nine month periods of the prior year. The decrease
primarily reflects the implementation of certain cost saving measures including
staff reductions in response to the decline in revenue, offset in part by
contracted increases in the cost of the Nielsen national Hispanic television
ratings service.
Interest expense-net for the three and nine months ended September 30, 1995
totaled $3.6 million and $10.8 million, respectively, as compared to $163,000
and $487,000, respectively, for the corresponding periods of the prior year.
Interest expense during the three and nine months ended September 30, 1995
primarily represents interest accrued on the Company's Old Notes and is offset
by $54,000 and $164,000 of interest income. Interest was not accrued on the
Company's public indebtedness during the 1994 periods because the Company was in
reorganization proceedings. Interest income for the three and nine month periods
ended September 30, 1994 was $170,000 and $677,000, respectively, and was offset
against reorganization items.
The Company is in a net operating loss position for federal income tax
purposes, and therefore no federal tax benefit was recognized for the periods.
The income tax provision recorded in all periods relates to WKAQ, which is taxed
separately under Puerto Rico income tax law, withholding taxes related to
intercompany interest, and certain state and local taxes. The Company's use of
net operating loss carry forwards is significantly limited due to certain
restrictions imposed by Section 382 of the Internal Revenue Code.
Equity in net loss from TeleNoticias of $1.5 million and $4.6 million
represents primarily the Company's 42% share of TeleNoticias' net loss for the
three and nine months ended September 30, 1995.
31
<PAGE>
FISCAL YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
Net revenue for each of the three years in the period ended December 31,
1994 was as follows (dollars in thousands):
<TABLE>
<CAPTION>
PREDECESSOR
-------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31 DECEMBER 31
1992 CHANGE 1993 CHANGE 1994
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net Commercial Air Time:
Continental U.S.:
Network and National Spot.................... $ 58,166 34% $ 77,953 5% $ 82,211
Local........................................ 41,050 12% 46,017 (3)% 44,563
------------- ------------- -------------
99,216 25% 123,970 2% 126,774
Puerto Rico.................................... 39,159 (1)% 38,711 (4)% 37,014
------------- ------------- -------------
138,375 18% 162,681 1% 163,788
Other Revenue.................................... 15,197 --% 15,128 33% 20,106
------------- ------------- -------------
Net Revenue................................ $ 153,572 16% $ 177,809 3% $ 183,894
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The increase in network and national spot revenue in 1994 is the result of
an increase in advertising expenditures in the overall marketplace, offset by
the Company receiving a smaller share of such expenditures as a result of a
decline in audience share. The increase in network and national spot revenue
during 1993 was the result of an increase in the Company's share of advertising
expenditures by existing advertisers and the attraction of new advertisers.
The decrease in local commercial air time revenue in 1994 is due primarily
to a decrease at KVEA (Los Angeles), which is related to the ratings decline,
partially offset by an increase at WSCV (Miami). The 1993 increase reflected
growth in revenue primarily at WSCV (Miami) and improved ratings in key time
periods in Miami and New York.
Commercial air time revenue at WKAQ (Puerto Rico) decreased 4% in 1994 and
1% in 1993 as a result of a slight decline in ratings.
Other revenue increased 33% during 1994 due to increases in sales of blocks
of broadcast time to block time programmers in both the U.S. and Puerto Rico.
Operating expenses, excluding network and corporate expenses and
depreciation and amortization, increased $9.2 million or 8% in 1994 and $12.9
million or 12% in 1993. These increases reflected the Company's development and
production of its own network news programs from May 1993 to November 1994.
Beginning December 1994, TeleNoticias assumed production of the Company's
network news programs.
Network expenses, which represent costs associated with the network
operations center as well as sales, marketing, and other network costs not
allocated to specific television stations, increased 9% and 24% for 1994 and
1993, respectively, primarily reflecting the operating costs associated with the
expanded levels of production and the contracted increases in the cost of the
Nielsen national Hispanic television ratings service. The rate of growth of
operating and network expenses decreased during the second half of 1994 (and
such expenses declined during the fourth quarter of 1994 as compared to the
fourth quarter of 1993), as the Company implemented certain cost saving measures
in response to the 1994 decline in revenue growth.
Corporate expenses decreased by 23% and 8% for 1994 and 1993, respectively,
primarily due to the rent and other savings associated with the relocation of
the Company's headquarters to Miami.
Other expenses for the year ended December 31, 1993 represents $1.1 million
of financial advisory and legal costs associated with the financial
restructuring prior to July 30, 1993, the date the Company
32
<PAGE>
consented to the entry of an order for relief under Chapter 11 of the Bankruptcy
Code, partially offset by the reversal of a $750,000 liability which was no
longer required. Other income of $1.4 million for the year ended December 31,
1992 consists primarily of the net effect of the reversal of $4.3 million of
liabilities provided at the date of acquisition of the Company's predecessor
which were no longer required, offset by the payment of $3.0 million for
financial advisory and legal costs in conjunction with the financial
restructuring. All costs associated with the Reorganization incurred subsequent
to July 29, 1993 are included in the caption "reorganization items" on the
consolidated statements of operations. As of December 31, 1994, the Company
completed its reorganization to which the following nonrecurring income and
expense items relate:
(i) As a result of the application of "fresh start" reporting upon
emergence from bankruptcy, the Company adjusted its assets and liabilities
to their estimated fair value as of December 30, 1994 pursuant to the
provisions of SOP 90-7. The resulting increase in the Company's net assets
of $86.9 million is included in reorganization items in the consolidated
statement of operations for the year ended December 31, 1994.
(ii) In accordance with the provisions of SOP 90-7, the legal,
professional and other costs and expenses related to the reorganization
totalling $11.6 million are included in reorganization items in the
consolidated statement of operations for the year ended December 31, 1994.
(iii) Also pursuant to SOP 90-7, included in reorganization items in the
consolidated statement of operations for the year ended December 31, 1994 is
interest income of $967,000.
(iv) An extraordinary gain from debt forgiveness of $130.5 million is
reported in the consolidated statement of operations for the year ended
December 31, 1994, which represents the total amount of liabilities
discharged in the reorganization, including accrued interest and unamortized
discount, reduced by the amount of distributions to holders of such
liabilities. The distributions included cash, new debt, shares of common
stock and warrants to purchase common stock.
Reorganization items of $2.5 million for 1993 are items associated with the
Chapter 11 proceedings incurred from July 30, 1993 and include $1.8 million for
financial advisory and legal fees, an accrual of $1.0 million for relocation,
severance and other costs associated with the reorganization, a $90,000 benefit
related to the write-off of various assets and liabilities in conjunction with
the renegotiation of certain leases, and $235,000 of interest income earned on
cash balances that would have otherwise been used to make scheduled principal
and interest payments on debt in default and to pay prepetition liabilities.
Interest expense for 1994 totalled $645,000 as compared to $25.0 million and
$37.0 million for 1993 and 1992, respectively. Interest expense has been accrued
through June 8, 1993. Additional interest expense of $39.4 million and $21.3
million would have been recorded for 1994 and 1993, respectively, if an
involuntary petition had not been filed. During 1993, the Company received
notification declaring due and payable in full its 12% junior subordinated
discount debentures as a result of defaults under the indenture agreement with
the trustee. Accordingly, included in interest expense for 1993 is $7.1 million
representing the additional interest expense to adjust the debentures to their
full face value on the consolidated balance sheet.
Interest income of $967,000 for 1994 and interest income from the period
July 30, 1993 to December 31, 1993 totalling $235,000 is included in
reorganization items on the consolidated statements of operations. Interest
income was $554,000 for the period from January 1, 1993 through July 29, 1993,
as compared to $1.3 million for the year ended December 31, 1992. The decrease
in interest income in 1993 from 1992 is due to lower rates of interest earned on
invested cash and the maturation of a note receivable in the third quarter of
1992 that was earning interest at a higher rate than the reinvested cash.
Equity in net loss from TeleNoticias of $1.3 million for 1994 represents the
Company's 42% share of TeleNoticias' net loss.
33
<PAGE>
The income tax provision recorded in all periods relates to WKAQ, which is
taxed separately under Puerto Rico income tax regulations, withholding taxes
related to intercompany interest, and certain federal, state and local taxes.
The Company was liable for $110,000 in U.S. federal and state taxes for 1994 as
a result of the alternative minimum tax. The utilization of net operating loss
carryforwards are subject to certain limitations imposed by Section 382 of the
Internal Revenue Code and their use will be significantly limited each year
subsequent to December 31, 1994.
LIQUIDITY AND SOURCES OF CAPITAL
The Company's cash flow provided by operating activities was $13.5 million
for the nine months ended September 30, 1995 as compared to $7.1 million for the
corresponding period of 1994. The increase is due principally to changes in
asset and liability accounts, including a greater decrease of accounts
receivable and lower net additions for television programming in the current
period.
The Company had working capital of $31.8 million at September 30, 1995.
Capital expenditures of approximately $4.3 million were made during first
nine months of 1995 for the general replacement and upgrading of equipment at
all stations. The Company estimates that capital expenditures of approximately
$2.3 million were made during the remainder of 1995 for the general replacement
and upgrading of equipment and modifications of facilities. Payments under the
Company's capital lease obligations are primarily for its satellite transponder.
The Company's principal sources of liquidity are cash from operations and
the Credit Facility. The Credit Facility provides for borrowings of up to $20
million, subject to an accounts receivable borrowing base, which was maintained
at September 30, 1995. At December 31, 1995, $5.9 million was outstanding under
the Credit Facility.
The Company owns a 42% interest in TeleNoticias and is required to make cash
contributions of up to $10.0 million through TeleNoticias' sixth year of
operations. The Company has made cash contributions totalling $8.2 million
through December 31, 1995 (which includes $5.4 million contributed in 1994) and
anticipates the remaining $1.8 million will be required during 1996. Commencing
December 1994, TeleNoticias assumed production of the Company's network news
programs for a six year period at an initial cost of $5.0 million per year,
increasing by $500,000 each year. In addition, the Company provides certain
services to TeleNoticias including the use of a news studio in the Company's
network operations center. The net loss from the Company's investment in
TeleNoticias includes depreciation and amortization of $192,000 and $528,000,
for the three and nine months ended September 30, 1995, respectively.
In March 1995, the Company settled litigation brought against the Company's
retirement and savings plan. The Company paid the settlement amount of
approximately $2.3 million on June 29, 1995 on behalf of the plan, which amount
was accrued for at December 31, 1994. See "Business -- Litigation."
The Credit Facility and the indentures governing the Old Notes and the
Senior Notes contain certain restrictive covenants that, among other things
limit the Company's ability to incur additional indebtedness, create liens, and
make investments and capital expenditures. In the absence of the adoption of the
Proposed Amendments, the Company will continue to be bound by the more
restrictive covenants of the Old Note Indenture. These restrictions may limit
the Company's ability to respond to opportunities or changes in the business.
See "Description of Certain Indebtedness" and "Description of Senior Notes."
The Company intends to fund the Acquisition and the Refinancing with
proceeds from the Offering. As a result, the Company is adding approximately $69
million in total debt to its capitalization. The Company anticipates that it
will have sufficient resources available to finance its operations and satisfy
its debt service requirements for the foreseeable future.
34
<PAGE>
BUSINESS
INTRODUCTION
Telemundo is one of two Spanish-language television broadcast networks in
the United States. The network provides programming 24-hours per day to its
owned and operated stations and affiliates, which serve 55 markets in the U.S.,
including the 32 largest Hispanic markets, and reach approximately 85% of all
U.S. Hispanic households. Hispanics currently constitute approximately 10% of
the U.S. population, or 27 million people, according to the U.S. Census Bureau,
which also projects Hispanics to be the largest minority group in the United
States by the year 2010. The Company also owns and operates the leading
full-power television station and related production facilities in Puerto Rico.
For the twelve months ended September 30, 1995, pro forma revenue and EBITDA for
the Company were $189.7 million and $30.2 million, respectively.
Except for the historical information contained herein, certain matters
discussed herein are forward looking statements that involve risks and
uncertainties, including those associated with the availability of programming,
the impact of competition, the integration of new operations and other risks
detailed from time to time in the Company's Securities and Exchange Commission
reports.
HISTORY OF SPANISH-LANGUAGE TELEVISION
In 1951, the first weekly Spanish-language television entertainment show in
the U.S. was broadcast by a station in San Antonio, Texas. By 1955, another
station in San Antonio was airing more than 50% of its programming in Spanish.
Responding to the growth of the U.S. Hispanic population, from an estimated
4.0 million in 1950 to an estimated 6.9 million in 1960, Spanish International
Network ("SIN"), the predecessor of Univision, was founded in 1961. Using the
station in San Antonio and programming supplied by Mexico based Televisa as its
foundation, the network continued to add owned and operated stations and
affiliates in key Hispanic markets over the next 25 years. In 1979, SIN created
Galavision, the first Spanish-language cable network in the U.S.
To serve the growing Hispanic market and provide an alternative to SIN,
independent Spanish-language stations were launched in major markets. In 1985,
the founders of what was to become Telemundo created KVEA, the second
Spanish-language station in Los Angeles.
Based on the success of KVEA and the compelling characteristics of the U.S.
Hispanic market, which had grown to an estimated 18.0 million people by 1986,
the Telemundo network was established in January 1987 with owned and operated
stations in the Los Angeles, Miami and New York Market Areas and other
independent Spanish-language stations joining as affiliates.
By 1988, recognizing the importance of offering high quality programming
that was relevant to Hispanics in the U.S., Telemundo and Univision began
producing the first programs specifically developed for the U.S. Hispanic
audience employing successful English-language televison formats.
At the end of 1992, Telemundo, Univision and Nielsen developed the Nielsen
Hispanic Television Index, a people-meter-based television ratings service for
Spanish-language television. This service provided the first broadly accepted
information about the Spanish-language television audience and was instrumental
in persuading many major general market advertisers and their agencies of the
importance of using Spanish-language television to reach the expanding Hispanic
market.
Upon the consummation of the acquisition of a majority interest of WSNS,
Telemundo will own and operate full-power Spanish-language television stations
in the seven largest Hispanic Market Areas in the United States, which along
with the Company's affiliates, now reach 85% of all U.S. Hispanic households.
35
<PAGE>
The development of Spanish-language television has been the result of the
significant growth of the U.S. Hispanic population, Hispanics' retention of the
Spanish language and resulting reliance on Spanish-language media for news,
information and entertainment, and advertisers' increasing awareness of the
market and its potential.
HISPANIC MARKET OVERVIEW
MARKET DEMOGRAPHICS
Hispanics are one of the fastest growing segments of the U.S. population.
According to the U.S. Census Bureau the Hispanic population has grown from an
estimated 14.6 million people, or 6.4% of the U.S. population in 1980, to 27
million or 10% in 1995. The Hispanic population in the U.S., the fifth largest
in the world, is growing at approximately five times the rate of the
non-Hispanic U.S. population. By the year 2010 Hispanics are projected by the
U.S. Census Bureau to account for approximately 13.5% of the total population of
the U.S. and would be the country's largest minority group.
The Hispanic population in the United States is highly concentrated, with
approximately 57% of the population residing in the top ten Hispanic markets. In
markets such as Los Angeles and Miami, the Hispanic population represents over a
third of the total population. In addition, Hispanic households in the United
States are also generally larger than non-Hispanic households, averaging 3.7
persons compared to 2.7 persons for all U.S. households. The Hispanic population
is also younger, with an average age of 26.2 years compared to 34.3 years for
the entire population, and spends a greater percentage of total household income
on consumer products than non-Hispanic households.
IMPORTANCE OF SPANISH LANGUAGE MEDIA, ESPECIALLY TELEVISION
The Company believes that a distinguishing characteristic of the Hispanic
market is that Hispanics tend to retain Spanish as their dominant or only
language. The 1995 Nielsen Enumeration Study indicates that 49% of Hispanic
households speak mainly or exclusively Spanish. Consequently, many Hispanics
rely on Spanish language media, as an important, and often the exclusive, source
of news and information as well as entertainment. Over 80% of Hispanic
households view Spanish-language television, and aggregate viewing of
Spanish-language television increased by approximately 20% for the quarter ended
September 30, 1995 as compared with the quarter ended September 30, 1993. As a
result, the Company believes that major advertisers such as The Procter & Gamble
Co., AT&T Corp. and Sears, Roebuck & Co. have found that Spanish language
television advertising is a more cost-efficient means to target this growing
audience than English-language broadcast media.
ADVERTISING MARKET
The annual purchasing power of Hispanics is approximately $200 billion. With
the continuing growth of the Hispanic market, advertisers have substantially
increased their use of Spanish-language media, particularly television.
According to HISPANIC BUSINESS MAGAZINE, an estimated $953 million of total
advertising expenditures were directed towards Spanish-language media in 1994,
representing a 15% increase from 1993, and an estimated $1.1 billion of total
advertising expenditures were directed towards Spanish-language media in 1995,
representing an 11% increase from 1994. Approximately half of these expenditures
were for Spanish-language television advertising. Despite the rapid growth,
advertising expenditures directed to the Hispanic television market still
represent less than 1.7% of all television advertising in the United States.
Based on Nielsen data, however, the Company estimates that approximately 4% of
total television viewing is of Spanish-language television. The Company believes
that this disparity will narrow as advertisers continue to increase their
advertising expenditures on Spanish-language television.
Over the last five years, the ten largest advertisers in Spanish-language
media (based on expenditures) have significantly increased their
Spanish-language advertising. Management believes that advertising should
continue to grow significantly as new advertisers enter the market and existing
advertisers increase the percentage of their budgets directed to
Spanish-language television. The Company also believes that it is well
positioned to attract a significant percentage of future increases in television
advertising spending targeted to the Hispanic community.
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BUSINESS STRATEGY
The Company's management team, led by Mr. Hernandez, has aggressively
pursued a number of strategies aimed at improving the profitability of the
Company. The Company believes that these strategies have contributed to the
improved results of operations experienced in the second half of 1995 and to the
Company's achievement of a 27% share of the Spanish-language network television
audience in December 1995.
INCREASING SHARE OF AUDIENCE THROUGH ENHANCED NETWORK PROGRAMMING
In March 1995, the network hired a new Executive Vice President for
Programming and Production and immediately implemented several measures aimed at
increasing the Company's audience share. Specifically, the Company rearranged
its prime time schedule to compete more effectively against programming offered
by the competition. The Company also added production capability in Los Angeles
to its production capability in Miami, enabling Telemundo to produce programs
which target U.S. Hispanics of Mexican origin. While the Company produces
approximately 44% of its network programming in its U.S. production facilities,
it also acquires programs from outside producers to provide a balanced program
lineup which will appeal to the greatest number of Hispanic viewers in the U.S.
The Company is exploring opportunities to co-produce programming with other
producers in Mexico and other Latin American countries.
The Company believes that its ability to produce as well as acquire
programming will allow it to increase its share of the Spanish-language
television audience while controlling its overall programming expenses. See "--
Reducing and Controlling Operating Expenses."
INCREASING REVENUE THROUGH ENHANCED SALES AND MARKETING EFFORTS
The Company devotes significant resources towards providing advertisers with
the data needed to understand better the purchasing habits and preferences of
the Hispanic market. At the network, as well as at each owned and operated
full-power station, the sales and marketing forces work closely with their
clients to increase the effectiveness of specific advertising campaigns and to
increase advertising spending directed to the Hispanic market and the Company.
The Company's sales force has extensive experience in both the general
market and Spanish-language media businesses. With this diverse background, the
sales force is able to create and implement fully integrated and specifically
targeted marketing campaigns for its clients. Since it produces a significant
amount of its own programming, Telemundo is able to offer its advertising
clients opportunities to integrate their products into particular programs and
develop major marketing events featuring these programs, the network talent and
the clients' products. The Company's top network advertisers include The Procter
& Gamble Co., AT&T Corp., MCI Communications Corp., Sears, Roebuck & Co., Ford
Motor Co., Western Union, The Coca-Cola Company and Sprint Corp.
REDUCING AND CONTROLLING OPERATING EXPENSES
The Company has reduced its operating expenses before depreciation and
amortization by $12.1 million, or 10%, for the nine months ended September 30,
1995 from the comparable period of the prior year. Over $8.4 million of these
reductions have been achieved through the lowering of program acquisition and
production costs. For example, the Company's decision to purchase novelas from
Latin American program suppliers rather than produce such programs itself, will
result in a reduction of more than 50% in the cost of the Company's prime time
novelas for 1995. Other significant cost saving measures included the relocation
of its corporate headquarters and the reduction of employee staff levels by
approximately 7%. After the consummation of the Acquisition, the Company
believes that it will realize cost savings at WSNS through efficiencies gained
by integrating WSNS into the Telemundo owned and operated station group. The
Company intends to continue to closely monitor and identify cost saving measures
throughout its operations.
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BUILDING A STRONGER LOCAL PRESENCE
Local news presence and involvement in community events are important
elements in the Company's strategy for each of its owned and operated stations
to achieve a distinct local identity, strengthen audience loyalty and increase
revenue. The Company invites its viewers to be part of its programming efforts
and to participate along with its stations in community events and other
outreach programs. The Company sponsors local community events such as "Calle
Ocho" in Miami, "Cinco de Mayo" in Los Angeles and the "Hispanic Day Parade" in
New York and has developed an award winning public information campaign, "De
Padres a Hijos" ("From Parents to Children"). The campaign awards annual
scholarships for Hispanic students and features nationally televised vignettes
on important issues in education. Awards are granted both on a national and
local level with all Telemundo stations participating in selecting recipients in
their respective markets.
CAPITALIZING ON DOMINANT MARKET POSITION IN PUERTO RICO
The Company's station in Puerto Rico, WKAQ, is the market leader in audience
share and revenue. Programming produced specifically for that market, in WKAQ's
own production facilities, has consistently ranked among the top rated programs
in Puerto Rico. In December 1995, WKAQ had 8 of the top 10 shows in the market
and a 33% share of the overall audience, including a 36% share in the prime time
period. WKAQ has also recently changed its affiliate covering the western side
of the island, resulting in what the Company believes is better coverage on a
more cost effective basis.
Capitalizing on its strong ratings, production capabilities, association
with most major entertainment events in Puerto Rico and aggressive sales and
marketing efforts, management believes that WKAQ should continue to achieve a
greater share of the market's total advertising dollars than WKAQ's share of the
audience. The Company has also focused on reducing operating costs at the
station and, as a result, expects operating expenses before depreciation and
amortization for 1995 to decline by approximately 4% from the prior year.
Operating synergies and cost efficiencies with the U.S. network will continue to
be explored.
STRENGTHENING THE NETWORK THROUGH SELECTIVE ACQUISITIONS AND CAPITAL
EXPENDITURES
The Company believes that securing distribution through station ownership in
the largest Hispanic Market Areas in the U.S. is an important element in
ensuring the strength of its network. In furtherance of this, the Company has
entered into an agreement to acquire a 74.5% interest in WSNS, its Chicago
affiliate. The acquisition of WSNS will ensure the network's long-term
distribution in the important Chicago Market Area. See "The Acquisition." A
large base of owned and operated stations allows the network to amortize program
investments and other network and corporate expenses over a larger portfolio of
properties and should provide greater leverage with advertisers and suppliers.
While the Company will continue to evaluate opportunities to enhance its network
as they arise, the Company does not currently have any other agreements to
acquire additional stations.
The Company also selectively invests in property and equipment in order to
strengthen signals, improve production capabilities and generate operating
efficiencies. For example, the Los Angeles station KVEA is replacing its
transmitter and antenna to improve its signal and provide better service to the
Los Angeles market. The Company was also one of the first broadcasters to use
digital broadcast compression equipment, providing the Company with the ability
to transmit multiple signals from a single satellite transponder. This enables
the network to simultaneously address different time zones and provide
additional live capabilities and interactivity between the stations and network
center on a cost-effective basis.
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THE TELEMUNDO NETWORK AND BROADCAST OPERATIONS
The Company's television network covers 55 markets in the United States,
including the 32 largest Hispanic markets, and reaches approximately 85% of all
U.S. Hispanic households. After the Acquisition of a majority interest in WSNS,
the Company's full-power Chicago affiliate, coverage will be achieved through
seven full-power and 13 low-power owned and operated television stations, 33
affiliated broadcast stations and 88 satellite direct cable systems affiliated
with the Company. The signal from the Company's owned and operated stations and
broadcast affiliates also is carried on an additional 507 cable systems
throughout the United States.
Network programming for the Company's owned and operated stations and
affiliates is transmitted 24-hours per day via satellite from the Company's
network operations center in Hialeah, Florida.
PROGRAMMING
The Company currently makes available Spanish-language programming 24-hours
per day, including movies, novelas, talk and entertainment shows, variety shows,
national and international news, music and sporting events. Approximately 44% of
such programming is produced by the Company at its production facilities near
Miami and in Los Angeles. The remainder of the Company's programming is
purchased from various program suppliers primarily in Mexico and other Latin
American countries.
Since 1990, the Company's programming schedule has included OCURRIO ASI, the
first news magazine format program in Spanish-language television. Produced by
the Company in its Miami facilities this show has consistently been one of
Telemundo's highest rated programs, drawing approximately 35% of the
Spanish-language network television audience in December 1995. Other Telemundo
produced programming with consistently strong market shares include two talk
shows, SEVCEC and EL Y ELLA, a noon-time variety show LA HORA LUNATICA, and a
musical variety program, PADRISIMO.
The programming lineup of WKAQ in Puerto Rico differs from that of the
Company's network, but includes approximately 15 hours per week of Telemundo
network programming. Through its production studios, WKAQ produces approximately
26 hours of programming weekly, including mini-series, news, public affairs,
music variety and comedy shows primarily directed toward the Puerto Rico market.
In addition, WKAQ has the right of first refusal to purchase novelas in the
Puerto Rico market produced by Televisa pursuant to a programming agreement with
approximately four years remaining. WKAQ also broadcasts programming from other
Latin American countries and broadcasts United States syndicated programming
dubbed in Spanish.
The Company also sells the rights to broadcast its original programming in
the international markets. Revenue from the syndication of the Company's
programming represented less than 1% of the Company's total revenue in 1994.
SALES AND MARKETING
The Company's principal source of revenue is the sale of network advertising
time on its network and the sale of local and national spot advertising time on
the Company's owned and operated television stations.
The Company has a network and national spot sales and marketing force,
including account executives and sales managers with backgrounds in both
Spanish-language and English-language media, to sell advertising time broadcast
over the Company's entire network (network sales) and to sell advertising time
in markets covered by the Company's owned and operated stations and affiliates
(national spot sales). The Company has national sales offices in New York, Los
Angeles, Miami, Chicago, San Francisco, San Antonio, Dallas and Orange County,
California.
The Company sells advertising time to a broad and diverse group of
advertisers. For the nine months ended September 30, 1995, the Company's network
and national spot advertising together accounted for approximately 63% of the
total commercial air time sales of the Company in the U.S. No single advertiser
accounted for 10% or more of the Company's 1994 total revenue. According to
HISPANIC BUSINESS MAGAZINE, the top ten advertisers in Spanish-language media in
1995, all of which are
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major advertisers on the Telemundo network were The Procter & Gamble Co., AT&T
Corp., McDonald's Corp., Anheuser-Busch Companies Inc., Sears, Roebuck & Co.,
Philip Morris Companies, Inc., Colgate-Palmolive Co., J.C. Penney Co. Inc, Ford
Motor Co. and The Quaker Oats Co.
Each owned and operated full-power station also has a sales and marketing
force to sell local and national spot advertising on its own behalf. At the
local level, the Company's advertisers include a wide range of clients which
customarily advertise on local television, including retailers, providers of
professional services and consumer goods manufacturers with products oriented
toward the general and Hispanic populations.
Additionally, the network and each of the Company's stations sell blocks of
air time during non-network programming hours to block time programmers.
THE COMPANY'S TELEVISION STATIONS
After the acquisition of a majority interest in its full-power Chicago
affiliate, the Company will own and operate eight full-power and 13 low-power
Spanish-language television stations in the United States and Puerto Rico.
FULL-POWER STATIONS
The Company's owned and operated full-power stations broadcast network
programming and produce and broadcast local news and other limited programming
focused on the audience in each of their respective local markets. Each
full-power station also sells blocks of broadcast time during non-network
programming hours to block time programmers. The following table sets forth
certain information about the Company's owned and operated full-power
Spanish-language television stations and its Chicago affiliate, WSNS, in which
the Company has agreed to acquire a majority interest. See "The Acquisition."
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<TABLE>
<CAPTION>
APPROXIMATE RANKING OF MARKET NUMBER OF OTHER RANKING OF
HISPANIC AREA BY NUMBER OF SPANISH- LANGUAGE MARKET AREA BY
TELEVISION HISPANICS HISPANIC TELEVISION NUMBER OF TOTAL
MARKET AREA SERVED HOUSEHOLDS IN AS A PERCENTAGE OF TELEVISION STATIONS OPERATING TELEVISION
AND STATION MARKET AREA(1) TOTAL POPULATION (1) HOUSEHOLDS (1) IN MARKET AREA (2) HOUSEHOLD (3)
- --------------------- -------------- --------------------- ----------------- ------------------ ----------------
<S> <C> <C> <C> <C> <C>
Los Angeles, CA 1,306,000 37% 1 2 2
KVEA, Channel 52
New York, NY 913,000 16% 2 1 1
WNJU, Channel 47
Miami, FL 434,000 37% 3 3 16
WSCV, Channel 51
Houston, TX 278,000 23% 4 2 11
KTMD, Channel 48
San Antonio, TX 274,000 51% 5 2 39
KVDA, Channel 60
San Francisco, CA 272,000 17% 6 2 5
KSTS, Channel 48
Chicago, IL (Pending) 270,000 12% 7 1 3
WSNS, Channel 44
San Juan, PR 1,064,000 -- -- 6 --
WKAQ, Channel 2
</TABLE>
- ------------------------------
(1) Estimated by Nielsen for January 1, 1996
(2) The Company and each of its Spanish-language competitors broadcast over UHF,
except in Puerto Rico, where WKAQ and its three major competitors broadcast
over VHF. The Company's principal competitor, Univision, owns a
Spanish-language station in each of the U.S. markets that are served by the
Company's owned and operated full-power stations. Independent
Spanish-language stations also broadcast in the Los Angeles, Miami, Houston,
San Antonio and San Francisco broadcast markets. The independent stations in
Los Angeles and Houston and one of the independent stations in Miami are
full-power stations.
(3) Based on 1994-1995 Nielsen data.
The information below regarding population growth and country of origin is
from Strategy Research Corporation, 1994 U.S. HISPANIC MARKET SURVEY.
LOS ANGELES: The Company owns and operates KVEA, Channel 52, licensed to
Corona, California and serving the Los Angeles market. KVEA began operating as a
Spanish-language station in 1985. Los Angeles is the largest U.S. Hispanic
market, representing approximately 18% of the Hispanic television households in
the United States. An estimated 5.3 million Hispanics reside in the Los Angeles
DMA, constituting approximately 37% of the Los Angeles DMA population. The
Hispanic population in Los Angeles more than doubled between 1980 and 1994, and
immigration trends indicate that the Hispanic population will continue to grow
rapidly. As a reflection of the significance of
Spanish-language television, a Spanish-language television news program
periodically draws a higher overall audience than any other news program in the
Los Angeles Market Area. The Hispanic population in Los Angeles is predominantly
Mexican in origin. In addition to a Univision station, Los Angeles has a local,
independently-owned Spanish-language television station.
NEW YORK: The Company owns and operates WNJU, Channel 47, licensed to
Linden, New Jersey and serving the New York market. WNJU began operating as a
Spanish-language station in 1965. New York is the second largest U.S. Hispanic
market, representing approximately 13% of the Hispanic television households in
the United States. An estimated 2.9 million Hispanics reside in the New York
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DMA, constituting approximately 16% of the New York DMA population. The Hispanic
population in New York increased by approximately 50% between 1980 and 1994.
Although almost half of this market is of Puerto Rican origin, the New York
Hispanic community is relatively diverse.
MIAMI: The Company owns and operates WSCV, Channel 51, licensed to Ft.
Lauderdale, Florida and serving the Miami-Ft. Lauderdale market. WSCV began
operating as a Spanish-language station in 1985. Miami is the third largest U.S.
Hispanic market, representing approximately 6% of the Hispanic television
households in the United States. An estimated 1.3 million Hispanics reside in
the Miami DMA, constituting approximately 37% of the Miami DMA population. The
Hispanic population in Miami increased by approximately 74% between 1980 and
1994. Approximately 60% of Hispanics in Miami are of Cuban origin. It has been
estimated that more than half of the population of Dade County is comprised of
Hispanics.
HOUSTON: The Company owns and operates KTMD, Channel 48, licensed to
Galveston, Texas and serving the Houston-Galveston market. KTMD began operating
as a Spanish-language station in 1987. The Houston-Galveston market is the
fourth largest U.S. Hispanic market, representing approximately 4% of the
Hispanic television households in the United States. An estimated 982,000
Hispanics reside in the Houston DMA (which includes Houston and Galveston),
constituting approximately 23% of the Houston DMA population. The Hispanic
population in Houston almost doubled between 1980 and 1994 and is principally of
Mexican origin.
SAN ANTONIO: The Company owns and operates KVDA, Channel 60, licensed to
and serving the San Antonio, Texas market. KVDA began operating as a
Spanish-language station in 1989. The San Antonio market is the fifth largest
U.S. Hispanic market, representing approximately 4% of the Hispanic television
households in the United States. An estimated 903,000 Hispanics reside in the
San Antonio DMA, constituting approximately 51% of the San Antonio DMA
population. The Hispanic population in San Antonio, which is principally of
Mexican origin, increased by approximately 47% between 1980 and 1994.
SAN FRANCISCO: The Company owns and operates KSTS, Channel 48, licensed to
San Jose, California and serving the San Francisco-San Jose market. KSTS began
operating as a Spanish-language station in 1987. The San Francisco-San Jose
Hispanic market is the sixth largest U.S. Hispanic market representing
approximately 4% of the Hispanic television households in the U.S. An estimated
976,000 Hispanics reside in the San Francisco DMA (which includes San Jose),
constituting approximately 17% of the San Francisco DMA population. The Hispanic
population in this market grew by approximately 63% from 1980 to 1994 and is
over 65% of Mexican origin.
CHICAGO: After the Acquisition, the Company will own a 74.5% interest in
and operate WSNS, Channel 44, serving the Chicago market. WSNS began operating
as a Spanish-language station in 1987. The Chicago market is the seventh largest
Hispanic market in the United States representing approximately 4% of the
Hispanic television households in the U.S. An estimated 995,000 Hispanics reside
in the Chicago DMA, constituting approximately 12% of the Chicago DMA
population. The Hispanic population grew by approximately 60% from 1980 to 1994
and approximates the overall ethnic mix of the U.S. Hispanic population base.
The Company believes this ethnic mix makes Chicago an attractive market in which
to test advertising campaigns.
SAN JUAN, PUERTO RICO: The Company owns and operates television station
WKAQ, Channel 2, in San Juan, which together with its affiliate, WOLE (Channel
12 in Mayaguez), and its translator facilities, cover virtually all of Puerto
Rico. WKAQ began operating as a Spanish-language television station in 1954. The
current population of Puerto Rico is approximately 3.3 million. WKAQ has
consistently been the number one station in Puerto Rico in terms of revenue and
share of audience.
LOW-POWER STATIONS
The Company owns and operates 13 low-power television stations and has
received permission from the FCC to build two additional LPTVs. LPTVs and
"translator stations" generally operate at significantly lower levels of power
than full-power stations. In addition their signals generally cover
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smaller areas than those covered by full-power stations and may not cover the
full Market Area. Under FCC rules, LPTVs operate on a secondary basis and are
subject to displacement. Under the 1992 Cable Act (described below), LPTVs have
very limited cable carriage rights. See "-- FCC Regulation." The Company's
low-power television stations operate with minimal staff and generally do not
originate programming or have their own sales forces. LPTV's extend the
network's coverage in areas where a full-power television station was not
available for the network.
<TABLE>
<CAPTION>
APPROXIMATE
HISPANIC
TELEVISION
AREA SERVED AND STATION(S) HOUSEHOLDS
- ------------------------------------------------------- -------------
<S> <C>
Santa Fe, NM: K52BS 185,000
Sacramento, CA (1): K47DQ, K52CK, K61FI 136,000
Boston, MA: W32AY 81,000
Austin, TX: K11SF 71,000
Salinas-Monterey, CA: K15CU 46,000
Odessa/Midland, TX (1): K60EE, K49CD 40,000
Colorado Springs, CO: K49CJ 39,000
Santa Maria, CA: K27EI 36,000
Salt Lake City, UT: K48EJ 32,000
Abilene, TX: K40DX 14,000
</TABLE>
(1) These areas are served by more than one LPTV.
AFFILIATES
The Company currently provides programming to 122 affiliates serving 39
Hispanic markets in the United States. The Company's affiliates in these
markets, which consist of 34 affiliated broadcast stations (including WSNS) and
88 satellite direct cable affiliates that take the network's signal directly
from the satellite, represent approximately 38% of the network's total coverage
of the U.S. Hispanic market.
The Company provides its affiliates with programming and retains the right
to sell generally 50% to 60% of the commercial advertising time available during
such programming. Affiliates generally carry the full network schedule. The
Company also acts as the exclusive representative of the affiliates for national
and regional spot advertising sales, and receives a commission on such sales.
The Company is able to provide advertising sales representation services to
affiliated stations by reason of a waiver of applicable regulations granted by
the FCC. Revenue from the Company's representation services represented less
than 1% of the total revenue of the Company in 1994.
The Company's current contracts with its affiliates generally have two to
five year terms and some provide for compensation to the affiliate. As of
December 1995, no single affiliated station accounted for more than 3.1% of
total network coverage, other than WSNS, in which the Company has agreed to
acquire a majority interest.
TELENOTICIAS
In July 1994, a subsidiary of the Company entered into a partnership
agreement with subsidiaries of each of Reuters Holdings PLC, an international
news and information organization, Antena 3 de Television, S.A., a Spanish media
company, and Arte Radiotelevision Argentino S.A., an Argentinean media company,
to launch TeleNoticias, a 24-hours per day international Spanish-language news
service with distribution in Latin America, the United States and Europe. The
service, which commenced transmitting in December 1994, originates from the
Company's network operations center in Hialeah, Florida. The service is
distributed in 17 countries, including the United States, Mexico, Spain,
Venezuela and Chile.
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The Company through TNNI holds a 42% interest in TeleNoticias. The Company
provides certain services to TeleNoticias, including the use of a news studio
and satellite uplink facilities at the Company's network operations center.
Pursuant to contract, TeleNoticias produces the Company's network news programs
and provides certain other news services. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition -- Liquidity and
Sources of Capital" and "-- Legal Proceedings."
COMPETITION
The broadcasting industry has become increasingly competitive in recent
years. Competitive success of a television network or station depends primarily
on public response to the programs broadcast, which affects the revenue earned
by the network or station from the sale of advertising time. In addition to
programming, factors determining competitive position include management's
ability and experience, marketing, research and promotional efforts.
In each of the markets in which the Company owns and operates full-power
stations, except Puerto Rico, the Company's station competes directly with a
full-power Univision station. The Univision stations and the Univision network
affiliates together reach a larger percentage of Hispanic viewers in the U.S.
than the Company's stations and affiliates and have attracted as much as 80% of
the Spanish-language network television viewing audience. Generally, the
competing Univision stations have been operating in their markets longer than
have the Company's stations. In addition, Univision entered into an agreement
with Televisa to manage Galavision and has also obtained an option to acquire
Galavision in 1996. Galavision, which has operated primarily as a
Spanish-language cable television network since 1980 and serves approximately
1.6 million subscribers, also competes with the Company. Both Televisa and
Venevision have entered into long-term contracts to supply Spanish-language
programming to the Univision and Galavision networks. Televisa is the largest
supplier of Spanish-language programs in the world. Through these program
license agreements, Univision has the right of first refusal for 25 years to air
in the U.S. all Spanish-language programming produced by Televisa and
Venevision. These supply contracts currently provide Univision with a
competitive advantage in obtaining programming originating from Mexico and in
targeting Hispanics of Mexican origin, which account for approximately 64% of
the U.S. Hispanic market. The Company's stations, especially in Puerto Rico and
Los Angeles, also face competition from various independent Spanish-language
television stations.
There are also several independent Spanish-language television stations that
broadcast, on a full-time or part-time basis, in markets in which the Company
owns and operates stations. Independent Spanish-language television stations
compete with Company-owned stations in the Los Angeles, Miami, Houston, San
Antonio and San Francisco Market Areas. The independent station in Los Angeles
also has a program supply agreement with Televisa. The independent stations in
Los Angeles and Houston and one of the independent stations in Miami are
full-power stations.
The Company's owned and operated television stations and affiliates also
face competition for advertising revenue from other sources serving the same
markets and competing for the same viewers such as other Spanish-language and
English-language media, including television stations, cable channels, radio
stations, magazines, newspapers, movies and other forms of entertainment. The
English-language media are generally better developed and better capitalized
than the Spanish-language media in the United States. Several English-language
networks and stations are broadcasting Spanish-language translations of their
general market programs using the second audio programs ("SAP"). The Company
believes these SAP transmissions have not attracted a significant number of
Hispanic viewers.
In Puerto Rico, WKAQ has three significant Spanish-language television
station competitors. In addition, three other Spanish-language television
stations operate in that market. Although the general market programming of the
three major English-language U.S. networks is available in Puerto Rico through
cable carriage, none of such programming has attracted a significant share of
the Puerto Rico audience date.
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Further advances in technology such as video compression, programming
through direct broadcast satellites and programming delivered through fiber
optic telephone lines could lower entry barriers for new channels and encourage
the development of increasingly specialized "niche" programming.
FCC REGULATION
LICENSING
The ownership of the Company's television stations and certain of its
television broadcasting operations are subject to the jurisdiction of the FCC
under the Communications Act. The Communications Act prohibits the operation of
television broadcasting stations except under a license issued by the FCC and
empowers the FCC, among other matters, to issue, renew, revoke and modify
broadcast licenses, to determine the location of stations, to establish areas to
be served and to regulate certain aspects of broadcast programming. The
Communications Act prohibits the assignment of a broadcast license or the
transfer of control of a licensee without the prior approval of the FCC. If the
FCC determines that violations of the Communications Act or the FCC's own
regulations have occurred, it may impose sanctions ranging from admonition of a
licensee to license revocation.
The Communications Act provides that a license may be granted to any
applicant if the public interest, convenience and necessity will be served
thereby, subject to certain limitations. Television broadcast licenses are
issued initially for terms of five years. Upon application, and in the absence
of a conflicting application, an objection to the renewal application, or an
adverse finding as to the licensee's qualifications, broadcast licenses usually
have been renewed for additional terms of up to five years without a hearing by
the FCC. Under the terms of the Telcom Bill, such licenses may be renewed in the
future for terms up to 8 years. FCC licenses of full-power stations held by the
Company have the following expiration dates: WKAQ and WSCV - February 1, 1997;
KTMD and KVDA - August 1, 1998; KSTS and KVEA - December 1, 1998; and WNJU -
June 1, 1999. The license for WSNS expires on December 1, 1997.
ATTRIBUTABLE INTERESTS
Under existing FCC regulations governing multiple ownership of broadcast
stations, a license to operate a television station will not be granted (unless
established waiver standards are met) to any party (or parties under common
control) that has an "attributable interest" in another broadcast station with
an overlapping service area. The regulations also prohibit (with certain
qualifications) any person or entity from having an "attributable interest" in
more than 12 full-power television stations, subject to a further limitation
based on the percentage of national audience included within the relevant
stations' markets. Additionally, the rules prohibit (with certain
qualifications) anyone with an "attributable interest" in a television station
from also having an "attributable interest" in a radio station, daily newspaper
or cable television system serving a community located within the relevant
coverage area of that station, and vice versa. The Telcom Bill would, among
other measures, eliminate the 12-station limit and increase the national
audience reach limitation from 25% to 35%. The President has announced his
intention to sign the Telcom Bill into law, but there is no assurance that he
will do so. The Company is unable to predict the nature, timing or effect of the
changes resulting from the Telcom Bill, if it is signed into law.
Under existing FCC regulations, the officers, directors and certain of the
equity owners of a broadcasting company are deemed to have an "attributable
interest" in the broadcasting company. In the case of a corporation controlling
or operating television stations, there is attribution only to directors and
officers and to stockholders who own 5% or more of the outstanding voting stock.
Institutional investors, including mutual funds, insurance companies and banks
acting in a fiduciary capacity, may own up to 10% of the outstanding voting
stock without being subject to such attribution, provided that such stockholders
exercise no control over the management or policies of the broadcasting company.
In the case of the Company, there are presently four attributable stockholders:
TLMD Partners, Bastion Capital Fund, L.P. ("Bastion"), Reliance Group Holdings,
Inc., its affiliates and subsidiaries ("Reliance") and
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Odyssey Partners, L.P. The FCC is currently reviewing its attribution guidelines
and has proposed modifying or eliminating certain provisions. The Company is
unable to predict the nature, timing or effect of the proposed changes.
In connection with the grant of consent to the transfer of control of the
Company's controlled television licensees from Telemundo Group, Inc. as
debtor-in-possession to the reorganized Telemundo Group, Inc., on December 23,
1994, the FCC granted a 12-month waiver of its "television duopoly rule" to
permit the orderly disposition of station KSMS-TV, Channel 67, Monterey,
California, which is presently licensed to KSMS-TV, L.P. The temporary waiver
was necessary because the Grade B contour of KSMS-
TV overlaps with the Grade B contour of KSTS, which is licensed to a Company
subsidiary. The television duopoly rule generally prohibits a party from holding
attributable interests in television stations that have overlapping Grade B
contours. Daniel D. Villanueva, who has an attributable interest in the Company
because of his affiliation with Bastion, also has an attributable interest in
KSMS-TV. Pursuant to the waiver, Mr. Villanueva must refrain from all
discussions and involvement regarding the Telemundo network and KSTS with any
Bastion or Company officer or director, or any employee with access to
information pertinent to those subjects, until KSMS-TV is sold. The FCC
consented to the assignment of the license of KSMS-TV to another party on
December 12, 1995. However, the assignment of the license of KSMS-TV was not
completed by December 30, 1995, the date that the temporary waiver expired, and
has not yet been completed because of a contract dispute between the licensee of
KSMS-TV and a third party. Therefore, the Company has filed a request with the
FCC for a 90-day extension of the waiver of the television duopoly rule. This
request is currently pending before the FCC. The Company is unable to predict
with any degree of certainty whether the extension request will be granted. If
the FCC refuses to grant the extension request, Mr. Villanueva could be required
by the FCC, among other possible remedies, to divest his interest in the Company
or in KSMS-TV.
FOREIGN OWNERSHIP RESTRICTIONS
The Communications Act limits the amount of capital stock that aliens may
own in a broadcast station licensee and in the parent company of a licensee. No
broadcast license may be held by a corporation of which any officer or director
is a non-citizen or of which more than one-fifth of its capital stock is owned
or voted by non-citizens or their representatives, by foreign governments or
their representatives, or by non-U.S. corporations. The Company's broadcast
licenses are held by subsidiary companies that are controlled directly or
indirectly by the Company. A broadcast license may not be granted to or held by
any corporation that is controlled, directly or indirectly, by any other
corporation that has a non-citizen as an officer, more than one-fourth of whose
directors are non-citizens, or more than one-fourth of whose capital stock is
owned or voted by non-citizens or their representatives, by foreign governments
or their representatives, or by non-U.S. corporations, if the FCC finds that the
public interest will be served by the refusal or revocation of such license. The
Company's Restated Certificate of Incorporation provides that the transfer of
the Company's capital stock, whether voluntary or involuntary, will not be
permitted and will be ineffective if such transfer would violate (or would
result in a violation of) the Communications Act or any of the rules or
regulations promulgated thereunder.
COVERAGE AND MUST-CARRY RIGHTS
The FCC has adopted regulations implementing the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Cable Act"). These regulations
required television broadcasters to elect, at three-year intervals beginning
June 17, 1993, whether to exercise either certain "must carry" or
"retransmission consent" rights in connection with their carriage by local cable
television systems. Those stations that elected to exercise must carry rights
could demand carriage on a specified channel on cable systems within their ADI.
However, these must carry rights are not absolute, but are dependent on
variables such as the number of activated channels on, and location and size of,
the cable system, the amount of duplicative programming on a broadcast station,
the channel positioning demands of other broadcast stations and the signal
quality of the stations at the cable system's principal headend. LPTVs have very
limited must carry rights, although cable systems cannot retransmit LPTV
stations' signals without their consent. The Company's owned and operated
full-power stations in the United States have
46
<PAGE>
elected "must carry" rights. A special three-judge panel of the U.S. District
Court for the District of Columbia upheld the constitutionality of the
must-carry rules. This determination has been appealed to the Supreme Court of
the United States. In the meantime, however, the FCC's must-carry regulations
implementing the Cable Act remain in effect.
The Company's stations serving several markets and many of the Company's
affiliates are classified by the FCC as "low-power" stations. Certain of the
Company's owned and operated stations and affiliates increase their coverage
through use of "translators" that rebroadcast the station's signal. Both
low-power and translator stations are referred to as "LPTV" stations and
generally operate at significantly lower levels of power than full-power
stations. Under FCC rules, such LPTV stations operate on a secondary basis; that
is, they are subject to displacement by a full-power station or other facility
if one is licensed and they must tolerate defined levels of electromagnetic
interference from full-power stations.
PROPOSED RULEMARKING AND PENDING LEGISLATION
The FCC has undertaken several initiatives to change aspects of television
and radio regulation, particularly with respect to broadcast programming,
station ownership restrictions and attribution rules.
The Commission is conducting a rulemaking proceeding to devise a table of
channel allotments in connection with the introduction of advanced (or "high
definition") television service ("ATV"). The FCC has preliminarily decided to
allot a second broadcast channel to each full-power commercial television
station for ATV operation. According to this preliminary decision, stations
would be permitted to phase in their ATV operations over an approximately
15-year period following adoption of a final table of allotments, at the end of
which they would be required to surrender their non-ATV channel. Alternatively,
Congress is now considering proposals to require incumbent broadcasters to bid
at auctions for the additional spectrum required to effect a transition to ATV.
Under certain circumstances, conversion to ATV operations may reduce a station's
geographical coverage area. In addition, the FCC will maintain the secondary
status of LPTV stations in connection with its implementation of a channel
allotment plan for ATV. The Commission has acknowledged that ATV channel
allotment may involve displacement of existing LPTV stations, particularly in
major television markets. A number of the Company's owned and operated and
affiliated low-power stations may be affected.
The Commission has issued a notice of proposed rulemaking to consider
changes to its attribution rules. The FCC also is conducting a rulemaking
proceeding to consider changes to its television multiple ownership rules that
might increase the number of television stations that may be commonly owned on a
national basis, relax the local joint co-ownership prohibition from Grade B
contour overlaps to Grade A overlaps only, and review the radio-television
ownership restriction. The Telcom Bill would, if it becomes law, substantially
modify broadcast multiple ownership restrictions. The FCC currently is examining
or recently has completed review of several rules governing the relationship
between broadcast television networks and their affiliated stations. The FCC in
1995 eliminated its former rule prohibiting ownership by a broadcast television
network of television stations in markets where the existing stations are so few
or of such unequal desirability that competition would be substantially
restrained by such ownership. Meanwhile, the FCC is conducting a rulemaking
proceeding to examine its rules prohibiting broadcast television networks from
representing their affiliated stations for the sale of non-network advertising
time and from influencing or controlling the rates set by its affiliates for the
sale of non-network advertising time (the Company acts as the exclusive
representative of its affiliates pursuant to a waiver of such restriction).
Separately, the FCC is conducting a rulemaking proceeding to consider the
relaxation or elimination of its rules prohibiting broadcast television networks
from (a) restricting their affiliates' right to reject network programming; (b)
reserving an option to use specified amounts of their affiliates' broadcast
time; (c) forbidding their affiliates from broadcasting programming of another
network; and (d) owning more than one broadcast television network; and to
consider the relaxation of its rule prohibiting network affiliated stations from
preventing other stations from broadcasting the programming of their network.
Significant areas of regulation remain, however, and the FCC continues to
enforce strictly its regulations in several such areas, including equal
employment obligations, children's programming,
47
<PAGE>
"indecent" programming restrictions, the "character qualifications" of
licensees, political advertising, environmental concerns, technical operating
matters and antenna tower maintenance. There are additional FCC regulations and
policies, and regulations and policies of other federal agencies governing
network-affiliate relations, political broadcasts, public affairs programming,
equal employment opportunity, taxation and other areas affecting the business
and operations of broadcast stations. Proposals for additional or revised rules
are considered by federal regulatory agencies and Congress from time to time.
The Company cannot predict the resolution of these issues or other issues
discussed above, although their outcome could, over a period of time, affect,
either adversely or favorably, the broadcasting industry.
The foregoing does not purport to be a complete summary of all the
provisions of the Communications Act or other Congressional acts or of the
regulations and policies of the FCC thereunder. Reference is made to the
Communications Act, the Telecommunications Act of 1996, S.652, 104th Cong., 1st
Sess. (1995), other Congressional acts, such regulations and policies, and the
public notices promulgated by the FCC for further information. The laws, rules,
regulations and interpretations governing the Company's business are revised
from time to time and it is not possible to predict the effect that future
regulatory changes will have on the Company's business.
PROPERTIES
In 1994, the Company moved its executive offices from New York City to a
location near Miami, Florida where it has production studios and its network
operations center. These facilities are located in approximately 120,000 square
feet of space under a lease which expires in December 1996, with options to
renew through December 2002.
The Company's New York network and national spot sales and marketing offices
and WNJU's sales and business offices are located in New York City in
approximately 38,000 square feet of leased space. The term of the lease runs
through February 1998.
The offices and studios of KVEA are located in leased premises in Glendale,
California. The two leases expire on January 31, 1997 and on February 1, 1997,
respectively, and each may be renewed for one five-year term. KVEA also leases
its transmitter and broadcast tower site on Mount Wilson in the Los Angeles area
under a month-to-month lease. A new lease is being negotiated.
The offices and studios of WNJU are located in leased premises in Hasbrouck
Heights, New Jersey under a lease that expires in 1999, and WNJU's sales force
and business office occupies office space in the Company's New York sales
office. The transmitter and antenna of WNJU are located on top of One World
Trade Center in New York City under a lease that expires in April 1999 with an
option to renew through April 2004.
The offices and studios of WSCV are located in the same leased premises
occupied by the Company's network operations center in Hialeah, Florida. In
addition, WSCV leases space for its antenna and transmitter in Miami, Florida
under a lease that expires in 2003, with options to renew through 2010.
The offices and studio of KTMD are located in leased premises in Houston,
Texas. The lease covering these premises expires on December 31, 1997. KTMD's
tower and transmitter are located on property owned by KTMD between Houston and
Galveston.
The offices and studio of KVDA are located in owned premises of
approximately 20,000 square feet in San Antonio, Texas. The transmitter and
broadcast tower of KVDA are located on approximately 80 acres of owned land
outside of San Antonio.
The offices and studios of KSTS are located in leased premises in San Jose,
California under leases that expire in 1998. The transmitter and antenna of KSTS
are located on leased property on Monument Peak, outside of San Jose, under a
lease that expires in 1998.
48
<PAGE>
The offices and studios of WKAQ and its related production facilities are
located in owned premises consisting of approximately 180,000 square feet in San
Juan, Puerto Rico. The transmitter and broadcast tower of WKAQ are located on
property owned by the Department of Natural Resources of the Commonwealth of
Puerto Rico, which has granted WKAQ a use permit expiring in 1998. WKAQ also
operates several translator facilities to cover small towns in the mountainous
regions of Puerto Rico.
The offices and studios of WSNS are located in owned premises consisting of
approximately 20,600 square feet in Chicago, Illinois. The transmitter and
antenna of WSNS are located on top of the Hancock Tower in Chicago under a lease
which expires in 1999 with an option to renew through 2009.
In addition, the Company leases various properties throughout the country in
which its LPTVs, broadcasting equipment, sales and other offices are located.
None of these properties are material to the Company's business.
EMPLOYEES
As of December 31, 1995, the Company and its subsidiaries had approximately
1,034 full-time employees, approximately 200 of whom were employees of WKAQ in
Puerto Rico. Approximately 60 employees at WNJU's studio facility in New Jersey,
approximately 25 employees at KSTS and approximately 120 employees of WKAQ are
covered by union contracts. The Company believes its relations with its
employees and unions are satisfactory. WSNS, the Company's affiliated station in
Chicago, in which the Company has recently agreed to acquire a majority
interest, has approximately 80 employees, of which approximately one-half are
unionized. The unionized employees at WSNS have been operating without an
executed collective bargaining agreement for approximately two years. However,
the Company does not believe this to be a significant operating risk.
LEGAL PROCEEDINGS
The Company and its subsidiaries are involved in certain litigation arising
in the normal course of their businesses. In addition, the Company was involved
in the following proceedings. The Company believes that none of the proceedings
in which it is involved will have a material adverse effect on the Company or
its business.
TELENOTICIAS PROCEEDING
On October 16, 1995, TNNI, a wholly-owned subsidiary of the Company which
holds partnership interests in TeleNoticias, filed an action in New York Supreme
Court, New York County against its partners to address certain corporate
governance issues affecting TeleNoticias. In its complaint, TNNI asserts a cause
of action for breach of a stockholders agreement, a cause of action for a
declaration that TNNI has the right to nominate the President of TeleNoticias, a
cause of action for a declaration that certain "board" resolutions are invalid,
and a cause of action for breach of fiduciary duty. Certain of the defendants
have asserted counterclaims against TNNI for injunctive and declaratory relief
as well as for damages in an unliquidated amount. In an order issued January 11,
1996, the Court denied the cross motions seeking injunctive relief and directed
that all discovery be completed within 60 days of the date of the order.
The partners of TeleNoticias are engaged in discussions in connection with
seeking a resolution of their disagreements regarding TeleNoticias. Such
discussions have included a number of possible alternatives, including a
resolution of the dispute regarding management of TeleNoticias, a winding up of
the partnership, and a purchase by one or more of the partners of the interests
of the other partners. In connection with these discussions, the Company has had
conversations with a number of organizations with respect to replacing some or
all of the other TeleNoticias partners. The Company does not contemplate
entering into any transaction relating to the replacement of any of the partners
of TeleNoticias if, as a result, the Company would have materially greater
financial commitments to TeleNoticias than it presently has with respect
thereto. The Company believes, but there can be no assurance, that the outcome
of the litigation, or the impact of any restructuring or winding up of
TeleNoticias, will not result in a material adverse effect on the Company or its
ability to acquire quality news programming.
49
<PAGE>
DENVER AFFILIATE PROCEEDING
On September 18, 1995, the Company instituted a lawsuit against Channel 59
of Denver, Inc. ("KUBD"), a broadcast affiliate of the Company whose ownership
had recently changed, in the District Court, County of Denver, Colorado seeking
to enjoin KUBD from discontinuing the broadcast of Telemundo programming. On
September 28, 1995, the Company obtained a preliminary injunction that requires
KUBD to continue to broadcast Telemundo programming consistent with its
broadcast schedule for a maximum period of six months. On November 17, 1995, the
Company and KUBD entered into a settlement agreement pursuant to which KUBD will
remain a Telemundo affiliate through March 31, 1996, subject to the right of
Company to extend the agreement for up to four successive one month periods. The
Company is currently negotiating with a potential replacement for this affiliate
in the market.
CHAPTER 11 REORGANIZATION
On June 8, 1993, certain holders of the outstanding public debt of the
Predecessor and the indenture trustee for such debt filed an involuntary
petition against the Predecessor under Chapter 11 of the Bankruptcy Code in the
United States Bankruptcy Court for the Southern District of New York (the
"Bankruptcy Court"). The petition was filed solely against the Predecessor and
did not include its subsidiaries. At the time of the involuntary filing, the
Predecessor was in default on all of its public debt, aggregating approximately
$309 million (including unpaid interest). On July 30, 1993, the Predecessor
consented to the entry of an order for relief under Chapter 11 of the Bankruptcy
Code.
On December 30, 1994 (the "Consummation Date"), the Predecessor consummated
the Reorganization. Pursuant to the Reorganization, holders of allowed claims
against the Predecessor received on the Consummation Date one or more of the
following forms of consideration: cash; Old Notes; new common stock, $.01 par
value ("Common Stock"), divided into two series, Series A ("Series A Common
Stock") and Series B ("Series B Common Stock"); and/or five-year warrants
("Creditor Warrants") to purchase Series A Common Stock at an exercise price of
$7.00 per share. Pursuant to the Reorganization, as of the Consummation Date,
all of the Predecessor's then-outstanding common stock and all other equity
interests in the Predecessor were canceled. The existing stockholders were given
the right to purchase 1,450,000 shares of Series A Common Stock. Reliance agreed
to acquire Series A Common Stock not acquired by other stockholders, for which
Reliance received warrants ("Reliance Warrants," together with the Creditor
Warrants, the "Warrants") to purchase an additional 416,667 shares of Series A
Common Stock at an exercise price of $7.19 per share. A total of approximately
$36,000,000 in cash; $116,889,000 principal amount of Old Notes; 4,388,394
shares of Series A Common Stock; 5,611,606 shares of Series B Common Stock (for
a total of 10,000,000 shares of Common Stock); and 1,056,417 Warrants (639,750
Creditor Warrants and 416,667 Reliance Warrants) were distributed in accordance
with the Reorganization.
Immediately prior to the Consummation Date, Reliance owned or controlled
58.4% of the Predecessor's then-outstanding common stock (the "Old Common
Stock"). Pursuant to the Reorganization, all of the Old Common Stock was
canceled. Following the Consummation Date and pursuant to the Reorganization,
Reliance received certain shares of Series A Common Stock and the Reliance
Warrants. See "Principal Stockholders."
Pursuant to the Reorganization, Reliance and the holders of certain creditor
classes of the Predecessor were given the right to designate certain members of
the Predecessor's Board of Directors as of the Consummation Date and have since
given up such rights. Following the Consummation Date, the holders of Series B
Common Stock voting as a series are entitled, for a period of five years or a
shorter period upon the occurrence of certain events, to elect a majority of the
Board of Directors of the Company. Following the Consummation Date, the holders
of the Series A Common Stock voting as a series are entitled to elect the
remaining members of the Board of Directors of the Company. See "Risk Factors --
Ownership by Major Stockholders" and "Principal Stockholders."
50
<PAGE>
MANAGEMENT
The following table sets forth the name, age and position of each of the
executive officers and directors of the Company as of January 12, 1996:
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------- --- -----------------------------------------
<S> <C> <C>
Roland A. Hernandez 38 President and Chief Executive Officer,
and Director
Jose C. Cancela 38 Executive Vice President
Stephen J. Levin 47 Executive Vice President
Peter J. Housman II 44 Chief Financial Officer and Treasurer
Stuart Livingston 38 Senior Vice President, Operations and
Administration and Secretary
Horace G. Dawson, III 41 Assistant General Counsel and Assistant
Secretary
Raymond R. Gutierrez 40 Vice President, Human Resources
Leon D. Black 44 Chairman of the Board and Director
Guillermo Bron 44 Director
Bruce H. Spector 53 Director
Edward M. Yorke 36 Director
Alan Kolod 47 Director
Barry W. Ridings 43 Director
David E. Yurkerwich 43 Director
</TABLE>
On August 18, 1995, Arthur M. Goldberg resigned as a Director of the Company
effective August 21, 1995. The vacancy created may only be filled by the holders
of the Series A Common Stock or directors elected by the holders of the Series A
Common Stock.
ROLAND A. HERNANDEZ has been a Director of the Company since August 1989 and
was reappointed to office as of December 30, 1994 upon consummation of the
Reorganization. In March 1995, the Board of Directors installed Mr. Hernandez as
President and Chief Executive Officer of the Company. Since 1987, Mr. Hernandez
has been an executive officer of the corporate general partner of Interspan
Communications ("Interspan"), a California limited partnership that owns
Spanish-language television station KFWD, Channel 52, a Company affiliate
serving the Dallas/Fort Worth market. See "Related Party Transactions."
JOSE C. CANCELA became Executive Vice President of the Company in April
1995. From June 1992 until April 1995, he served as President, Station Group of
the Company. He served as Senior Vice President of Univision Station Group, Inc.
from September 1991 until June 1992.
STEPHEN J. LEVIN became Executive Vice President of the Company in April
1995. From November 1993 to March 1995, Mr. Levin was Sales Manager for National
Cable Advertising, Inc., a broadcast time sales company. From February 1993 to
October 1993, he was a marketing consultant to various radio and television
broadcasting companies. From June 1991 to November 1992, Mr. Levin served as
General Manager of WNJU, the Company's station serving the New York Market Area,
and from February 1989 to June 1991, Mr. Levin was the General Manager of KVEA,
the Company's station serving the Los Angeles Market Area.
PETER J. HOUSMAN II became Chief Financial Officer and Treasurer of the
Company in February 1987. From February 1991 until April 1995, he also served as
President, Business and Corporate Affairs of the
51
<PAGE>
Company. Mr. Housman served as Senior Vice President of the Company from
February 1987 until February 1991 and served as Senior Vice President, Treasurer
and Chief Financial Officer of the Company's predecessor from November 1986 to
February 1987.
STUART LIVINGSTON became Senior Vice President, Operations and
Administration of the Company in April 1995 and Secretary in September 1995.
From January 1994 to March 1995, Mr. Livingston was Vice President of Affiliate
Relations for Univision. From September 1989 to December 1993, Mr. Livingston
was Vice President of Broadcast Operations of Univisa, Inc., a U.S. subsidiary
of Televisa.
HORACE G. DAWSON, III became Assistant General Counsel and Assistant
Secretary of the Company in September 1992. Mr. Dawson served as Corporate
Counsel of the Company from 1987 to September 1992.
RAYMOND R. GUTIERREZ became Vice President, Human Resources of the Company
in September 1993. Mr. Gutierrez served as Director, Human Resources of the
Company from 1990 until September 1993.
LEON D. BLACK became Chairman of the Board of Directors of the Company as of
December 30, 1994 upon consummation of the Company's Reorganization. Mr. Black
is one of the founding principals and a limited partner of Apollo Advisors, L.P.
("Apollo Advisors") which, together with an affiliate, acts as managing general
partner of Apollo Investment Fund, L.P., AIF II, L.P. ("AIF II"), and Apollo
Investment Fund III, L.P., private securities investment funds. AIF II is the
manager of TLMD Partners. Mr. Black also is a founding principal of Lion
Advisors, L.P. ("Lion Advisors") which acts as financial advisor to and
representative for certain institutional investors with respect to securities
investments. Mr. Black is a director of Samsonite, Inc., Big Flower Press, Inc.,
Converse, Inc., Interco, Incorporated, Culligan Water Technologies, Inc., and
Gillett Holdings, Inc.
GUILLERMO BRON became a director of the Company as of December 30, 1994 upon
consummation of the Reorganization. From July 1994 to the present, Mr. Bron has
been an officer, director and principal stockholder of the corporate general
partner of Bastion Partners, L.P., a Delaware limited partnership ("Bastion
Partners"), which is the general partner of Bastion, an investment fund and a
principal stockholder of the Company. Mr. Bron is a director of Pan American
Bank.
BRUCE H. SPECTOR became a director of the Company as of December 30, 1994
upon consummation of the Reorganization. Since October 1992, Mr. Spector has
been a consultant to Apollo Advisors. In March 1995, Mr. Spector became a
principal of Apollo Advisors. Mr. Spector is a director of Gillett Holdings,
Inc.
EDWARD M. YORKE became a director of the Company as of June 1995. Since
1992, Mr. Yorke has been a principal of Apollo Advisors and Lion Advisors and
since March 1995 of Apollo Advisors II, L.P. From 1990 to 1992, Mr. Yorke was a
Vice President in the high-yield capital markets group of BT Securities Corp.,
an investment banking firm. Mr. Yorke is a director of Aris Industries, Inc.,
Big Flower Press, Inc., Salant Corporation and Webcraft Technologies, Inc.
ALAN KOLOD became a director of the Company as of December 30, 1994 upon
consummation of the Reorganization. Mr. Kolod has been a member of the New York
law firm Moses & Singer LLP since December 1989.
BARRY W. RIDINGS became a director of the Company as of March 1995. Mr.
Ridings has been a Managing Director of the investment banking firm Alex. Brown
& Sons Incorporated since March 1990. Mr. Ridings is currently a director of
Greenman Brothers, Inc., New Valley Corporation, Norex America, Inc., SubMicron
Systems Corporation, Tiger Direct, Inc., TransCor Waste Services Inc. and
Trinity Americas Inc. See "Underwriting."
DAVID E. YURKERWICH became a director of the Company as of March 1995. Mr.
Yurkerwich is a founder and Vice Chairman of Peterson Consulting L.P., a
litigation, dispute and economic consulting firm of which Mr. Yurkerwich has
been a member since 1980.
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<PAGE>
PRINCIPAL STOCKHOLDERS
At January 10, 1996, there were approximately 118 holders of record of the
Company's Common Stock. The Company's Common Stock is divided into Series A
Common Stock and Series B Common Stock (collectively, the "Common Stock"). At
January 10, 1996, there were 5,958,278 shares of Series A Common Stock and
4,041,922 shares of Series B Common Stock outstanding.
Except as noted below, the following table sets forth information regarding
the ownership of the Company's Common Stock at January 10, 1996 by (a) all
persons known to the Company to be the beneficial owners of more than 5% of the
Company's Series A Common Stock or Series B Common Stock outstanding at January
10, 1996, (b) each director and executive officer of the Company, and (c) all
directors and executive officers of the Company as a group. Except as noted
below, to the Company's knowledge, each such owner has sole voting and
investment power for the shares indicated as beneficially owned by them.
<TABLE>
<CAPTION>
SERIES A COMMON STOCK SERIES B COMMON STOCK
-------------------------------- -------------------------------
AMOUNT AND AMOUNT AND AMOUNT AND
NATURE OF NATURE OF NATURE OF
BENEFICIAL PERCENTAGE OF BENEFICIAL PERCENTAGE OF BENEFICIAL
NAME OF BENEFICIAL OWNER OWNERSHIP CLASS OWNERSHIP CLASS OWNERSHIP
- ----------------------------------- ------------- ----------------- ------------ ----------------- ----------------
<S> <C> <C> <C> <C> <C>
TLMD Partners II, L.L.C. 41,776(2) * 1,550,465 38.4% 1,592,241(2)
c/o Apollo Advisors, L.P.
Two Manhattanville Road
Purchase, NY 10577 (1)
Bastion Capital Fund, L.P. 864,997 14.5 882,688 21.8 1,747,685(3)
Suite 2960
1999 Avenue of the Stars
Los Angeles, CA 90067 (1)
Reliance Group Holdings, Inc. 1,133,158 18.6 -- -- 1,133,158(4)
Park Avenue Plaza
55 East 52nd Street
New York, NY 10055
Hernandez Partners 49,998 * 450,001 11.1 499,999(5)
900 S. Garfield Avenue
Alhambra, CA 91801 (1)
Odyssey Partners 262,940 4.4 273,671 6.8 536,611(6)
31 West 52 Street
New York, New York 10019
Leon D. Black (1) 2,933 * 200,000 4.9 202,933(2)
Guillermo Bron (1) 864,997 14.5 882,688 21.8 1,747,685(3)
Roland A. Hernandez (1) 49,998 * 450,001 11.1 499,999(5)
Alan Kolod 500 * -- -- 500
David E. Yurkerwich 1,000 * -- -- 1,000
All directors and executive
officers
as a group** 919,428 15.4 1,532,689 37.9 2,452,117
<CAPTION>
PERCENTAGE OF
TOTAL COMMON
NAME OF BENEFICIAL OWNER STOCK
- ----------------------------------- -----------------
<S> <C>
TLMD Partners II, L.L.C. 15.9%
c/o Apollo Advisors, L.P.
Two Manhattanville Road
Purchase, NY 10577 (1)
Bastion Capital Fund, L.P. 17.5
Suite 2960
1999 Avenue of the Stars
Los Angeles, CA 90067 (1)
Reliance Group Holdings, Inc. 11.2
Park Avenue Plaza
55 East 52nd Street
New York, NY 10055
Hernandez Partners 5.0
900 S. Garfield Avenue
Alhambra, CA 91801 (1)
Odyssey Partners 5.4
31 West 52 Street
New York, New York 10019
Leon D. Black (1) 2.0
Guillermo Bron (1) 17.5
Roland A. Hernandez (1) 5.0
Alan Kolod *
David E. Yurkerwich *
All directors and executive
officers
as a group** 24.5
</TABLE>
- ------------------------
* Less than 1%
** None of the directors and executive officers of the Company listed in
"Management," which have been excluded from this table, beneficially owns
any Common Stock of the Company.
53
<PAGE>
(1) TLMD Partners, a Delaware limited liability company, Bastion, Hernandez
Partners, a California partnership ("Hernandez Partners"), and Mr. Black
(collectively, the "Major Stockholders"), collectively own 917,930 shares of
Series A Common Stock, constituting 15.4% of the Series A Common Stock
outstanding (excluding warrants described in Footnote 2), and 3,083,154
shares of Series B Common Stock, constituting 76.3% of the Series B Common
Stock outstanding. In total, the Major Stockholders own 4,001,084 shares of
Common Stock, constituting 40.0% of the Common Stock outstanding.
The Major Stockholders have entered into the Shareholders Agreement pursuant
to which each of them has agreed subject to the provisions of the
Shareholders Agreement, among other things, to use its reasonable best
efforts to cause Mr. Black (or his nominee), two nominees of TLMD Partners,
a nominee of Bastion and a nominee of Hernandez Partners to be elected to
the Board of Directors of the Company. Pursuant to the Shareholders
Agreement, the Major Stockholders have agreed that all of the shares of
Common Stock owned by each of them will be voted by a voting committee
comprised of three members, one of which is appointed by TLMD Partners, one
of which is appointed by Bastion and one of which is an independent member
(as defined in the Shareholders Agreement). Currently, the members of the
voting committee are John Hannan, a principal and limited partner of Apollo
Advisors, Mr. Bron, a director of the Company, and Alan Abramson, a private
investor, respectively. The addresses of Messrs. Hannan, Bron and Abramson
are c/o Apollo Management, L.P., 1301 Avenue of the Americas, New York, NY
10019, 1999 Avenue of the Stars, Suite 2960, Los Angeles, CA 90067, and c/o
Abramson Brothers Inc., 501 5th Avenue, New York, New York 10017,
respectively. The parties to the Shareholders Agreement have appointed the
voting committee as their attorney-in-fact and proxy to vote all shares of
Common Stock owned by such parties as to which a vote of stockholders is
required (including as relates to the election of directors as contemplated
above). The Shareholders Agreement (other than certain provisions relating
to the rights of Major Stockholders other than TLMD Partners to participate
in certain sales of Common Stock by TLMD Partners and specified transferees)
will terminate on the earlier of the date when no shares of Series B Common
Stock are outstanding and the date when TLMD ceases to own shares of Series
B Common Stock representing at least 245,003 shares of Series B Common
Stock. The Shareholders Agreement (other than such sale participation
rights) may also be terminated as of the date specified by TLMD Partners in
a written notice delivered to the other Major Stockholders, subject to the
receipt of any regulatory approvals.
Each Major Stockholder disclaims beneficial ownership of any shares of
Common Stock which it does not directly own.
(2) Includes warrants expiring December 30, 1999 representing the immediate
right to purchase 41,774 shares of Series A Common Stock at an exercise
price of $7.00 per share. Warrants to purchase 29,242 shares of Series A
Common Stock are owned by Artemis America, G.P., a Delaware general
partnership. Voting, dispositive and investment power with respect to the
securities held by Artemis America, G.P. have been vested in Lion Advisors
pursuant to an investment management agreement. The remaining warrants to
purchase 12,532 shares of Series A Common Stock are owned by AIF II. AIF II
is the manager of TLMD Partners and has sole dispositive power with respect
to the securities held by TLMD Partners. Mr. Black and Mr. Yorke are
associated with Apollo Advisors, and Lion Advisors. TLMD Partners, Mr.
Black, Mr. Yorke and Mr. Spector disclaim beneficial ownership of the
warrants held by AIF II and Artemis America, G.P.
(3) The information with respect to Bastion and its beneficial ownership of
shares of the Company's Common Stock is based on the Schedule 13D filed with
the Securities and Exchange Commission, which was last amended January 3,
1996. The sole general partner of Bastion is Bastion Partners. The only
general partners of Bastion Partners are Bron Corp., a Delaware corporation
("BC"), and Villanueva Investments, Inc., a Delaware corporation ("VII").
The sole holder of voting stock and the sole director and officer of BC is
Mr. Bron. The sole holder of voting stock of VII is the Daniel Villanueva
Living Trust, a trust created under the laws of California, the co-trustees
of which are
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Daniel D. Villanueva and Myrna E. Villanueva. Mr. Villanueva is the sole
director and principal officer of VII. Messrs. Bron and Villanueva are the
managing directors of Bastion Capital Corp., which manages the affairs of
Bastion pursuant to a management agreement.
(4) The information on Reliance and its beneficial ownership of the Company's
Common Stock is based on information provided by Reliance for inclusion in
the Registration Statement on Form S-3 filed with the Securities and
Exchange Commission on January 31, 1996 to register 994,231 shares of Series
A Common Stock held beneficially by Reliance Insurance Company ("RIC"), an
indirect wholly-owned subsidiary of Reliance, United Pacific Insurance
Company ("United"), a wholly-owned subsidiary of RIC, and Reliance. Of the
amount shown, 82 shares are held beneficially by Reliance, 1,119,076 shares
are held beneficially by RIC, and 14,000 shares are held beneficially by
United. The 1,119,076 shares held by RIC also include warrants to purchase
32 shares of Series A Common Stock beneficially owned by RIC and the 82
shares held by Reliance include warrants to purchase 6 shares of Series A
Common Stock beneficially owned by Reliance, both at an exercise price of
$7.00 per share, which warrants are exercisable until December 30, 1999. The
1,119,076 shares held by RIC also include warrants beneficially owned by RIC
to purchase 138,889 shares of Series A Common Stock at an exercise price of
$7.19 which warrants became exercisable on December 30, 1995 but does not
include warrants beneficially owned by RIC to purchase 277,778 shares of
Series A Common Stock at an exercise price of $7.19 per share, one-half of
which warrants become exercisable on each of December 30, 1996 and 1997 for
five-year periods from the date they become exercisable. Saul P. Steinberg,
the Chairman of the Board of the Company until December 30, 1994, and
affiliated trusts own or control approximately 46% of the outstanding common
stock of Reliance. Mr. Steinberg disclaims beneficial ownership of all of
these shares of Common Stock and warrants. See "-- Related Party
Transactions."
(5) The general partners of Hernandez Partners are Mr. Hernandez and Enrique
Hernandez, Jr., his brother. Each of the general partners of Hernandez
Partners has dispositive and voting power with respect to the shares of
Common Stock held by Hernandez Partners, except as described in footnote (1)
above.
(6) The information with respect to Odyssey Partners, L.P. and its beneficial
ownership of shares of the Company's Common Stock is based on the Schedule
13D filed with the Securities and Exchange Commission, which was last
amended on December 22, 1995.
RELATED PARTY TRANSACTIONS
The Major Stockholders have entered into the Shareholders Agreement relating
to the transfer and voting of shares of Common Stock owned by each of the Major
Stockholders. See "Principal Stockholders" above.
On December 30, 1994, in connection with the consummation of the
Reorganization, the Company, Apollo Advisors and RIC entered into a registration
rights agreement pursuant to which the Company agreed to register under the
Securities Act Common Stock held by Apollo Advisors and RIC and certain of their
respective affiliates and transferees (each a "Rights Holder" and collectively,
the "Rights Holders"). Under the registration rights agreement, the Company is
obligated, subject to certain terms and conditions and upon demand by either of
the Rights Holders, to use reasonable diligence to effect and to maintain for
not more than 90 days the registration under the Securities Act of certain
registrable securities as defined in the agreement. The Company is not required
to effect more than two such registrations for each of the Rights Holders with
respect to Common Stock during the term of the agreement. Apollo Advisors has
the right to request and demand registration with respect to Old Notes held by
it and certain affiliates and transferees. A demand for registration under the
agreement must be made by Rights Holders (a) within five years of the date of
the agreement in the case of (i) Common Stock acquired other than through the
exercise of warrants and (ii) the Old Notes and (b) within the later of (i) five
years from the date of the agreement and (ii) two years after the exercise of
warrants in the case of Common Stock acquired through the exercise of warrants.
In addition, so long as any of the registrable securities are outstanding, if
the Company proposes to register any of its securities under the
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Securities Act, whether or not for its own account, subject to certain specified
exceptions, the Rights Holders have the right to request the Company to include
the Rights Holders' registrable securities in such registration, subject to
certain terms and conditions. As described below, Apollo Advisors has assigned
its right to register Old Notes to Salomon.
On August 21, 1995, pursuant to the registration rights agreement, RIC
notified the Company of its intention to exercise its right to demand the
registration of the offer and sale of certain shares beneficially owned by RIC.
On January 31, 1996, the Company filed with the Securities and Exchange
Commission a registration statement under the Act to register 994,231 shares of
Series A Common Stock owned by RIC and certain of its affiliates for offer and
sale from time to time.
RIC and its affiliates provided the Company and its subsidiaries with
certain insurance coverage at an aggregate cost to the Company of approximately
$910,000 which was paid in 1993, $200,000 of which was payment for coverage
provided in 1994.
Apollo Advisors, through its affiliates (collectively "Apollo"),
beneficially owned 41.6% of the aggregate outstanding principal amount of the
Old Notes (the "Apollo Notes"). Apollo tendered the Apollo Notes in the
Repurchase Offer and delivered its Consent to the Proposed Amendments. As of
December 12, 1995, the Company had received Consents from holders of a majority
of the aggregate outstanding principal amount of Old Notes and on that date, the
Company and the Trustee under the Old Note Indenture executed the Supplemental
Indenture. Upon the execution of the Supplemental Indenture, the Proposed
Amendments became effective and binding on all holders of Old Notes, including
those holders who did not submit their Consents, but will not become operative
until the Acceptance Date.
On December 28, 1995, Apollo sold to Salomon all rights (including the right
to receive any Consent Fees), interest and title associated with the Apollo
Notes in the Repurchase Offer. In connection with such sale, Apollo Advisors
assigned to Salomon, and to subsequent holders of the Apollo Notes, certain
rights and obligations under the registration rights agreement. Telemundo
consented to such assignment with the following limitations: (i) any demand for
registration of the Apollo Notes may only be made by the registered holders of a
majority of the principal amount of Apollo Notes and any holder of Apollo Notes
which does not elect to include Apollo Notes in such registration statement
loses its rights to registration; (ii) no demand for registration may be made
until the earlier of May 15, 1996 and the termination of the Repurchase Offer
and any such demand is subject to certain rights of the Company to postpone such
registration and (iii) the Apollo Notes are not entitled to be included in any
other registration by the Company of any of its securities whether or not for
its own account.
Interspan owns and operates television station KFWD, Channel 52, the
Company's Dallas/Forth Worth network affiliate. Mr. Hernandez is a director and
executive officer of the corporate general partner of Interspan, which is owned
by Mr. Hernandez and his family. Pursuant to Interspan's affiliation agreement
with the Company, Interspan received approximately $1,125,000 in network
compensation during 1994 and paid the Company approximately $189,000 for the
Company's services as the exclusive national sales representative for KFWD.
Moses & Singer LLP, a law firm of which Alan Kolod, a director of the
Company, is a partner, provided legal services to the creditors committee under
the Company's Reorganization, which legal services ultimately were paid for by
the Company. The amount paid by the Company for such services rendered in 1994
was approximately $204,000. Such services were rendered pursuant to the
Reorganization and prior to the time Mr. Kolod became a director.
Management believes that the transactions described above were on terms no
less favorable to the Company than could be obtained in arm's length
transactions with unaffiliated parties.
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THE ACQUISITION
THE PURCHASE AGREEMENT
The following is a summary of certain provisions of the Purchase Agreement
for the Acquisition. Such summary is qualified in its entirety by reference to
the Purchase Agreement.
THE ACQUISITION. On November 8, 1995, Telemundo of Chicago, Inc. ("TCI"), a
subsidiary of Telemundo, entered into a definitive agreement to acquire,
directly and indirectly, an aggregate 74.5% interest in Video 44. The Purchase
Agreement provides for TCI to acquire all of the outstanding stock of Harriscope
of Chicago, Inc. ("Harriscope"), which owns a 50% interest in Video 44, from a
subsidiary of Oak Industries, Inc. ("Oak") and the other stockholders of
Harriscope and for TCI to acquire a 24.5% direct interest in Video 44 from such
Oak subsidiary (such selling parties, collectively, the "Sellers"). The purchase
price for such acquisition is $44.7 million (subject to adjustment based upon,
among other things, the net working capital of Video 44 on the date of closing),
payable as follows: $14.7 million to Oak with respect to its 24.5% direct
interest in Video 44 and $30 million to the stockholders of Harriscope for all
of the outstanding stock of Harriscope.
LIQUIDATED DAMAGES. On November 9, 1995 TCI deposited $1.5 million in
escrow pending the closing of the transaction or termination of the Purchase
Agreement. Sellers will be entitled to the escrowed amounts upon satisfaction of
certain specified requirements if, among other things, TCI defaults in the
performance of its obligations under the Purchase Agreement in any material
respect and if, as a result of such default, the conditions precedent to TCI's
or Sellers' obligations to close are not satisfied, or TCI shall be unable to
secure adequate financing to consummate the Acquisition, and, as a result, the
transactions contemplated by the Purchase Agreement are not consummated. In
general, failure to obtain FCC approval of the Acquisition will not, in and of
itself, entitle Sellers to the escrowed amounts.
CONDITIONS TO CLOSING. The transactions contemplated by the Purchase
Agreement are subject to receipt of FCC approval, expiration or termination of
any applicable Hart-Scott Rodino Antitrust Improvements Act (the "HSR Act")
waiting period and satisfaction or waiver of certain customary closing
conditions set forth in the Purchase Agreement. On December 4, 1995, the early
termination of the HSR Act waiting period was granted.
The Purchase Agreement requires that an FCC Order (as defined in the
Purchase Agreement) approving the Acquisition shall have become a Final Order
(defined to be an FCC Order no longer subject to judicial, administrative or
other review); provided that TCI may, at its sole option, waive this condition
in order to close after December 31, 1995 following issuance of an FCC Order
which has not yet become a Final Order. The transfer of control application was
filed with the FCC on November 9, 1995 and an FCC Order was granted on February
2, 1996. The Company presently intends to, though reserves the right not to,
consummate the Acquisition prior to the time such approval becomes a Final
Order.
TERMINATION. The Purchase Agreement may be terminated upon mutual agreement
of the parties thereto. In addition, if (a) an FCC Order has not become a Final
Order or the closing has not occurred on or before the date which is six months
after the filing of a transfer of control application with the FCC, (b) the FCC
designates such FCC application for an evidentiary hearing, or (c) the FCC
denies transfer of the Video 44 interests or issues a Final Order in connection
with such FCC application with conditions (other than conditions to the WSNS
license existing as of the date of the Purchase Agreement) which are materially
adverse to TCI or Telemundo or in any way materially diminish TCI's operating
rights with respect to WSNS (provided TCI is not in material breach under the
Purchase Agreement), TCI may terminate the Agreement with proper notice. Sellers
will also have a similar right to terminate the Purchase Agreement upon the
occurrence of (a) or (b) above.
INDEMNIFICATION. Following the closing of the Acquisition, Sellers have
agreed, subject to certain limitations, to indemnify and hold TCI harmless from
and against certain liabilities, damages, losses, costs and expenses ("Claims")
arising out of or accruing from a breach of representations made by
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Sellers or non-compliance with covenants made by Sellers contained in the
Purchase Agreement, and certain taxes incurred, or attributable to events
occurring, prior to closing for which Video 44 or Harriscope may be liable. In
general, these indemnification obligations continue for 18 months after closing
(subject to extension to the extent of any pending Claim) with longer periods
for certain matters, and are subject to a maximum aggregate indemnity of $4.5
million for certain matters, with a maximum limit of $44.7 million for certain
specified matters relating to, among other things, title matters and taxes.
TCI has agreed to provide similar indemnification relating to, among other
things, Claims arising out of or accruing from a breach of representations made
by TCI, noncompliance with certain covenants of TCI contained in the Purchase
Agreement and certain actions of TCI relating to post-closing operation of Video
44, subject to a maximum aggregate indemnity of $4.5 million.
THE JOINT VENTURE AGREEMENT
At the closing of the Acquisition, TCI, Harriscope and the remaining 25.5%
owner of Video 44, Essaness Theatres Corporation, a Delaware corporation
("Essaness"), will enter into a partnership agreement (the "Joint Venture
Agreement") relating to Video 44. The following is a summary of certain
provisions of the Joint Venture Agreement, and is qualified in its entirety by
reference to the Joint Venture Agreement.
MANAGEMENT. The Joint Venture Agreement provides, among other things, that
overall management and control of the business and affairs of Video 44 shall be
vested exclusively in TCI, subject to certain approval rights granted to
Essaness with respect to certain specified major decisions.
PREFERRED DISTRIBUTION. According to the terms of the Joint Venture
Agreement, Essaness is entitled to a minimum annual preferred distribution
(payable monthly), of $2.55 million in 1996 (such $2.55 million increasing by
10% for each fiscal year subsequent to the 1996 fiscal year) subject to
reduction in the amount of Essaness' proportionate share of capital expenditures
(which for the purpose of calculating the minimum distribution is deemed to be
$300,000 in 1996, increasing 10% annually in subsequent years). The Joint
Venture Agreement provides that, in general and as long as Essaness remains a
partner of Video 44, to the extent that Essaness receives a distribution
pursuant to the preferred distribution provisions in any year that exceeds the
amounts it would have been entitled to receive in the absence of such provision
(the "Excess Payment"), the amount of such Excess Payment shall be deducted and
distributed to TCI and Harriscope from amounts otherwise distributable to
Essaness in excess of the mimimum distribution in subsequent years. Remaining
amounts of distributable cash (calculated in accordance with the Joint Venture
Agreement) will generally be distributed to the partners of Video 44 in
accordance with their interests in the Joint Venture. Such preferred
distribution provisions terminate upon a transfer of Essaness' interest (other
than to permitted transferees).
TRANSFER; PURCHASE RIGHT. In general, transfers of interests in Video 44
(other than transfers to certain permitted transferees, which include the
Company in the case of TCI) are subject to a right of first refusal in favor of
the other parties to the Joint Venture Agreement.
Commencing 54 months after closing, TCI may notify Essaness of its desire to
purchase all of Essaness' interest in Video 44. If TCI and Essaness cannot reach
agreement on terms, TCI may, after 58 months following the closing, formally
offer to purchase Essaness' interest. Upon receiving such offer, Essaness may
either accept the offer or deliver a bona fide counteroffer from a third party
(in which Essaness may have a minority interest) to purchase all the interests
held by TCI and Harriscope on terms no less favorable than TCI's offer and at a
purchase price based upon a total valuation of Video 44 that is greater than the
valuation contained in TCI's offer. If such counter-offer is made, TCI may
either accept the offer or agree to purchase Essaness' interest at a price based
upon the total valuation of Video 44 set forth in Essaness' counter-offer.
Commencing 72 months after the closing, Essaness may offer to purchase all
of TCI's and Harriscope's interests in Video 44. If TCI and Essaness cannot
reach agreement on terms Essaness may, after 76 months following the closing,
formally offer to purchase TCI's and Harriscope's interests. Upon receiving such
offer, TCI may either accept such offer or deliver a bona fide counter-offer to
purchase all
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of Essaness' interest on terms no less favorable than the formal offer,
including a purchase price based upon a total valuation of Video 44 that is
greater than the valuation contained in the formal offer. If such counter-offer
is made, Essaness shall sell its interests to TCI.
AFFILIATION AGREEMENT. The Affiliation Agreement between Telemundo and
Video 44 will remain in effect on substantially the same terms and conditions as
are presently in effect after the consummation of the Acquisition for so long as
Essaness maintains its 25.5% interest. If TCI and Harriscope sell their
interests in Video 44, then the Company has the option to continue the
Affiliation Agreement for one year or terminate such agreement on the date of
such transfer.
CONSENT SOLICITATION AND REPURCHASE OFFER
On November 27, 1995, the Company commenced soliciting Consents to the
Proposed Amendments to the Old Note Indenture. As of January 30, 1996, the
holders of $116,705,500 principal amount of Old Notes, representing
approximately 99.8% of the aggregate outstanding principal amount of Old Notes,
had tendered their Old Notes and delivered their Consents to the Proposed
Amendments. As of December 12, 1995, the Company had received Consents from
holders of a majority of the aggregate outstanding principal amount of the Old
Notes and on such date, the Company and the Trustee under the Old Note Indenture
executed the Supplemental Indenture. Upon the execution of the Supplemental
Indenture, the Proposed Amendments became effective and binding on all holders
of Old Notes, including those holders who did not submit their Consents, but
will not become operative until the date the Company accepts the Old Notes for
purchase pursuant to the Repurchase Offer (the "Acceptance Date"). Consent Fees
will be paid only after the Acceptance Date.
On November 27, 1995, the Company commenced the Repurchase Offer to
repurchase any and all of its Old Notes in cash (the "Repurchase Offer
Consideration") equal to 100% of their principal amount ($1,000 per $1,000
principal amount) if tendered before the Consent Date and for an amount equal to
85% of their principal amount ($850 per $1,000 principal amount) if tendered on
or after the Consent Date. The initial expiration date of the Repurchase Offer
was 5:00 p.m., New York City time, on December 26, 1995, and the Repurchase
Offer is presently scheduled to expire at 5:00 p.m., New York City time on
February 12, 1996, unless extended. The Company intends to extend the expiration
date of the Repurchase Offer from time to time until immediately prior to the
consummation of the Acquisition and the Offering. The Repurchase Offer is
subject to a number of conditions, including receipt of financing satisfactory
to the Company, but is not subject to a repurchase of a minimum principal amount
of Old Notes. The Repurchase Offer Consideration will be paid promptly after the
Acceptance Date.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
CREDIT FACILITY
In connection with the consummation of the Reorganization, the Company and
its subsidiaries entered into the Credit Facility, a copy of which is
incorporated by reference as an exhibit to the Registration Statement. The
following summary of the material provisions of the Credit Facility as currently
in effect does not purport to be complete, and is subject to, and qualified in
its entirety by reference to, all the provisions of the Credit Facility. The
Company has initiated discussions to either amend or replace its existing Credit
Facility with another facility providing similar borrowing capacity on terms
that are more advantageous to the Company. There can be no assurance that the
Company will negotiate and enter into any such arrangements.
GENERAL. The Credit Facility provides for revolving credit loans, letters
of credit and letter of credit guarantees of the lesser of (i) a borrowing base
(the "Borrowing Base") equal to the sum of $5 million and 80% of eligible
accounts receivable created in the ordinary course of business and (ii) $20
million, less the undrawn or unreimbursed amounts of letters of credit and
letters of credit guarantees outstanding.
SECURITY. In order to secure the Credit Facility, the Company has granted
the lender a security interest in all the Company's accounts receivables, books
and records, equipment, general intangibles, inventory, money and other assets
of the Company, other than the assets and stock of all entities related to the
Acquisition.
MATURITY. The Credit Facility will mature on the fifth anniversary thereof
but the Company may terminate the Credit Facility prior to its maturity, upon
ninety-days prior written notice, by the repayment of all amounts outstanding
under the Credit Facility plus an early termination premium that declines over
time.
INTEREST. Interest is payable on the average daily balance outstanding at a
rate of 1.75% plus the highest of the variable rates of interest, per annum,
most recently announced by (i) Bank of America, N.T. & S.A., (ii) Mellon Bank,
N.A., and (iii) Citibank, N.A., or any successor to any of the foregoing
institutions.
COVENANTS. The Credit Facility requires the Company to comply with certain
financial ratios and tests, under which the Company will be required to achieve
certain financial and operating results. The Credit Facility also imposes
restrictions on the Company's ability to incur or guarantee debt, create liens,
dispose of assets, liquidate or make other fundamental changes in the Company,
change its name, undertake a change of control, terminate any communications
license or franchise, make certain capital expenditures, make restricted
payments, make certain investments and undertake transactions with affiliates.
See "Risk Factors -- Substantial Leverage; Restrictive Covenants."
EVENTS OF DEFAULT. The Credit Facility contains customary events of
default, including failure to pay principal and interest when due, failure to
perform covenants under the Credit Facility, a material impairment of the
ability to repay amounts borrowed under the Credit Facility, the attachment of
material property, commencement of insolvency proceedings and certain bankruptcy
actions, the imposition of certain liens on the Company's property, certain
payment defaults on other indebtedness of the Company, payment on indebtedness
subordinated to the Credit Facility except as permitted by the relevant
subordination provisions, any material misrepresentation by the Company and
certain ERISA violations.
INDEMNIFICATION. The Company has agreed to indemnify the lender against any
and all losses, liabilities, claims, damages or expenses relating to the Credit
Facility, including but not limited to reasonable attorney's fees and settlement
costs, unless such damages arise as a result of the lender's gross negligence of
willful misconduct.
CONSUMMATION OF TRANSACTIONS. Consummation of the Transactions will require
a waiver to, amendment of, or repayment of amounts then outstanding under, the
Company's Credit Facility (and to the extent the Company determines it to be
necessary or appropriate, substitution of an alternate credit
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facility). The lender under the Credit Facility has consented to the
Transactions and the terms and conditions of the Credit Facility will remain
substantially the same. The maximum borrowing capacity under the Credit Facility
will remain at $20 million.
OLD NOTE INDENTURE
In connection with the consummation of the Reorganization, the Company
issued $116,889,000 aggregate principal amount of the Old Notes pursuant to the
Old Note Indenture, a copy of which is incorporated by reference as an exhibit
to the Registration Statement. Pursuant to the Repurchase Offer, the Company
will offer to repurchase any and all of its outstanding Old Notes and will
solicit Consents from Holders of the Old Notes to the amendment of certain terms
of the Old Notes and the Old Note Indenture. These amendments would conform
certain of the covenants contained in the Old Notes and the Old Note Indenture
to the similar covenants in the Senior Notes and the Senior Note Indenture. As
of January 30, 1996, the holders of $116,705,500 principal amount of Old Notes,
representing approximately 99.8% of the aggregate outstanding principal amount
of Old Notes, had tendered their Old Notes and delivered their Consents to the
Proposed Amendments. Upon the execution of the Supplemental Indenture, the
Proposed Amendments became effective and binding on all holders of Old Notes,
including those holders who did not submit Consents, but will not become
operative until the Acceptance Date.
The following summary of the material provisions of the Old Notes and the
Old Note Indenture as currently in effect does not purport to be complete, and
is subject to, and qualified in its entirety by reference to, all the provisions
of the Old Note Indenture. For the purposes of this section, terms not otherwise
defined in this section, shall have their respective meanings as set forth in
the Old Note Indenture.
GENERAL. The Old Notes, all of which were outstanding at January 31, 1996,
mature on December 30, 2001, are limited to $116,889,000 aggregate principal
amount and are unsecured obligations of the Company.
SINKING FUND. A sinking fund provides for the mandatory redemption of $25
million of the original aggregate principal amount of the Old Notes on each of
December 30, 1999 and December 30, 2000 at a redemption price equal to 100% of
the principal amount thereof, plus accrued and unpaid interest, if any, to the
redemption date. The Company may reduce such obligation with Old Notes acquired
by the Company other than through operation of the sinking fund.
OPTIONAL REDEMPTION. The Old Notes will be subject to redemption at any
time after December 30, 1997, at the option of the Company, in whole or in part,
on not less than 30 nor more than 60 days' prior notice, in amounts of $100 or
an integral multiple thereof, at declining redemption prices set forth in the
Old Note Indenture, together with accrued and unpaid interest, if any, to the
redemption date.
CHANGE OF CONTROL PUT. If a Change of Control shall occur at any time, then
each Holder of the Old Notes shall have the right to require the Company to
purchase such Holder's Old Notes in whole or in part in integral multiples of
$100, at a purchase price in cash in an amount equal to 101% of the principal
amount of such Old Notes, plus accrued and unpaid interest, if any, to the date
of purchase.
CERTAIN COVENANTS. The Old Note Indenture contains a number of covenants
restricting the operation of the Company and its subsidiaries, including
covenants with respect to the following matters: (i) Limitation on Restricted
Payments (in the form of the declaration or payment of certain dividends or
distributions, the repurchase, redemption, retirement or other acquisition of
any capital stock of the Company, or the voluntary prepayment of Subordinated
Indebtedness); (ii) Limitation on Transactions with Affiliates; (iii) Limitation
on Incurrences of Additional Indebtedness and issuances of Disqualified Capital
Stock; (iv) limitation on Payment Restrictions affecting Subsidiaries; (v)
Limitation on Liens; (vi) Sales of Assets; (vii) Limitation on Investments and
(viii) When Company may Merge, etc. Certain of these covenants will be proposed
to be amended in connection with the Consent Solicitation. See
"-- Proposed Amendments to the Old Note Indenture."
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SUPPLEMENTAL INDENTURES. The Old Note Indenture permits the Company and the
Trustee, without notice to or the consent of the Holders, to amend or supplement
the Old Note Indenture or the Old Notes for certain specified purposes. Subject
to the absolute and unconditional rights of Holders to receive principal,
premium, if any, and interest, the Company and the Trustee may amend or
supplement the Old Note Indenture or the Old Notes, subject to specified
exceptions, with the consent of the Holders of at least a majority in aggregate
principal amount of the then outstanding Old Notes, and such amendments or
supplemental indentures will be binding on every Holder whether or not such
Holder has consented thereto.
EVENTS OF DEFAULT. The Events of Default under the Old Note Indenture
include provisions that are typical of senior debt financings. Upon the
occurrence of an Event of Default, the Trustee or the Holders of at least 25% in
the aggregate principal amount of outstanding Old Notes may, and the Trustee at
the request of such holders shall, declare all unpaid principal and premium, if
any, and accrued interest on all Old Notes to be due and payable as provided in
the Old Note Indenture.
PROPOSED AMENDMENTS TO THE OLD NOTE INDENTURE
The Proposed Amendments to the Old Note Indenture are intended to conform
the following covenants to the similar covenants in the Senior Note Indenture:
Commission Reports, Limitation on Restricted Payments, Limitation on Incurrences
of Additional Indebtedness and Issuances of Disqualified Capital Stock,
Limitation on Payment Restrictions Affecting Subsidiaries, Limitation on Liens,
Limitations on Transactions with Affiliates, Limitation on Investments, and When
Company May Merge, Etc. Various definitions in the Old Note Indenture are
proposed to be amended and some new definitions are proposed to be added in
order to conform the Old Note Indenture to the Senior Note Indenture. There is
no assurance that the covenants in the Senior Notes ultimately issued (or any
other debt security that may be issued by the Company instead of the Senior
Notes to finance the Acquisition, the Refinancing and related fees and expenses)
will not be materially different from the covenants described in "Description of
the Senior Notes."
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DESCRIPTION OF THE SENIOR NOTES
The Senior Notes will be issued under an Indenture, dated as of
, 1996 (the "Senior Note Indenture") among the Company and Bank of
Montreal Trust Company, as trustee (the "Trustee"). The terms of the Senior
Notes include those stated in the Senior Note Indenture and those made part of
the Senior Note Indenture by reference to the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"), as in effect on the date of the Senior Note
Indenture. The Senior Notes are subject to all such terms, and holders of the
Senior Notes are referred to the Senior Note Indenture and the Trust Indenture
Act for a statement of them. The following is a summary of the material terms
and provisions of the Senior Notes. This summary does not purport to be a
complete description of the Senior Notes and is subject to the detailed
provisions of, and qualified in its entirety by reference to, the Senior Notes
and the Senior Note Indenture (including the definitions contained therein). A
copy of the form of Senior Note Indenture substantially in the form in which it
is to be executed has been filed with the Commission as an exhibit to the
Registration Statement of which this Prospectus is a part. Definitions relating
to certain capitalized terms are set forth under "-- Certain Definitions" and
throughout this description. Capitalized terms that are used but not otherwise
defined herein have the meanings assigned to them in the Senior Note Indenture
and such definitions are incorporated herein by reference. As used under this
caption, the term "Company" refers only to Telemundo Group, Inc. and not to its
subsidiaries or affiliates.
GENERAL
The Senior Notes will mature on , 2006 and will be limited to an
aggregate principal amount at maturity of $ . The Senior Notes will
bear interest from , 1996 at a rate of % per annum until
, 1999, and at a rate of % per annum from and including
, 1999, until maturity. Interest is payable semiannually on
and of each year, commencing , 1996, to the
persons who are holders of record thereof at the close of business on the
or preceding such interest payment date. The Senior
Notes will be issued at a substantial discount from their principal amount at
maturity ( % of the principal amount at maturity).
Interest on the Senior Notes will be computed on the basis of a 360-day year
of twelve 30-day months. Principal and interest will be payable at the office of
the Paying Agent, but, at the option of the Company, interest may be paid by
check mailed to the registered holders of record at their registered addresses.
The Senior Notes will be transferrable and exchangeable at the office of the
Registrar. The Company has initially appointed the Trustee as the Registrar and
the Paying Agent under the Senior Note Indenture. The Senior Notes will be
issued in fully registered form in denominations of $1,000 and any integral
multiple thereof.
RANKING
The Senior Notes will be general unsecured obligations of the Company. The
Senior Notes will rank PARI PASSU in right of payment with all senior
Indebtedness of the Company, and senior in right of payment to all future
subordinated Indebtedness of the Company. The Senior Notes will be effectively
subordinated, however, to (i) secured Indebtedness of the Company to the extent
of the assets securing that Indebtedness (including any Indebtedness under the
Credit Facilities which can be secured by a Lien on substantially all of the
assets of the Company) and (ii) all Indebtedness and other liabilities of
Subsidiaries.
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OPTIONAL REDEMPTION
The Senior Notes may not be redeemed prior to , 2001, subject to
the following paragraphs. On and after that date, the Company may redeem the
Senior Notes, as a whole at any time or in part from time to time, at the
following redemption prices (expressed in percentages of Accreted Value), plus
accrued and unpaid interest to the redemption date:
<TABLE>
<CAPTION>
IF REDEEMED DURING THE PERIOD PERCENTAGE
- -------------------------------------------------------------- ------------
<S> <C>
From , 2001 through , 2002 %
From , 2002 through , 2003 %
From , 2003 through , 2004 %
From , 2004 and thereafter........................ 100.00%
</TABLE>
As described in "Change of Control Offer" below, each holder shall have the
right to require the Company to offer to purchase all or a portion of such
holder's Senior Notes at a purchase price in cash equal to 101% of the Accreted
Value thereof plus accrued and unpaid interest to the date of purchase. For a
discussion of certain issues concerning Change of Control, see "Change of
Control Offer" below.
Notwithstanding the foregoing, the Company may at its option, on one or more
occasions, redeem up to % of the aggregate outstanding principal amount of
Senior Notes, at any time and from time to time prior to , 1999,
with the Net Proceeds of one or more Common Stock Offerings, at the following
redemption prices (expressed in percentages of Accreted Value), plus accrued and
unpaid interest to the redemption date, provided that at least $ million
aggregate principal amount at Stated Maturity of Senior Notes remain outstanding
immediately after the occurrence of any such redemption:
<TABLE>
<CAPTION>
IF REDEEMED DURING THE PERIOD PERCENTAGE
- -------------------------------------------------------------- ------------
<S> <C>
From , 1996 through , 1997 %
From , 1997 through , 1998 %
From , 1998 through , 1999 %
</TABLE>
In the event of redemption of fewer than all of the Senior Notes, the
Trustee shall select the Senior Notes to be redeemed by lot or by any other
method that complies with applicable legal and securities exchange requirements,
if any, and that the Trustee considers fair and appropriate and in accordance
with methods generally used at the time of selection by fiduciaries in similar
circumstances. The Senior Notes will be redeemable in whole or in part upon not
less than 30 nor more than 60 days' prior written notice, mailed by first class
mail to a holder's last address as it shall appear on the register maintained by
the Registrar of the Senior Notes. On and after any redemption date, interest
will cease to accrue on the Senior Notes or portions thereof called for
redemption unless the Company shall fail to redeem any such Senior Note.
SINKING FUND
There will be no mandatory sinking fund payments for the Senior Notes.
CERTAIN COVENANTS
The Senior Note Indenture will contain, among others, the following
covenants. Except as otherwise specified, all of the covenants described below
will appear in the Senior Note Indenture.
LIMITATION ON ADDITIONAL INDEBTEDNESS
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, incur (as defined) any Indebtedness (including
Acquired Indebtedness) unless (a) after giving effect to the incurrence of such
Indebtedness and the receipt and application of the proceeds thereof, the ratio
of the total Indebtedness of the Company and its Restricted Subsidiaries, on a
consolidated basis, to the Company's EBITDA (determined on a pro forma basis for
the preceding four full fiscal quarters of the Company for which financial
statements are available at the date of determination) is less than 7.0 to 1 if
the Indebtedness is incurred prior to eighteen months from the Issue Date and
6.5 to 1 if the Indebtedness is incurred thereafter, determined by giving pro
forma effect to (i) the incurrence of such Indebtedness and (if applicable) the
application of the net proceeds therefrom, including to refinance other
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Indebtedness, as if such Indebtedness was incurred, and the application of such
proceeds occurred, at the beginning of such four fiscal quarters; (ii) the
incurrence, repayment or retirement of any other Indebtedness by the Company and
its Restricted Subsidiaries since the first day of such four full fiscal
quarters (and all Indebtedness incurred and the receipt and application of
proceeds thereof and all Indebtedness repaid or retired since the end of the
most recently completed fiscal quarter of the Company for which a balance sheet
is available preceding the date of determination) as if such incurrence (and, if
applicable, the application of proceeds), repayment and retirement occurred at
the beginning of such four fiscal quarters; (iii) in the case of Acquired
Indebtedness, the related acquisition as if such acquisition had occurred at the
beginning of such four fiscal quarters; and (iv) any acquisition or disposition
by the Company and its Restricted Subsidiaries of any company or any business or
any assets out of the ordinary course of business, or any related repayment of
Indebtedness, in each case since the first day of such four fiscal quarters,
assuming such acquisition, disposition or repayment had been consummated on the
first day of such four fiscal quarters, and (b) no Default or Event of Default
shall have occurred and be continuing at the time or as a consequence of the
incurrence of such Indebtedness.
Notwithstanding the foregoing, the Company and any of its Restricted
Subsidiaries, may incur Permitted Indebtedness, as specified, provided, that the
Company will not incur any Permitted Indebtedness that ranks junior in right of
payment to the Senior Notes that has a maturity or mandatory sinking fund
payment prior to the Stated Maturity of the Senior Notes.
LIMITATION ON RESTRICTED PAYMENTS
The Company will not make, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, make, any Restricted Payment, unless:
(a) no Default or Event of Default shall have occurred and be continuing
at the time of or immediately after giving effect to such Restricted
Payment;
(b) immediately after giving pro forma effect to such Restricted
Payment, the Company could incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) under the covenant set forth under the first
paragraph of "-- Limitation on Additional Indebtedness"; and
(c) immediately after giving effect to such Restricted Payment, the
aggregate of all Restricted Payments declared or made after the Issue Date
does not exceed the sum of (1) 100% of the Company's Cumulative EBITDA minus
1.4 times the Company's Cumulative Consolidated Interest Expense, (2) 100%
of the aggregate Net Proceeds in cash (including cash Net Proceeds received
upon the conversion of noncash proceeds) from the issue or sale, after the
Issue Date, of Capital Stock (other than Disqualified Capital Stock or
Capital Stock of the Company issued to any Subsidiary of the Company) of the
Company or any Indebtedness or other securities of the Company convertible
into or exercisable or exchangeable for Capital Stock (other than
Disqualified Capital Stock) of the Company which has been so converted or
exercised or exchanged, as the case may be, and (3) an amount equal to the
net reduction in Investments, subsequent to the date of the Senior Note
Indenture, in any Person resulting from payments of interest on debt,
dividends, repayments of loans or advances, return of capital, or other
transfers of property (but only to the extent such distributions are not
included in the calculation of Consolidated Net Income), in each case, to
the Company or any Restricted Subsidiary from any Person, not to exceed in
the case of any Person, the amount of Investments previously made by the
Company or any Restricted Subsidiary in such Person and which was treated as
a Restricted Payment.
The provisions of this covenant shall not prohibit: (i) the payment of any
distribution within 60 days after the date of declaration thereof, if at such
date of declaration such payment would comply with the provisions of the Senior
Note Indenture; (ii) so long as no Default or Event of Default shall have
occurred and be continuing, the purchase, redemption, acquisition, cancellation
or other retirement for value of shares of Capital Stock of the Company held by
present or former officers, directors or employees (or their estates or
beneficiaries under their estates) and which payments, in the aggregate to all
such
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Persons do not exceed $4,000,000; (iii) so long as no Default or Event of
Default shall have occurred and be continuing, the acquisition, redemption or
retirement of any shares of Capital Stock of the Company or a Restricted
Subsidiary or by conversion into, or by or in exchange for, shares of Capital
Stock (other than Disqualified Capital Stock) of the Company, provided that the
proceeds of any sale of Capital Stock shall not increase the amount available
for Restricted Payments; or (iv) distributions by Video 44, to a minority
partner (other than a Restricted Subsidiary) pursuant to the Joint Venture
Agreement. The amounts expended to purchase, redeem, retire or acquire, convert
or exchange or make distributions on Capital Stock as set forth in the
immediately preceding clauses (ii), (iii) and (iv) (other than distributions
funded by capital contributions of Telemundo of Chicago, Inc. or Harriscope of
Chicago, Inc. pursuant to Section 3.5(a) of the Joint Venture Agreement) shall
be excluded from the calculation of the amount available for Restricted Payments
under the previous paragraph.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by this covenant were computed, which calculations may be based upon
the Company's latest available financial statements, and that no Default or
Event of Default exists and is continuing and no Default or Event of Default
will occur immediately after giving effect to any Restricted Payment.
LIMITATION ON LIENS
The Company will not, and will not permit any of its Restricted Subsidiaries
to, create, incur or otherwise cause or suffer to exist or become effective any
Liens of any kind (other than Permitted Liens and Liens created to secure the
Company's obligations to the Trustee) upon any property or asset of the Company
or any Restricted Subsidiary or any shares of stock or debt of any Restricted
Subsidiary, now owned or hereafter acquired, unless (i) if such Lien secures
Indebtedness which is PARI PASSU with the Senior Notes, then the Senior Notes
are secured on an equal and ratable basis with the obligations so secured until
such time as such obligation is no longer secured by a Lien or (ii) if such Lien
secures Indebtedness which is subordinated to the Senior Notes, then the Senior
Notes are secured prior to the obligations so secured, and such Lien shall be
subordinated to the Lien granted to the holders of the Senior Notes to the same
extent as such subordinated Indebtedness is subordinated to the Senior Notes
until such time as such obligation is no longer secured by a Lien.
LIMITATION ON TRANSACTIONS WITH AFFILIATES
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, conduct any business or enter into any transaction
or series of related transactions (including, without limitation, the sale,
purchase, exchange or lease of assets or property or rendering of any services)
with or for the benefit of any Affiliate (other than the Company or a
Wholly-Owned Restricted Subsidiary or a majority-owned Restricted Subsidiary (so
long as no minority interest is owned by an entity which is otherwise an
Affiliate) and including entities in which the Company or any of its Restricted
Subsidiaries own a minority interest) (an "Affiliate Transaction") or extend,
renew, waive or otherwise modify the terms of any Affiliate Transaction entered
into prior to the Issue Date unless the terms of such Affiliate Transaction are
fair and reasonable to the Company or such Restricted Subsidiary, as the case
may be, and the terms of such Affiliate Transaction are at least as favorable as
the terms which could be obtained by the Company or such Restricted Subsidiary,
as the case may be, in a comparable transaction made on an arm's-length basis
between unaffiliated parties. With respect to any Affiliate Transaction
involving an amount or having a value in excess of $5 million, the Company must
obtain a resolution of the Board of Directors (including a majority of the
disinterested directors) certifying that, in their good faith judgment, such
Affiliate Transaction complies with the preceding sentence and with respect to
any Affiliate Transaction involving an amount or having a value in excess of $10
million, such certificate shall be accompanied by a written opinion from an
Independent Financial Advisor that the transaction is fair from a financial
point of view to the Company or such Restricted Subsidiary. A certificate
evidencing such resolution shall be delivered to the Trustee within five
Business Days after the consummation of such Affiliate Transaction.
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The foregoing provisions will not apply to (i) any Restricted Payment that
is not prohibited by the provisions described under "-- Limitation on Restricted
Payments" contained herein; or (ii) any transaction, approved by the Board of
Directors of the Company, with an officer or director of the Company or of any
Subsidiary in his or her capacity as officer or director entered into in the
ordinary course of business, including compensation and employee benefit
arrangements with any officer or director of the Company.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any Restricted
Subsidiary to (i)(a) pay dividends or make any other distributions to the
Company or any other Restricted Subsidiary on its Capital Stock or with respect
to any other interest or participation in, or measured by, its profits or (b)
pay any Indebtedness owed to the Company or any other Restricted Subsidiary,
(ii) make loans or advances to the Company or any other Restricted Subsidiary,
or (iii) transfer any of its properties or assets to the Company or any other
Restricted Subsidiary, except for such encumbrances or restrictions existing
under or by reason of:
(a) any agreement existing on the Issue Date, including the Loan and
Security Agreement, the Senior Note Indenture and the Old Note Indenture (if
Old Notes are still outstanding), as in effect on the Issue Date;
(b) any agreement governing Acquired Indebtedness or Capital Stock of a
Person acquired by the Company or any of its Restricted Subsidiaries as in
effect at the time of such acquisition (except to the extent such
Indebtedness was incurred in connection with or in anticipation of such
acquisition), provided that such restriction does not extend to or cover any
Person, or the properties or assets of any Person, other than the Person so
acquired;
(c) agreements relating to an acquisition of Property, provided that
such encumbrances or restrictions relate solely to the Property so acquired;
(d) agreements relating to Indebtedness incurred to refinance
Indebtedness set forth in preceding clauses (a)-(c) and which Indebtedness
incurred to refinance Indebtedness set forth in preceding clause (a)-(c) is
refinancing Indebtedness permitted under the covenants described under
"Limitation on Additional Indebtedness" and "Limitation on Restricted
Subsidiary Debt and Preferred Stock", provided that the encumbrances or
restrictions contained in the agreements governing such permitted
refinancing are no more restrictive in the aggregate than such encumbrances
or restrictions contained in the agreements governing the Indebtedness being
refinanced immediately prior to such refinancing and do not extend to or
cover any other Person or the property of any other Person other than the
Person in respect of whom such encumbrance or restriction relating to the
Indebtedness being refinanced applied;
(e) applicable law;
(f) customary non-assignment provisions in leases and any license of
intellectual property entered into in the ordinary course of business
(including programming agreements) and Local Marketing Agreements;
(g) agreements for the sale of any assets of any Restricted Subsidiary,
provided that such restriction is only applicable to the assets to be sold
by such Restricted Subsidiary;
(h) Purchase Money Indebtedness for property acquired in the ordinary
course of business that only imposes restrictions on the Property so
acquired and any improvements on such Property; and
(i) Capitalized Lease Obligations that are otherwise permitted
hereunder, provided that such encumbrance or restriction does not extend to
any Property other than that subject to the underlying lease.
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LIMITATION ON CERTAIN ASSET SALES
The Company will not, and will not permit any of its Restricted Subsidiaries
to, consummate an Asset Sale unless (i) the Company or such Restricted
Subsidiary, as the case may be, receives consideration at the time of such sale
or other disposition at least equal to the Fair Market Value (as conclusively
evidenced by an Officers' Certificate for amounts up to $5 million and by a
resolution of the Company's board of directors set forth in an Officers'
Certificate and delivered to the Trustee for amounts in excess of $5 million) of
the assets sold or otherwise disposed of, and (ii)(a) at least 75% of the
consideration therefor received by the Company or its Restricted Subsidiary, as
the case may be, is in the form of cash or Cash Equivalents, or (b) the
consideration therefor received by the Company or such Restricted Subsidiary in
an Asset Swap is determined by an Independent Financial Advisor to be
substantially comparable in type to the asset being sold; provided that any
liabilities (as shown on the Company's or such Restricted Subsidiary's most
recent balance sheet or in the notes thereto) of the Company or any Restricted
Subsidiary (other than liabilities that are by their terms subordinated to the
Senior Notes) that are assumed by the transferee of any such assets shall be
deemed to be Cash Equivalents (to the extent of the lesser of the Fair Market
Value or book value of such liabilities); and provided further that any Asset
Sale with respect to the stock or assets of Telemundo News Network, Inc. shall
not be subject to clause (ii)(a) of this paragraph.
The Company or any Restricted Subsidiary, as the case may be, may cause the
Asset Sale Proceeds from such Asset Sale to be applied (a) to the extent the
Company elects, or is required, to prepay, repay or purchase debt under any then
existing Senior Indebtedness of the Company or Indebtedness of any Restricted
Subsidiary within 360 days following the receipt of the Asset Sale Proceeds from
any Asset Sale; (b) to the extent of the balance of Asset Sale Proceeds after
application as described above, to the extent the Company elects, to an
investment in assets acquired by the Company or any Restricted Subsidiary
(including Capital Stock or other securities purchased in connection with the
acquisition of Capital Stock or Property of another Person) used or useful in
businesses similar or related to the business of the Company or Restricted
Subsidiary as conducted at the time of such Asset Sale, and the Asset Sale
Proceeds are applied within 360 days following the receipt of such Asset Sale
Proceeds (the "Asset Sale Trigger Date"); and (c) if on the Asset Sale Trigger
Date with respect to any Asset Sale, the Available Asset Sale Proceeds exceed
$10 million, the Company shall apply an amount equal to such Available Asset
Sale Proceeds to an offer to repurchase the Senior Notes, at a purchase price in
cash equal to 100% of the Accreted Value thereof plus accrued and unpaid
interest, if any, to the date of repurchase (an "Excess Proceeds Offer"). If an
Excess Proceeds Offer is not fully subscribed, the Company may retain the
portion of the Available Asset Sale Proceeds not required to repurchase Senior
Notes and use such amount for general corporate purposes. Upon completion of an
Excess Proceeds Offer, the amount of Available Asset Sale Proceeds shall be
reset to zero.
If the Company is required to make an Excess Proceeds Offer, the Company
shall mail, within 30 days following the Asset Sale Trigger Date, a notice to
the holders stating, among other things: (1) that such holders have the right to
require the Company to apply the Available Asset Sale Proceeds to repurchase
such Senior Notes at a purchase price in cash equal to 100% of the Accreted
Value thereof plus accrued and unpaid interest, if any, to the date of purchase;
(2) the purchase date, which shall be no earlier than 30 days and not later than
60 days from the date such notice is mailed; (3) the instructions, determined by
the Company, that each holder must follow in order to have such Senior Notes
repurchased; and (4) the calculations used in determining the amount of
Available Asset Sale Proceeds to be applied to the repurchase of such Senior
Notes.
LIMITATION ON CAPITAL STOCK OF RESTRICTED SUBSIDIARIES
The Company will not (i) sell, pledge, hypothecate or otherwise convey or
dispose of any Capital Stock of a Restricted Subsidiary (other than in
connection with Indebtedness incurred pursuant to the "Limitation on Additional
Indebtedness" covenant as permitted by clause (a) of the definition of
"Permitted Indebtedness")or (ii) permit any of its Restricted Subsidiaries to
issue any Capital Stock, other than to the Company or a Wholly-Owned Subsidiary
of the Company (other than director's qualifying shares
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in an amount not in excess of 1% of the total outstanding shares of such
Person). The foregoing restrictions shall not apply to an asset sale made in
compliance with "-- Limitation on Certain Asset Sales" or the issuance of
Preferred Stock in compliance with the covenant described under "-- Limitation
on Restricted Subsidiary Debt and Preferred Stock."
LIMITATION ON RESTRICTED SUBSIDIARY DEBT AND PREFERRED STOCK
The Company will not permit any of its Restricted Subsidiaries to, directly
or indirectly, incur (as defined) any Indebtedness (including Acquired
Indebtedness) or issue any Preferred Stock other than, without duplication:
(a)(1) Purchase Money Indebtedness and Capitalized Lease Obligations
incurred in the ordinary course of business in a principal amount outstanding at
the time of incurrence which does not in the aggregate exceed $15 million at any
time outstanding;
(2) Indebtedness incurred or incurrable under any Guarantee of any
Restricted Subsidiary made in the ordinary course of business and not to exceed
$10 million at any time outstanding; and
(3) Indebtedness incurred or incurrable pursuant to a Local Marketing
Agreement, for a television station located outside of the continental United
States and operated in a country, a territory or a possession in which the
Company owns and operates a television station on the date of this Indenture, in
an amount as determined in accordance with GAAP, not to exceed $50 million at
any time outstanding;
provided, however, that (A) after giving effect to the incurrence of any
Indebtedness pursuant to this clause (a) of this covenant and the receipt and
application of the proceeds thereof, the ratio of the total Indebtedness of the
Company's Restricted Subsidiaries (excluding Indebtedness incurred by any
Restricted Subsidiary pursuant to clause (b), (f) or (h) of this covenant), on a
combined consolidated basis, to the Company's EBITDA (determined on a pro forma
basis for the preceding four fiscal quarters of the Company for which financial
statements are available at the date of determination) is less than 3.0 to 1,
determined by giving pro forma effect to (i) the incurrence of such Indebtedness
and (if applicable) the application of the net proceeds therefrom, including to
refinance other Indebtedness, as if such Indebtedness was incurred, and the
application of such proceeds occurred, at the beginning of such four fiscal
quarters; (ii) the incurrence, repayment or retirement of any other Indebtedness
by the Company and its Restricted Subsidiaries since the first day of such four
full fiscal quarters (and all Indebtedness incurred and the receipt and
application of proceeds thereof and all Indebtedness repaid or retired since the
end of the most recently completed fiscal quarter of the Company for which a
balance sheet is available preceding the date of determination) as if such
incurrence (and, if applicable, the application of proceeds), repayment and
retirement occurred at the beginning of such four fiscal quarters; (iii) in the
case of Acquired Indebtedness, the related acquisition as if such acquisition
had occurred at the beginning of such four fiscal quarters; and (iv) any
acquisition or disposition by the Company and its Restricted Subsidiaries of any
company or any business or any assets out of the ordinary course of business, or
any related repayment of Indebtedness, in each case since the first day of such
four fiscal quarters, assuming such acquisition, disposition or repayment had
been consummated on the first day of such four fiscal quarters, and (B) no
Default or Event of Default shall have occurred and be continuing at the time or
as a consequence of the incurrence of such Indebtedness;
(b) Indebtedness of any Restricted Subsidiary or Preferred Stock of any
Restricted Subsidiary issued to and held by the Company or a Wholly-Owned
Restricted Subsidiary of the Company, provided that such Indebtedness or
Preferred Stock is at all times held by the Company or a Wholly-Owned Restricted
Subsidiary of the Company;
(c) Indebtedness of any Restricted Subsidiary under Currency Agreements and
Interest Rate Protection Agreements which are entered into for the purpose of
protection against risk of currency or interest rate fluctuations affecting any
Restricted Subsidiary in its ordinary course of business or that are related to
payment obligations of any Restricted Subsidiary otherwise permitted under the
Senior Note Indenture;
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(d) Indebtedness or Preferred Stock of any Restricted Subsidiary remaining
outstanding immediately after the Issue Date after giving effect to the
consummation of the transactions described in the Prospectus under "Use of
Proceeds" above;
(e) Indebtedness incurred or incurrable in respect of reimbursement
obligations related to letters of credit, banker's acceptances or similar
facilities entered into in the ordinary course of business;
(f) Indebtedness incurred or incurrable by Telemundo of Chicago, Inc. and
Harriscope of Chicago, Inc. pursuant to Section 3.5(a) of the Joint Venture
Agreement;
(g) Indebtedness in respect to bids, performance and surety bonds and
obligations provided in the ordinary course of business and appeal bonds;
(h) Acquired Indebtedness, provided that such Indebtedness was not incurred
or issued as a result of or in connection with or in anticipation of such Person
becoming a Restricted Subsidiary of the Company and immediately after giving
effect to such Person becoming a Restricted Subsidiary of the Company (as if
such Indebtedness was incurred and issued on the first day of the four quarter
period) the Company could incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under the "Limitation on Additional Indebtedness"
covenant above;
(i) Indebtedness incurred by a Restricted Subsidiary in exchange for, or
the proceeds of which are used to refinance Indebtedness referred to in clause
(a)(1) and clauses (c) through (g) of this paragraph, provided that (i) such
Indebtedness is in an aggregate principal amount not in excess of the aggregate
principal amount then outstanding of the Indebtedness being refinanced, plus the
amount of accrued and unpaid interest, if any, and premiums owed, if any, not in
excess of preexisting payment provisions on such Indebtedness being refinanced,
plus the reasonable, customary expenses, fees, and costs of the Company incurred
in connection with such refinancing, (ii) such Indebtedness is scheduled to
mature either (A) no earlier than the Indebtedness being refinanced or (B) after
the Stated Maturity of the Senior Notes, and (iii) such Indebtedness has an
Average Life at the time such Indebtedness is incurred that is equal to or
greater than the Average Life of the Indebtedness being refinanced; and
(j) Indebtedness of any Restricted Subsidiary evidenced by or arising under
the Loan and Security Agreement.
LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS
The Company will not, and will not permit any Restricted Subsidiary to,
enter into any Sale and Lease-Back Transaction unless (i) the net proceeds
received in such Sale and Lease-Back Transaction are at least equal to the fair
market value of the property sold; (ii) the Company could incur the Attributable
Indebtedness in respect of such Sale and Lease-Back Transaction in compliance
with the covenant described under "-- Limitation on Additional Indebtedness" and
(iii) the Company shall apply or cause to be applied the Asset Sale Proceeds of
such transaction in accordance with the covenant described under "-- Limitation
on Asset Sales."
CHANGE OF CONTROL OFFER
Within 30 days of the occurrence of a Change of Control, the Company shall
notify the Trustee in writing of such occurrence and shall make an offer to
purchase (the "Change of Control Offer") the outstanding Senior Notes at a
purchase price equal to 101% of the Accreted Value thereof plus any accrued and
unpaid interest thereon to the Change of Control Payment Date (as hereinafter
defined) (such purchase price being hereinafter referred to as the "Change of
Control Purchase Price") in accordance with the procedures set forth in this
covenant.
Within 30 days of the occurrence of a Change of Control, the Company also
shall (i) cause a notice of the Change of Control Offer to be sent at least once
to the Dow Jones News Service or similar
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business news service in the United States and (ii) send by first-class mail,
postage prepaid, to the Trustee and to each holder of the Senior Notes, at the
address appearing in the register maintained by the Registrar of the Senior
Notes, a notice stating:
(i) that the Change of Control Offer is being made pursuant to this
covenant and that all Senior Notes validly tendered will be accepted for
payment, and otherwise subject to the terms and conditions set forth herein;
(ii) the Change of Control Purchase Price and the purchase date (which
shall be a Business Day no earlier than 20 business days from the date such
notice is mailed (the "Change of Control Payment Date"));
(iii) that any Senior Note or portion thereof not validly tendered will
continue to accrue interest in accordance with the terms thereof;
(iv) that, unless the Company defaults in the payment of the Change of
Control Purchase Price, any Senior Notes accepted for payment pursuant to
the Change of Control Offer shall cease to accrue interest after the Change
of Control Payment Date;
(v) that holders accepting the offer to have their Senior Notes
purchased pursuant to a Change of Control Offer will be required to
surrender the Senior Notes to the Paying Agent at the address specified in
the notice prior to the close of business on the Business Day preceding the
Change of Control Payment Date;
(vi) that holders will be entitled to withdraw their acceptance if the
Paying Agent receives, not later than the close of business on the third
Business Day preceding the Change of Control Payment Date, a tested telex,
facsimile transmission or letter setting forth the name of the holder, the
principal amount of the Senior Notes delivered for purchase, and a statement
that such holder is withdrawing his election to have such Senior Notes
purchased;
(vii) that holders whose Senior Notes are being purchased only in part
will be issued new Senior Notes equal in principal amount to the unpurchased
portion of the Senior Notes surrendered, provided that each Senior Note
purchased and each such new Senior Note issued shall be in denominations of
$1,000 and integral multiples thereof;
(viii) any other procedures that a holder must follow to accept a Change
of Control Offer or effect withdrawal of such acceptance; and
(ix) the name and address of the Paying Agent.
On the Change of Control Payment Date, the Company shall, to the extent
lawful, (i) accept for payment Senior Notes or portions thereof validly tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent
money sufficient to pay the purchase price of all Senior Notes or portions
thereof so tendered and (iii) deliver or cause to be delivered to the Trustee
Senior Notes so accepted together with an Officers' Certificate stating the
Senior Notes or portions thereof tendered to the Company. The Paying Agent shall
promptly mail or deliver to each holder of Senior Notes so accepted payment in
an amount equal to the purchase price for such Senior Notes, and the Company
shall execute and issue, and the Trustee shall promptly authenticate and mail or
deliver to such holder, a new Senior Note equal in principal amount to any
unpurchased portion of the Senior Notes surrendered; provided that each such new
Senior Note shall be issued in denominations of $1,000 and integral multiples
thereof.
The Senior Note Indenture will provide that, (A) if the Company or any
Subsidiary thereof has issued any outstanding (i) Indebtedness that is
subordinated in right of payment to the Senior Notes or (ii) Preferred Stock and
the Company or such Subsidiary is required to repurchase, or make an offer to
repurchase, such Indebtedness, or redeem, or make an offer to redeem, such
Preferred Stock, in the event of a Change of Control or to make a distribution
with respect to such subordinated Indebtedness or Preferred Stock in the event
of a Change of Control, the Company shall not consummate any such offer or
distribution with respect to such subordinated Indebtedness or Preferred Stock
until such time as
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<PAGE>
the Company shall have paid the Change of Control Purchase Price in full to the
holders of Senior Notes that have accepted the Company's Change of Control Offer
and shall otherwise have consummated the Change of Control Offer made to holders
of the Senior Notes and (B) the Company will not issue Indebtedness or Preferred
Stock that is subordinated in right of payment to the Senior Notes or Preferred
Stock with change of control provisions requiring the payment of such
Indebtedness or Preferred Stock prior to the payment of the Senior Notes in the
event of a Change of Control under the Senior Note Indenture.
In the event that a Change of Control occurs and the holders of Senior Notes
exercise their right to require the Company to purchase Senior Notes, if such
purchase constitutes a "tender offer" for purposes of Rule 14e-1 under the
Exchange Act at that time, the Company will comply with the requirements of Rule
14e-1 as then in effect with respect to such repurchase.
None of the provisions relating to a purchase upon a Change of Control is
waivable by the Board of Directors of the Company or the Trustee. In the event
that the Company was required to purchase Senior Notes pursuant to a Change of
Control Offer, the Company expects that it would need to seek third-party
financing to the extent it does not have available funds to meet its purchase
obligations. However, there can be no assurance that the Company would be able
to obtain such financing. The occurrence of a Change of Control would likely
constitute an event of default under the Credit Facilities and would permit the
holders of that Indebtedness to declare all amounts thereunder to be immediately
due and payable.
In the event of a change of control with respect to the Old Notes, the
Company would be required to make an offer to purchase all Old Notes then
outstanding at a purchase price equal to 101% of the principal amount thereof,
plus accrued and unpaid interest thereon, if any, to the date of such purchase.
The Company could, in the future, enter into certain transactions, including
certain recapitalizations of the Company, that would not constitute a Change of
Control with respect to the Senior Notes, but would increase the amount of
Indebtedness outstanding at such time.
Failure by the Company to purchase the Senior Notes when required
constitutes an Event of Default with respect to the Senior Notes. See "-- Events
of Default."
The Change of Control provision of the Senior Notes may in certain
circumstances make more difficult or discourage a takeover of the Company and
thus the removal of incumbent management. The Change of Control provision is
not, however, the result of management's knowledge of any specific effort to
obtain control of the Company by means of a merger, tender offer, solicitation
or otherwise, or part of a plan by management to adopt a series of anti-takeover
provisions.
REPORTS
So long as any Senior Note is outstanding, the Company shall file with the
Commission and, within 15 days after it files them with the Commission, file
with the Trustee and thereafter promptly mail or promptly cause the Trustee to
mail to the holders of the Senior Notes at their addresses as set forth in the
register of the Senior Notes, copies of the periodic reports and the
information, documents and other reports (without exhibits unless requested in
writing by any such holder) which the Company is required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act or which the
Company would be required to file with the Commission if the Company then had a
class of securities registered under the Exchange Act. In addition, the Company
shall cause its annual report to stockholders and any quarterly or other
financial reports furnished to its stockholders generally to be filed with the
Trustee no later than the date such materials are mailed or made available to
the Company's stockholders, and thereafter mailed promptly to the holders of the
Senior Notes at their addresses as set forth in the register of Senior Notes.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Company will not consolidate with, merge with or into, or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
assets (as an entirety or substantially as an entirety in one transaction or a
series of related transactions), to any Person (other than the merger or
transfer of assets of a Wholly-Owned Restricted Subsidiary of the Company into
another Wholly-Owned Restricted
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Subsidiary of the Company or into the Company) unless: (i) the Company shall be
the continuing Person, or the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or to which the properties and
assets of the Company are sold, assigned, transferred, leased, conveyed or
disposed of shall be a corporation organized and existing under the laws of the
United States or any State thereof or the District of Columbia and shall
expressly assume, by a supplemental indenture, executed and delivered to the
Trustee, in form satisfactory to the Trustee, all of the obligations of the
Company under the Senior Notes and the Senior Note Indenture, and the
obligations under the Senior Note Indenture shall remain in full force and
effect; (ii) immediately before and immediately after giving effect to such
transaction on a pro forma basis, no Default or Event of Default shall have
occurred and be continuing, and (iii) immediately after giving effect to such
transaction on a pro forma basis the Company or such Person could incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) under the
covenant set forth under "Certain Covenants -- Limitation on Additional
Indebtedness," and immediately after such transaction, the Company or the
surviving Person holds all material permits, licenses, certifications or
approvals required for operation of the business of the Company as the same is
conducted prior to such transaction and immediately thereafter.
In connection with any consolidation, merger or transfer of assets
contemplated by this provision, the Company shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an Officers' Certificate and an opinion of counsel, each stating that
such consolidation, merger, sale, assignment, conveyance, or transfer and the
supplemental indenture in respect thereto comply with the provisions of the
Senior Note Indenture and that all conditions precedent in the Senior Note
Indenture relating to such transaction or transactions have been complied with.
EVENTS OF DEFAULT
The following events are defined in the Senior Note Indenture as "Events of
Default":
(i) default in any payment of any interest on any Senior Note when the
same becomes due and payable and such default continues for a period of 30
days;
(ii) default in the payment of any principal of, or premium, if any, on
any Senior Note when the same becomes due and payable at its Stated
Maturity, upon redemption, upon declaration or otherwise, including any
failure by the Company to redeem or purchase Senior Notes when required
pursuant to the Senior Note Indenture or the Senior Notes;
(iii) failure by the Company or any Restricted Subsidiary in the
observance or performance of any covenant or agreement (other than the
obligations specified in clauses (i) and (ii)) in the Senior Notes or the
Senior Note Indenture for a period of 60 days after written notice from the
Trustee or the holders of not less than 25% in aggregate principal amount of
the Senior Notes then outstanding;
(iv) default in the payment when due after any applicable grace period
of principal, interest or premium with respect to any Indebtedness of the
Company or any Restricted Subsidiary thereof or the acceleration of any
Indebtedness of the Company or any Restricted Subsidiary, and, in either
case, the total amount of such unpaid or accelerated debt exceeds $5
million;
(v) the rendering of any judgment or judgments (not subject to appeal
and other than any judgment as to which an insurance company rated A- or
better by A. M. Best has accepted full liability) against the Company or any
Restricted Subsidiary thereof in an aggregate principal amount in excess of
$5 million which remains unstayed, in effect and unpaid for a period of 60
consecutive days thereafter; and
(vi) certain events involving bankruptcy, insolvency or reorganization
of the Company or any Restricted Subsidiary thereof.
The Senior Note Indenture provides that the Trustee may withhold notice to
the holders of the Senior Notes of any default (except in payment of principal
or premium, if any, or interest on the Senior Notes) if the Trustee considers it
to be in the interest of the holders of the Senior Notes to do so.
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The Senior Note Indenture will provide that if an Event of Default (other
than an Event of Default resulting from certain events of bankruptcy, insolvency
or reorganization of the Company) shall have occurred and be continuing, then
the Trustee or the holders of not less than 25% in aggregate principal amount of
the Senior Notes then outstanding may declare to be immediately due and payable
the entire Accreted Value of all the Senior Notes then outstanding plus accrued
interest to the date of acceleration and such amounts shall become immediately
due and payable, provided, however, that after such acceleration but before a
judgment or decree based on acceleration is obtained by the Trustee, the holders
of a majority in aggregate principal amount of outstanding Senior Notes may,
under certain circumstances, rescind and annul such acceleration if all Events
of Default, other than nonpayment of accelerated principal, premium, if any, or
interest, have been cured or waived as provided in the Senior Note Indenture. In
case an Event of Default resulting from certain events of bankruptcy, insolvency
or reorganization of the Company shall occur, Accreted Value, premium, if any,
and interest with respect to all of the Senior Notes shall be due and payable
immediately without any declaration or other act on the part of the Trustee or
the holders of the Senior Notes.
The holders of a majority in principal amount of the Senior Notes then
outstanding shall have the right to waive any existing default or compliance
with any provision of the Senior Note Indenture or the Senior Notes and to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, subject to certain limitations specified in the Senior
Note Indenture.
No holder of any Senior Note will have any right to institute any proceeding
with respect to the Senior Note Indenture or for any remedy thereunder, unless
such holder shall have previously given to the Trustee written notice of a
continuing Event of Default and unless also the holders of at least 25% in
aggregate principal amount of the outstanding Senior Notes shall have made
written request and offered reasonable indemnity to the Trustee to institute
such proceeding as a trustee, and unless the Trustee shall not have received
from the holders of a majority in aggregate principal amount of the outstanding
Senior Notes a direction inconsistent with such request and shall have failed to
institute such proceeding within 60 days. However, such limitations do not apply
to a suit instituted on such Senior Note on or after the respective due dates
expressed in such Senior Note.
DEFEASANCE AND COVENANT DEFEASANCE
The Senior Note Indenture provides the Company may elect either (a) to
defease and be discharged from any and all obligations with respect to the
Senior Notes (except for the obligations to register the transfer or exchange of
such Senior Notes, to replace temporary or mutilated, destroyed, lost or stolen
Senior Notes, to maintain an office or agency in respect of the Senior Notes and
to hold monies for payment in trust) ("defeasance") or (b) to be released from
their obligations with respect to the Senior Notes under certain covenants
contained in the Senior Note Indenture and described above under "-- Certain
Covenants" ("covenant defeasance"), upon the deposit with the Trustee (or other
qualifying trustee), in trust for such purpose, of money and/or U.S. Government
Obligations which through the payment of principal and interest in accordance
with their terms will provide money, in an amount sufficient to pay the
principal of, premium, if any, and interest on the Senior Notes, on the
scheduled due dates therefor or on a selected date of redemption in accordance
with the terms of the Senior Note Indenture. Such a trust may only be
established if, among other things, the Company has delivered to the Trustee an
Opinion of Counsel (as specified in the Senior Note Indenture) (i) to the effect
that neither the trust nor the Trustee will be required to register as an
investment company under the Investment Company Act of 1940, as amended, and
(ii) to the effect that holders of the Senior Notes or persons in their
positions will not recognize income, gain or loss for federal income tax
purposes as a result of such deposit, defeasance and discharge and will be
subject to federal income tax on the same amount and in the same manner and at
the same times, as would have been the case if such deposit, defeasance and
discharge had not occurred which, in the case of a defeasance only, must be
based upon a private ruling concerning the Senior Notes, a published ruling of
the Internal Revenue Service or a change in applicable federal income tax law.
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AMENDMENT, SUPPLEMENT AND WAIVER
The Senior Note Indenture (including the terms and conditions of the Senior
Notes) may be modified or amended by the Company and the Trustee, without the
consent of the holders of any Senior Notes, for the purposes of (a) adding to
the covenants of the Company for the benefit of the holders of Senior Notes; (b)
surrendering any right or power conferred upon the Company; (c) evidencing the
succession of another Person to the Company and the assumption by such successor
of the covenants and obligations of the Company thereunder and in the Senior
Notes as permitted by the Senior Note Indenture; or (d) curing any ambiguity or
correcting or supplementing any defective provision contained in the Senior Note
Indenture or making any changes in any other provisions of the Senior Note
Indenture which the Company and the Trustee may deem necessary or desirable and
which, in either case, will not adversely affect the interests of the holders of
Senior Notes.
The Senior Note Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the then outstanding Senior Notes, to enter into
any supplemental indenture for the purpose of adding, changing or eliminating
any of the provisions of the Senior Note Indenture, or of modifying in any
manner the rights of the holders under the Senior Note Indenture, provided that
no such supplemental indenture may without the consent of the holder of each
outstanding Senior Note affected thereby: (a) reduce the amount of Senior Notes
whose holders must consent to an amendment or waiver; (b) reduce the rate of, or
extend the time for payment of, interest, including defaulted interest, on any
Senior Note; (c) reduce the principal of or premium on or change the fixed
maturity of any Senior Note or alter the redemption provisions with respect
thereto; (d) make the principal of, or premium, if any, or interest on, any
Senior Note payable in money other than as provided for in the Senior Note
Indenture and the Senior Notes; (e) waive continuing default in the payment of
the principal of or premium, if any, or interest on, or redemption or repurchase
payment with respect to, any Senior Notes, including, without limitation, a
continuing failure to make payment when required upon a Change of Control or
after an Asset Sale Offer Trigger Date; (f) after the Company's obligation to
purchase the Senior Notes arises under the Senior Note Indenture amend, modify
or change the obligation of the Company to make or consummate a Change of
Control Offer in the event of a Change of Control or an Asset Sale Offer in the
event of an Asset Sale Offer Trigger Date or waive any default in the
performance thereof or modify any of the provisions or definitions with respect
to any such offers; or (g) make any change in provisions relating to waivers of
defaults, the ability of holders to enforce their rights under the Senior Note
Indenture or the matters discussed in these clauses (a) through (g).
COMPLIANCE CERTIFICATE
The Company will deliver to the Trustee on or before 105 days after the end
of the Company's fiscal year and on or before 60 days after the end of each of
the first, second and third fiscal quarters in each year an Officers'
Certificate stating whether or not the signers know of any Default or Event of
Default that has occurred. If they do, the certificate will describe the Default
or Event of Default and its status.
THE TRUSTEE
The Trustee under the Senior Note Indenture will be the Registrar and Paying
Agent with regard to the Senior Notes. The Senior Note Indenture provides that,
except during the continuance of an Event of Default, the Trustee will perform
only such duties as are specifically set forth in the Senior Note Indenture.
During the existence of an Event of Default, the Trustee will exercise such
rights and powers vested in it under the Senior Note Indenture and use the same
degree of care and skill in its exercise as a prudent person would exercise
under the circumstances in the conduct of such person's own affairs.
TRANSFER AND EXCHANGE
Holders of the Senior Notes may transfer or exchange Senior Notes in
accordance with the Senior Note Indenture. The Registrar under such Senior Note
Indenture may require a holder, among other things, to furnish appropriate
endorsements and transfer documents, and to pay any taxes and fees required by
law or permitted by the Senior Note Indenture. The Registrar is not required to
transfer or exchange any Senior Note selected for redemption. Also, the
Registrar is not required to transfer or
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exchange any Senior Note for a period of 15 days before selection of the Senior
Notes to be redeemed, for a period beginning 15 days before the mailing of a
notice of an Excess Proceeds Offer or a Change of Control Offer, or for 15 days
before an interest payment date.
The registered holder of a Senior Note may be treated as the owner of it for
all purposes.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants contained in the Senior Note Indenture. Reference is made to the
Senior Note Indenture for the full definition of all such terms as well as any
other capitalized terms used herein for which no definition is provided.
"ACCRETED VALUE" as of any date (the "specified date") means, with respect
to each $1,000 face amount of Senior Notes, the following amount:
(i) if the specified date is one of the following dates (each an
"accrual date"), the amount set forth opposite such date below:
<TABLE>
<CAPTION>
SEMI-ANNUAL ACCRUAL DATE ACCRETED VALUE
- ------------------------------------------------------------------ ----------------
<S> <C>
$
$
$
$
$
$
$
$
</TABLE>
(ii) if the specified date occurs between two semi-annual accrual dates,
the sum of (A) the accreted value for the semi-annual accrual date
immediately preceding the specified date and (B) an amount equal to the
product of (i) the accreted value for the immediately following semi-annual
accrual date less the accreted value for the immediately preceding
semi-annual accrual date and (ii) a fraction, the numerator of which is the
number of days (not to exceed 180 days) from the immediately preceding
semi-annual accrual date to the specified date, using a 360-day year of
twelve 30-day months, and the denominator of which is 180.
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person (including an
Unrestricted Subsidiary) existing at the time such Person becomes a Restricted
Subsidiary or assumed in connection with the acquisition of assets from such
Person.
"AFFILIATE" of any specified Person means any other Person which directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, such specified Person. For the purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by," and "under common control with"), as used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by agreement or
otherwise. With respect to the Company, Affiliate will also include any
Permitted Holder or its Affiliates so long as such Permitted Holder or its
Affiliates own shares of the Capital Stock of the Company or would otherwise be
an Affiliate.
"APOLLO" means collectively, Apollo Advisors, L.P., a Delaware limited
partnership, Lion Advisors, L.P., a Delaware limited partnership, Apollo
Investment Fund, L.P., a Delaware limited partnership, Apollo Investment Fund
II, L.P., a Delaware limited partnership, or any investment fund, investment
account or other entity whose investing manager, investment advisor or general
partner, or any principal thereof, is any of the foregoing entities or
individuals or any principal or Affiliate of any of them; provided, however,
that no entity or individual shall be deemed within the definition of Apollo
when that entity or individual ceases to be an Affiliate of any of the foregoing
entities or individuals or an investment fund,
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investment account or other entity whose investing manager, investment advisor
or general partner, or any principal thereof, is any of the foregoing entities
or individuals or any principal or Affiliate of any of them.
"ASSET SALE" means the sale, issuance, conveyance, transfer, lease, or other
disposition (including without limitation, by way of merger, consolidation or
Sale and Lease-Back transaction) (collectively, a "transfer"), directly or
indirectly, in any single transaction or series of related transactions
involving assets with a fair market value in excess of $1,000,000 (other than to
the Company or any of its Restricted Subsidiaries) of (a) any Capital Stock of
or other equity interest in any Restricted Subsidiary of the Company, (b) all or
substantially all of the assets of any division or line of business of the
Company or of any Restricted Subsidiary thereof, or (c) any other properties of
the Company or any Restricted Subsidiary, other than in the ordinary course of
business; provided that Asset Sales shall not include (i) transfers to the
Company or to a Restricted Subsidiary or to any other Person if after giving
effect to such sale, lease, conveyance, transfer or other disposition such other
Person becomes a Restricted Subsidiary; (ii) transfers governed by the covenant
described in "Merger, Consolidation or Sale of Assets;" (iii) sales of Permitted
Investments permitted under clause (ii) of the definition of "Permitted
Investments;" and (iv) the sale, issuance, conveyance, transfer, lease, or other
disposition of an Investment described in clause (iii) of the definition of
Restricted Payment, provided that such Investment was permitted by the terms of
the Senior Note Indenture, unless such disposition constitutes the transfer of
all of the Capital Stock of a Wholly-Owned Restricted Subsidiary.
"ASSET SALE PROCEEDS" means, with respect to any Asset Sale, (i) cash
received by the Company or any Restricted Subsidiary from such Asset Sale, after
(a) provision for all income or other taxes measured by or resulting from such
Asset Sale, (b) payment of all brokerage commissions, underwriting, accounting,
legal and other fees and expenses related to such Asset Sale, (c) provision for
minority interest holders in any Restricted Subsidiary as a result of such Asset
Sale and (d) deduction of appropriate amounts to be provided by the Company or a
Restricted Subsidiary as a reserve, in accordance with GAAP, against any
liabilities associated with the assets sold or disposed of in such Asset Sale
and retained by the Company or a Restricted Subsidiary after such Asset Sale,
including, without limitation, pension and other post employment benefit
liabilities and liabilities related to environmental matters or against any
indemnification obligations associated with the assets sold or disposed of in
such Asset Sale, and (ii) promissory notes and other noncash consideration
received by the Company or any Restricted Subsidiary from such Asset Sale or
other disposition upon the liquidation or conversion of such notes or non-cash
consideration into cash, provided however that any Asset Sale Proceeds with
respect to the assets of Telemundo News Network, Inc. shall be after deduction
for amounts actually contributed to TeleNoticias del Mundo, L.P. by the Company.
"ASSET SWAP" means an asset sale by the Company or any Restricted Subsidiary
in exchange for properties or assets that will be used in the Primary Business
of the Company and its Restricted Subsidiaries.
"ATTRIBUTABLE INDEBTEDNESS" under the Senior Note Indenture in respect of a
Sale and Lease-Back Transaction means, as at the time of determination, the
greater of (i) the fair value of the property subject to such arrangement (as
determined by the Board of Directors) and (ii) the present value (discounted at
the interest rate borne by the Senior Notes, compounded annually) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale and Lease-Back Transaction (including any period for
which such lease has been extended).
"AVAILABLE ASSET SALE PROCEEDS" means, with respect to any Asset Sale, the
aggregate Asset Sale Proceeds from such Asset Sales that have not been applied
in accordance with clauses (a) or (b), and which have not yet been the basis for
an Excess Proceeds Offer in accordance with clause (c), of the second paragraph
of "Certain Covenants -- Limitation on Certain Asset Sales."
"AVERAGE LIFE" means, as of the date of determination, with respect to any
Indebtedness or security, the quotient obtained by dividing (a) the sum of the
product of (i) the number of years from such date to
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the date of each successive scheduled principal or redemption payment of such
Indebtedness or security multiplied by (ii) the amount of such principal or
redemption payment by (b) the sum of all such principal or redemption payments.
"CAPITAL STOCK" means, with respect to any Person, any and all shares or
other equivalents (however designated) of capital stock, partnership interests
or any other participation, right or other interest in the nature of an equity
interest in such Person or any option, warrant or other security convertible
into any of the foregoing.
"CAPITALIZED LEASE OBLIGATIONS" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
"CASH EQUIVALENTS" means (i) securities with maturities within 365 days of
the date of acquisition, issued, fully guaranteed or insured by the United
States Government or any agency thereof; (ii) certificates of deposit, time
deposits, overnight bank deposits, banker's acceptances and repurchase
agreements issued by a Qualified Issuer having maturities of 270 days or less
from the date of acquisition; (iii) commercial paper of an issuer rated at least
A-1 by S&P or P-1 by Moody's, or carrying an equivalent rating by a nationally
recognized rating agency if both of the two named rating agencies cease
publishing ratings of investments and having maturities of 270 days or less from
the date of acquisition and (iv) money market accounts or funds with or issued
by Qualified Issuers.
A "CHANGE OF CONTROL" of the Company will be deemed to have occurred at such
time as (i) any Person (including a Person's Affiliates and associates), other
than a Permitted Holder, becomes the beneficial owner (as defined under Rule
13d-3 or any successor rule or regulation promulgated under the Exchange Act) of
50% or more of the total voting or economic power of the Company's Common Stock,
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the shareholders of the Company has been
approved by a 66 2/3% of the directors then still in office who either were
directors at the beginning of such period or whose election or recommendation
for election was previously so approved) cease to constitute a majority of the
Board of Directors of the Company; or (iii) so long as $10 million principal
amount of Old Notes remains outstanding, any "change in control" occurs (as
defined at such time) with respect to the Old Notes.
"COMMON STOCK" of any Person means all Capital Stock of such Person that is
generally entitled to (i) vote in the election of directors of such Person or
(ii) if such Person is not a corporation, vote or otherwise participate in the
selection of the governing body, partners, managers or others that will control
the management and policies of such Person.
"COMMON STOCK OFFERING" means a public offering by the Company of shares of
its Common Stock (however designated and whether voting or non-voting) and any
and all rights, warrants or options to acquire such Common Stock.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person, for any
period, the aggregate amount of interest which, in conformity with GAAP, would
be set forth opposite the caption "interest expense" or any like caption on an
income statement for such Person and its Subsidiaries on a consolidated basis
(including, but not limited to, Redeemable Dividends, whether paid or accrued,
on Preferred Stock of a Subsidiary (as defined below in these "Certain
Definitions"), imputed interest included in Capitalized Lease Obligations, all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing, the net costs associated with
hedging obligations, amortization of other financing fees and expenses, the
interest portion of any deferred payment obligation, amortization of discount or
premium, if any, and all other non-cash interest expense (other than interest
amortized to cost of sales)) plus, without duplication, all net capitalized
interest for such period and all interest incurred or paid under any guarantee
of Indebtedness (including
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a guarantee of principal, interest or any combination thereof) of any Person,
plus the amount of all dividends or distributions paid on Disqualified Capital
Stock (other than dividends paid or payable in shares of Capital Stock of the
Company).
"CONSOLIDATED NET INCOME" means, with respect to any Person, for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; PROVIDED,
HOWEVER, that (a) for any Person (the "other Person") in which the Person in
question or any of its Subsidiaries has less than a 100% interest (which
interest does not cause the net income of such other Person to be consolidated
into the net income of the Person in question in accordance with GAAP) (i) Net
Income of the other Person shall be included only to the extent of the amount of
dividends or distributions paid to the Person in question or its Subsidiary, and
(ii) net loss related to the interest of the Company and its Subsidiaries in
TeleNoticias del Mundo, L.P. shall be included in Net Income of the Company and
its Subsidiaries only to the extent that such net loss is in excess of $10
million and to the extent the Company or its Subsidiaries have contributed or
contribute amounts to TeleNoticias del Mundo, L.P. in an aggregate amount in
excess of $10 million, (b) the Net Income of any Subsidiary of the Person in
question that is subject to any restriction or limitation on the payment of
dividends or the making of other distributions shall be excluded to the extent
of such restriction or limitation, (c) the Net Income of any Person acquired in
a pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded, (d) any net gain (but not loss) resulting from an
Asset Sale by the Person in question or any of its Subsidiaries other than in
the ordinary course of business shall be excluded, (e) extraordinary, unusual
and non-recurring gains and losses shall be excluded, and (f) all non-cash items
increasing Consolidated Net Income and not otherwise included in the definition
of EBITDA shall be excluded.
"CREDIT FACILITIES" means any credit facility or agreement (including the
Loan and Security Agreement) with a bank or syndicate of banks or other
financial institutions (including working capital or revolving credit
facilities) including any related guarantees, collateral documents, instruments
and agreements executed in connection therewith, as such agreements may be
amended, renewed, extended, substituted, refinanced, restructured, replaced,
supplemented or otherwise modified from time to time (including without
limitation, any successive renewals, extensions, substitutions, refinancings,
restructurings, replacements, supplementations or other modifications of the
foregoing). For all purposes under the Senior Note Indenture, "Credit
Facilities" shall include any amendments, renewals, extensions, substitutions,
refinancings, restructurings, replacements, supplements or any other
modifications that increase the principal amount of the Indebtedness thereunder
or commitments to lend thereunder and have been made in compliance with the
"Limitation on Additional Indebtedness" covenant; PROVIDED that for purposes of
the definition of "Permitted Indebtedness," no such increase may result in the
principal amount of Indebtedness of the Company under the Credit Facilities
exceeding the amount permitted by clause (a) of the definition of "Permitted
Indebtedness."
"CUMULATIVE CONSOLIDATED INTEREST EXPENSE" means with respect to any Person,
as of any date of determination, Consolidated Interest Expense from the Issue
Date to the end of the Company's most recently ended full fiscal quarter prior
to such date, taken as a single accounting period.
"CUMULATIVE EBITDA" means with respect to any Person, as of any date of
determination, EBITDA from the Issue Date to the end of the Company's most
recently ended full fiscal quarter prior to such date, taken as a single
accounting period.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency swap
agreement or other similar arrangement designed to protect the Company or any of
its Restricted Subsidiaries against fluctuations in currency values.
"DISQUALIFIED CAPITAL STOCK" means any Capital Stock of the Company or a
Restricted Subsidiary thereof which, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable at the
option of the holder), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the maturity date of the Senior Notes, for cash or
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securities constituting Indebtedness. Without limitation of the foregoing,
Disqualified Capital Stock shall be deemed to include (i) any Preferred Stock of
a Restricted Subsidiary of the Company and (ii) any Preferred Stock of the
Company, with respect to either of which, under the terms of such Preferred
Stock, by agreement or otherwise, such Restricted Subsidiary or the Company is
obligated to pay current dividends or distributions in cash during the period
prior to the maturity date of the Senior Notes.
"EBITDA" means, for any Person, for any period for which it is to be
determined, an amount equal to the sum of, without duplication, (i) Consolidated
Net Income for such period, plus (ii) the provision for taxes for such period
based on income or profits to the extent such income or profits were included in
computing Consolidated Net Income and any provision for taxes utilized in
computing net loss under clause (i) hereof, plus (iii) Consolidated Interest
Expense for such period (including, for this purpose, Redeemable Dividends to
the extent that such dividends were deducted in determining Net Income), plus
(iv) depreciation and amortization for such period on a consolidated basis, plus
(v) non-cash charges for such period on a consolidated basis, except that with
respect to the Company each of the foregoing items shall be determined on a
consolidated basis with respect to the Company and its Restricted Subsidiaries
only.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FAIR MARKET VALUE" or "fair value" means, with respect to any asset or
property or Capital Stock, the price which could be negotiated in an
arm's-length, free market transaction, for cash, between an informed and willing
seller and an informed, willing and able buyer, neither of whom is under undue
pressure or compulsion to complete the transaction.
"GAAP" means generally accepted accounting principles consistently applied
as in effect in the United States from time to time.
"GUARANTEE" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and,
without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or
other obligation of such other Person (whether arising by virtue of partnership
arrangements, or by agreement to keepwell, to purchase assets, goods, securities
or services, to take-or-pay, or to maintain financial statement conditions or
otherwise) or (ii) entered into for purposes of assuring in any other manner the
obligee of such Indebtedness or other obligation of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
PROVIDED that the term "Guarantee" shall not include endorsements for collection
or deposit in the ordinary course of business. The term "Guarantee" used as a
verb has a corresponding meaning.
"INCUR" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
guarantee or otherwise become liable in respect of such Indebtedness or other
obligation or the recording, as required pursuant to GAAP or otherwise, of any
such Indebtedness or other obligation on the balance sheet of such person (and
"incurrence," "incurred," "incurrable," and "incurring" shall have meanings
correlative to the foregoing); provided, however, that a change in GAAP that
results in an obligation of such Person that exists at such time becoming
Indebtedness shall not be deemed an incurrence of such Indebtedness.
"INDEBTEDNESS" means, with respect to any Person, at any date of
determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto), (iv) all obligations of such
Person to pay the deferred and unpaid purchase price of property (excluding any
balances that constitute accounts payable or trade payables, and other accrued
liabilities arising in the ordinary course of business, including, without
limitation, any and all programming obligations), which purchase price is due
more than six months after the date of placing such property in service or
taking delivery and title thereto, (v) all obligations of such Person as lessee
under Capitalized
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Lease Obligations and all Purchase Money Indebtedness; (vi) all Indebtedness of
other Persons secured by a Lien on any asset of such Person, whether or not such
Indebtedness is assumed by such Person; provided that the amount of such
Indebtedness shall be the lesser of (A) the fair market value of such asset at
such date of determination and (B) the principal amount of such Indebtedness,
(vii) all Indebtedness of other Persons Guaranteed by such Person to the extent
such Indebtedness is Guaranteed by such Person; (viii) to the extent not
otherwise included in this definition, net obligations under Currency Agreements
and Interest Rate Agreements; and (ix) all Disqualified Capital Stock issued by
such Person. The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and, with respect to contingent obligations, the maximum liability upon
the occurrence of the contingency giving rise to the obligation; PROVIDED that
the amount outstanding at any time of any Indebtedness issued with original
issue discount is the face amount of such Indebtedness less the remaining
unamortized portion of the original issue discount of such Indebtedness at such
time as determined in conformity with GAAP and for purposes of calculating the
amount of the Senior Notes outstanding at any time, the amount shall be the
Accreted Value thereof as of such time. A Guarantee of (or an obligation with
respect to a letter of credit supporting) Indebtedness permitted by the terms of
the Senior Note Indenture will not constitute a separate incurrence of
Indebtedness.
"INDEPENDENT FINANCIAL ADVISOR" means an accounting, appraisal, expert or
investment banking firm of nationally recognized standing that is, in the
reasonable and good faith judgment of the Board of Directors of the Company,
qualified to perform the task for which such firm has been engaged and
disinterested and independent with respect to the Company and its Affiliates.
"INTEREST RATE PROTECTION AGREEMENT" means, for any Person, any interest
rate swap agreement, interest rate cap agreement, interest rate collar agreement
or other similar agreement designed to protect the party therein against
fluctuations in interest rates.
"INVESTMENTS" means, directly or indirectly, any advance, account receivable
(other than an account receivable arising in the ordinary course of business),
loan or capital contribution to (by means of transfers of property to others,
payments for property or services for the account or use of others or
otherwise), the purchase of any stock, bonds, notes, debentures, partnership or
joint venture interests or other securities of, the acquisition, by purchase or
otherwise, of all or substantially all of the business or assets or stock or
other evidence of beneficial ownership of, any Person or the making of any
investment in any Person. Investments shall exclude extensions of trade credit
in the ordinary course of business, repurchases or redemptions of the Senior
Notes by the Company, prepaid expenses (including television programming)
arising in the ordinary course of business, endorsements for collection or
deposit in the ordinary course of business, worker's compensation, utility,
lease and similar deposits made in the ordinary course of business, and loans
and advances to employees, other than officers and directors of the Company or
any Restricted Subsidiary, made in the ordinary course of business.
"ISSUE DATE" means the date the Senior Notes are first issued by the Company
and authenticated by the Trustee under the Senior Note Indenture.
"JOINT VENTURE AGREEMENT" means the Amended and Restated Partnership
Agreement of Video 44, dated as of November 8, 1995 by and among Essaness
Theatres Corporation, Telemundo of Chicago, Inc. and Harriscope of Chicago,
Inc., as in effect on the date of the Senior Note Indenture, without regard to
any amendments or supplements thereto.
"LIEN" means with respect to any property or assets of any Person, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance, preference,
priority, or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including
without limitation, any Capitalized Lease Obligation, conditional sales, or
other title retention agreement having substantially the same economic effect as
any of the foregoing).
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"LOAN AND SECURITY AGREEMENT" means the Loan and Security Agreement by and
between the Company, certain of its Subsidiaries and Foothill Capital
Corporation dated December 30, 1994, as such agreement may be amended, renewed,
extended, substituted, refinanced, restructured, replaced, supplemented or
otherwise modified from time to time (including without limitation, any
successive renewals, extensions, substitutions, refinancings, restructurings,
replacements or supplementations or other modifications of the foregoing),
provided that any amendments, renewals, extensions, substitutions, refinancings,
restructurings, replacements, supplements or modifications do not increase the
principal amount of the Indebtedness thereunder exceeding $20 million.
"LOCAL MARKETING AGREEMENT" means a local marketing arrangement, sale
agreement, time brokerage agreement, management agreement or similar arrangement
pursuant to which a Person (which, if not the Company, shall be a single-purpose
entity which cannot conduct any other business operations but those which are to
be purchased or managed pursuant to the following provisions): (i) obtains the
right to sell at least a majority of the advertising inventory of a television
station on behalf of a third party, (ii) purchases at least a majority of the
air time of a television station to exhibit programming and sell advertising
time, (iii) manages the selling operations of a television station with respect
to at least a majority of the advertising inventory of such station, (iv)
manages the acquisition of programming for a television station, (v) acts as a
program consultant for a television station, or (vi) manages the operation of a
television station generally.
"MATURITY" means the date on which the principal of a Senior Note becomes
due and payable in full as provided therein or herein, whether at its Stated
Maturity or by declaration of acceleration, call for redemption or otherwise.
"NET INCOME" means, with respect to any Person for any period, the net
income (loss) of such Person determined in accordance with GAAP.
"NET PROCEEDS" means (a) in the case of any sale of Capital Stock by the
Company, the aggregate net proceeds received by the Company, after payment of
expenses, commissions and the like incurred in connection therewith, whether
such proceeds are in cash or in property (valued at the fair market value
thereof, as determined in good faith by the Board of Directors, at the time of
receipt) and (b) in the case of any exchange, exercise, conversion or surrender
of outstanding securities of any kind for or into shares of Capital Stock of the
Company which is not Disqualified Capital Stock, the net book value of such
outstanding securities on the date of such exchange, exercise, conversion or
surrender (plus any additional amount required to be paid by the holder to the
Company upon such exchange, exercise, conversion or surrender, less any and all
payments made to the holders, e.g., on account of fractional shares and less all
expenses incurred by the Company in connection therewith).
"PERMITTED HOLDERS" means Apollo, TLMD, Bastion Capital Fund L.P. or
Hernandez Partners or any of their respective Affiliates.
"PERMITTED INDEBTEDNESS" means, without duplication, (a) Indebtedness of the
Company or, to the extent permitted in clause (j) of the covenant entitled
"Limitation on Restricted Subsidiary Debt and Preferred Stock," any Restricted
Subsidiary, evidenced by or arising under Credit Facilities, which taken
together (without duplication) is in an aggregate principal amount at any one
time not to exceed $75 million; (b) Indebtedness of the Company evidenced by or
arising under the Senior Notes and the Senior Note Indenture; (c) Indebtedness
of the Company or any Restricted Subsidiary remaining outstanding immediately
after the Issue Date after giving effect to the consummation of the transactions
described in the Prospectus under "Use of Proceeds" above; (d) Indebtedness of
the Company or any Restricted Subsidiary under Currency Agreements and Interest
Rate Protection Agreements which are entered into for the purpose of protection
against risk of currency or interest rate fluctuations affecting the Company or
any of its Subsidiaries in its ordinary course of business or that are related
to payment obligations of the Company or any of its Subsidiaries otherwise
permitted under the Senior Note Indenture; (e) unsecured Indebtedness of the
Company owing to a Restricted Subsidiary of the Company which shall be evidenced
by an intercompany promissory note that is subordinated in right of payment to
the payment and performance of the Company's obligations under the Senior Note
Indenture and the
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Senior Notes and any subsequent issuance or transfer of Capital Stock of a
Restricted Subsidiary of the Company (the "Creditor Subsidiary") that results in
such Creditor Subsidiary ceasing to be a Restricted Subsidiary of the Company or
any subsequent transfer of Indebtedness owing from the Company to such Creditor
Subsidiary (other than a transfer to another Restricted Subsidiary of the
Company) shall be deemed in each case to constitute the incurrence of
Indebtedness by the Company to the extent of any such Indebtedness then
outstanding; (f) Indebtedness of the Company incurred in connection with a
repurchase of the Senior Notes pursuant to a Change of Control, in whole or in
part, provided that the principal amount of such Indebtedness does not exceed
101% of the Accreted Value of the Senior Notes repurchased and the reasonable,
customary expenses, fees and costs of the Company, and such Indebtedness (x) has
an Average Life to Stated Maturity equal to or greater than the remaining
Average Life to Maturity of the Senior Notes, and (y) does not mature prior to
the Stated Maturity of the Senior Notes; (g) Purchase Money Indebtedness and
Capitalized Lease Obligations of the Company or, to the extent permitted
pursuant to the covenant entitled "Limitation on Restricted Subsidiary Debt and
Preferred Stock," any Restricted Subsidiary, incurred in the ordinary course of
business in a principal amount outstanding at the time of incurrence which does
not in the aggregate exceed $15 million at any time outstanding; (h)
Indebtedness of the Company or any Restricted Subsidiary incurred or incurrable
in respect of reimbursement obligations related to letters of credit, banker's
acceptances or similar facilities entered into in the ordinary course of
business; (i) Indebtedness of the Company and any Restricted Subsidiary in
respect to bids, performance and surety bonds and obligations provided in the
ordinary course of business and appeal bonds; (j) Acquired Indebtedness,
provided that such Indebtedness was not incurred or issued as a result of, or in
connection with, or in anticipation of, such Person becoming a Restricted
Subsidiary of the Company and immediately after giving effect to such Person
becoming a Restricted Subsidiary of the Company (as if such Indebtedness was
incurred and issued on the first day of the previous four fiscal quarters), the
Company could incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) under the "Limitation on Additional Indebtedness" covenant above;
(k) Indebtedness incurred by the Company in exchange for, or the proceeds of
which are used to refinance Indebtedness incurred in compliance with the ratio
set forth in the first paragraph of the covenant entitled "Limitation on
Additional Indebtedness" and Indebtedness referred to in clauses (b) through (d)
and (f) through (i) of this definition, provided that (i) such Indebtedness is
in an aggregate principal amount not in excess of the aggregate principal amount
then outstanding of the Indebtedness being refinanced, plus the amount of
accrued and unpaid interest, if any, and premiums owed, if any, not in excess of
preexisting payment provisions on such Indebtedness being refinanced, plus the
reasonable, customary expenses, fees, and costs of the Company incurred in
connection with such refinancing, (ii) such Indebtedness is scheduled to mature
either (A) no earlier than the Indebtedness being refinanced or (B) after the
Stated Maturity of the Senior Notes, and (iii) such Indebtedness has an Average
Life at the time such Indebtedness is incurred that is equal to or greater than
the Average Life of the Indebtedness being refinanced, and (iv) such
Indebtedness is ranked in right of payment to the Senior Notes no more favorably
than the Indebtedness being refinanced is ranked in right of payment to the
Senior Notes; (l) Indebtedness incurred or incurrable, to the extent permitted
pursuant to the covenant entitled "Limitation on Restricted Subsidiary Debt and
Preferred Stock", by a Restricted Subsidiary under any Guarantee of any
Restricted Subsidiary made in the ordinary course of business and not to exceed
$10 million at any one time outstanding; (m) Indebtedness incurred or incurrable
by Telemundo of Chicago, Inc. and Harriscope of Chicago, Inc. pursuant to
Section 3.5(a) of the Joint Venture Agreement; (n) Indebtedness of the Company
not otherwise permitted to be incurred pursuant to this section, so long as the
aggregate principal amount of all such Indebtedness does not exceed $25 million
at any one time outstanding; (o) Indebtedness of a Restricted Subsidiary for
refinancing of certain Indebtedness as permitted under clause (i) of "Certain
Covenants -- Limitation on Restricted Subsidiary Debt and Preferred Stock;" (p)
Indebtedness of any Restricted Subsidiary or Preferred Stock of any Restricted
Subsidiary issued to and held by the Company or a Wholly-Owned Restricted
Subsidiary of the Company, provided that such Indebtedness or Preferred Stock is
at all times held by the Company or a Wholly-Owned Restricted Subsidiary of the
Company; and (q) Indebtedness, to the extent permitted pursuant to the covenant
entitled "Limitation on Restricted Subsidiary Debt and Preferred Stock," of any
Restricted Subsidiary pursuant to a Local Marketing Agreement.
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"PERMITTED INVESTMENTS" means, for any Person, Investments made on or after
the date of the Indenture consisting of:
(i) Investments by the Company, or by a Restricted Subsidiary thereof,
in the Company or a Restricted Subsidiary:
(ii) Temporary Cash Investments;
(iii) Investments in Property used in the ordinary course of business;
(iv) Investments by the Company, or by a Restricted Subsidiary thereof,
in a Person (or in all or substantially all of the business or assets of
such Person), if as a result of such Investment (a) such Person becomes a
Restricted Subsidiary of the Company, (b) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or a
Restricted Subsidiary thereof or (c) such business or assets are owned by
the Company or a Restricted Subsidiary;
(v) an Investment that is made by the Company or a Restricted Subsidiary
thereof in the form of any stock, bonds, notes, debentures, partnership or
joint venture interests or other securities that are issued by a third party
to, or otherwise received by, the Company or Restricted Subsidiary solely as
partial consideration for the consummation of an Asset Sale that is
otherwise permitted under the covenant described under "Limitation on Sale
of Assets";
(vi) Investments pursuant to any agreement or obligation of the Company
or a Restricted Subsidiary, in effect on the Issue Date, which requires the
Company to make such Investments;
(vii) Investments made after the Issue Date in the Primary Business of
the Company not to exceed $25 million at any one time outstanding;
(viii) Investments made after the Issue Date in majority-owned
Subsidiaries of the Company in the Primary Business of the Company not to
exceed $10 million at any one time outstanding;
(ix) loans and reasonable advances to officers and directors of the
Company or any of its Restricted Subsidiaries made in the ordinary course of
business in an aggregate principal amount not exceeding $1,000,000;
(x) Investments received in settlement of obligations incurred in the
ordinary course of business owed to the Company or any Restricted Subsidiary
(other than by the Company or any Subsidiary) and as a result of bankruptcy
or insolvency proceedings or upon the foreclosure, perfection or enforcement
of any Lien in favor of the Company or any Restricted Subsidiary;
(xi) Investments held by any Person on the date such Person becomes a
Restricted Subsidiary and not in excess of 5% of the total fair market value
of the assets of such Person being transferred in such acquisition; and
(xii) Investments in any Person with which the Company or any of the
Restricted Subsidiaries has entered into, or has an agreement that, subject
to consummation of such agreement, entitles the Company or any of its
Restricted Subsidiaries to enter into, a Local Marketing Agreement and
investments in any Person created by such a Local Marketing Agreement.
"PERMITTED LIENS" means, without duplication (a) Liens securing Indebtedness
incurred under the Credit Facilities incurred in accordance with "Certain
Covenants -- Limitation on Indebtedness"; (b) Liens on property or assets of, or
any shares of stock of or secured debt of, any Person or corporation existing at
the time such Person or corporation becomes a Restricted Subsidiary of the
Company or at the time such Person or corporation is merged into the Company or
any of its Restricted Subsidiaries, provided that such Liens are not incurred in
connection with, or in contemplation of, such Person or corporation becoming a
Restricted Subsidiary of the Company or merging into the Company or any of its
Restricted Subsidiaries; (c) Liens on Property existing at the time of
acquisition of such Property, provided that such Liens are not incurred in
connection with, or in contemplation of, such Property being
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acquired; (d) Liens existing on the date of the Senior Note Indenture; (e) Liens
securing Capitalized Lease Obligations permitted to be incurred under the
covenant entitled "Limitation on Additional Indebtedness" provided that such
Lien does not extend to any property other than that subject to underlying
lease; (f) charges or levies (other than any Lien imposed by the Employee
Retirement Income Security Act of 1974, as amended) that are not yet subject to
penalties for non-payment or are being contested in good faith by appropriate
proceedings and for which adequate reserves, if required, have been established
or other provisions have been made in accordance with GAAP; (g) statutory
mechanics', workmen's, materialmen's, operators', warehousemen's, repairmen's
and bankers' liens, and similar Liens imposed by law and arising in the ordinary
course of business for sums which are not overdue by more than 15 days or, if so
overdue, are being contested in good faith by appropriate proceedings and for
which adequate reserves, if required, have been established or other provisions
have been made in accordance with GAAP; (h) minor imperfections of, or
encumbrances on, title that do not impair the value of property for its intended
use; (i) Liens (other than any Lien under the Employee Retirement Income
Security Act of 1974, as amended) incurred or deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security; (j) Liens incurred or deposits
made to secure the performance of tenders, bids, leases, statutory or regulatory
obligations, bankers' acceptances, surety and appeal bonds, government
contracts, performance and return of money bonds and other obligations of a
similar nature incurred in the ordinary course of business (exclusive of
obligations for the payment of borrowed money); (k) easements, rights-of-way,
municipal and zoning ordinances and similar charges, encumbrances, title defects
or other irregularities that do not materially interfere with the ordinary
course of business of the Company or of any of its Subsidiaries; (l) Liens to
secure Purchase Money Indebtedness that is otherwise permitted under the Senior
Note Indenture, PROVIDED that (1) any such Lien is created solely for the
purpose of securing Indebtedness representing, or incurred to finance, refinance
or refund the cost (including the sales and excise taxes, installation and
delivery charges and other direct costs of, and other direct expenses paid or
charged in connection with, such purchase or construction) of the item of
Property subject thereto and such Lien is created prior to, at the time of or
within 365 days after the later of the acquisition, the completion of
construction or the commencement of full operation of such property, (2) the
principal amount of the Indebtedness secured by such Lien does not exceed 100%
of such cost, and (3) any such Lien shall not extend to or cover any Property
other than such item of Property and any improvements on such item or proceeds
thereof; (m) Liens in favor of the Company or any Wholly-Owned Subsidiary of the
Company; (n) Liens arising from the rendering of a final judgment or order
against the Company or any Subsidiary of the Company that does not give rise to
an Event of Default and that do not interfere with the ordinary course of the
Company and its Subsidiaries; (o) Liens securing reimbursement obligations with
respect to letters of credit incurred in accordance with the Senior Note
Indenture that encumber documents and other property relating to such letters of
credit and the products and proceeds thereof; (p) Liens encumbering customary
initial deposits and margin deposits, and other Liens that are within the
general parameters customary in the industry and incurred in the ordinary course
of business securing Indebtedness under Interest Rate Protection Agreements and
Currency Agreements constituting Indebtedness permitted to be incurred pursuant
to the "Limitation on Additional Indebtedness" covenant pursuant to clause (d)
of the definition of "Permitted Indebtedness"; (q) Liens securing Permitted
Indebtedness incurred in accordance with subsection (j) of the definition of
"Permitted Indebtedness"; (r) other Liens securing obligations incurred in the
ordinary course of business which obligations do not exceed $250,000 in the
aggregate at any one time outstanding; (s) Liens to secure any permitted
extension, renewal, refinancing or refunding (or successive extensions,
renewals, refinancings or refundings), in whole or in part, of any Indebtedness
secured by Liens referred to in the foregoing clauses (b) through (r), provided
that such Liens do not extend to any other property or assets and the principal
amount of the debt secured by such Liens is not increased; (t) Liens with
respect to any license of intellectual property entered into in the ordinary
course of business (including programing agreements); and (u) Liens in
connection with Local Marketing Agreements related to the Primary Business.
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"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government (including any agency or political subdivision thereof).
"PREFERRED STOCK" means any Capital Stock of a Person, however designated,
which entities the holder thereof to a preference with respect to dividends,
distributions or liquidation proceeds of such Person over the holders of other
Capital Stock issued by such Person.
"PRIMARY BUSINESS" means the ownership and operation of television stations
and networks and production facilities and the creation, production, development
and distribution of products for television.
"PROPERTY" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in the
most recent consolidated balance sheet of such Person and its Subsidiaries under
GAAP.
"PURCHASE MONEY INDEBTEDNESS" means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including the cost
of construction) of an item of property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such Person incurred in connection therewith.
"QUALIFIED ISSUER" means any commercial bank having capital, surplus and
undivided profits totaling in excess of $100,000,000 and the outstanding
short-term debt securities of which are rated at least A-2 by S&P or at least
P-2 by Moody's, or carrying an equivalent rating by a nationally recognized
rating agency if both the two named rating agencies cease publishing ratings of
investments.
"REDEEMABLE DIVIDEND" means, for any dividend or distribution with regard to
Disqualified Capital Stock, the quotient of the dividend or distribution divided
by the difference between one and the maximum statutory federal income tax rate
(expressed as a decimal number between 1 and 0) then applicable to the issuer of
such Disqualified Capital Stock.
"RESTRICTED PAYMENT" means, without duplication, any of the following: (i)
the declaration or payment of any dividend or any other distribution or payment
on Capital Stock of the Company or any Restricted Subsidiary of the Company or
any payment made to the direct or indirect holders (in their capacities as such)
of Capital Stock of the Company or any Restricted Subsidiary of the Company
(other than (x) dividends or distributions payable solely in Capital Stock
(other than Disqualified Capital Stock) or in options, warrants or other rights
to purchase Capital Stock (other than Disqualified Capital Stock), and (y) in
the case of Restricted Subsidiaries of the Company, dividends or distributions
payable to the Company or to a Wholly-Owned Subsidiary of the Company), (ii) the
purchase, redemption or other acquisition or retirement for value of any Capital
Stock of the Company or any of its Restricted Subsidiaries (other than Capital
Stock owned by the Company or a Wholly-Owned Subsidiary of the Company,
excluding Disqualified Capital Stock), (iii) the making of any Investment or
guarantee of any Investment in any Person other than a Permitted Investment,
(iv) any designation of a Restricted Subsidiary as an Unrestricted Subsidiary on
the basis of the fair market value of such Subsidiary utilizing standard
valuation methodologies and approved by the Board of Directors and (v)
forgiveness of any Indebtedness (other than Indebtedness of a Wholly-Owned
Restricted Subsidiary) of an Affiliate of the Company to the Company or a
Restricted Subsidiary. For purposes of determining the amount expended for
Restricted Payments, cash distributed or invested shall be valued at the face
amount thereof and property other than cash shall be valued at its fair market
value determined as conclusively determined by the Company's Board of Directors
in good faith.
"RESTRICTED SUBSIDIARY" means a Subsidiary of the Company other than an
Unrestricted Subsidiary and includes all of the Subsidiaries of the Company
existing as of the Issue Date, including but not limited to Telemundo of
Chicago, Inc. The Board of Directors of the Company may designate any
Unrestricted Subsidiary as a Restricted Subsidiary if immediately after giving
effect to such action (and
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treating any Acquired Indebtedness as having been incurred at the time of such
action), the Company could have incurred at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to the "Limitation on
Additional Indebtedness" covenant.
"SALE AND LEASE-BACK TRANSACTION" means any arrangement with any Person
providing for the leasing by the Company or any Restricted Subsidiary of the
Company of any real or tangible personal property, which property has been or is
to be sold or transferred by the Company or such Restricted Subsidiary to such
Person in contemplation of such leasing.
"STATED MATURITY" means, with respect to any security or Indebtedness, the
date specified therein as the fixed date on which any principal of such security
or Indebtedness is due and payable, including pursuant to any mandatory
redemption provision (but excluding any provision providing for the repurchase
thereof at the option of the holder thereof).
"SUBSIDIARY" of any specified Person means any corporation, partnership,
joint venture, association or other business entity, whether now existing or
hereafter organized or acquired, (i) in the case of a corporation, of which more
than 50% of the total voting power of the Capital Stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
officers or trustees thereof is held by such first-named Person or any of its
Subsidiaries; or (ii) in the case of a partnership, joint venture, association
or other business entity, with respect to which such first-named Person or any
of its Subsidiaries has the power to direct or cause the direction of the
management and policies of such entity by contract or otherwise or if in
accordance with GAAP such entity is consolidated with the first-named Person for
financial statement purposes.
"TEMPORARY CASH INVESTMENTS" means (i) Investments in marketable, direct
obligations issued, guaranteed or insured by the United States of America, or of
any governmental agency thereof and backed by the full faith and credit of the
United States, in each case maturing within 365 days of the date of acquisition
thereof; (ii) Investments in certificates of deposit or Eurodollar deposits,
demand deposits, time deposits, overnight bank deposits, and banker's
acceptances offered by a Qualified Issuer, maturing within 365 days of the date
of acquisition thereof; (iii) commercial paper maturing no more than one year
from the date of creation thereof and, at the time of acquisition, having a
rating of at least A-1 from S&P or at least P-1 from Moody's; (iv) repurchase
obligations with a term of not more than seven (7) days for underlying
securities of the type described in clause (i) above entered into with any
Qualified Issuer; (v) deposits available for withdrawal on demand with a
Qualified Issuer; (vi) Investments not exceeding 365 days in duration in money
market funds that invest substantially all of such funds' assets in the
Investments described in the preceding clauses (i), (ii) and (iii); and (vii)
foreign equivalents of the Investments described in clauses (i), (ii) and (v)
above, provided that such foreign equivalents shall be permitted by the Company
or a Restricted Subsidiary only to the extent that such Person holds such
foreign equivalents in the ordinary course of its business and in the currency
of the country where such Person conducts its business.
"TLMD" means TLMD Partners II, L.L.C., a Delaware limited liability company,
and its Affiliates, members (including voting committee members), investing
managers and investment advisors, or any investment fund, investment account or
other entity whose investing manager, investment advisor or general partner, or
any principal thereof, is any of the foregoing entities or individuals or any
principal or Affiliate of any of them; provided, however, that no entity or
individual shall be deemed within the definition of TLMD when that entity or
individual ceases to be an Affiliate of any of the foregoing entities or
individuals or an investment fund, investment account or other entity whose
investing manager, investment advisor or general partner, or any principal
thereof, is any of the foregoing entities or individuals or any principal or
Affiliate of any of them.
"UNRESTRICTED SUBSIDIARY" means (a) any Subsidiary of an Unrestricted
Subsidiary and (b) any Subsidiary of the Company which is classified after the
Issue Date as an Unrestricted Subsidiary by a resolution adopted by the Board of
Directors of the Company, provided that a Subsidiary organized or
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acquired after the Issue Date may be so classified as an Unrestricted Subsidiary
only if such classification is in compliance with the covenant set forth under
"Limitation on Restricted Payments." The Trustee shall be given prompt notice by
the Company of each resolution adopted by the Board of Directors of the Company
under this provision, together with a copy of each such resolution adopted.
"WHOLLY-OWNED SUBSIDIARY" or "WHOLLY-OWNED RESTRICTED SUBSIDIARY" means any
Restricted Subsidiary all of the outstanding voting securities (other than
directors' qualifying shares) of which are owned, directly or indirectly, by the
Company.
BOOK ENTRY DELIVERY AND FORM
The Senior Notes are expected to be issued in the form of a fully registered
Global Certificate. The Global Certificate will be deposited with or on behalf
of The Depository Trust Company, New York, New York (the "Depositary") and
registered in the name of the Depositary's nominee. Except as set forth below,
the Global Certificate may be transferred, in whole and not in part, only to
another nominee of the Depositary or to a successor of the Depositary or its
nominee.
The Depositary is a limited purpose trust company created to hold securities
for its participating organizations (the "Participants") and to facilitate the
clearance and settlement of transactions in deposited securities between
Participants through electronic book entry changes in the accounts of its
Participants. The Participants include securities brokers and dealers (including
the Underwriters), banks, trust companies, clearing corporations and certain
other organizations. Access to the Depositary's book entry system is also
available to organizations that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("indirect
participants"). Persons who are not Participants may beneficially own securities
held by the Depositary only through Participants and indirect participants.
The Company expects that, upon the Company's issuance of the Senior Notes
and pursuant to the Depositary's procedures, the Depositary will credit the
accounts of Participants designated by the Underwriters with the principal
amount of the Senior Notes purchased by the Underwriters, and ownership of
beneficial interests in the Global Certificate will be shown on, and the
transfer of that ownership will be effected only through, records maintained
with the Depositary (with respect to Participants' interests), the Participants
and the indirect participants. The laws of some states require that certain
Persons take physical delivery in definitive form of securities that they own.
Consequently, the ability to transfer beneficial interests in the Global
Certificate is limited to that extent.
So long as a nominee of the Depositary is the registered owner of the Global
Certificate, the nominee will be considered the sole owner or holder of the
Senior Notes for all purposes under the Senior Note Indenture. Except as
provided below, owners of beneficial interests in the Global Certificate will
not be entitled to have Senior Notes registered in their names, will not receive
or be entitled to receive physical delivery of Senior Notes in definitive form
and will not be considered the owners or holders thereof under the Senior Note
Indenture.
Neither the Company nor the Trustee or any other paying agent or registrar
for the Senior Notes will have any responsibility or liability for any aspect of
the records relating to payments made on account of beneficial ownership
interests in the Global Certificate or for maintaining, supervising or reviewing
any records relating to those beneficial ownership interests.
Payments of principal, premium, if any, and interest on the Global
Certificate registered in the name of the Depositary's nominee will be made by
the Company through the Trustee to the Depositary's nominee as the registered
owner of the Global Certificate. Under the terms of the Senior Note Indenture,
the Company and the Trustee will treat the Persons in whose names the Senior
Notes are registered as the owners of the Senior Notes for all purposes of
receiving payments of principal, premium, if any, and interest on the Senior
Notes and for all other purposes. Therefore, neither the Company nor the Trustee
or any other paying agent will have any direct responsibility or liability for
the payment of principal, premium, if any, or interest on the Senior Notes to
owners of beneficial interests in the Global Certificate. Pursuant to the
Depositary's present practices, upon receipt of any payment of principal,
premium, if
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any, or interest on the Senior Notes, the Depositary will immediately credit the
accounts of the Participants with payments in amounts proportionate to their
respective holdings in principal amount of beneficial interests in a Global
Certificate as shown on the records of the Depositary. Payments by Participants
and indirect participants to owners of beneficial interests in the Global
Certificate will be governed by standing instructions and customary practices
for securities held for the accounts of customers in bearer form or registered
in "street name" and will be the responsibility of the Participants and indirect
participants.
As long as the Senior Notes are represented by a Global Certificate, the
Depositary's nominee will be the holder of the Senior Notes and therefore will
be the only entity that can exercise a right to repayment or repurchase of the
Senior Notes. See "Change of Control Offer" and "Certain Covenants -- Limitation
on Certain Asset Sales" above. Notice by Participants or indirect participants
or by owners of beneficial interests in a Global Certificate held through
Participants or indirect participants of the exercise of the option to elect
repayment of beneficial interests in Senior Notes represented by a Global
Certificate must be provided to Participants and transmitted to the Depositary.
In order to ensure that the Depositary's nominee will timely exercise a right to
repayment of a particular Senior Note, the beneficial owner of the Senior Note
must instruct the broker or other Participant or indirect participant through
which it holds an interest in the Senior Note to notify the Depositary of its
election. Different firms have different cutoff times for accepting instructions
from their customers and, accordingly, each beneficial owner should consult the
broker or other Participant or indirect participant through which it holds an
interest in Senior Notes in order to ascertain the cutoff time for giving
instructions. The Company will not be liable for any delay in delivery to the
Trustee or other paying agent of notices of the exercise of an option to effect
repayment.
The Company will issue Senior Notes in definitive form in exchange for the
Global Certificate if (a) the Depositary is at any time unwilling or unable to
continue as depositary and a successor depositary is not appointed by the
Company within 90 days, (b) an Event of Default has occurred and is continuing
and the Trustee or other registrar has received a request from the Depositary to
issue Senior Notes in definitive form in lieu of all or a portion of the Global
Certificate (in which case the Company will deliver Senior Notes in definitive
form within 30 days of the request) or (c) the Company determines not to have
the Senior Notes represented by a Global Certificate. In any such event, an
owner of a beneficial interest in the Global Certificate will be entitled to
have Senior Notes equal in principal amount in its beneficial interest
registered in its name and will be entitled to receive physical delivery of that
principal amount of Senior Notes in definitive form. Senior Notes so issued in
definitive form will be issued in denominations of $1,000 and integral multiples
thereof, registered in the names of the beneficial owners or their nominees,
without coupons.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain U.S. federal income tax consequences
associated with the acquisition, ownership, and disposition of Senior Notes by
an initial purchaser of such Senior Notes. Akin, Gump, Strauss, Hauer & Feld,
L.L.P., counsel to the Company, is of the opinion that certain federal income
tax consequences of an investment in Senior Notes are as described by the
following discussion. The following summary does not discuss all of the aspects
of U.S. federal income taxation that may be relevant to a prospective holder of
the Senior Notes in light of his particular circumstances or to certain types of
holders (including insurance companies, tax-exempt entities, financial
institutions or broker-dealers, foreign corporations and persons who are not
citizens or residents of the United States) which are subject to special
treatment under the U.S. federal income tax laws. In addition, this summary does
not describe any tax consequences under state, local, or foreign tax laws.
The discussion is based upon the Internal Revenue Code of 1986, as amended
(the "Code"), Treasury Regulations, Internal Revenue Service ("IRS") rulings and
pronouncements and judicial decisions now in effect, all of which are subject to
change at any time by legislative, judicial or administrative action. Any such
changes may be applied retroactively in a manner that could adversely affect a
holder of the Senior Notes. The Company has not sought and will not seek any
rulings from the IRS with respect to the matters discussed below. There can be
no assurance that the IRS will not take positions concerning the tax
consequences of the purchase, ownership or disposition of the Senior Notes which
are different from those discussed herein.
EACH PROSPECTIVE PURCHASER OF SENIOR NOTES SHOULD CONSULT HIS OWN TAX
ADVISOR REGARDING THE PARTICULAR TAX CONSEQUENCES TO SUCH PURCHASER OF
ACQUIRING, OWNING AND DISPOSING OF SENIOR NOTES INCLUDING THE APPLICATION OF
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
AMOUNT OF ORIGINAL ISSUE DISCOUNT ON THE SENIOR NOTES
The Senior Notes will be issued with original issue discount for federal
income tax purposes, and holders of the Senior Notes will be required to
recognize such original issue discount as ordinary interest income as it accrues
on the Senior Notes (regardless of whether the holder is a cash or accrual basis
taxpayer). As a result, in certain accrual periods a holder will be required to
recognize gross income in excess of the amount of cash payments received.
The amount of original issue discount with respect to each Senior Note will
be equal to the excess of the "stated redemption price at maturity" of such
Senior Note over its issue price, as defined below. The "stated redemption price
at maturity" of each Senior Note will include all cash payments (other than
stated interest to the extent that it is unconditionally payable at least
annually at a single fixed rate ("qualified stated interest")) required to be
made thereunder until maturity. The "issue price" of the Senior Notes should be
equal to the initial offering price to the public (excluding bond houses,
brokers, and others acting as underwriters or wholesalers) at which price a
substantial amount of Senior Notes are sold. Qualified stated interest on the
Senior Notes is % per annum. To the extent that the stated interest of %
that accrues beginning exceeds qualified stated interest, such
excess will also be included in the Senior Notes' stated redemption price at
maturity.
TAXATION OF ORIGINAL ISSUE DISCOUNT ON THE SENIOR NOTES
Each holder of a Senior Note will be required to include in gross income (as
interest) an amount equal to the sum of the "daily portions" of the original
issue discount on the Senior Notes for each day such holder holds a Senior Note.
The daily portions of original issue discount required to be included in a
holder's gross income will be determined on a constant yield basis by allocating
to each day during the taxable year in which the holder holds the Senior Notes a
pro rata portion of the original issue discount thereon which is attributable to
the "accrual period." The amount of the original issue discount attributable to
each accrual period will be the product of the "adjusted issue price" of the
Senior Notes at
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the beginning of such accrual period multiplied by the "yield to maturity" of
the Senior Notes, less the amount of any qualified stated interest allocable to
the accrual period. Appropriate adjustments will be made in computing the amount
of original issue discount attributable to the initial accrual period. The
adjusted issue price of the Senior Notes at the beginning of the first accrual
period is the issue price. Thereafter, the adjusted issue price of a Senior Note
is the issue price of the Senior Note plus the aggregate amount of original
issue discount that accrued in all prior accrual periods, and less any payments
(other than payments of qualified stated interest) on the Senior Note. The yield
to maturity of a Senior Note will be the discount rate that, when used to
compute the present value (on a semi-annual compounded basis) of all principal
and interest payments to be made under a Senior Note, produces a present value
equal to the issue price of the Senior Note.
The "accrual periods" of a Senior Note (other than the initial accrual
period) are each of the six-month periods during the term of the Senior Note
that end on and of each year.
TAXATION OF QUALIFIED STATED INTEREST ON THE SENIOR NOTES
Absent some special circumstances that may be applicable to a particular
holder, qualified stated interest paid on a Senior Note will be taxable to a
holder as ordinary interest income at the time it accrues or is received, in
accordance with the holder's regular method of accounting for federal income tax
purposes.
The Company will furnish annually to certain record holders of the Senior
Notes and to the IRS information with respect to original issue discount
accruing during the calendar year (as well as qualified stated interest paid
during that year) as may be required under applicable regulations.
SALE OR OTHER TAXABLE DISPOSITION OF THE SENIOR NOTES
The sale, redemption or other taxable disposition of a Senior Note will
result in the recognition of gain or loss to the holder in an amount equal to
the difference between (a) the amount of cash and fair market value of property
received (except to the extent attributable to the payment of accrued qualified
stated interest) in exchange therefor and (b) the holder's adjusted tax basis in
such Senior Note.
A holder's initial tax basis in a Senior Note purchased by such holder
generally will be equal to the issue price of the Senior Notes, as discussed
above. The holder's initial tax basis in a Senior Note will be increased by the
amount of original issue discount included in gross income with respect to such
Senior Note to the date of disposition and decreased by the amount of payments
(other than payments of qualified stated interest) with respect to such Senior
Notes.
Any gain or loss on the sale or other taxable disposition of a Senior Note
will be capital gain or loss, assuming a purchaser of the Senior Note holds such
security as a "capital asset" (generally property held for investment) within
the meaning of Section 1221 of the Code. Any capital gain or loss will be long-
term capital gain or loss if the Senior Note had been held for more than one
year and otherwise will be short-term capital gain or loss. Payments on such
disposition for accrued qualified stated interest not previously included in
income will be treated as ordinary interest income.
BACKUP WITHHOLDING
The backup withholding rules require a payor to deduct and withhold a tax if
(a) the payee fails to furnish a taxpayer identification number ("TIN") to the
payor, (b) the IRS notifies the payor that the TIN furnished by the payee is
incorrect, (c) the payee has failed to report properly the receipt of
"reportable payments" and the IRS has notified the payor that withholding is
required, or (d) there has been a failure of the payee to certify under the
penalty of perjury that a payee is not subject to withholding under Section 3406
of the Code. As a result, if any one of the events discussed above occurs with
respect to a holder of Senior Notes, the Company, its paying agent or other
withholding agent will be required to withhold a tax equal to 31% of any
"reportable payment" made in connection with the Senior Notes of such holder. A
"reportable payment" includes, among other things, amounts paid in respect of
interest or original issue discount and amounts paid through brokers in
retirement of securities. Any amounts withheld from a payment to a holder under
the backup withholding rules will be allowed as a refund or
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credit against such holder's federal income tax, provided that the required
information is furnished to the IRS. Certain holders (including, among others,
corporations and certain tax-exempt organizations) are not subject to the backup
withholding and, as discussed above, information reporting requirements.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS TO THE COMPANY AND TO CORPORATE
HOLDERS OF SENIOR NOTES
The Senior Notes will constitute "applicable high yield discount
obligations" ("AHYDOs") if the yield to maturity of such Senior Notes is equal
to or greater than the sum of the relevant applicable federal rate (the "AFR")
plus five percentage points. If the Senior Notes constitute AHYDOs, the Company
will not be entitled to deduct original issue discount that accrues with respect
to such Senior Notes until amounts attributable to original issue discount are
paid, although the tax consequences to holders will not be affected.
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UNDERWRITING
Subject to the terms and conditions set forth in an Underwriting Agreement
(the "Underwriting Agreement") between the Company and Salomon Brothers Inc,
Alex. Brown & Sons Incorporated, BT Securities Corporation (the "Underwriters"),
the Company has agreed to issue and sell to the Underwriters, and the
Underwriters have agreed to purchase from the Company, the Senior Notes in the
aggregate principal amount set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITERS OF SENIOR NOTES
- --------------------------------------------------------------------------- -----------------
<S> <C>
Salomon Brothers Inc....................................................... $
Alex. Brown & Sons Incorporated............................................
BT Securities Corporation..................................................
-----------------
Total.................................................................. $
-----------------
-----------------
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions set forth therein. The Underwriters will be
obligated to purchase all the Senior Notes offered hereby if any Senior Notes
are purchased.
The Underwriters have advised the Company that the Underwriters propose
initially to offer the Senior Notes to the public at the public offering price
set forth on the cover page of this Prospectus and to certain dealers at such
price less a concession not in excess of % of the principal amount at
maturity of the Senior Notes. The Underwriters may allow and such dealers may
reallow a concession not in excess of % of such principal amount at maturity
of the Senior Notes. After the initial public offering, the public offering
price and such concessions may be changed.
The Company does not intend to list the Senior Notes on any national
securities exchange or to arrange for their quotation on Nasdaq. The
Underwriters have indicated that they intend to make a market in the Senior
Notes, subject to applicable laws and regulations. However, the Underwriters are
not obligated to do so and any such market-making may be discontinued at any
time at the sole discretion of the Underwriters without notice. Accordingly, no
assurance can be given that any market for the Senior Notes will develop, or, if
any such market develops, as to the liquidity of such market. See "Risk Factors
- -- No Prior Public Market; Possible Volatility of Senior Note Price."
The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities and expenses, including liabilities
under the Act, or contribute to payments the Underwriters may be required to
make in respect thereof.
Bankers Trust Company, the trustee under the Old Note Indenture, is an
affiliate of BT Securities Corporation. Barry W. Ridings, a managing director of
Alex. Brown & Sons Incorporated ("Alex. Brown"), is a member of the Board of
Directors of the Company.
On December 28, 1995, Salomon acquired the Apollo Notes from Apollo. Under
the Rules of Fair Practice of the National Association of Security Dealers, Inc.
(the "NASD"), when more than 10% of the proceeds of a public offering of debt
securities is to be paid to a member of the NASD participating in the Offering,
or an affiliate thereof, the yield at which the debt securities are distributed
to the public must be no lower than that recommended by a "qualified independent
underwriter" as defined in Section 2(1) of Schedule E of the Bylaws of the NASD.
Salomon will in the aggregate receive more than 10% of the net proceeds from the
Offering of the Senior Notes as a result of the use of such proceeds to acquire
the Old Notes. Accordingly, Alex. Brown has agreed to act as the qualified
independent underwriter in connection with the Offering. The yield on the Senior
Notes, when sold to the public at the public offering price set forth on the
cover of this Prospectus, will be no lower than that recommended by such
qualified independent underwriter. Alex. Brown, as the qualified independent
underwriter, has performed due diligence with respect to the information
contained herein pursuant to the applicable requirements of the NASD and has
participated in the preparation of the Registration Statement of which this
Prospectus is a part.
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Salomon Brothers Inc has been retained as the dealer manager in connection
with the Consent Solicitation and Repurchase Offer referred to above. See
"Summary -- Other Transactions."
EXPERTS
The audited consolidated financial statements and the related financial
statement schedule included in this Prospectus and incorporated by reference
from the Company's Annual Report on Form 10-K for the year ended December 31,
1994 have been audited by Deloitte & Touche LLP, independent auditors, as stated
in their report, which is included and incorporated herein by reference, and
have been so incorporated and included in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.
The financial statements of Video 44 as of December 31, 1994 and 1993 and
for each of the two years in the period ended December 31, 1994 included in this
Prospectus have been so included in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
LEGAL MATTERS
The validity of the Senior Notes and certain legal matters have been passed
upon for the Company by Akin, Gump, Strauss, Hauer & Feld, L.L.P. Certain legal
matters will be passed upon for the Underwriters by Munger, Tolles & Olson.
Munger, Tolles & Olson also represents the Company in connection with certain
other matters.
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<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
TELEMUNDO GROUP, INC.
Audited Consolidated Financial Statements
Independent Auditors' Report of Deloitte & Touche LLP.............................. F-2
Consolidated Statements of Operations for the years ended December 31, 1992, 1993
and 1994.......................................................................... F-3
Consolidated Balance Sheets at December 31, 1993 and 1994.......................... F-4
Consolidated Statements of Changes in Common Stockholders' Equity for the years
ended December 31, 1992, 1993 and 1994............................................ F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1992, 1993
and 1994.......................................................................... F-6
Notes to Consolidated Financial Statements......................................... F-7
Schedule II -- Valuation and Qualifying Accounts................................... F-18
Unaudited Consolidated Financial Statements
Consolidated Statements of Operations for the nine months ended September 30, 1994
and 1995.......................................................................... F-20
Consolidated Balance Sheets at December 31, 1994 and September 30, 1995............ F-21
Consolidated Statement of Changes in Common Stockholders' Equity for the nine
months ended September 30, 1995................................................... F-22
Consolidated Statements of Cash Flows for the nine months ended September 30, 1994
and 1995.......................................................................... F-23
Notes to Consolidated Financial Statements......................................... F-24
VIDEO 44
Audited Financial Statements
Report of Independent Accountants of Price Waterhouse LLP.......................... F-27
Statements of Income for the years ended December 31, 1993 and 1994................ F-28
Balance Sheets at December 31, 1993 and 1994....................................... F-29
Statements of Joint Venturers' Equity for the years ended December 31, 1993 and
1994.............................................................................. F-30
Statements of Cash Flows for the years ended December 31, 1993 and 1994............ F-31
Notes to Financial Statements...................................................... F-32
Unaudited Financial Statements
Statements of Income for the nine months ended September 30, 1994 and 1995......... F-37
Balance Sheet at September 30, 1995................................................ F-38
Statements of Cash Flows for the nine months ended September 30, 1994 and 1995..... F-39
Note to Financial Statements....................................................... F-40
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Telemundo Group, Inc.
Miami, Florida
We have audited the accompanying consolidated balance sheets of Telemundo Group,
Inc. and its subsidiaries (the "Company") as of December 31, 1994 (Successor
Company balance sheet) and 1993 (Predecessor Company balance sheet), and the
related consolidated statements of operations, changes in common stockholders'
equity (deficiency) and of cash flows for each of the three years in the period
ended December 31, 1994 (Predecessor Company operations). Our audits also
included the consolidated financial statement schedule listed on page F-18.
These financial statements and the financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and the financial statement schedule 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.
As discussed in Notes 1 and 2 to the financial statements, on July 20, 1994, the
Bankruptcy Court entered an order confirming the plan of reorganization which
became effective after the close of business on December 30, 1994. Accordingly,
the accompanying financial statements have been prepared in conformity with
AICPA Statement of Position 90-7, "Financial Reporting for Entities in
Reorganization Under the Bankruptcy Code," for the Successor Company as a new
entity with assets, liabilities and a capital structure having carrying values
not comparable with prior periods as described in Notes 1 and 2.
In our opinion, the Successor Company consolidated balance sheet presents
fairly, in all material respects, the financial position of the Company as of
December 31, 1994. Further, in our opinion, the Predecessor Company consolidated
financial statements referred to above present fairly, in all material respects,
the financial position of the Predecessor Company as of December 31, 1993, and
the results of its operations and its cash flows for each of the three years in
the period ended December 31, 1994 in conformity with generally accepted
accounting principles. Also, in our opinion, such financial statement schedule,
when considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly in all material respects, the information set forth
therein.
/s/ Deloitte & Touche LLP
Miami, Florida
March 22, 1995
F-2
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PREDECESSOR
----------------------------------------------------
YEAR ENDED DECEMBER 31 1992 1993 1994
- ------------------------------------------------------------ ---------------- ---------------- ----------------
<S> <C> <C> <C>
Net revenue................................................. $ 153,572,000 $ 177,809,000 $ 183,894,000
---------------- ---------------- ----------------
Costs and expenses:
Direct operating costs.................................... 71,211,000 83,166,000 90,914,000
Selling, general and administrative expenses other than
network and corporate.................................... 33,225,000 34,191,000 35,688,000
Network expenses.......................................... 21,026,000 26,167,000 28,501,000
Corporate expenses........................................ 6,772,000 6,219,000 4,811,000
Depreciation and amortization............................. 10,515,000 11,469,000 10,804,000
---------------- ---------------- ----------------
142,749,000 161,212,000 170,718,000
---------------- ---------------- ----------------
Operating income............................................ 10,823,000 16,597,000 13,176,000
Other (expense) income...................................... 1,438,000 (351,000) (34,000)
Reorganization items........................................ -- (2,543,000) 76,255,000
Interest expense -- net of interest income of $1,308,000 in
1992 and $554,000 in 1993.................................. (35,739,000) (24,411,000) (645,000)
Equity in net loss from TeleNoticias........................ -- -- (1,314,000)
---------------- ---------------- ----------------
Income (loss) before income taxes........................... (23,478,000) (10,708,000) 87,438,000
Income tax provision........................................ (3,265,000) (3,351,000) (3,389,000)
---------------- ---------------- ----------------
Income (loss) before extraordinary item..................... (26,743,000) (14,059,000) 84,049,000
Extraordinary gain -- extinguishment of debt................ -- -- 130,482,000
---------------- ---------------- ----------------
Net income (loss)........................................... $ (26,743,000) $ (14,059,000) $ 214,531,000
---------------- ---------------- ----------------
---------------- ---------------- ----------------
Net income (loss) per share................................. $ * $ * $ *
---------------- ---------------- ----------------
---------------- ---------------- ----------------
<FN>
- ------------------------
* Net income (loss) per share is not applicable as the Company has been
recapitalized and has adopted fresh start reporting as of December 31, 1994
(see Note 2).
</TABLE>
See notes to consolidated financial statements
F-3
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
PREDECESSOR
----------------
AT DECEMBER 31 1993 1994
- ------------------------------------------------------------------------------ ---------------- ----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................... $ 37,675,000 $ 1,850,000
Accounts receivable, less allowance for doubtful accounts of $2,501,000 and
$2,845,000................................................................. 43,141,000 47,673,000
Television programming...................................................... 12,505,000 12,410,000
Prepaid expenses and other.................................................. 5,760,000 6,296,000
---------------- ----------------
Total current assets.................................................... 99,081,000 68,229,000
Property and equipment -- net................................................. 67,042,000 62,774,000
Television programming........................................................ 2,827,000 3,172,000
Other assets.................................................................. 707,000 909,000
Investment in TeleNoticias.................................................... -- 4,148,000
Broadcast licenses and reorganization value in excess of amounts allocable to
identifiable assets.......................................................... -- 92,792,000
---------------- ----------------
$ 169,657,000 $ 232,024,000
---------------- ----------------
---------------- ----------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable............................................................ $ 5,724,000 $ 7,308,000
Accrued expenses and other.................................................. 22,527,000 23,304,000
Television programming obligations.......................................... 5,139,000 5,292,000
---------------- ----------------
Total current liabilities............................................... 33,390,000 35,904,000
Long-term debt................................................................ -- 100,724,000
Capital lease obligations..................................................... 7,814,000 7,263,000
Television programming obligations............................................ 1,782,000 763,000
Other liabilities............................................................. 14,703,000 17,370,000
Liabilities subject to settlement under chapter 11 proceedings................ 326,784,000 --
---------------- ----------------
384,473,000 162,024,000
---------------- ----------------
Contingencies and commitments (Note 10)
Common stockholders' equity (deficiency):
Series A common stock, $.01 par value, 14,388,394 shares authorized,
4,388,394 shares outstanding at December 31, 1994.......................... -- 44,000
Series B common stock, $.01 par value, 5,611,606 shares authorized,
5,611,606 shares outstanding at December 31, 1994.......................... -- 56,000
Common stock, $.01 par value, 100,000,000 shares authorized, 37,042,924
shares outstanding at December 31, 1993.................................... 370,000 --
Additional paid-in capital.................................................. 245,768,000 69,900,000
Retained earnings (deficit)................................................. (460,954,000) --
---------------- ----------------
(214,816,000) 70,000,000
---------------- ----------------
$ 169,657,000 $ 232,024,000
---------------- ----------------
---------------- ----------------
</TABLE>
See notes to consolidated financial statements
F-4
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
NUMBER OF
SHARES COMMON
OUTSTANDING STOCK
---------------------------------------- ------------------------------------
SERIES A SERIES B SERIES A SERIES B ADDITIONAL
COMMON COMMON COMMON COMMON COMMON COMMON PAID-IN
STOCK STOCK STOCK STOCK STOCK STOCK CAPITAL
-------------- ----------- ----------- ------------ --------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
January 1, 1992........ 37,042,924 -- -- $ 370,000 $ -- $ -- $ 245,768,000
Net loss................ -- -- -- -- -- -- --
-------------- ----------- ----------- ------------ --------- ----------- ----------------
Balance, December 31,
1992................... 37,042,924 -- -- 370,000 -- -- 245,768,000
Net loss................ -- -- -- -- -- -- --
-------------- ----------- ----------- ------------ --------- ----------- ----------------
Balance, December 31,
1993................... 37,042,924 -- -- 370,000 -- -- 245,768,000
Net income.............. -- -- -- -- -- -- --
Elimination of former
equity interests....... (37,042,924) -- -- (370,000) -- -- (245,768,000)
Common stock issued in
the restructuring and
application of fresh
start reporting........ -- 4,388,394 5,611,606 -- 44,000 56,000 69,900,000
-------------- ----------- ----------- ------------ --------- ----------- ----------------
Balance, December 31,
1994................... -- 4,388,394 5,611,606 $ -- $ 44,000 $ 56,000 $ 69,900,000
-------------- ----------- ----------- ------------ --------- ----------- ----------------
-------------- ----------- ----------- ------------ --------- ----------- ----------------
<CAPTION>
COMMON
RETAINED STOCKHOLDERS'
EARNINGS EQUITY
(DEFICIT) (DEFICIENCY)
---------------- ----------------
<S> <C> <C>
Balance,
January 1, 1992........ $ (420,152,000) $ (174,014,000)
Net loss................ (26,743,000) (26,743,000)
---------------- ----------------
Balance, December 31,
1992................... (446,895,000) (200,757,000)
Net loss................ (14,059,000) (14,059,000)
---------------- ----------------
Balance, December 31,
1993................... (460,954,000) (214,816,000)
Net income.............. 214,531,000 214,531,000
Elimination of former
equity interests....... 246,423,000 285,000
Common stock issued in
the restructuring and
application of fresh
start reporting........ -- 70,000,000
---------------- ----------------
Balance, December 31,
1994................... $ -- $ 70,000,000
---------------- ----------------
---------------- ----------------
</TABLE>
See notes to consolidated financial statements
F-5
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PREDECESSOR
--------------------------------------------------
YEAR ENDED DECEMBER 31 1992 1993 1994
- ------------------------------------------------------------ --------------- --------------- ----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................... $ (26,743,000) $ (14,059,000) $ 214,531,000
Charges not affecting cash:
Extraordinary gain -- extinguishment of debt.............. -- -- (130,482,000)
Fresh start revaluation................................... -- -- (86,901,000)
Depreciation and amortization............................. 10,515,000 11,469,000 10,804,000
Equity in net loss from TeleNoticias...................... -- -- 1,314,000
Accretion of zero coupon bonds............................ 19,653,000 12,900,000 --
Other..................................................... -- 735,000 --
Changes in assets and liabilities:
Accrued interest on debt in default....................... 15,974,000 10,998,000 --
Accounts receivable....................................... (2,670,000) (5,283,000) (4,532,000)
Television programming.................................... 3,282,000 (3,794,000) (250,000)
Television programming obligations........................ (3,279,000) 931,000 (866,000)
Accounts payable and accrued expenses and other........... (2,580,000) 3,067,000 4,465,000
--------------- --------------- ----------------
14,152,000 16,964,000 8,083,000
--------------- --------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment......................... (3,992,000) (8,485,000) (12,550,000)
Investment in TeleNoticias.................................. -- -- (5,462,000)
Payments relating to acquisitions and divestitures.......... (4,058,000) (1,907,000) --
Principal payments of notes receivable relating to the sale
of a business.............................................. 10,981,000 -- --
--------------- --------------- ----------------
2,931,000 (10,392,000) (18,012,000)
--------------- --------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of obligations under capital leases................ -- (614,000) (594,000)
Borrowings under credit line................................ -- -- 200,000
Payments of liabilities for settlements relating to
consummation of the Plan................................... -- -- (35,928,000)
Proceeds from common stock issued pursuant to the Plan...... -- -- 10,426,000
--------------- --------------- ----------------
-- (614,000) (25,896,000)
--------------- --------------- ----------------
(Decrease) increase in cash and cash equivalents............ 17,083,000 5,958,000 (35,825,000)
Cash and cash equivalents, beginning of year................ 14,634,000 31,717,000 37,675,000
--------------- --------------- ----------------
Cash and cash equivalents, end of year...................... $ 31,717,000 $ 37,675,000 $ 1,850,000
--------------- --------------- ----------------
--------------- --------------- ----------------
</TABLE>
SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITY:
In 1993, capital lease obligations of $9,037,000 were incurred primarily to
finance the acquisition of a satellite transponder.
See notes to consolidated financial statements
F-6
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Telemundo Group, Inc. ("Telemundo"), together with its subsidiaries
(collectively, the "Company") is a Spanish-language television network that,
through its owned and operated stations and affiliates, serves 53 markets in the
continental United States, including the 32 largest Hispanic markets, and
reaches approximately 86% of all U.S. Hispanic households. The Company also owns
and operates a television station and related production facilities in Puerto
Rico. The Company produces Spanish-language programming for use on its network
and for sale in foreign countries and sells advertising time on behalf of its
owned and operated television stations and affiliates. The Company also holds a
42% interest in TeleNoticias del Mundo, L.P. ("TeleNoticias"), a 24-hour Spanish
language news service distributed in Latin America, the United States and
Europe.
BASIS OF PRESENTATION
On December 30, 1994, Telemundo consummated its financial restructuring
pursuant to a plan of reorganization under chapter 11 of the Bankruptcy Code
(see Note 2 for a description of the chapter 11 proceedings and the plan of
reorganization). Pursuant to the provisions of the American Institute of
Certified Public Accountants Statement of Position 90-7 entitled "Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-7"),
the Company adjusted its assets and liabilities to their estimated fair values
upon consummation of the reorganization. The adjustments to reflect the
consummation of the reorganization as of December 31, 1994, including the gain
on debt discharge and the adjustment to record assets and liabilities at their
fair values, have been reflected in the accompanying financial statements. The
balance sheet at December 31, 1993 is presented on a historical cost basis
without giving effect to the reorganization. Therefore, the Company's balance
sheet as of December 31, 1994 generally is not comparable to prior periods and
is separated by a line (see Note 2). For purposes of these financial statements,
the term "Predecessor" refers to the Company prior to emergence from chapter 11
reorganization.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Telemundo and
its subsidiaries. All significant intercompany balances and transactions have
been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
The Company considers short-term investments with a maturity of three months
or less to be cash equivalents. Such short-term investments are carried at cost
which approximates fair value.
TELEVISION PROGRAMMING
Television programming rights and the related obligations are recorded at
gross contract prices. The costs of the rights are amortized on varying bases
related to the license and distribution periods, usage of the programs and
management's estimate of revenue to be realized from each airing of the
programs.
DEPRECIATION AND AMORTIZATION
Property and equipment is depreciated by the straight-line method over
estimated useful lives as follows:
<TABLE>
<CAPTION>
Buildings............................................................. 40 Years
<S> <C>
Antennas and Transmitters............................................. 20 Years
Other Broadcast Equipment............................................. 3 to 7 Years
Furniture and Fixtures................................................ 5 to 7 Years
Automobiles and Trucks................................................ 4 Years
Life of
Leasehold Improvements and Satellite Transponder...................... Lease
</TABLE>
F-7
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BROADCAST LICENSES AND REORGANIZATION VALUE IN EXCESS OF AMOUNTS ALLOCABLE
TO IDENTIFIABLE ASSETS
Broadcasting licenses and reorganization value in excess of amounts
allocable to identifiable assets represents the portion of reorganization value
not attributable to specific tangible assets of the Company at the time of the
reorganization. This value is attributable primarily to FCC broadcast licenses.
The Company has contracted an independent appraisal firm that is currently in
the process of allocating a value between broadcast licenses and other
intangible assets. On an ongoing basis the Company will review the carrying
value of broadcast licenses and reorganization value in excess of amounts
allocable to identifiable assets and if such review indicates that these values
may not be recoverable, the Company's carrying value of broadcast licenses or
reorganization value in excess of amounts allocable to identifiable assets will
be reduced to its estimated fair value.
REVENUE RECOGNITION
Revenue is derived primarily from the sale of advertising time on a network,
national spot and local basis. In addition, the Company earns revenue from the
sale of blocks of broadcast time during non-network programming hours. Revenue
is recognized when earned, i.e., when the advertisement is aired or the block of
broadcast time is utilized. During 1994 and 1993, no customer accounted for more
than 10 percent of the Company's commercial air time revenue. Commercial air
time revenue from over 30 individual brands of a major advertiser collectively
accounted for 10 percent of the Company's total commercial air time revenue in
1992.
PER COMMON SHARE INFORMATION
As a result of the effects of the reorganization, per share information for
all periods presented is not applicable and has therefore been omitted from the
accompanying financial statements.
RECLASSIFICATIONS
Certain reclassifications have been made in the prior years' financial
statements to conform with the current year's presentation.
2. CHAPTER 11 REORGANIZATION
On June 8, 1993 (the "Petition Date"), certain holders of the outstanding
13 5/8% subordinated debentures and the indenture trustee for such debentures
filed an involuntary petition for reorganization under chapter 11 of title 11 of
the United States Code (the "Bankruptcy Code") in the United States Bankruptcy
Court for the Southern District of New York (the "Bankruptcy Court"). The
involuntary petition was filed against Telemundo and did not include its
subsidiaries. On July 30, 1993, the Company consented to the entry of an order
for relief under the Bankruptcy Code. On July 20, 1994, the Bankruptcy Court
entered an order confirming the Company's second amended plan of reorganization
(the "Plan"). The reorganization was consummated on December 30, 1994 (the
"Consummation Date") and is reflected in the accompanying financial statements
as if the consummation occurred on December 31, 1994, which is not significantly
different than operations through December 30, 1994.
Under the terms of the Plan, the following occurred: (a) an aggregate of
$31,348,000 in cash, $88,668,000 in principal amount of new 10.25% senior notes
("10.25% Notes"), 8,550,000 shares of the common stock of reorganized Telemundo
("New Common Stock") and 639,750 warrants to purchase New Common Stock were
issued in satisfaction of bondholder and general unsecured creditor claims; (b)
$7.0 million was paid to settle all claims relating to an unfavorable long-term
lease; and (c) $219,000 in cash and $28,220,000 in 10.25% Notes were issued and
the Company received $2,639,000 from a co-defendant as part of the Blair
settlement agreement (see Note 10). Under the Plan, pre-existing equity
interests were canceled. The existing stockholders were given rights to purchase
1,450,000 shares of
F-8
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. CHAPTER 11 REORGANIZATION (CONTINUED)
New Common Stock. Reliance Group Holdings, Inc. and its affiliates agreed to
acquire New Common Stock not acquired by other stockholders for which commitment
they received 416,667 warrants to purchase New Common Stock. Substantially all
distributions of securities and cash have been made.
Reorganization items are items associated with chapter 11 proceedings that
were incurred subsequent to July 29, 1993 and consisted of the following:
<TABLE>
<CAPTION>
1993 1994
--------------- ---------------
<S> <C> <C>
Reorganization Costs:
Professional fees.................................................. $ (1,850,000) $ (6,365,000)
Contract cancellation costs........................................ -- (3,479,000)
Litigation settlement ............................................. -- (668,000)
Interest income.................................................... 235,000 967,000
Other.............................................................. (928,000) (1,101,000)
--------------- ---------------
(2,543,000) (10,646,000)
Revaluation of Assets and Liabilities................................ -- 86,901,000
--------------- ---------------
$ (2,543,000) $ 76,255,000
--------------- ---------------
--------------- ---------------
</TABLE>
In connection with its consummation of the Plan on December 30, 1994,
Telemundo adopted fresh start reporting in accordance with SOP 90-7. The fresh
start reporting equity value of $70 million was determined by the Company with
the assistance of its financial advisors using certain financial analyses,
including discounted future cash flows. The significant factors considered were
analyses of publicly available information of other companies believed to be
comparable to the Company, industry, economic and overall market conditions, and
historical and projected performance of the Company.
Under fresh start reporting, the reorganization value of the entity has been
allocated to the reorganized company's assets and liabilities on a basis
substantially consistent with the purchase method of accounting. The portion of
reorganization value not attributable to specific tangible or identifiable
intangible assets were included in "Broadcast Licenses and Reorganization Value
in Excess of Amounts Allocable to Identifiable Assets" in the accompanying
consolidated balance sheet as of December 31, 1994. The fresh start reporting
adjustments will have a significant effect on the Company's future statements of
operations including depreciation and amortization and interest expense.
F-9
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. CHAPTER 11 REORGANIZATION (CONTINUED)
The effects of the Plan and fresh start reporting on the Company's
consolidated balance sheet as of December 31, 1994 are as follows (in
thousands):
<TABLE>
<CAPTION>
ADJUSTMENTS TO RECORD
CONSUMMATION OF PLAN
-----------------------------------------
DISCHARGE OF
PREDECESSOR LIABILITIES REORGANIZED
BALANCE SHEET SUBJECT TO EQUITY FRESH BALANCE SHEET
DEC. 31, 1994 SETTLEMENT INFUSION START DEC. 31, 1994
------------- ------------ -------- ------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents... $ 20,352 $ (28,928)(a) $ 10,426(b) $ -- $ 1,850
Accounts receivable, less
allowance for doubtful
accounts................... 47,673 -- -- -- 47,673
Television programming...... 12,410 -- -- -- 12,410
Prepaid expenses and
other...................... 6,296 -- -- -- 6,296
------------- ------------ -------- ------- -------------
Total current assets...... 86,731 (28,928) 10,426 -- 68,229
Property and equipment --
net.......................... 68,665 -- -- (5,891)(c) 62,774
Television programming........ 3,172 -- -- -- 3,172
Other assets.................. 909 -- -- -- 909
Investment in TeleNoticias.... 4,148 -- -- -- 4,148
Broadcast licenses and
reorganization value in
excess of identifiable
assets....................... -- -- -- 92,792(d) 92,792
------------- ------------ -------- ------- -------------
$ 163,625 $ (28,928) $ 10,426 $86,901 $232,024
------------- ------------ -------- ------- -------------
------------- ------------ -------- ------- -------------
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY):
<S> <C> <C> <C> <C> <C>
Current liabilities:
Accounts payable............ $ 7,308 $ -- $ -- $ -- $ 7,308
Accrued expenses and
other...................... 20,567 -- -- 2,737(d) 23,304
Television programming
obligations................ 5,292 -- -- -- 5,292
------------- ------------ -------- ------- -------------
Total current
liabilities.............. 33,167 -- -- 2,737 35,904
Long-term debt................ 200 100,524(a) -- -- 100,724
Capital lease obligations..... 7,263 -- -- -- 7,263
Television programming
obligations.................. 763 -- -- -- 763
Other liabilities............. 15,960 -- -- 1,410(d) 17,370
Liabilities subject to
settlement under chapter 11
proceedings (including debt
in default).................. 319,784 (319,784)(a) -- -- --
Common stockholders' equity
(deficiency)................. (213,512) 190,332(a) 10,426(b) 82,754(e) 70,000
------------- ------------ -------- ------- -------------
$ 163,625 $ (28,928) $ 10,426 $86,901 $232,024
------------- ------------ -------- ------- -------------
------------- ------------ -------- ------- -------------
<FN>
- ------------------------
(a) To record discharge of liabilities subject to settlement pursuant to the
Plan: (i) cash distribution of $31,348,000, issuance of $88,669,000 in
10.25% Notes and issuance of 8,550,000 shares of New Common Stock valued at
$7 per share ($59,850,000) in satisfaction of bondholder and general
unsecured creditor claims, (ii) cash distribution of $219,000, issuance of
$28,220,000 in 10.25% Notes and receipt of $2,639,000 from a co-defendant
as part of the Blair settlement agreement (see Note 10), and (iii)
$130,482,000 gain from the discharge of liabilities subject to settlement.
Pursuant to the provisions of SOP 90-7, the $88,669,000 in 10.25% Notes
issued to bondholders and general unsecured creditors and the $28,220,000
in 10.25% Notes issued as part of the Blair settlement agreement were
recorded at their fair values of $76,254,000 and $24,270,000, respectively,
based upon market trading activity at the time of consummation, reflecting
an effective interest rate of 13.34%.
</TABLE>
F-10
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. CHAPTER 11 REORGANIZATION (CONTINUED)
<TABLE>
<S> <C>
Cash of $907,000 and 10.25% Notes of $9,211,000 distributed represented
interest accretion from January 31, 1994 through December 30, 1994,
pursuant to the Plan.
The Plan also provided for the payment of $7.0 million to settle all claims
relating to an unfavorable long-term lease, which payment was made in June
1994.
(b) To record cash received from existing stockholders for New Common Stock as
part of the consummation of the Plan (1,450,000 shares at $7.19 per share
pursuant to the Plan).
(c) To record the effect of adjusting carrying value to fair market value in
accordance with fresh start reporting.
(d) To record broadcast licenses and reorganization value in excess of amounts
allocable to identifiable net assets in accordance with fresh start
reporting and accrue for additional reorganization costs.
(e) To record the fresh start reorganization equity value at $70,000,000.
</TABLE>
3. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
PREDECESSOR
--------------
DECEMBER 31 1993 1994
- ---------------------------------------------------------------------- -------------- ----------------
<S> <C> <C>
Land.................................................................. $ 4,161,000 $ 4,161,000
Buildings............................................................. 12,837,000 15,975,000
Broadcast equipment, antennas and transmitters........................ 76,137,000 29,046,000
Satellite transponder................................................. 8,706,000 6,999,000
Leasehold interests................................................... 12,255,000 --
Leasehold improvements................................................ 7,859,000 6,593,000
-------------- ----------------
121,955,000 62,774,000
Less accumulated depreciation and amortization........................ (54,913,000) --
-------------- ----------------
$ 67,042,000 $ 62,774,000
-------------- ----------------
-------------- ----------------
</TABLE>
4. INVESTMENT IN TELENOTICIAS
In July 1994, the Company entered into a partnership agreement with
subsidiaries of Reuters Holdings PLC, an international news and information
organization, Antena 3 de Television, S.A., a Spanish media company, and Arte
Radiotelevisivo Argentino, S.A., an Argentinean media company, to launch a
24-hour international Spanish-language news service. The 24-hour news service,
TeleNoticias, which began transmitting on December 1, 1994, is produced and
distributed from the Company's network operations center in Hialeah, Florida.
The Company holds a 42% interest in the partnership and accounts for its
interest in the partnership using the equity method. The Company is required to
make cash contributions to the partnership of up to $6.5 million during the
partnership's first fiscal year, which commenced on September 16, 1994, and up
to an aggregate of $10.0 million through its sixth fiscal year. The Company made
cash contributions totalling $5.5 million to the partnership in 1994, primarily
for start-up costs. Certain equipment purchases previously made by the Company
were subsequently transferred to and reimbursed by the partnership. Commencing
December 1994, TeleNoticias assumed production of the Company's network news
programs for a six year period at an initial cost of $5 million per year,
increasing by $500,000 each year. In addition, the Company provides certain
services to the partnership including the use of a news studio in the Company's
network operations center.
F-11
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. ACCRUED EXPENSES
<TABLE>
<CAPTION>
PREDECESSOR
--------------
DECEMBER 31 1993 1994
- ----------------------------------------------------------------------- -------------- --------------
<S> <C> <C>
Accrued compensation and commissions................................... $ 5,530,000 $ 3,865,000
Accrued agency commissions............................................. 3,808,000 4,334,000
Accrued reorganization costs........................................... 2,847,000 5,677,000
Other accrued expenses................................................. 10,342,000 9,428,000
-------------- --------------
$ 22,527,000 $ 23,304,000
-------------- --------------
-------------- --------------
</TABLE>
6. LONG-TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 31 1994
- -------------------------------------------------------------------------------------- ----------------
<S> <C>
10.25% senior notes................................................................... $ 100,524,000
Revolving credit facility............................................................. 200,000
----------------
100,724,000
Less: current portion................................................................. --
----------------
$ 100,724,000
----------------
----------------
</TABLE>
All debt outstanding at December 31, 1993 was in default and was included in
liabilities subject to settlement in the consolidated balance sheet.
As described in Note 2, the Predecessor debt was exchanged for cash, debt
and securities pursuant to the Plan. Significant terms of the reorganized
Company's debt agreements are as follows:
10.25% SENIOR NOTES: The 10.25% senior notes ("10.25% Notes") have been
recorded at their fair value of $100,524,000 reflecting an effective
interest rate of 13.34%, based upon market trading activity at the time of
consummation. The 10.25% Notes are unsecured obligations of the Company
with an outstanding aggregate principal amount of $116,888,000 bearing
interest from December 31, 1994, payable semi-annually, and maturing
December 30, 2001.
The 10.25% Notes are redeemable, at the option of the Company, in whole or
in part, at any time after December 30, 1997, by payment of accrued and
unpaid interest thereon to the date of prepayment and payment of the
following redemption prices for each $100 of principal amount thereof:
<TABLE>
<CAPTION>
YEAR PRICE
- ---------------------------------------------------------------------------- ---------
<S> <C>
1998........................................................................ $ 105
1999........................................................................ $ 103
2000........................................................................ $ 101
</TABLE>
The Company may also acquire 10.25% Notes in open market purchases, tender
offers or in other market transactions.
The Company is required to make the following mandatory sinking fund
payments:
<TABLE>
<CAPTION>
PRINCIPAL
DECEMBER 30 AMOUNT
- -------------------------------------------------------------------- --------------
<S> <C>
1999................................................................ $ 25,000,000
2000................................................................ $ 25,000,000
2001................................................................ $ 66,889,000
</TABLE>
F-12
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT (CONTINUED)
The Company may credit against such required sinking fund obligations, in
the order of the scheduled sinking fund payments, the principal amount of
any and all 10.25% Notes acquired by the Company through open market
purchases, tender offers, and other market transactions.
REVOLVING CREDIT FACILITY: The Revolving Credit Facility ("Credit
Facility") allows for borrowings up to $20 million, subject to the
Company's maintenance of an adequate accounts receivable borrowing base,
which was maintained at December 31, 1994. Interest accrues at a rate of
prime plus 1.75% (10.25% at December 31, 1994) . Minimum annual interest
during 1995 and 1996 is $360,000. The agreement expires December 30, 1999
and is cancelable at the Company's option prior to expiration upon payment
of an early termination fee, except during the first 60 days of 1998 or
1999 when the agreement may be terminated without incurring an early
termination fee. The Company is required to pay a fee of 0.5% per annum
based on the average unborrowed portion of the Credit Facility. The
Company is also required to pay other annual fees and expenses in
connection with the borrowing agreement. The Credit Facility is secured by
substantially all assets of the Company and does not require compensating
balances.
The 10.25% Notes and Credit Facility agreements contain certain covenants
which, among other things, require the Company to maintain certain financial
ratios and impose on Telemundo and its subsidiaries certain limitations or
prohibitions on: (i) the incurrence of indebtedness or the guarantee or
assumption of indebtedness of another; (ii) the creation or incurrence of
mortgages, pledges or security interests on the property or assets of the
Company or any of its subsidiaries in order to secure debt; (iii) the sale of
assets of the Company or any of its subsidiaries; (iv) the merger or
consolidation of the Company with any person or other entity; (v) the payment of
dividends or the redemption or repurchase of any capital stock of the Company;
and (vi) investments and acquisitions.
Liabilities recorded as of the Petition Date that were expected to be
settled under a plan of reorganization were separately classified in the
consolidated balance sheet at December 31, 1993. At December 31, 1993, such
liabilities consisted primarily of debt in default aggregating $309,002,000
(including accrued interest of $28,233,000 prior to the Petition Date) and other
obligations assumed as part of the acquisition of the Company's predecessor.
Included in interest expense for the year ended December 31, 1993 was
$7,100,000 representing the additional interest in the period to adjust certain
debentures to their full face value. Contractual interest obligations were
accrued up until June 8, 1993, the Petition Date. Additional interest expense of
$39,400,000 and $21,300,000 would have been recorded through December 31, 1994
and 1993, respectively, if the involuntary petition had not been filed.
In addition to not making the scheduled principal payments on matured senior
notes, the Company did not make scheduled cash payments of interest totalling
$10,300,000 and $10,400,000 in 1993 and 1992, respectively. Included in interest
expense for the years ended December 31, 1993 and 1992 were accruals of interest
at stipulated rates (ranging from 11.0% to 13.6%) on matured debt and on unpaid
scheduled interest totalling $6,300,000 and $5,600,000, respectively.
F-13
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES
The Company and its domestic subsidiaries file a consolidated federal income
tax return. The Company files a separate Puerto Rico income tax return for its
operations in Puerto Rico. The income tax provision consisted of:
<TABLE>
<CAPTION>
PREDECESSOR
-------------------------------------------
YEAR ENDED DECEMBER 31 1992 1993 1994
- -------------------------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Puerto Rico (a)..................................................... $ 3,065,000 $ 3,195,000 $ 3,279,000
Federal, state and local (b)........................................ 200,000 156,000 110,000
------------- ------------- -------------
$ 3,265,000 $ 3,351,000 $ 3,389,000
------------- ------------- -------------
------------- ------------- -------------
<FN>
(a) Represents a provision for withholding tax related to intercompany
interest.
(b) Federal and state taxes are a result of the alternative minimum tax.
</TABLE>
The Company paid $1,260,000, $1,025,000 and $988,000 for withholding taxes
related to its operations in Puerto Rico in 1994, 1993 and 1992, respectively.
In addition, the Company paid U.S. income taxes of $153,000 and $208,000 in 1993
and 1992, respectively.
The tax effects comprising the Company's net deferred taxes as of December
31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
PREDECESSOR
---------------
DECEMBER 31 1993 1994
- ------------------------------------------------------------------------------ --------------- ----------------
<S> <C> <C>
Deferred Tax Assets:
Net operating loss carryforwards ("NOLs")................................... $ 88,344,000 $ 72,601,000
Amortization of FCC broadcast licenses...................................... 34,763,000 32,824,000
Other....................................................................... 2,092,000 5,541,000
--------------- ----------------
125,199,000 110,966,000
Deferred Tax Liability:
Amortization of FCC broadcast licenses and other............................ -- (36,138,000)
Accelerated depreciation.................................................... (4,330,000) (2,022,000)
--------------- ----------------
(4,330,000) (38,160,000)
--------------- ----------------
Net deferred tax asset........................................................ 120,869,000 72,806,000
Valuation allowance........................................................... (120,869,000) (72,806,000)
--------------- ----------------
Net deferred tax.............................................................. $ -- $ --
--------------- ----------------
--------------- ----------------
</TABLE>
Limitations imposed by Section 382 of the Internal Revenue Code after a
change in control, which occurred on the consummation date, will limit the
amount of NOLs which will be available to offset future U.S. taxable income to
approximately $6,600,000 annually, or a total of $92,400,000 during the
permitted carryover period, except in certain circumstances.
As there is no assurance that the Company will generate sufficient earnings
to utilize its available tax assets, including its NOLs which are limited in any
given year, a valuation allowance has been established to offset the existing
net deferred tax asset.
F-14
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES (CONTINUED)
The Company has NOLs expiring as follows:
<TABLE>
<S> <C> <C> <C>
U.S. PUERTO RICO
- ------------------------------ ----------------------------
2002........ $ 22,606,000 1996........ $ 5,772,000
2003........ 43,317,000 1997........ 4,958,000
2004........ 31,103,000 1998........ 5,973,000
2005........ 6,262,000 1999........ 5,657,000
2006........ 31,799,000 2000........ 3,402,000
2007........ 26,942,000 2001........ 1,629,000
--------------
2008........ 8,676,000
----------------
$ 170,705,000 $ 27,391,000
---------------- --------------
---------------- --------------
</TABLE>
The Company also has state tax NOLs in various jurisdictions.
8. WARRANTS
Pursuant to the Plan, 639,750 warrants were issued and outstanding at
December 31, 1994 entitling the holders of each warrant to purchase one share of
Series A common stock at $7 per share. These warrants are exercisable from
December 30, 1994 and expire on December 30, 1999.
Also pursuant to the Plan, 416,667 warrants were issued to Reliance Group
Holdings, Inc. and its affiliates. Each warrant entitles the holder to purchase
one share of Series A common stock at $7.19 per share and is exercisable in
three equal annual installments commencing December 30, 1995 and expires five
years from the date it becomes exercisable.
The warrants contain certain antidilutive provisions in the event of a
change in the Company's capitalization.
9. EMPLOYEE RETIREMENT AND INCENTIVE PLANS
The Company maintains a qualified defined contribution retirement and
savings plan for its U.S. employees. The aggregate cost for this plan totalled
$1,054,000, $1,406,000 and $1,306,000 in 1994, 1993 and 1992, respectively.
Pursuant to the Plan, the Company has adopted a Stock Plan (the "Stock
Plan") whereby key employees may be granted restricted stock or options to
acquire up to 1,000,000 shares of Series A common stock. 600,000 of these
options were granted on the Consummation Date. Options to purchase 300,000
shares become exercisable upon the attainment of certain earnings targets for
the six month period ending June 30, 1995; thereafter, if such earnings targets
had been met, options to purchase 150,000 shares become exercisable in each of
1996 and 1997. Each option entitles the holder to purchase one share of Series A
common stock at $7 per share for a maximum term of 10 years. The grantee must be
employed by the Company on the vesting date in order for the options to become
exercisable. Of the 600,000 options granted on the consummation date, 500,000
options issued to a former officer were canceled subsequent to December 31,
1994. The former officer was issued separate options to purchase 150,000 shares
of Series A common stock with an exercise price of $7 per share exercisable from
January 1, 1996 through December 31, 1998. The Stock Plan is administered by a
committee of the Company's board of directors.
Subsequent to year end, the Company issued options to purchase 512,500
shares of Series A common stock to an officer of the Company for a maximum term
of 10 years. The exercise price of these options is $10 per share and
one-quarter of the options vest annually upon the Company attaining certain
earnings targets. Any options that have not vested at the end of nine years from
the grant date will vest at that time if the officer is still employed by the
Company.
F-15
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. CONTINGENCIES AND COMMITMENTS
Telemundo, several affiliates and its independent auditors were defendants
in an action brought in December 1987 styled John Blair Communications, Inc.,
et. al. v. Reliance Capital Group, L.P., et. al. in the Supreme Court of the
State of New York, County of New York. Telemundo and all other parties in the
action have settled the action. Such settlement is included in Telemundo's Plan
and is reflected in the consolidated financial statements.
The Company and its subsidiaries are also involved in a number of other
actions and are contesting the allegations of the complaints in each pending
action and believe, based on current knowledge, that the outcome of all such
actions will not have a material adverse effect on the Company's consolidated
financial position or results of operations.
The Company is obligated under various leases, some of which contain renewal
options and provide for cost escalation payments. At December 31, 1994, future
minimum rental payments under such leases are as follows:
<TABLE>
<CAPTION>
OPERATING
LEASES CAPITAL LEASES
-------------- --------------
<S> <C> <C>
1995................................................................... $ 2,585,000 $ 1,159,000
1996................................................................... 2,486,000 1,189,000
1997................................................................... 2,217,000 1,219,000
1998................................................................... 1,773,000 1,260,000
1999................................................................... 1,285,000 1,380,000
2000 and later......................................................... 1,823,000 4,715,000
-------------- --------------
Total minimum lease payments........................................... $ 12,169,000 10,922,000
--------------
--------------
Less amount representing interest...................................... (3,093,000)
--------------
Present value of minimum lease payments (includes current portion of
$566,000)............................................................. $ 7,829,000
--------------
--------------
</TABLE>
Rent expense was $2,711,000, $3,600,000 and $3,400,000 in 1994, 1993, and
1992, respectively.
Certain of the Company's affiliation agreements, which typically last two to
five years, provide for compensation to affiliates.
The Company has employment agreements with certain officers pursuant to
which the Company has commitments for compensation aggregating $1,761,000,
$1,725,000 and $1,214,000 for 1995, 1996 and 1997, respectively. These
agreements provide for additional compensation based upon the achievement of
certain performance targets.
11. TRANSACTIONS WITH AFFILIATES
The Company paid approximately $1,125,000, $1,053,000 and $933,000 in 1994,
1993 and 1992, respectively, to a broadcast television station affiliate, in
which a director of the Company has a financial interest.
Reliance Insurance Company provided the Company with certain insurance
coverage for which the Company paid $910,000 and $593,000, in 1993 and 1992,
respectively.
In connection with the financial restructuring, the Company paid
approximately $204,000, $150,000 and $198,000 in 1994, 1993 and 1992,
respectively, to a law firm in which a director of the Company is a partner. The
payments were for services rendered prior to the director becoming a member of
the board.
Management believes that the transactions described above were on terms no
less favorable to the Company than could be obtained from unaffiliated parties.
F-16
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. OTHER (EXPENSE) INCOME
Other expense in 1993 includes financial advisory and legal fees incurred
prior to July 30, 1993 totalling $1,100,000 partially offset by the reversal of
a $750,000 liability which was no longer required. Other income of $1,400,000
for the year ended December 31, 1992 consists primarily of the net effect of the
reversal of $4,300,000 of liabilities provided at the date of acquisition of the
Company's predecessor which were no longer required, offset by the payment of
$3,000,000 in financial advisory and legal costs in conjunction with the
financial restructuring.
13. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
1994 QUARTER
--------------------------------------------
FIRST SECOND THIRD FOURTH YEAR
--------- --------- --------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net revenue......................................... $ 37,974 $ 49,094 $ 44,739 $ 52,087 $ 183,894
--------- --------- --------- ----------- -----------
--------- --------- --------- ----------- -----------
Operating income (loss)............................. $ (4,998) $ 5,354 $ 2,004 $ 10,816 $ 13,176
--------- --------- --------- ----------- -----------
--------- --------- --------- ----------- -----------
Income (loss) before extraordinary items............ $ (7,330) $ 2,908 $ (551) $ 89,022 $ 84,049
--------- --------- --------- ----------- -----------
--------- --------- --------- ----------- -----------
Net income (loss)**................................. $ (7,330) $ 2,908 $ (551) $ 219,504 $ 214,531
--------- --------- --------- ----------- -----------
--------- --------- --------- ----------- -----------
Net income (loss) per share......................... $ * $ * $ * $ * $ *
--------- --------- --------- ----------- -----------
--------- --------- --------- ----------- -----------
Common stock price range (a):
High................................................ $ .25 $ .25 $ .28 --
Low................................................. $ .03 $ .06 $ .19 --
</TABLE>
<TABLE>
<CAPTION>
1993 QUARTER
-------------------------------------------
FIRST SECOND THIRD FOURTH YEAR
---------- --------- --------- --------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net revenue.......................................... $ 33,401 $ 44,799 $ 47,257 $ 52,352 $ 177,809
---------- --------- --------- --------- -----------
---------- --------- --------- --------- -----------
Operating income (loss).............................. $ (5,013) $ 5,029 $ 6,862 $ 9,719 $ 16,597
---------- --------- --------- --------- -----------
---------- --------- --------- --------- -----------
Net income (loss).................................... $ (22,770) $ (4,155) $ 6,011 $ 6,855 $ (14,059)
---------- --------- --------- --------- -----------
---------- --------- --------- --------- -----------
Net income (loss) per share.......................... $ * $ * $ * $ * $ *
---------- --------- --------- --------- -----------
---------- --------- --------- --------- -----------
Common stock price range (a):
High................................................. $ .88 $ .13 $ .10 $ .25
Low.................................................. $ .02 $ .01 $ .01 $ .01
</TABLE>
- ------------------------
* Net income (loss) per share is not applicable as the Company has been
recapitalized and has adopted fresh start reporting as of December 31, 1994
(see Note 2).
** Net income for the year and for the fourth quarter was significantly
impacted by certain nonrecurring income and expense items related to the
Company's emergence from Chapter 11 bankruptcy proceedings (see Note 2).
(a) During 1994 and 1993 the Company's then-existing common stock was traded in
the over-the-counter market and was quoted in the National Association of
Securities Dealers Electronic Bulletin Board. Effective January 3, 1995, the
Company's New Common Stock is traded over-the-counter and is quoted on the
NASDAQ National Market.
F-17
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
COLUMN B COLUMN C COLUMN D COLUMN E
----------- -------------------------------- --------------- -----------
ADDITIONS
---------------------------------------------
BALANCE AT CHARGED TO CHARGED TO DEDUCTED FROM BALANCE AT
BEGINNING PROFIT AND LOSS OTHER ACCOUNTS RESERVES END OF
DESCRIPTION OF PERIOD OR INCOME DESCRIBE -- DESCRIBE (A) PERIOD
- ------------------------------------- ----------- --------------- --------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1992:
Allowance for doubtful accounts.... $ 2,046 $ 1,641 $ -- $ 1,680 $ 2,007
----------- ------- ------- ------- -----------
----------- ------- ------- ------- -----------
Year Ended December 31, 1993:
Allowance for doubtful accounts.... $ 2,007 $ 2,052 $ -- $ 1,558 $ 2,501
----------- ------- ------- ------- -----------
----------- ------- ------- ------- -----------
Year Ended December 31, 1994:
Allowance for doubtful accounts.... $ 2,501 $ 2,392 $ -- $ 2,048 $ 2,845
----------- ------- ------- ------- -----------
----------- ------- ------- ------- -----------
Year Ended December 31, 1992:
Reserve for TV Program Exhibition
Rights............................ $ 3,107 $ 1,017 $ -- $ 1,952 $ 2,172
----------- ------- ------- ------- -----------
----------- ------- ------- ------- -----------
Year Ended December 31, 1993:
Reserve for TV Program Exhibition
Rights............................ $ 2,172 $ 1,666 $ -- $ 1,701 $ 2,137
----------- ------- ------- ------- -----------
----------- ------- ------- ------- -----------
Year Ended December 31, 1994:
Reserve for TV Program Exhibition
Rights............................ $ 2,137 $ 3,705 $ -- $ 4,593 $ 1,249
----------- ------- ------- ------- -----------
----------- ------- ------- ------- -----------
</TABLE>
- ------------------------
(a) Amounts written off, net of recoveries
F-18
<PAGE>
(This page has been left blank intentionally.)
F-19
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
PREDECESSOR
----------------
NINE MONTHS ENDED SEPTEMBER 30 1994 1995
- ------------------------------------------------------------------------------ ---------------- ----------------
<S> <C> <C>
Net revenue................................................................... $ 131,807,000 $ 119,848,000
---------------- ----------------
Costs and expenses:
Direct operating costs...................................................... 68,734,000 59,148,000
Selling, general and administrative expenses other than network and
corporate.................................................................. 27,107,000 25,917,000
Network expenses............................................................ 21,822,000 20,994,000
Corporate expenses.......................................................... 3,885,000 3,345,000
Depreciation and amortization............................................... 7,899,000 8,653,000
---------------- ----------------
129,447,000 118,057,000
---------------- ----------------
Operating income.............................................................. 2,360,000 1,791,000
Other expense................................................................. (20,000) (19,000)
Reorganization items.......................................................... (4,250,000) --
Interest expense -- net of interest income of $164,000 in 1995................ (487,000) (10,756,000)
Net loss from investment in TeleNoticias...................................... -- (4,590,000)
---------------- ----------------
Income (loss) before income taxes............................................. (2,397,000) (13,574,000)
Income tax provision.......................................................... (2,575,000) (2,534,000)
---------------- ----------------
Net loss...................................................................... $ (4,972,000) $ (16,108,000)
---------------- ----------------
---------------- ----------------
Net loss per share............................................................ $ * $ (1.61)
---------------- ----------------
---------------- ----------------
Average number of shares outstanding.......................................... * 10,000,000
---------------- ----------------
---------------- ----------------
</TABLE>
- ------------------------
* Net income (loss) per share is not applicable as the Company has been
recapitalized and has adopted fresh start reporting as of December 31, 1994
(see Note 2).
See notes to consolidated financial statements
F-20
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31 SEPTEMBER 30
1994 1995
---------------- ----------------
<S> <C> <C>
ASSETS (UNAUDITED)
Current assets:
Cash and cash equivalents................................................... $ 1,850,000 $ 9,030,000
Accounts receivable, less allowance for doubtful accounts of $2,743,000 and
$2,845,000................................................................. 47,673,000 37,938,000
Television programming...................................................... 12,410,000 14,210,000
Prepaid expenses and other.................................................. 6,296,000 5,095,000
---------------- ----------------
Total current assets.................................................. 68,229,000 66,273,000
Property and equipment -- net................................................. 62,774,000 60,086,000
Television programming........................................................ 3,172,000 2,091,000
Other assets.................................................................. 909,000 924,000
Investment in TeleNoticias.................................................... 4,148,000 377,000
Broadcast licenses and reorganization value in excess of amounts allocable to
identifiable assets -- net................................................... 92,792,000 90,848,000
---------------- ----------------
$ 232,024,000 $ 220,599,000
---------------- ----------------
---------------- ----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................................ $ 7,308,000 $ 7,903,000
Accrued expenses and other.................................................. 23,304,000 20,535,000
Television programming obligations.......................................... 5,292,000 5,991,000
---------------- ----------------
Total current liabilities............................................. 35,904,000 34,429,000
Long-term debt................................................................ 100,724,000 106,339,000
Capital lease obligations..................................................... 7,263,000 6,807,000
Television programming obligations............................................ 763,000 816,000
Other liabilities............................................................. 17,370,000 17,977,000
---------------- ----------------
162,024,000 166,368,000
---------------- ----------------
Contingencies and commitments (Note 3)
Common stockholders' equity:
Series A Common Stock, $.01 par value, 14,388,394 shares authorized,
4,388,394 and 5,823,407 shares outstanding at December 31, 1994 and
September 30, 1995......................................................... 44,000 58,000
Series B Common Stock, $.01 par value, 5,611,606 shares authorized,
5,611,606 and 4,176,693 shares outstanding at December 31, 1994 and
September 30, 1995......................................................... 56,000 42,000
Additional paid-in capital.................................................... 69,900,000 70,239,000
Retained earnings (deficit)................................................... -- (16,108,000)
---------------- ----------------
70,000,000 54,231,000
---------------- ----------------
$ 232,024,000 $ 220,599,000
---------------- ----------------
---------------- ----------------
</TABLE>
See notes to consolidated financial statements
F-21
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES
IN COMMON STOCKHOLDERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES COMMON
OUTSTANDING STOCK
------------------------- ---------------------
SERIES A SERIES B SERIES A SERIES B ADDITIONAL RETAINED COMMON
COMMON COMMON COMMON COMMON PAID-IN EARNINGS STOCKHOLDERS'
STOCK STOCK STOCK STOCK CAPITAL (DEFICIT) EQUITY
----------- ------------ --------- ---------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1994...... 4,388,394 5,611,606 $ 44,000 $ 56,000 $ 69,900,000 $ -- $ 70,000,000
Net loss................ -- -- -- -- -- (16,108,000) (16,108,000)
Stock option
transactions (a)....... -- -- -- -- 338,000 -- 338,000
Warrant conversions..... 100 -- -- -- 1,000 -- 1,000
Stock conversions....... 1,434,913 (1,434,913) 14,000 (14,000) -- -- --
----------- ------------ --------- ---------- --------------- --------------- ---------------
Balance,
September 30, 1995..... 5,823,407 4,176,693 $ 58,000 $ 42,000 $ 70,239,000 $ (16,108,000) $ 54,231,000
----------- ------------ --------- ---------- --------------- --------------- ---------------
----------- ------------ --------- ---------- --------------- --------------- ---------------
</TABLE>
- ------------------------
(a) Effect of the cancellation and issuance of options to a former officer.
See notes to consolidated financial statements
F-22
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
PREDECESSOR
---------------
NINE MONTHS ENDED SEPTEMBER 30 1994 1995
- ------------------------------------------------------------------------------- --------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss....................................................................... $ (4,972,000) $ (16,108,000)
Charges not affecting cash:
Depreciation and amortization................................................ 7,899,000 8,653,000
Interest accretion on 10.25% Senior Notes.................................... -- 1,113,000
Net loss from investment in TeleNoticias..................................... -- 4,590,000
Changes in assets and liabilities:
Accounts receivable.......................................................... 1,933,000 9,735,000
Television programming....................................................... (4,146,000) (719,000)
Television programming obligations........................................... 125,000 752,000
Accounts payable and accrued expenses and other.............................. 6,262,000 5,463,000
--------------- ---------------
7,101,000 13,479,000
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment............................................ (13,526,000) (4,274,000)
Reimbursement by TeleNoticias partnership of equipment purchases............... 3,838,000 --
Capital contribution to TeleNoticias partnership............................... (1,912,000) (775,000)
--------------- ---------------
(11,600,000) (5,049,000)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of obligations under capital leases................................... (420,000) (413,000)
Advance under revolving credit facility........................................ -- 4,718,000
Payment under revolving credit facility........................................ -- (216,000)
Payments of reorganization items, liabilities subject to settlement under
chapter 11 proceedings and other settlement payments.......................... (10,785,000) (5,339,000)
--------------- ---------------
(11,205,000) (1,250,000)
--------------- ---------------
Increase (decrease) in cash and cash equivalents............................... (15,704,000) 7,180,000
Cash and cash equivalents, beginning of period................................. 37,675,000 1,850,000
--------------- ---------------
Cash and cash equivalents, end of period....................................... $ 21,971,000 $ 9,030,000
--------------- ---------------
--------------- ---------------
Supplemental cash flow information:
Interest paid................................................................ $ -- $ 5,991,000
--------------- ---------------
--------------- ---------------
Income taxes paid, including Puerto Rico withholding taxes................... $ 1,121,000 $ 1,707,000
--------------- ---------------
--------------- ---------------
</TABLE>
See notes to consolidated financial statements
F-23
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited consolidated
financial statements of Telemundo Group, Inc. ("Telemundo") and subsidiaries
(collectively the "Company") include all adjustments (consisting of normal
recurring accruals only) necessary to present fairly the Company's financial
position at September 30, 1995, and the results of operations and cash flows for
all periods presented. The results of operations for interim periods are not
necessarily indicative of the results to be obtained for the entire year.
For a summary of significant accounting policies, which have not changed
from December 31, 1994, and additional financial information, see the Company's
Annual Report on Form 10-K for the year ended December 31, 1994.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
On December 30, 1994 (the "Consummation Date"), Telemundo consummated its
financial restructuring pursuant to a plan of reorganization under chapter 11 of
the Bankruptcy Code (the "Plan"). The period prior to the consummation of the
Plan is presented on a historical cost basis without giving effect to the
reorganization and is separated by a line. For purposes of these financial
statements, the term "Predecessor" refers to the Company prior to emergence from
chapter 11 reorganization.
BROADCAST LICENSES AND REORGANIZATION VALUE IN EXCESS OF AMOUNTS ALLOCABLE TO
IDENTIFIABLE ASSETS
Broadcast licenses and reorganization value in excess of amounts allocable
to identifiable assets represents the portion of reorganization value not
attributable to specific tangible assets of the Company at the time of the
reorganization. This value is attributable primarily to FCC broadcast licenses
($82,520,000 net of accumulated amortization). Intangible assets are being
amortized on a straight-line basis over periods ranging from 10 to 40 years. On
an ongoing basis, the Company will continue to review the carrying value of
broadcast licenses and reorganization value in excess of amounts allocable to
identifiable assets and if such review indicates that the value may not be fully
recoverable, the carrying value will be reduced to estimated fair value.
NET LOSS PER SHARE
Net loss per share for the three and nine months ended September 30, 1995 is
calculated by dividing the net loss by the average number of shares outstanding
during the period. Conversion of stock options and warrants is not included in
the computation as all stock options and warrants are antidilutive. As a result
of the effects of the reorganization, per share information and average number
of shares outstanding for the 1994 period are not applicable and therefore have
been omitted from the accompanying financial statements.
RECLASSIFICATIONS
Certain reclassifications have been made in the prior period's financial
statements to conform with the current period's presentation.
3. SUBSEQUENT EVENTS
On November 8, 1995, a wholly-owned subsidiary of Telemundo entered into a
definitive agreement to acquire, directly and indirectly, an aggregate 74.5%
interest in a joint venture ("Video 44") which owns WSNS-TV, Channel 44, in
Chicago. The purchase price for such acquisition is approximately $44.7 million
(subject to adjustment based upon, among other things, the net working capital
of Video 44 on the date of closing). The transaction is contingent upon, among
other things, approval of the Federal Communications Commission, expiration or
termination of the applicable waiting period under the Hart-
F-24
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
3. SUBSEQUENT EVENTS (CONTINUED)
Scott-Rodino Antitrust Improvements Act, and closing of financing necessary to
consummate the transaction. The Company is considering various financing
alternatives, which may include adjustments to the Company's capitalization.
The Company holds a 42% interest in TeleNoticias del Mundo, L.P.
("TeleNoticias"), a 24-hour Spanish language news service distributed in Latin
America, the United States and Europe. On October 16, 1995, a wholly-owned
subsidiary of Telemundo filed an action in New York State court, naming the
general and other limited partners of TeleNoticias as defendants, to address
certain governance issues affecting TeleNoticias. In its complaint, the Company
asserted, among other things, a cause of action for breach of a stockholders
agreement and for a declaration that the Company has the right to nominate and
remove the president of TeleNoticias. Certain of the defendants have asserted
counter-claims against the Company for injunctive and declaratory relief as well
as for damages in unliquidated amounts. The Company believes that the outcome of
this litigation will not result in a material adverse effect on the Company or
its access to news programming.
F-25
<PAGE>
(This page has been left blank intentionally.)
F-26
<PAGE>
Report of Independent Accountants
To the Joint Venturers
of Video 44
In our opinion, the accompanying balance sheets and the related statements
of income, of joint venturers' equity and of cash flows present fairly, in all
material respects, the financial position of Video 44 (an unincorporated joint
venture) at December 31, 1994 and 1993, and the results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
Video 44's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Chicago, Illinois
March 27, 1995
F-27
<PAGE>
VIDEO 44
(AN UNINCORPORATED JOINT VENTURE)
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1993 AND 1994
<TABLE>
<CAPTION>
1993 1994
-------------- --------------
<S> <C> <C>
Net revenues..................................................................... $ 13,988,120 $ 16,385,054
-------------- --------------
Operating expenses
Technical and program.......................................................... 2,922,086 3,271,257
Selling, general and administrative............................................ 3,829,767 4,595,806
Management fee -- related party (Note 7)....................................... 400,000 400,000
Depreciation and amortization.................................................. 1,685,068 1,852,052
-------------- --------------
8,836,921 10,119,115
-------------- --------------
Operating income................................................................. 5,151,199 6,265,939
-------------- --------------
Interest income.................................................................. 60,435 42,449
Interest expense -- related party................................................ (518,620) (457,594)
-------------- --------------
(458,185) (415,145)
-------------- --------------
Net income....................................................................... $ 4,693,014 $ 5,850,794
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of this statement.
F-28
<PAGE>
VIDEO 44
(AN UNINCORPORATED JOINT VENTURE)
BALANCE SHEETS
DECEMBER 31, 1993 AND 1994
<TABLE>
<CAPTION>
ASSETS 1993 1994
- ------------------------------------------------------------------------------ ----------------- --------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents................................................... $ 1,616,623 $ 1,188,721
Accounts receivable -- trade, net of allowance for uncollectible accounts of
$240,085 and $50,000 in 1993 and 1994, respectively........................ 3,030,849 3,145,756
Other current assets........................................................ 245,293 209,302
----------------- --------------
Total current assets 4,892,765 4,543,779
----------------- --------------
PROPERTY AND EQUIPMENT
Land........................................................................ 1,090,252 1,090,247
Building and improvements................................................... 1,632,932 1,661,875
Equipment, furniture and fixtures, and vehicles............................. 4,299,155 4,397,302
----------------- --------------
7,022,339 7,149,424
Less: Accumulated depreciation 3,136,720 3,566,261
----------------- --------------
Net property and equipment 3,885,619 3,583,163
----------------- --------------
BROADCAST LICENSE (NET) -- NOTE 3............................................. 13,843,695 13,270,109
NON-COMPETE AGREEMENT (NET) -- NOTE 3......................................... 3,266,663 2,466,663
----------------- --------------
$ 25,888,742 $ 23,863,714
----------------- --------------
----------------- --------------
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND JOINT VENTURERS' EQUITY
- ------------------------------------------------------------------------------
<S> <C> <C>
CURRENT LIABILITIES
Note payable -- related party -- current portion............................ $ 3,200,000 $ 2,000,000
Accounts payable............................................................ 164,255 223,262
Partnership distributions payable........................................... 640,000 --
Music license fees.......................................................... 729,726 665,919
Employee compensation....................................................... 740,031 779,752
Advance payment for programming............................................. -- 300,000
Other....................................................................... 153,896 122,259
----------------- --------------
Total current liabilities................................................. 5,627,908 4,091,192
NOTE PAYABLE -- RELATED PARTY -- LONG TERM.................................... 5,400,000 1,600,000
JOINT VENTURERS' EQUITY....................................................... 14,860,834 18,172,522
----------------- --------------
$ 25,888,742 $ 23,863,714
----------------- --------------
----------------- --------------
</TABLE>
The accompanying notes are an integral part of this statement.
F-29
<PAGE>
VIDEO 44
(AN UNINCORPORATED JOINT VENTURE)
STATEMENTS OF JOINT VENTURERS' EQUITY
YEARS ENDED DECEMBER 31, 1993 AND 1994
<TABLE>
<CAPTION>
NATIONAL
SUBSCRIPTION
HARRISCOPE ESSANESS TELEVISION
OF CHICAGO, THEATRES OF CHICAGO,
INC. CORPORATION INC. TOTAL
-------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Equity at January 1, 1993.......................... $ 6,621,411 $ 2,404,093 $ 2,892,316 $ 11,917,820
Net income for the year ended December 31, 1993.... 2,346,507 1,196,719 1,149,788 4,693,014
Capital distributions.............................. (875,000) (446,250) (428,750) (1,750,000)
-------------- ------------- ------------- --------------
Equity at December 31, 1993........................ 8,092,918 3,154,562 3,613,354 14,860,834
Net income for the year ended December 31, 1994.... 2,925,397 1,491,952 1,433,445 5,850,794
Capital distributions.............................. (1,269,554) (647,472) (622,080) (2,539,106)
-------------- ------------- ------------- --------------
Equity at December 31, 1994........................ $ 9,748,761 $ 3,999,042 $ 4,424,719 $ 18,172,522
-------------- ------------- ------------- --------------
-------------- ------------- ------------- --------------
</TABLE>
The accompanying notes are an integral part of this statement.
F-30
<PAGE>
VIDEO 44
(AN UNINCORPORATED JOINT VENTURE)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1993 AND 1994
<TABLE>
<CAPTION>
1993 1994
--------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,693,014 $ 5,850,794
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization................................................. 1,685,068 1,852,052
(Increase) decrease in other assets and liabilities:
Accounts receivable -- trade, net........................................... (679,836) (114,907)
Other assets................................................................ (66,140) 35,996
Accounts payable............................................................ (86,897) 59,007
Accrued liabilities......................................................... (252,335) 244,277
--------------- -------------
Net cash provided by operating activities................................. 5,292,874 7,927,219
--------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures............................................................ (142,917) (176,015)
Escrow account.................................................................. 5,703,431 --
Acquisition of broadcast license and non-compete agreement...................... (18,338,707) --
Other........................................................................... 47,100 --
--------------- -------------
Net cash used by investing activities..................................... (12,731,093) (176,015)
--------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuances of notes payable -- related party....................... 15,300,000 --
Repayments of notes payable -- related party.................................... (7,200,000) (5,000,000)
Capital distributions........................................................... (1,110,000) (3,179,106)
--------------- -------------
Net cash provided by (used by) financing activities....................... 6,990,000 (8,179,106)
--------------- -------------
DECREASE IN CASH AND CASH EQUIVALENTS............................................. (448,219) (427,902)
CASH AND CASH EQUIVALENTS
Beginning of year............................................................... 2,064,842 1,616,623
--------------- -------------
End of year..................................................................... $ 1,616,623 $ 1,188,721
--------------- -------------
--------------- -------------
</TABLE>
The accompanying notes are an integral part of this statement.
F-31
<PAGE>
VIDEO 44
(AN UNINCORPORATED JOINT VENTURE)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Video 44, a joint venture ("Venture"), was formed in 1980 for the purpose of
constructing, owning and operating facilities to broadcast over Channel 44 in
Chicago, Illinois. The Joint Venture Agreement provides for the capital,
profits, assets and liabilities of Video 44 to be allocated to the joint
venturers as follows:
<TABLE>
<S> <C>
Harriscope of Chicago, Inc. ("Harriscope").......................... 50.0%
Essaness Theatres Corporation ("Essaness").......................... 25.5%
National Subscription Television of Chicago, Inc. ("NST")........... 24.5%
</TABLE>
The Management Board of Video 44 consists of seven members, three of whom
are appointed by an affiliate of Oak Industries, Inc., an investor in NST and
Harriscope; two of whom are appointed by officers of Harriscope; and two of whom
are appointed by officers of Essaness.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash balances and short-term
investments with original maturities of three months or less. The Venture
recorded $60,435 and $42,449 in interest income on short-term investments in
1993 and 1994, respectively. All amounts are recorded at cost, which
approximates market.
REVENUE RECOGNITION
Advertising revenues are recognized when commercials are broadcast.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Additions and improvements are
capitalized, while expenditures for maintenance and repairs are expensed as
incurred. Depreciation is computed using the straight-line method over the
estimated useful lives of the assets. The cost and accumulated depreciation of
property sold or retired are removed from the accounts, and gains or losses, if
any, are reflected in earnings for the period.
BROADCAST LICENSE AND NON-COMPETE AGREEMENTS
Broadcast license costs are being amortized on a straight-line basis over 25
years. The non-compete agreement is being amortized on a straight-line basis
over five years, the term of the non-compete agreement. Periodically the value
of these assets are reviewed for impairment. Accumulated amortization at
December 31, 1993 for the broadcast license and non-compete agreement was
$495,012 and $733,337, respectively. Accumulated amortization at December 31,
1994 for the broadcast license and non-compete agreement was $1,068,598 and
$1,533,337, respectively.
INCOME TAXES
No provision for income taxes is necessary in the financial statements of
the Venture because, as a joint venture, it is not subject to income tax, and
the tax effect of its activities accrues to the joint venturers.
EMPLOYEE BENEFITS
The Company sponsors two defined contribution employee benefit plans, one
covering union employees and the other covering salaried employees. Annual
contributions to these plans are based on a fixed rate per hour for union
employees and a fixed percentage of wages for salaried employees. Expense
relating to these plans amounted to $113,669 and $126,014 in 1993 and 1994,
respectively.
F-32
<PAGE>
VIDEO 44
(AN UNINCORPORATED JOINT VENTURE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 -- ALLOWANCE FOR DOUBTFUL ACCOUNTS
The following is an analysis of the activity in the allowance for doubtful
accounts during 1993 and 1994:
<TABLE>
<S> <C>
Balance at December 31, 1992.................................... $ 165,734
Expense......................................................... 205,219
Write-offs (net of recoveries).................................. (130,868)
---------
Balance at December 31, 1993.................................... 240,085
Expense......................................................... 326,352
Write-offs (net of recoveries).................................. (516,437)
---------
Balance at December 31, 1994.................................... $ 50,000
---------
---------
</TABLE>
NOTE 3 -- BROADCAST LICENSE
In August 1982, the Venture filed an application with the Federal
Communications Commission ("FCC") for renewal of its broadcast license. In
November 1982, a competing application was filed for a construction permit for a
new broadcast television station on the same frequency utilized by the Venture.
The competing application was mutually exclusive with the application for
license renewal filed by the Venture. Comparative hearings on the two
applications were held during 1983 and 1984 and, in February 1986, an
administrative law judge issued a decision granting the competing applicant's
request for a construction permit and denying the Venture's application for
renewal of its broadcast license. The Venture appealed the decision to the
Review Board of the FCC and, in January 1989, the Review Board reversed the
administrative law judge's opinion and granted the Venture's renewal application
and denied the application of the competing applicant. The competing applicant
appealed the FCC's decision to the U.S. Court of Appeals for the District of
Columbia ("Court"). In April 1990, the Court ruled that the FCC's renewal of the
Venture's license was arbitrary and capricious and remanded the case to the FCC
for further proceedings.
In a Memorandum Opinion and Order adopted September 1990, the FCC reversed
its earlier order renewing the Venture's license, denied the Venture's
application for renewal and granted a construction permit to the competing
applicant. The ruling authorized the Venture to continue operation of the
station for 91 days following the later of (a) the release of the order or (b)
the completion of proceedings for reconsideration before the FCC and/or judicial
review upon appeal. The Venture requested the FCC to reconsider its decision and
in July 1991, the FCC upheld its earlier decision. The Venture then appealed the
FCC decision to the Court.
In October 1992, the Venture entered into an agreement ("Agreement") with
the competing applicant to acquire the competing applicant's rights to the
license that had been awarded to the competing applicant. The Agreement provided
for two payments to be made by the Venture to the competing applicant: 1) the
first payment, totalling $11,666,667 plus accrued interest at the prime rate
plus 1% from September 1, 1992 to the date of payment, to be made within 10 days
following the date on which an order by the FCC approving the settlement shall
become a final order not subject to judicial review; and 2) the second payment,
totalling $6,009,757, plus accrued interest on $5,833,833 of such amount at the
prime rate plus 1% from September 1, 1992 to the date of payment, to be made
within 10 days following the date on which an order by the FCC approving the
transfer of the license to the Venture through its license renewal application
shall become a final order not subject to judicial review.
In connection with the Agreement, the Venture established an escrow account
with a commercial bank to secure the payments to be made to the competing
applicant. In October 1992, the Venture deposited $5,676,424 in cash in the
escrow account. In addition, Oak Industries, Inc. and the Irving B.
F-33
<PAGE>
VIDEO 44
(AN UNINCORPORATED JOINT VENTURE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 -- BROADCAST LICENSE (CONTINUED)
Harris Revocable Trust ("Trust"), an investor in Harriscope, each issued letters
of credit for $6,000,000 payable to the competing applicant, subject to the
completion of the conditions outlined above for the first and second payments to
the competing applicant.
In February 1993, the FCC's order approving the Agreement between the
Venture and the competing applicant became final. In February 1993, the Venture
made its first payment to the competing applicant in the amount of $12,029,133.
In May 1993, the FCC's order approving the transfer of the license to the
Venture became final. In May 1993, the Venture made its second payment to the
competing applicant in the amount of $6,309,574. The total purchase price of
$18,338,707 was allocated to the broadcast license and the non-compete agreement
in accordance with the terms of the agreement.
NOTE 4 -- DEBT
On May 27, 1993, the Venture entered into a Term Loan Agreement ("Loan") for
$10 million with the Trust. The Loan requires quarterly payments of principal
and interest, beginning on September 30, 1993 and June 30, 1993, respectively,
with final maturity on May 31, 1996. Future principal payments total $2.0
million in 1995 and $1.6 million in 1996. Interest accrues quarterly on the
outstanding principal balance at the Venture's option of LIBOR plus 2.25% (8.25%
at December 31, 1994) (decreasing to 1.5% after September 30, 1995) or the prime
rate (as quoted by First National Bank of Chicago) plus .5% (9.0% at December
31, 1994) (with no premium after September 30, 1995). The Loan is secured by a
first lien on and a security interest in both tangible and intangible assets of
the Venture, including but not limited to accounts receivable, fixtures and
equipment, and the Venture's broadcast license. The Loan contains certain
covenants which, among other things, require the Venture to maintain at the end
of each calendar quarter a defined cash flow coverage ratio and prohibit the
Venture from making certain investments, incurring lease liabilities in excess
of $125,000 per year or making capital expenditures in excess of $200,000 per
year.
In connection with entering into the Loan, the Venture incurred $117,929 of
legal costs and closing fees, which have been deferred and are being amortized
on a straight-line basis over the Loan term.
The Loan proceeds were used to repay the amounts borrowed from the Lenders,
as described below. The remaining proceeds were used for the second payment to
the competing applicant (along with existing cash balances of the Venture) under
the Agreement as described in Note 3.
The total Loan balance outstanding of $3,600,000 at December 31, 1994 has
been allocated between current and long-term liabilities, based on the scheduled
repayment of the principal balance.
On October 7, 1992, the Venture entered into a Financing Agreement with Oak
Industries, Harriscope and the Trust (collectively, the "Lenders"), whereby the
Lenders agreed to lend the Venture up to the following amounts as needed by the
Venture to meet its financial obligations under the Agreement:
<TABLE>
<S> <C>
Oak Industries................................................. $5,750,000
Trust.......................................................... $5,750,000
Harriscope..................................................... $1,000,000
</TABLE>
The terms of the Financing Agreement provided for payment of interest at the
prime rate plus 4%. On October 8, 1992, the Venture borrowed $500,000 from
Harriscope under the terms of the Financing Agreement, with such amount payable
on demand by Harriscope. Accordingly, such obligation was recorded as a current
liability at December 31, 1992.
F-34
<PAGE>
VIDEO 44
(AN UNINCORPORATED JOINT VENTURE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 -- DEBT (CONTINUED)
On February 10, 1993, the Venture borrowed $2,650,000 from Oak Industries
and $2,650,000 from the Trust under the terms of the Financing Agreement. Such
funds, along with the balance in the escrow deposit account described in Note 3
and existing cash balances of the Venture, were used to pay the first payment to
the competing applicant described in Note 3.
Borrowings under the Financing Agreement were repaid in May 1993 and the
financing agreement was subsequently canceled.
Interest paid during fiscal years 1993 and 1994 totaled approximately
$495,000 and $423,000, respectively.
NOTE 5 -- NETWORK AGREEMENT
Since January 1989, the Venture has been an affiliate of Telemundo Group,
Inc. ("Telemundo"). Pursuant to a Network Affiliation and Representation
Agreement, Telemundo provides the Venture with Spanish-language programming for
broadcast in the Chicago market and with national sales representation services
to market commercial advertising time. Under the terms of the latest agreement
effective January 1, 1993 and expiring December 31, 1995, Telemundo guaranteed
the Venture a minimum level of Total Affiliate Revenues (as defined).
NOTE 6 -- LEASE AGREEMENT
The Company leases certain operating facilities under a lease which expires
in 1999, with the option to extend the lease term through September 30, 2009.
The lease generally provides that the Company will pay for utilities, real
estate taxes, maintenance and insurance. Minimum annual rental payments are
$185,338 for the period 1995 through 1998 and $139,004 in 1999.
Rent expense was $217,458 and $203,606 in 1993 and 1994, respectively.
NOTE 7 -- RELATED PARTY TRANSACTIONS
In 1993 and 1994, the Venture paid management fees of $400,000 as follows:
- $150,000 to Oak Industries, Inc.
- $125,000 to an individual who is an investor in Essaness.
- $75,000 allocated evenly to two individuals who are investors
in Harriscope.
- $50,000 to Harriscope Corporation, a corporation owned by an
investor in Harriscope.
F-35
<PAGE>
(This page has been left blank intentionally.)
F-36
<PAGE>
VIDEO 44
(AN UNINCORPORATED JOINT VENTURE)
STATEMENTS OF INCOME
(UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1995
<TABLE>
<CAPTION>
1994 1995
-------------- --------------
<S> <C> <C>
Net revenues..................................................................... $ 11,873,186 $ 13,256,810
-------------- --------------
Operating expenses
Technical and program.......................................................... 2,366,462 2,933,767
Selling, general and administrative............................................ 3,130,350 4,240,855
Management fee -- related party................................................ 300,000 300,000
Depreciation and amortization.................................................. 1,385,592 1,413,950
-------------- --------------
7,182,404 8,888,572
-------------- --------------
Operating income................................................................. 4,690,782 4,368,238
-------------- --------------
Interest expense, net of income.................................................. (302,651) (117,174)
-------------- --------------
Net income....................................................................... $ 4,388,131 $ 4,251,064
-------------- --------------
-------------- --------------
</TABLE>
The accompanying note is an integral part of this statement.
F-37
<PAGE>
VIDEO 44
(AN UNINCORPORATED JOINT VENTURE)
BALANCE SHEET
(UNAUDITED)
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
ASSETS
- --------------------------------------------------------------------------------------------------
<S> <C>
CURRENT ASSETS
Cash and cash equivalents....................................................................... $ 1,054,894
Accounts receivable -- trade, net of
allowance for uncollectible accounts of $195,426............................................... 3,376,348
Other current assets............................................................................ 243,085
--------------
Total current assets.......................................................................... 4,674,327
--------------
PROPERTY AND EQUIPMENT
Land............................................................................................ 1,090,247
Building and improvements....................................................................... 1,683,673
Equipment, furniture and fixtures, and vehicles................................................. 5,251,394
--------------
8,025,314
Less: Accumulated depreciation.................................................................. 3,950,008
--------------
Net property and equipment................................................................ 4,075,306
--------------
BROADCAST LICENSE (NET)........................................................................... 12,839,909
NON-COMPETE AGREEMENT (NET)....................................................................... 1,866,660
--------------
$ 23,456,202
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND JOINT VENTURERS' EQUITY
- --------------------------------------------------------------------------------------------------
<S> <C>
CURRENT LIABILITIES
Note payable -- related party -- current portion................................................ $ 900,000
Accounts payable................................................................................ 398,103
Music license fees.............................................................................. 547,628
Employee compensation........................................................................... 783,113
Advance payment for programming................................................................. 597,891
Other........................................................................................... 195,881
--------------
Total current liabilities..................................................................... 3,422,616
JOINT VENTURERS' EQUITY........................................................................... 20,033,586
--------------
$ 23,456,202
--------------
--------------
</TABLE>
The accompanying note is an integral part of this statement.
F-38
<PAGE>
VIDEO 44
(AN UNINCORPORATED JOINT VENTURE)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1995
<TABLE>
<CAPTION>
1994 1995
-------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income....................................................................... $ 4,388,131 $ 4,251,064
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization.................................................. 1,385,592 1,413,950
(Increase) decrease in other assets and liabilities:
Accounts receivable -- trade, net............................................ 44,988 (230,592)
Other assets................................................................. (49,300) (33,783)
Accounts payable............................................................. 62,353 174,841
Accrued liabilities.......................................................... (129,619) 256,583
-------------- -------------
Net cash provided by operating activities.................................. 5,702,145 5,832,063
-------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures............................................................. (108,076) (875,890)
-------------- -------------
Net cash used by investing activities...................................... (108,076) (875,890)
-------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of notes payable -- related party..................................... (3,700,000) (2,700,000)
Capital distributions............................................................ (2,879,106) (2,390,000)
-------------- -------------
Net cash used by financing activities...................................... (6,579,106) (5,090,000)
-------------- -------------
DECREASE IN CASH AND CASH EQUIVALENTS.............................................. (985,037) (133,827)
CASH AND CASH EQUIVALENTS
Beginning of year................................................................ 1,616,623 1,188,721
-------------- -------------
End of period.................................................................... $ 631,586 $ 1,054,894
-------------- -------------
-------------- -------------
</TABLE>
The accompanying note is an integral part of this statement.
F-39
<PAGE>
VIDEO 44
(AN UNINCORPORATED JOINT VENTURE)
NOTE TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments necessary to present fairly the financial position of
Video 44 as of September 30, 1995 and the results of its operations and its cash
flows for each of the nine-month periods ended September 30, 1995 and 1994. All
adjustments reflected in the accompanying unaudited financial statements are of
a normal recurring nature. Results of operations for interim periods are not
necessarily indicative of the results to be expected for the full year.
F-40
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITERS. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR A
SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANY ONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information.......................... 3
Incorporation of Certain Documents by
Reference.................................... 3
Prospectus Summary............................. 5
Risk Factors................................... 14
Use of Proceeds................................ 21
Capitalization................................. 22
Unaudited Pro Forma Consolidated Financial
Data......................................... 23
Selected Historical Consolidated Financial
Data......................................... 29
Management's Discussion and Analysis of Results
of Operations and Financial Condition........ 30
Business....................................... 35
Management..................................... 51
Principal Stockholders......................... 53
The Acquisition................................ 57
Consent Solicitation and Repurchase Offer...... 59
Description of Certain Indebtedness............ 60
Description of the Senior Notes................ 63
Certain Federal Income Tax Considerations...... 90
Underwriting................................... 93
Experts........................................ 94
Legal Matters.................................. 94
Index to Financial Statements.................. F-1
</TABLE>
--------------
UNTIL , 1996 (40 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THE
DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
$
TELEMUNDO GROUP, INC.
% SENIOR NOTES
DUE 2006
[LOGO]
SALOMON BROTHERS INC
ALEX. BROWN & SONS
INCORPORATED
BT SECURITIES CORPORATION
PROSPECTUS
DATED , 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses in connection with the
issuance and distribution of the Senior Notes.
<TABLE>
<S> <C>
SEC registration fee.......................................... $ 60,345
NASD filing fee............................................... 19,942
Blue Sky fees and expenses.................................... 20,000
Accounting fees and expenses.................................. 150,000
Legal fees and expenses....................................... 470,000
Printing and engraving expenses............................... 400,000
Miscellaneous................................................. 49,713
-----------
TOTAL..................................................... $ 1,170,000
-----------
-----------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article Seventh of the Company's Restated Certificate of Incorporation
provides that no director of the Company shall be personally liable to the
Company or its stockholders for monetary damages for any breach of his fiduciary
duty as a director except for liability (1) for any breach of the director's
duty of loyalty to the Company or its stockholders, (2) for acts or omissions
that are not in good faith or involve intentional misconduct or a knowing
violation of the law, (3) under Section 174 of the Delaware General Corporation
Law ("DGCL") or (4) for any transaction from which the director derived an
improper personal benefit.
Section 145 of the DGCL permits the indemnification by a Delaware
corporation of its directors, officers, employees and agents in connection with
actions, suits or proceedings brought against them by a third party or in the
right of the corporation, by reason of the fact that they were or are such
directors, officers, employees or agents, against liabilities and expenses
incurred in any such action, suit or proceeding; provided that such persons
satisfy certain standards set forth in such section.
The Company's Amended and Restated By-laws provide, among other things, and
subject to the procedures specified therein, that (1) the Company shall
indemnify any person who was or is a party or is threatened to be made a party
to any action (other than an action by or in the right of the Company) by reason
of the fact that he is a director or officer of the Company, or is serving at
the request of the Company as a director or officer of another corporation or
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Company, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful; and (2) the Company shall indemnify any person who was
or is a party or is threatened to be made a party to any action or suit by or in
the right of the Company to procure a judgment in its favor by reason of the
fact that he is a director or officer of the Company, or is serving at the
request of the Company as a director or officer of another corporation or
enterprise, against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Company, provided that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Company unless
and only to the extent that the Court of Chancery of the State of Delaware or
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
II-1
<PAGE>
The directors and officers of the Company and its subsidiaries are insured
(subject to certain exceptions and deductions) against liabilities which they
may incur in their capacity as such under liability insurance policies carried
by the Company.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ----------
<C> <S>
1.1 Form of Underwriting Agreement between the Company and Salomon
Brothers Inc.**
2.1 Chapter 11 Plan of Reorganization filed with the United States
Bankruptcy Court for the Southern District of New York (the
"Bankruptcy Court") on November 19, 1993, filed as Exhibit 2.1
to the Company's Current Report on Form 8-K dated November 22,
1993 and incorporated herein by reference.
2.2 Second Amended Disclosure Statement pursuant to Section 1125 of
the Bankruptcy Code dated April 29, 1994, filed as Exhibit 28.1
to the Company's Current Report on Form 8-K dated July 20, 1994
and incorporated herein by reference.
2.3 Second Amended Plan of Reorganization filed with the Bankruptcy
Court on April 29, 1994, filed as Exhibit 2.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31,
1994 (the "March 31, 1994 10-Q") and incorporated herein by
reference.
2.4 Order Pursuant to Section 1129 of the Bankruptcy Code confirming
the Debtor's Second Amended Chapter 11 Plan of Reorganization
dated July 20, 1994, filed as Exhibit 2.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September
30, 1994 (the "September 30, 1994 10-Q") and incorporated herein
by reference.
4.1 Indenture dated as of December 30, 1994 between the Company and
Bankers Trust Company, trustee, with respect to the 10.25%
Senior Notes due December 30, 2001, filed as Exhibit 4.2 to the
Company's Current Report on Form 8-K dated December 30, 1994
(the "December 30, 1994 8-K") and incorporated herein by
reference.
4.2 Warrant Agreement dated as of December 30, 1994 between the
Company and Shawmut Bank Connecticut, National Association,
filed as Exhibit 4.3 to the December 30, 1994 8-K and
incorporated herein by reference.
4.3 Warrant Agreement dated as of December 30, 1994 between the
Company and Reliance Insurance Company, filed as Exhibit 4.4 to
the December 30, 1994 8-K and incorporated herein by reference.
4.4 Registration Rights Agreement dated as of December 30, 1994
between the Company, Apollo Advisors, L.P. and Reliance
Insurance Company, filed as Exhibit 4.5 to the December 30, 1994
8-K and incorporated herein by reference.
4.5 Supplemental Indenture dated as of December 12, 1995 between the
Company and Bankers Trust Company, trustee, with respect to the
10.25% Senior Notes due December 30, 2001.**
4.6 Form of Indenture dated as of , 1996 between the Company
and Bank of Montreal Trust Company, as trustee, with respect to
the % Senior Notes due 2006.**
5.1 Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.**
10.1 Employment Agreements between the Company and each of Joaquin F.
Blaya, Jose C. Cancela, Filiberto Fernandez and Jose Del Cueto,
filed as Exhibit 10.19 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1992, and incorporated
herein by reference.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ----------
<C> <S>
10.2 Employment Agreement between the Company and Gustavo Pupo-Mayo
dated as of September 16, 1994 filed as Exhibit 10.9 to the 1994
Form 10-K and incorporated therein by reference.
10.3 Continuation Agreement between the Company and Bernard S. Carrey
dated October 15, 1993 filed as Exhibit 10.18 to the 1993 10-K
and incorporated herein by reference.
10.4 Continuation Agreement between the Company and Kevin M. Sheehan
dated October 15, 1993 filed as Exhibit 10.19 to the 1993 10-K
and incorporated herein by reference.
10.5 Amendment No. 1 dated as of May 15, 1994 to Employment Agreement
between the Company and Joaquin F. Blaya dated as of May 26,
1992, filed as Exhibit 10.1 to the Company's Form 10-Q for the
quarter ended June 30, 1994 (the "June 30, 1994 10-Q") and
incorporated herein by reference.
10.6 Employment Agreement between the Company and Joaquin F. Blaya
dated as of May 15, 1994, filed as Exhibit 10.2 to the June 30,
1994 10-Q and incorporated herein by reference.
10.7 Employment Agreement dated as of May 15, 1994 between the Company
and Peter J. Housman II, filed as Exhibit 10.3 to the June 30,
1994 10-Q and incorporated herein by reference.
10.8 Amendment No. 1 dated as of May 15, 1994 to Employment Agreement
between the Company and Jose C. Cancela dated as of May 27,
1992, filed as Exhibit 10.4 to the June 30, 1994 10-Q and
incorporated herein by reference.
10.9 Employment Agreement dated as of May 15, 1994 between the Company
and Jose C. Cancela, filed as Exhibit 10.5 to the June 30, 1994
10-Q and incorporated herein by reference.
10.10 Settlement Agreement dated May 16, 1994 between John Blair
Communications, Inc., John Blair & Company, Inc., Blair
Entertainment Corporation, JHR Acquisition Corp., Telemundo
Group, Inc., Reliance Capital Group, L.P. Reliance Associates,
L.P. Reliance Capital Group, Inc., Reliance Group Holdings,
Inc., Deloitte & Touche, Henry R. Silverman, Donald G. Raider,
Peter J. Housman II, and the Official Committee of Unsecured
Creditors in Telemundo Group, Inc.'s Chapter 11 case, filed as
Exhibit 10.6 to the June 30, 1994 10-Q and incorporated herein
by reference.
10.11 Limited Partnership Agreement dated July 20, 1994 between
Telemundo News Network, Inc., Telenoticias del Mundo, Inc.,
Reuter Latam News, Inc., Antena 8 International, Inc. and Artear
Argentina Corporation, filed as Exhibit 10.8 to the June 30,
1994 10-Q and incorporated herein by reference.
10.12 Loan and Security Agreement dated as of December 31, 1994 between
the Company and Foothill Capital Corporation, filed as Exhibit
10.1 to the December 30, 1994 8-K and incorporated herein by
reference.
10.13 Agreement to Purchase NST Venture Interest and Capital Stock by
and among The Stockholders of Harriscope of Chicago, Inc. and
National Subscription Television of Chicago, Inc. and Telemundo
of Chicago, Inc. dated as of November 8, 1995, filed as Exhibit
10.1 to the Form 10-Q/A filed November 27, 1995 and incorporated
herein by reference.
10.14 Form of Partnership Agreement, dated November 8, 1995, by and
among Essaness Theatres Corporation, Telemundo of Chicago, Inc.
and Harriscope of Chicago, Inc., filed as Exhibit 10-2 to the
Form 10-Q/A filed November 27, 1995 and incorporated herein by
reference.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ----------
<C> <S>
10.15 Consent between the Company and Foothill Capital Corporation,
dated as of February 2, 1996, to the Loan and Security Agreement
between the Company and Foothill Capital Corporation, dated as
of December 31, 1994.**
23.1 Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (included in
Exhibit 5.1).**
23.2 Consent of Deloitte & Touche LLP.**
23.3 Consent of Price Waterhouse LLP.**
24.1 Power of Attorney.*
25.1 Statement of Eligibility of Trustee.**
</TABLE>
- ------------------------
* Filed with the Registration Statement on Form S-3 (No. 33-64599) dated
November 27, 1995.
** Filed herein.
(b) Financial Statement Schedules
See Index to Financial Statements, page F-1.
ITEM 17. UNDERTAKINGS
(a) The undersigned hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 (and where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement 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.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant for expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(c) The registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as a 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 purposes of determining any liability under the Securities Act
of 1933, 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-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Hialeah, State of Florida, on February 6, 1996.
TELEMUNDO GROUP, INC.
By: _________________*________________
Roland A. Hernandez
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on February 6, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------------------ ---------------------------------------------------------
<C> <S>
* President and Chief Executive Officer and Director
Roland A. Hernandez (Principal Executive Officer)
/s/Peter J. Housman II
Peter J. Housman II Chief Financial Officer (Principal Financial Officer)
*
Steven E. Dawson (Principal Accounting Officer)
*
Leon D. Black Director
*
Guillermo Bron Director
*
Alan Kolod Director
*
Bruce H. Spector Director
*
Barry W. Ridings Director
*
Edward M. Yorke Director
*
David E. Yurkerwich Director
*By /s/Peter J. Housman II
Peter J. Housman II
ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ---------- ------------------------------------------------------------ -----
<C> <S> <C>
1.1 Form of Underwriting Agreement between the Company and
Salomon Brothers Inc.**
2.1 Chapter 11 Plan of Reorganization filed with the United
States Bankruptcy Court for the Southern District of New
York (the "Bankruptcy Court") on November 19, 1993, filed
as Exhibit 2.1 to the Company's Current Report on Form 8-K
dated November 22, 1993 and incorporated herein by
reference.
2.2 Second Amended Disclosure Statement pursuant to Section 1125
of the Bankruptcy Code dated April 29, 1994, filed as
Exhibit 28.1 to the Company's Current Report on Form 8-K
dated July 20, 1994 and incorporated herein by reference.
2.3 Second Amended Plan of Reorganization filed with the
Bankruptcy Court on April 29, 1994, filed as Exhibit 2.2 to
the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1994 (the "March 31, 1994 10-Q") and
incorporated herein by reference.
2.4 Order Pursuant to Section 1129 of the Bankruptcy Code
confirming the Debtor's Second Amended Chapter 11 Plan of
Reorganization dated July 20, 1994, filed as Exhibit 2.2 to
the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1994 (the "September 30, 1994 10-Q")
and incorporated herein by reference.
4.1 Indenture dated as of December 30, 1994 between the Company
and Bankers Trust Company, trustee, with respect to the
10.25% Senior Notes due December 30, 2001, filed as Exhibit
4.2 to the Company's Current Report on Form 8-K dated
December 30, 1994 (the "December 30, 1994 8-K") and
incorporated herein by reference.
4.2 Warrant Agreement dated as of December 30, 1994 between the
Company and Shawmut Bank Connecticut, National Association,
filed as Exhibit 4.3 to the December 30, 1994 8-K and
incorporated herein by reference.
4.3 Warrant Agreement dated as of December 30, 1994 between the
Company and Reliance Insurance Company, filed as Exhibit
4.4 to the December 30, 1994 8-K and incorporated herein by
reference.
4.4 Registration Rights Agreement dated as of December 30, 1994
between the Company, Apollo Advisors, L.P. and Reliance
Insurance Company, filed as Exhibit 4.5 to the December 30,
1994 8-K and incorporated herein by reference.
4.5 Supplemental Indenture dated as of December 12, 1995 between
the Company and Bankers Trust Company, trustee, with
respect to the 10.25% Senior Notes due December 30, 2001.**
4.6 Form of Indenture dated as of , 1996 between the
Company and Bank of Montreal Trust Company, as trustee,
with respect to the % Senior Notes due 2006.**
5.1 Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.**
10.1 Employment Agreements between the Company and each of
Joaquin F. Blaya, Jose C. Cancela, Filiberto Fernandez and
Jose Del Cueto, filed as Exhibit 10.19 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30, 1992, and incorporated herein by reference.
10.2 Employment Agreement between the Company and Gustavo
Pupo-Mayo dated as of September 16, 1994 filed as Exhibit
10.9 to the 1994 Form 10-K and incorporated therein by
reference.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ---------- ------------------------------------------------------------ -----
<C> <S> <C>
10.3 Continuation Agreement between the Company and Bernard S.
Carrey dated October 15, 1993 filed as Exhibit 10.18 to the
1993 10-K and incorporated herein by reference.
10.4 Continuation Agreement between the Company and Kevin M.
Sheehan dated October 15, 1993 filed as Exhibit 10.19 to
the 1993 10-K and incorporated herein by reference.
10.5 Amendment No. 1 dated as of May 15, 1994 to Employment
Agreement between the Company and Joaquin F. Blaya dated as
of May 26, 1992, filed as Exhibit 10.1 to the Company's
Form 10-Q for the quarter ended June 30, 1994 (the "June
30, 1994 10-Q") and incorporated herein by reference.
10.6 Employment Agreement between the Company and Joaquin F.
Blaya dated as of May 15, 1994, filed as Exhibit 10.2 to
the June 30, 1994 10-Q and incorporated herein by
reference.
10.7 Employment Agreement dated as of May 15, 1994 between the
Company and Peter J. Housman II, filed as Exhibit 10.3 to
the June 30, 1994 10-Q and incorporated herein by
reference.
10.8 Amendment No. 1 dated as of May 15, 1994 to Employment
Agreement between the Company and Jose C. Cancela dated as
of May 27, 1992, filed as Exhibit 10.4 to the June 30, 1994
10-Q and incorporated herein by reference.
10.9 Employment Agreement dated as of May 15, 1994 between the
Company and Jose C. Cancela, filed as Exhibit 10.5 to the
June 30, 1994 10-Q and incorporated herein by reference.
10.10 Settlement Agreement dated May 16, 1994 between John Blair
Communications, Inc., John Blair & Company, Inc., Blair
Entertainment Corporation, JHR Acquisition Corp., Telemundo
Group, Inc., Reliance Capital Group, L.P. Reliance
Associates, L.P. Reliance Capital Group, Inc., Reliance
Group Holdings, Inc., Deloitte & Touche, Henry R.
Silverman, Donald G. Raider, Peter J. Housman II, and the
Official Committee of Unsecured Creditors in Telemundo
Group, Inc.'s Chapter 11 case, filed as Exhibit 10.6 to the
June 30, 1994 10-Q and incorporated herein by reference.
10.11 Limited Partnership Agreement dated July 20, 1994 between
Telemundo News Network, Inc., Telenoticias del Mundo, Inc.,
Reuter Latam News, Inc., Antena 8 International, Inc. and
Artear Argentina Corporation, filed as Exhibit 10.8 to the
June 30, 1994 10-Q and incorporated herein by reference.
10.12 Loan and Security Agreement dated as of December 31, 1994
between the Company and Foothill Capital Corporation, filed
as Exhibit 10.1 to the December 30, 1994 8-K and
incorporated herein by reference.
10.13 Agreement to Purchase NST Venture Interest and Capital Stock
by and among The Stockholders of Harriscope of Chicago,
Inc. and National Subscription Television of Chicago, Inc.
and Telemundo of Chicago, Inc. dated as of November 8,
1995, filed as Exhibit 10.1 to the Form 10-Q/A filed
November 24, 1995 and incorporated herein by reference.
10.14 Form of Partnership Agreement, dated November 8, 1995, by
and among Essaness Theatres Corporation ("Essaness"),
Telemundo of Chicago, Inc. and Harriscope of Chicago, Inc.,
filed as Exhibit 10-2 to the Form 10-Q/A filed November 24,
1995 and incorporated herein by reference.
10.15 Consent between the Company and Foothill Capital
Corporation, dated as of February 2, 1996, to the Loan and
Security Agreement between the Company and Foothill Capital
Corporation, dated as of December 31, 1994.**
23.1 Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
(included in Exhibit 5.1).**
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ---------- ------------------------------------------------------------ -----
<C> <S> <C>
23.2 Consent of Deloitte & Touche LLP.**
23.3 Consent of Price Waterhouse LLP.**
24.1 Power of Attorney.*
25.1 Statement of Eligibility of Trustee.**
</TABLE>
- ------------------------
*Filed with the Registration Statement on Form S-3 (No. 33-64599) dated
November 27, 1995.
** Filed herein.
<PAGE>
TELEMUNDO GROUP, INC.
$[ ]
[ %] SENIOR NOTES
DUE 2006
UNDERWRITING AGREEMENT
New York, New York
February __, 1996
Salomon Brothers Inc
Alex. Brown & Sons Incorporated
BT Securities Corporation
c/o Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Dear Sirs:
Telemundo Group, Inc., a Delaware corporation (the "Company"),
proposes to sell to Salomon Brothers Inc, Alex. Brown & Sons Incorporated and BT
Securities Corporation (each an "Underwriter" and together, the "Underwriters")
[ %] Senior Notes due 2006 in the aggregate principal amount of $___,000,000
(the "Securities"). The Securities are to be issued pursuant to an indenture
dated as of _______________________, 1996 (the "Indenture") between the Company
and Bank of Montreal Trust Company, as trustee (the "Trustee"), which shall
contain the terms described in the Prospectus (as defined below).
The Securities are being issued and sold in connection with the
acquisition by the Company through a wholly owned subsidiary (the "Acquisition")
of a 74.5% interest in Video 44, an Illinois general partnership ("Video 44")
and the refinancing (the "Refinancing") of certain of the Company's outstanding
indebtedness. The Refinancing includes (i) the Company's offer (the "Purchase
Offer") to holders of the Company's 10.25% Senior Notes due 2001 (the "Old
Notes"), upon the terms and conditions set forth in the Offer to Purchase and
Consent Solicitation Statement dated November 27, 1995 (the "Offer to
Purchase"), to purchase for cash any and all of the outstanding Old Notes and
(ii) the Company's solicitation of consents from holders of the Old Notes to
amendments (the
<PAGE>
"Proposed Amendments") to certain of the provisions in the indenture governing
the Old Notes (the "Old Note Indenture") and payment of a consent fee in
connection therewith as described in the Offer to Purchase. After receipt of
the Requisite Consents (as defined in the Offer to Purchase) from holders of Old
Notes, the Company and the trustee under the Old Note Indenture entered into a
supplemental indenture to give effect to the Proposed Amendments (the
"Supplemental Indenture"). The Acquisition and the Refinancing are
collectively referred to herein as the "Transactions". The Supplemental
Indenture and the Agreement to Purchase NST Venture Interest and Capital Stock
dated as of November 8, 1995 between a subsidiary of the Company and the other
parties thereto are collectively referred to as the "Transaction Documents".
1. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to, and agrees with, each Underwriter as set forth below in this
Section 1. Certain terms used in this Section 1 are defined in paragraph (y)
hereof.
(a) The Company meets the requirements for use of Form S-3 under the
Securities Act of 1933 (the "Act") and has filed with the Securities and
Exchange Commission (the "Commission") a registration statement (file
number 33-64599) on such Form, including a related form of preliminary
prospectus, for the registration under the Act of the offering and sale of
the Securities. The Company may have filed one or more amendments
thereto, including the related form of preliminary prospectus, each
of which has previously been furnished to you. The Company will next file
with the Commission either (A) prior to effectiveness of such registration
statement, a further amendment to such registration statement, including
the form of final prospectus, (B) after effectiveness of such registration
statement, a final prospectus in accordance with Rules 430A and 424(b)(1)
or (4) or (C) a final prospectus in accordance with Rules 415 and 424(b)(2)
or (5). In the case of clause (B), the Company has included in such
registration statement, as amended at the Effective Date, all information
(other than Rule 430A Information) required by the Act and the rules
thereunder to be included in the Prospectus with respect to the Securities
and the offering thereof. As filed, such amendment and form of final
prospectus, or such final prospectus, shall include all Rule 430A
Information, together with all other such required information, with
respect to the Securities and the offering thereof and, except to the
extent the Underwriters shall agree in writing to a modification, shall be
in all substantive respects in the form furnished to you prior to the
Execution Time or, to the extent not completed at the Execution Time, shall
contain only such specific additional information and other changes (beyond
that contained in the latest Preliminary Prospectus) as the Company has
advised you, prior to the Execution Time, will be included or made therein.
(b) On the Effective Date, the Registration Statement did or will,
and when the Prospectus is first filed (if required) in accordance with
Rule 424(b) and on the Closing Date, the Prospectus (and any supplements
thereto) will, comply in all
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<PAGE>
material respects with the applicable requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and the Trust Indenture Act of
1939 (the "Trust Indenture Act") and the respective rules thereunder; on
the Effective Date, the Registration Statement did not or will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading; on the Effective Date and on the Closing Date, the
Indenture did or will comply in all material respects with the requirements
of the Trust Indenture Act and the rules thereunder; and on the Effective
Date, the Prospectus, if not filed pursuant to Rule 424(b), did not or will
not, and on the date of any filing pursuant to Rule 424(b) and, on the
Closing Date, the Prospectus (together with any supplement thereto) will
not, include any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided, however, that the Company makes no representations or warranties
to (i) that part of the Registration Statement which shall constitute the
Statement of Eligibility (Form T-1) under the Trust Indenture Act of the
Trustee or (ii) the information contained in or omitted from the
Registration Statement or the Prospectus (or any supplement thereto) in
reliance upon and in conformity with information furnished in writing to
the Company by or on behalf of any Underwriter specifically for use in
connection with the preparation of the Registration Statement or the
Prospectus (or any supplement thereto).
(c) The Company has all necessary corporate power and authority to
execute, deliver and perform its obligations under this Agreement; the
Company and each subsidiary has all necessary corporate power and authority
to enter into and consummate the Transactions and execute, deliver and
perform its obligations under the Transaction Documents to which it is a
party. The execution, delivery and performance by the Company of its
obligations under this Agreement and the Indenture, and the execution,
delivery and performance by the Company and each subsidiary of its
obligations under and each Transaction Document to which it is a party, and
the consummation of the transactions contemplated hereby and thereby, have
been duly authorized by all necessary corporate action on the part of the
Company and such subsidiary. This Agreement has been duly executed and
delivered by the Company. Each Transaction Document has been or, by the
Closing Date, will be duly executed and delivered by the Company or a
subsidiary substantially in the form previously delivered to you and, when
executed and delivered by the Company or such subsidiary and assuming due
execution by the other parties thereto, will constitute legal, valid and
binding obligations of the Company and such subsidiary, enforceable
against the Company or such subsidiary, as the case may be, in accordance
with their respective terms. At or prior to the Closing Date, the Company
will have duly executed and delivered each Transaction Document to be
executed and delivered by the Company or a subsidiary.
(d) The Company has all requisite corporate power and authority to
execute, issue and deliver the Securities and to incur and perform its
obligations thereunder. The Securities have been duly authorized by the
Company and, when executed, authenticated and issued in the manner provided
for in the Indenture and the Securities, as applicable, and delivered
against payment of the purchase price therefor
-3-
<PAGE>
as provided herein, the Securities will constitute valid and binding
obligations of the Company, entitled to the benefits of the Indenture and
enforceable against the Company in accordance with their terms; the
Securities will, when issued, authenticated and delivered, conform in
all material respects to the description thereof contained in the
Prospectus;
(e) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Indenture; and the
Indenture has been duly authorized by the Company, will be substantially in
the form heretofore delivered to you, and, when executed and delivered by
the Company and assuming due execution by the Trustee, will constitute a
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms. At the Closing Date, the Company
will have duly executed and delivered the Indenture, and the Indenture will
have been duly qualified under the Trust Indenture Act. The Indenture
when executed and delivered will conform in all material respects to the
description thereof contained in the Prospectus.
(f) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction in which it is organized, with full
corporate power and authority to own its properties and conduct its
business as described in the Prospectus, and is duly qualified to do
business as a foreign corporation and is in good standing under the laws of
each jurisdiction which requires such qualification wherein it owns or
leases properties or conducts business, and in which the failure to be so
qualified or to be in good standing would, in the aggregate in all such
cases, have a material adverse effect on the business, condition
(financial or otherwise), results of operation, operations or prospects of
the Company and its subsidiaries on a consolidated basis (a "Material
Adverse Effect"). Except for __________, the Company's only subsidiaries
are those listed on Exhibit 21 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1994, and the only subsidiaries that are
"significant subsidiaries" as defined in Regulation S-X under the Act
are ___________.
(g) The Company's authorized equity capitalization is as set forth in
the Prospectus; the capital stock and indebtedness of the Company conforms
to the description thereof to the extent contained in the Prospectus; the
outstanding shares of Series A common stock, par value $.01 per share, and
Series B common stock, par value $.01 per share (collectively, the "Common
Stock") have been duly authorized and validly issued and are fully paid
and nonassessable; and none of such shares have been issued in violation
of or subject to preemptive rights, co-sale rights, rights of first
refusal or other rights to subscribe for the capital stock of the Company.
(h) All of the outstanding shares of capital stock of each of the
Company's subsidiaries have been duly and validly authorized and issued and
are fully paid and
-4-
<PAGE>
nonassessable, and all such outstanding shares are owned by the Company
either directly or through wholly-owned subsidiaries free and clear of any
lien, claim, security interest or other encumbrance, restriction on
transfer or other defect in title except for encumbrances under the
Credit Facility (as defined in the Prospectus).
(i) Except as described in the Prospectus, there are no outstanding
options, warrants or other rights calling for the issuance of, and no
commitments, plans or arrangements to issue, any shares of capital stock of
the Company or any security convertible into or exchangeable or exercisable
for capital stock of the Company; and except as described in the Prospectus
or in the Registration Rights Agreement dated December 30, 1994 (the
"Registration Rights Agreement"), by and among the Company, Apollo
Advisors, L.P. ("Apollo"), and Reliance Insurance Company, as supplemented
by the letter dated December 27, 1995, among the Company, Salomon and
Apollo, there is no holder of any securities of the Company or any other
person who has the right, contractual or otherwise, to cause the Company to
sell or otherwise issue to them, or to permit them to underwrite the sale
of, any of the Securities or the right to have any Common Stock or other
securities of the Company included in the Registration Statement or the
right, as a result of the filing of the Registration Statement, to require
registration under the Act of any shares of Common Stock or other
securities of the Company. The description of the Company's stock option
and other stock plans or arrangements, and the options or other rights
granted and exercised thereunder, set forth in the Prospectus accurately
and fairly presents the information required under the Act and the rules
and regulations of the Commission thereunder (the "Regulations") to be
shown with respect to such plans, arrangements, options and rights.
(j) There is no pending or threatened action, suit or proceeding
before any court or governmental agency, authority or body or any
arbitrator involving the Company or any of its subsidiaries of a character
required to be disclosed in the Prospectus which is not adequately
disclosed in the Prospectus, and there is no franchise, contract, agreement
or other document of a character required to be described in the
Registration Statement or Prospectus, or to be filed as an exhibit to the
Registration Statement, or required to be filed under the Exchange Act if
upon such filing they would be incorporated by reference therein, which is
not described or filed as required. The statements in the Prospectus under
the captions "Business--Legal Proceedings" and "Risk Factors--Telenoticias"
and descriptions in the Registration Statement and the Prospectus of
statutes, regulations, contracts, franchises, other documents, and pending
or threatened actions, suits or proceedings before any court or arbitrator,
or brought by any governmental agency, authority or body are accurate in
all material respects and fairly summarize the matters therein described.
-5-
<PAGE>
(k) The consolidated financial statements of the Company and its
consolidated subsidiaries, and the financial statements of Video 44
together with related schedules and notes, included in the Registration
Statement and the Prospectus present fairly the consolidated financial
position and the consolidated results of operations and cash flows of the
Company and its consolidated subsidiaries and Video 44, respectively, for
the periods or at the dates therein specified; such consolidated financial
statements and related schedules and notes have been prepared in conformity
with generally accepted accounting principles, consistently applied
throughout the periods involved except as otherwise noted in such financial
statements; and the other financial data concerning the Company, its
subsidiaries and Video 44 set forth in the Registration Statement and the
Prospectus (and any amendment or supplement thereto) are accurately
presented and were derived from such financial statements and the books and
records of the Company or Video 44, as the case may be. The pro forma
consolidated financial statements and other pro forma financial data
included in the Prospectus present fairly the information shown therein,
have been prepared in accordance with the Commission's rules and guidelines
with respect to pro forma financial statements, have been properly compiled
on the pro forma bases described therein, and the assumptions used in the
preparation thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions or circumstances referred to
therein. Deloitte & Touche LLP and, with respect to the financial
statements of Video 44 only, Price Waterhouse LLP, whose reports are filed
with the Commission as a part of the Registration Statement and the
Prospectus, are independent public accountants as required by the Act and
the Regulations.
(l) Neither the Company nor any of its subsidiaries is, and after
giving effect to the Transactions will be, in violation of its charter,
bylaws, agreement of partnership or limited partnership or other
organizational documents, or in violation in any material respect of any
law, ordinance, administrative or governmental rule or regulation
applicable to the Company or its subsidiaries, or in violation of any
decree of any court or governmental agency or body having jurisdiction over
the Company or its subsidiaries, or in default in any material respect in
the performance of any obligation, agreement or condition contained in any
bond, debenture, note or any other evidence of indebtedness or in any
material agreement, indenture, lease or other instrument to which the
Company or its subsidiaries are a party or by which it or any of their
properties may be bound.
(m) The Company and each of its subsidiaries has such permits,
licenses, franchises and authorizations of governmental or regulatory
authorities ("permits") as are necessary to own their properties and to
conduct their business in the manner described in the Prospectus and to
consummate the Transactions, except where the failure so to have would not,
in all such cases in the aggregate, result in a Material Adverse Effect;
the Company and each subsidiary has fulfilled and performed all of
-6-
<PAGE>
their obligations with respect to such permits and no event has
occurred which allows, or after notice or lapse of time would allow,
revocation or termination thereof or results in any other impairment
of the rights of the holder of any such permit which would result, in the
aggregate, in a Material Adverse Effect; and none of such permits contains
any restriction that is burdensome to the Company or its subsidiaries in
conducting its or their business as described in the Prospectus or to
consummate the Transactions which would result, in the aggregate, in a
Material Adverse Effect.
(n) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not been (1)
any material adverse change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company, (2)
any transaction that is material to the Company, except transactions
entered into in the ordinary course of business, (3) any obligation, direct
or contingent, that is material to the Company incurred by the Company,
except obligations incurred in the ordinary course of business, (4) any
change in the capital stock or outstanding indebtedness of the Company that
is material to the Company, (5) any dividend or distribution of any kind
declared, paid or made on the capital stock of the Company or (6) any loss
or damage (whether or not insured) to the property of the Company which has
been sustained or will have been sustained which has a Material Adverse
Effect.
(o) Except as set forth in the Registration Statement and Prospectus,
(1) the Company has good and marketable title to all properties and assets
described in the Registration Statement and Prospectus as owned by it, free
and clear of any pledge, lien, security interest, encumbrance, claim or
equitable interest, other than such as would not have a Material Adverse
Effect, (2) except where the failure would not have a Material Adverse
Effect, the agreements to which the Company is a party described in the
Registration Statement and Prospectus are valid agreements, enforceable by
the Company and its subsidiaries (as applicable), except as the
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles and, to the
Company's knowledge, the other contracting party or parties thereto are not
in material breach or material default under any of such agreements, and
(3) except where the failure would not have a Material Adverse Effect, the
Company has valid and enforceable leases for all properties described in
the Registration Statement and the Prospectus as leased by it, except as
the enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
or affecting creditors' rights generally or by general equitable
principles. Except as set forth in the Registration Statement and the
Prospectus, and except where the failure would not have a Material Adverse
Effect, the Company owns or leases all such properties as are necessary to
its operations as now conducted or as proposed to be conducted.
(p) The Company and its subsidiaries have filed all federal, state,
local, and foreign tax returns required to be filed, which returns are true
and correct in all
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<PAGE>
material respects, and the Company and its subsidiaries are not in default
in the payment of any taxes which were payable pursuant to said returns or
any assessments with respect thereto, except where either (i) the amount of
such unpaid taxes is not in excess of the amount reserved therefor, or (ii)
the Company is contesting such default in good faith through appropriate
proceedings.
(q) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that: (i) transactions are
executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general
or specific authorizations; and (iv) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(r) The Company and its subsidiaries own or possess adequate licenses
or other rights to use all patents, trademarks, trademark registrations,
service marks, service mark registrations, trade names, copyrights,
licenses, inventions, trade secrets, and know-how or other similar rights
("Intellectual Property") necessary for the conduct of their business as
described in the Prospectus, neither the Company nor its subsidiaries have
infringed, are now infringing, and their business as presently conducted
and as proposed to be conducted will not cause any of them to infringe, any
Intellectual Property belonging to any other person, which infringement or
infringements, either individually or in the aggregate, could have a
Material Adverse Effect; the Company has not received any claim or notice
of infringement or potential infringement of any Intellectual Property of
any other person which could have a Material Adverse Effect; and neither
the Company nor any of its subsidiaries has any claim against a third party
with respect to the infringement by such third party of Intellectual
Property of the Company or any such subsidiary material to the business or
prospects of the Company and its subsidiaries considered as a whole. To
the Company's knowledge, the Company is not using any confidential
information or trade secrets of any former employer of any past or present
employees.
(s) Neither the Company nor any of its subsidiaries is involved in
any labor dispute with any union or group of employees nor, to the
knowledge of the Company, is any dispute threatened; and the Company is not
aware of any existing or imminent labor disturbance by the employees of any
of its principal suppliers, manufacturers, distributors, licensees or
contractors, in each case, which might reasonably be expected to result in
a Material Adverse Effect.
-8-
<PAGE>
(t) There has not been any generation, use, handling, transportation,
treatment, storage, release or disposal of any Hazardous Substance (as
defined herein) in connection with the conduct of the business of the
Company or any subsidiary or the use of any property or facility of the
Company or any subsidiary which has created any liability under any
Environmental Laws that is or could reasonably be expected to have a
Material Adverse Effect. Except as described in the Prospectus and except
for matters that in the aggregate could not reasonably be expected to have
a Material Adverse Effect, (i) neither the Company nor any subsidiary has
received (1) any notice or claim to the effect that it is or may be liable
to any person as a result of the release or threatened release of any
Hazardous Substance or (2) any letter or request for information under
Section 104 of the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. Section 9604) or comparable state laws, and (ii)
to the best of the Company's knowledge, none of the operations of the
Company or any subsidiary is the subject of any federal or state
investigation evaluating whether any remedial action is needed to respond
to a release or a threatened release of any Hazardous Substance at any
facility of the Company or any subsidiary or at any other location at which
work produced by the Company's or subsidiaries' operations may have been
disposed.
"Hazardous Substance" shall mean any (1) substance that is
defined or listed in, or otherwise classified pursuant to, any applicable
laws or regulations as a "hazardous substance," "hazardous material,"
"hazardous waste," "toxic substance," or any other formulation intended to
define, list, or classify substances by reason of deleterious properties
such as ignitability, corrosivity, reactivity, carcinogenicity,
reproductive toxicity, "TCLP toxicity," or "EP toxicity," (2) oil,
petroleum or petroleum-derived substance and drilling fluid, produced
water, and other waste associated with the exploration, development, or
production or crude oil, natural gas, or geothermal resources, or
(3) flammable substance or explosive, any radioactive material, any
hazardous waste or substance, any toxic waste or substance or any other
material or pollutant which poses a hazard to any property of the Company
or to persons on or about such property.
(u) The Company and its subsidiaries maintain insurance of the types
and in the amounts generally deemed adequate for their respective
businesses, including, but not limited to, general liability insurance and
insurance covering real and personal property owned or leased by the
Company or any of its subsidiaries against theft, damage, destruction, acts
of vandalism and all other risks customarily insured against, all of which
insurance is in full force and effect.
(v) Neither the Company nor any subsidiary is an investment company
or is controlled by an investment company or investment companies
required to be registered under
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<PAGE>
the Investment Company Act of 1940, as amended, and the rules and
regulation of the Commission thereunder.
(w) Neither the issuance and sale of the Securities, the execution,
delivery or performance of this Agreement, the Indenture or each
Transaction Document by the Company nor the consummation by the Company or
by a subsidiary of the transactions contemplated hereby, thereby or by the
Prospectus (i) requires any consent, approval, authorization or other order
of or registration or filing with any court, regulatory body,
administrative agency or other governmental body, agency or official
(except such as may have been obtained or such as may be required for the
registration of the Securities under the Act and compliance with the
securities or Blue Sky laws of various jurisdictions) or conflicts or will
conflict with or constitutes or will constitute a breach of, or a default
under, the certificate of incorporation or bylaws of the Company or
(ii) conflicts or will conflict with or constitutes or will constitute a
breach of, or a default under, any agreement, indenture, lease or other
instrument to which the Company is a party or by which it or any of its
properties may be bound, or violates or will violate any statute, law,
regulation or filing or judgment, injunction, order or decree applicable
to the Company or any subsidiary or any of its properties, or will result
in the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any subsidiary pursuant to the terms
of any agreement or instrument to which it is a party or by which it may
be bound or to which any of its property or assets is subject, in each
case which would have a Material Adverse Effect.
(x) The Company's plan of reorganization (the "Plan of
Reorganization") was confirmed by order (Doc. No. 297) (the "Confirmation
Order") of the United States Bankruptcy Court for the Southern District of
New York (the "Bankruptcy Court") on July 20, 1994 after adequate notice
and a hearing, both in compliance with the United States Bankruptcy Code,
11 U.S.C. Section 101 et. seq. (the "Code"), and applicable national and
local bankruptcy rules (the "Bankruptcy Rules"). Notice in compliance with
the Code, the Bankruptcy Rules and the Confirmation Order was given of the
time fixed for filing proofs of claims by the order of the Bankruptcy Court
entered ___________________. Each of the Plan of Reorganization and the
Confirmation Order remains in force and effect, without amendment, and the
Plan of Reorganization has been consummated (within the meaning of 11
U.S.C. Section 1101(2)) in accordance with its terms. The Company is not
in violation of, and no default by the Company exists with respect to, any
term or provision of the Plan of Reorganization or the Confirmation Order.
There is no condition specified in the Plan of Reorganization the
occurrence of which would result in the termination of the Plan of
Reorganization. The bankruptcy petition regarding the Company was
terminated on July 19, 1995. No appeal of the Confirmation Order has been
filed, and no request for revocation of the Confirmation Order under 11
U.S.C. Section 1144 has
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<PAGE>
been made and the time permitted under the Code for filings appeals or
requesting revocation has lapsed; and there is no other legal or
governmental proceeding pending or, to the Company's knowledge, threatened
challenging or questioning the Plan of Reorganization, the Confirmation
Order, or the implementation of either of them.
(y) The terms which follow, when used in this Agreement, shall have
the meanings indicated. The term "the Effective Date" shall mean each date
that the Registration Statement and any post-effective amendment or
amendments thereto became or become effective. "Execution Time" shall mean
the date and time that this Agreement is executed and delivered by the
parties hereto. "Preliminary Prospectus" shall mean any preliminary
prospectus referred to in paragraph (a) above and any preliminary
prospectus included in the Registration Statement at the Effective Date
that omits Rule 430A Information. "Prospectus" shall mean the prospectus
relating to the Securities that is first filed pursuant to Rule 424(b)
after the Execution Time or, if no filing pursuant to Rule 424(b) is
required, shall mean the form of final prospectus relating to the
Securities included in the Registration Statement at the Effective Date.
"Registration Statement" shall mean the registration statement referred to
in paragraph (a) above, including incorporated documents, exhibits and
financial statements, as amended at the Execution Time (or, if not
effective at the Execution Time, in the form in which it shall become
effective) and, in the event any post-effective amendment thereto or a
registration statement filed with respect to the Securities pursuant to
Rule 462(b) (or post-effective amendment thereto), becomes effective prior
to the Closing Date (as hereinafter defined), shall also mean such
registration statement as so amended or registration statement (or
amendment thereto) pursuant to Rule 462(b), respectively. Such term shall
include any Rule 430A Information deemed to be included therein at the
Effective Date as provided by Rule 430A or any Term Sheet filed pursuant to
Rule 434. "Rule 424", "Rule 430A," "Rule 434" and Rule 462 refer to such
rules under the Act. "Rule 430A Information" means information with
respect to the Securities and the offering thereof permitted to be omitted
from the Registration Statement when it becomes effective pursuant to Rule
430A. Any reference herein to the Registration Statement, a Preliminary
Prospectus
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<PAGE>
or the Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 which
were filed under the Exchange Act.
2. PURCHASE AND SALE. Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, the Company
agrees to issue and sell to each Underwriter, and each Underwriter agrees,
severally and not jointly, to purchase from the Company, the respective
principal amounts of the Securities set forth opposite such Underwriter's name
in Schedule I hereto at a purchase price of ___% of the principal amount
thereof.
3. DELIVERY AND PAYMENT. Delivery of and payment for the Securities
shall be made at 10:00 AM, New York City time, on ________________, 1996, or
such later date (not later than _______________, 1996) as the Underwriters shall
designate, which date and time may be postponed by agreement between the
Underwriters and the Company or as provided in Section 10 hereof (such date and
time of delivery and payment for the Securities being herein called the "Closing
Date"). Delivery of the Securities shall be made to the respective accounts of
the Underwriters against payment by the several Underwriters of the respective
aggregate purchase prices of the Securities being sold by the Company to or upon
the order of the Company at the Company's request by certified or official bank
check or checks drawn on or by a New York Clearing House bank and payable in
next day funds or wire transfer and payable in immediately available funds,
with appropriate reimbursement for the cost of funds. Delivery of the
Securities shall be made at such location in New York, New York as the
Underwriters shall reasonably designate at least one business day in advance of
the Closing Date and payment for the Securities shall be made at the offices of
Akin, Gump, Strauss, Hauer & Feld, L.L.P., 399 Park Avenue, New York, New York
10022. Certificates for the Securities shall be registered in such names and
in such denominations as the Underwriters may request not less than two full
business days in advance of the Closing Date.
The Company agrees to have the Securities available for inspection,
checking and packaging by the Underwriters in New York, New York, not later than
1:00 PM on the business day prior to the Closing Date.
4. OFFERING BY UNDERWRITERS. It is understood that the several
Underwriters propose to offer the Securities for sale to the public as set forth
in the Prospectus.
5. AGREEMENTS. The Company agrees with the several Underwriters
that:
(a) The Company will use its best efforts to cause the Registration
Statement, if not effective at the Execution Time, and any amendment
thereof, to become effective. Prior to the termination of the offering of
the Securities, the Company will not file any amendment of the Registration
Statement or supplement to
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the Prospectus unless the Company has furnished you a copy for your review
prior to filing and will not file any such proposed amendment or supplement
to which you reasonably object. Subject to the foregoing sentence, if the
Registration Statement has become or becomes effective pursuant to Rule
430A, or filing of the Prospectus is otherwise required under Rule 424(b),
the Company will cause the Prospectus, properly completed, and any
supplement thereto to be filed with the Commission pursuant to the
applicable paragraph of Rule 424(b) within the time period prescribed and
will provide evidence satisfactory to the Underwriters of such timely
filing. The Company will promptly advise the Underwriters (A) when the
Registration Statement, if not effective at the Execution Time, and any
amendment thereto, shall have become effective, (B) when the Prospectus,
and any supplement thereto, shall have been filed (if required) with the
Commission pursuant to Rule 424(b), (C) when, prior to termination of the
offering of the Securities, any amendment to the Registration Statement
shall have been filed or become effective, (D) of any request by the
Commission for any amendment of the Registration Statement or supplement to
the Prospectus or for any additional information, (E) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement or the institution or threatening of any proceeding
for that purpose and (F) of the receipt by the Company of any notification
with respect to the suspension of the qualification of the Securities for
sale in any jurisdiction or the initiation or threatening of any proceeding
for such purpose. The Company will use its best efforts to prevent the
issuance of any such stop order and, if issued, to obtain as soon as
possible the withdrawal thereof.
(b) If, at any time when a prospectus relating to the Securities is
required to be delivered under the Act, any event occurs as a result of
which the Prospectus as then supplemented would include any untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein in the light of the circumstances under
which they were made not misleading, or if it shall be necessary to amend
the Registration Statement or supplement the Prospectus to comply with the
Act or the rules thereunder, the Company promptly will prepare and file
with the Commission, subject to the second sentence of paragraph (a) of
this Section 5, an amendment or supplement which will correct such
statement or omission or effect such compliance.
(c) As soon as practicable, the Company will make generally available
to its security holders and to the Underwriters an earnings statement or
statements of the Company and its subsidiaries which will satisfy the
provisions of Section 11(a) of the Act and Rule 158 under the Act.
(d) The Company will furnish to the Underwriters and counsel for the
Underwriters, without charge, signed copies of the Registration Statement
(including
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exhibits thereto) and, so long as delivery of a prospectus by an
Underwriter or dealer may be required by the Act, as many copies of each
Preliminary Prospectus and the Prospectus and any supplement thereto as the
Underwriters may reasonably request. The Company will pay the expenses of
printing or other production of all documents relating to the offering.
(e) The Company will arrange for the qualification of the Securities
for sale under the laws of such jurisdictions as the Underwriters may
designate, will maintain such qualifications in effect so long as required
for the distribution of the Securities and will pay the fee of the National
Association of Securities Dealers, Inc., in connection with its review of
the offering.
(f) The Company will apply the net proceeds from the sale of its
Securities substantially in accordance with the description set forth in
the Prospectus and any Preliminary Prospectus under the heading "Use of
Proceeds."
(g) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter
92-198, AN ACT RELATING TO DISCLOSURE OF DOING BUSINESS WITH CUBA, and the
Company further agrees that if it commences engaging in business with the
government of Cuba or with any person or affiliate located in Cuba after
the date the Registration Statement becomes or has become effective with
the Securities and Exchange Commission or with the Florida Department of
Banking and Finance (the "Department"), whichever date is later, or if the
information reported in the Prospectus, if any, concerning the Company's
business with Cuba or with any person or affiliate located in Cuba changes
in any material way, the Company will provide the Department notice of such
business or change, as appropriate, in a form acceptable to the Department.
6. CONDITIONS TO THE OBLIGATIONS OF THE UNDERWRITERS. The
obligations of the Underwriters to purchase the Securities shall be subject to
the accuracy of the representations and warranties on the part of the Company
contained herein as of the Execution Time and the Closing Date and any
settlement date pursuant to Section 3 hereof, to the accuracy of the statements
of the Company made in any certificates pursuant to the provisions hereof, to
the performance by the Company of its obligations hereunder and to the following
additional conditions:
(a) If the Registration Statement has not become effective prior to
the Execution Time, unless the Underwriters agree in writing to a later
time, the Registration Statement will become effective not later than
(i) 6:00 PM New York City time on the date of determination of the public
offering price, if such determination occurred at or prior to 3:00 PM New
York City time on such date or (ii) 12:00 Noon on the business day
following the day on which the public offering
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price was determined, if such determination occurred after 3:00 PM New York
City time on such date; if filing of the Prospectus, or any supplement
thereto, is required pursuant to Rule 424(b), the Prospectus, and any such
supplement, will be filed in the manner and within the time period required
by Rule 424(b); and no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or threatened.
(b) The Company shall have furnished to the Underwriters the opinions
of the Assistant General Counsel of the Company, Akin, Gump, Strauss,
Hauer & Feld, L.L.P., and Hogan & Hartson, L.L.P., counsel for the Company,
dated the Closing Date, substantially in the form of Exhibit A hereto.
(c) The Underwriters shall have received from Munger, Tolles & Olson,
counsel for the Underwriters, such opinion or opinions, dated the Closing
Date, with respect to the issuance and sale of the Securities, the
Registration Statement, the Prospectus (together with any supplement
thereto) and other related matters as the Underwriters may reasonably
require, and the Company shall have furnished to such counsel such
documents as they reasonably request for the purpose of enabling them to
pass upon such matters.
(d) The Company shall have furnished to the Underwriters a
certificate of the Company, signed on behalf of the Company by the Chief
Executive Officer and the principal financial or accounting officer of the
Company, dated the Closing Date, to the effect that the signers of such
certificate have carefully examined the Registration Statement, the
Prospectus, any supplement to the Prospectus and this Agreement and that:
(i) the representations and warranties of the Company in this
Agreement are true and correct in all material respects on and as of
the Closing Date with the same effect as if made on the Closing Date
and the Company has complied with all the agreements and satisfied all
the conditions on its part to be performed or satisfied at or prior to
the Closing Date;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or, to the Company's knowledge,
threatened; and
(iii) since the date of the most recent financial statements
included in the Prospectus (exclusive of any supplement thereto),
there has been no material adverse change in the condition (financial
or other), earnings, business or properties of the Company, whether or
not arising from transactions in the ordinary course of business,
except as set forth in or contemplated in the Prospectus (exclusive of
any supplement thereto).
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<PAGE>
(e) At the Execution Time and at the Closing Date, Deloitte & Touche
LLP shall have furnished to the Underwriters a letter or letters, dated
respectively as of the Execution Time and as of the Closing Date, in form
and substance satisfactory to the Underwriters, confirming that they are
independent accountants within the meaning of the Act and the Exchange Act
and the respective applicable published rules and regulations thereunder
and stating in effect that:
(i) in their opinion the audited financial statements and
financial statement schedules included or incorporated in the
Registration Statement and the Prospectus and reported on by them
comply in form in all material respects with the applicable accounting
requirements of the Act and the Exchange Act the respective applicable
published rules and regulations thereunder;
(ii) on the basis of procedures (but not an examination in
accordance with generally accepted auditing standards) consisting of
the following:
(1) a reading of the minutes of the meetings of the
stockholders, directors and the Audit and Compensation Committees
of the Company and, where applicable, the Company's subsidiaries;
(2) performing the procedures specified by the American
Institute of Certified Public Accountants for a review of interim
financial information as described in SAS No. 71, Interim
Financial Information, on the unaudited interim financial
statements of the Company and its consolidated subsidiaries
included in the Registration Statement and reading the unaudited
interim financial data for the period from the date of the latest
audited balance sheet included in the Registration Statement to
the date of the latest available interim financial data; and
(3) inquiries of certain officials of the Company who have
responsibility for financial and accounting matters of the
Company regarding its subsidiaries as to transactions and events
subsequent to the December 31, 1994 audited financial statements
incorporated in the Prospectus,
nothing came to their attention which caused them to believe that:
(1) the unaudited financial statements included or
incorporated by reference in the Registration Statement and the
Prospectus do not comply in form in all material respects with
the
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<PAGE>
applicable accounting requirements of the Act and the Exchange
Act and the respective applicable published rules and regulations
thereunder;
(2) any material modifications should be made to the
unaudited financial statements for them to be in conformity with
generally accepted accounting principles; or
(3) with respect to the period subsequent to September 30,
1995, at a specified date not more than five business days prior
to the date of the letter, there was any change in the capital
stock, increase in long-term debt, or decrease in consolidated
net current assets or stockholders' equity (deficiency) of the
Company as compared with the amounts shown on the September 30,
1995 consolidated balance sheet included in the Registration
Statement and the Prospectus, or for the period from October 1,
1995 to such specified date there were any decreases, as compared
with the corresponding period in the preceding year, in
consolidated net revenue or in total or per share amounts of net
income of the Company and its consolidated subsidiaries, except
in all instances for changes or decreases set forth in such
letter, in which case the letter shall be accompanied by an
explanation by the Company as to the significance thereof unless
said explanation is not deemed necessary by the Underwriters; and
(iii) they are unable to and do not express any opinion on
the pro forma capitalization or Pro Forma Consolidated Financial
Statements of the Company or on the pro forma adjustments applied to
the historical amounts included in such statements (the "Pro Forma
Information"); however, for purposes of such letter they have:
(1) read the Pro Forma Information;
(2) made inquiries of certain officials of the Company who
have responsibility for financial and accounting matters about
the basis for their determination of the pro forma adjustments
and whether the Pro Forma Information above complies in form in
all material respects with the applicable accounting requirements
of Rule 11-02 of Regulation S-X;
(3) compared the historical amounts in the Pro Forma
Information with the Company's audited financial statements or
accounting records; and
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<PAGE>
(4) proved the arithmetic accuracy of the application of the
pro forma adjustments to the historical amounts in the Pro Forma
Information; and
on the basis of such procedures, and such other inquiries and
procedures as may be specified in such letter, nothing came to
their attention that caused them to believe that the Pro Forma
Information included in the Registration Statement does not
comply as to form in all material respects with the applicable
requirements of Rule 11-02 of Regulation S-X and that the pro
forma adjustments have not been properly applied to the
historical amounts in the compilation of such statements; and
(iv) they have performed certain other specified procedures as a
result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of the Company and its subsidiaries) set
forth in the Registration Statement and the Prospectus, including the
information set forth under the captions "Summary Historical and
Proforma Consolidated Financial Data," "Risk Factors", "Selected
Historical Consolidated Financial Data," "Capitalization,"
"Management's Discussion and Analysis of Results of Operations and
Financial Condition" and "Business" in the Prospectus, agrees with the
accounting records of the Company and its subsidiaries.
References to the Prospectus in this paragraph (e) include any
supplement thereto at the date of the letter.
(f) At the Execution Time and at the Closing Date, Price Waterhouse
LLP shall have furnished to the Underwriters a letter or letters, dated
respectively as of the Execution Time and as of the Closing Date, in form
and substance satisfactory to the Underwriters, confirming that they are
independent accountants within the meaning of the Act and the Exchange Act
and the respective applicable published rules and regulations thereunder
and stating in effect that:
(i) in their opinion the audited financial statements and
financial statement schedules included or incorporated in the
Registration Statement and the Prospectus and reported on by them
comply in form in all material respects with the applicable accounting
requirements of the Act and the Exchange Act and the respective
applicable published rules and regulations thereunder;
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<PAGE>
(ii) on the basis of procedures (but not an examination in
accordance with generally accepted auditing standards) consisting of
the following:
(1) a reading of the minutes of the meetings, if any, of
the stockholders, directors and the management committee of
Video 44;
(2) performing the procedures specified by the American
Institute of Certified Public Accountants for a review of interim
financial information as described in SAS No. 71, Interim
Financial Information, on the unaudited interim financial
statements of Video 44 included in the Registration Statement and
reading the unaudited interim financial data for the period from
the date of the latest audited balance sheet included in the
Registration Statement to the date of the latest available
interim financial data; and
(3) inquiries of certain officials of Video 44 who have
responsibility for financial and accounting matters of Video 44
as to whether the unaudited financial statements referred to
above comply as to form in all material respects with the
applicable accounting requirements of the Act and the published
rules and regulations thereunder,
nothing came to their attention which caused them to believe that:
(1) the unaudited financial statements included in the
Registration Statement and the Prospectus do not comply in form
in all material respects with the applicable accounting
requirements of the Act and the Exchange Act and the respective
applicable published rules and regulations thereunder;
(2) any material modifications should be made to the
unaudited financial statements for them to be in conformity with
generally accepted accounting principles; or
(3) with respect to the period subsequent to September 30,
1995, at a specified date not more than five business days prior
to the date of the letter, of Video 44 as compared with the
amounts shown on the September 30, 1995 balance sheet included in
the Registration Statement and the Prospectus, or for the period
from October 1, 1995 to such specified date there were any
decreases, as compared with the corresponding period in the
preceding year, in net revenues, or in total
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or per share amounts of net income of Video 44, except in all
instances for changes or decreases set forth in such letter, in
which case the letter shall be accompanied by an explanation by
Video 44 as to the significance thereof unless said explanation
is not deemed necessary by the Underwriters.
References to the Prospectus in this paragraph (f) include any supplement
thereto at the date of the letter.
(g) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Registration Statement (exclusive of any
amendment thereof) and the Prospectus (exclusive of any supplement
thereto), there shall not have been (i) any change or decrease specified in
the letter or letters referred to in paragraphs (e) and (f) of this Section
6 or (ii) any change, or any development involving a prospective change, in
or affecting the business or properties of the Company and its subsidiaries
the effect of which, in any case referred to in clause (i) or (ii) above,
is, in the reasonable judgment of the Underwriters, so material and adverse
as to make it impractical or inadvisable to proceed with the offering or
delivery of the Securities as contemplated by the Registration Statement
(exclusive of any amendment thereof) and the Prospectus (exclusive of any
supplement thereto).
(h) The NASD shall not have raised any objection to the fairness and
reasonableness of the underwriting terms and arrangements which remain
unresolved.
(i) The Indenture shall have been executed by the parties thereto in
the form heretofore approved by and delivered to you and such agreement
shall not have been amended.
(j) All of the conditions to have occurred on or prior to such time
to the obligations of the Company and the Subsidiaries to consummate the
Transactions shall have been satisfied or waived.
(k) At or prior to the Closing Date, the Transactions shall have
been or will be contemporaneously duly and validly consummated.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
this Agreement and all obligations of the Underwriters hereunder may be
canceled at, or at any time prior to, the Closing Date by the Underwriters.
Notice of such
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cancellation shall be given to the Company in writing or by telephone or
telegraph confirmed in writing.
7. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If the sale of the
Securities provided for herein is not consummated because of any condition to
the obligations of the Underwriters set forth in Section 6 hereof, because of
any termination pursuant to Section 11 hereof or because of any refusal,
inability or failure on the part of the Company to perform any agreement herein
or comply with any provision hereof other than by reason of a default by the
Underwriters, the Company will reimburse the Underwriters severally upon demand
for all out-of-pocket expenses (including fees and disbursements of counsel)
that shall have been reasonably incurred by them in connection with the proposed
purchase and sale of the Securities.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter, the directors, officers, employees and agents of each
Underwriter and each person who controls any Underwriter within the meaning
of the Act against any and all losses, claims, damages or liabilities,
joint or several, to which they or any of them may become subject under the
Act or other federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
registration statement for the registration of the Securities as originally
filed or in any amendment thereof, or in any Preliminary Prospectus or the
Prospectus, or in any amendment thereof or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, and agrees to reimburse each such indemnified party,
as incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; PROVIDED, HOWEVER, that (i) the Company will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any such untrue statement or
alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of an Underwriter specifically for use in
connection with the preparation thereof and (ii) such indemnity with
respect to any Preliminary Prospectus shall not inure to the benefit of
any Underwriter (or any person controlling such Underwriter) from whom the
person asserting any such loss, claim, damage or liability purchased the
Securities which are the subject thereof if such person did not receive a
copy of the Prospectus (or the Prospectus as supplemented) at or prior to
the confirmation of the sale of such Securities to such person in any case
where delivery is required by the Act and the untrue statement or omission
of a material fact contained in such Preliminary Prospectus was corrected
in the Prospectus (or the Prospectus was supplemented). This indemnity
agreement will be in addition to any liability which the Company may
otherwise have.
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company, each of its directors, each of its officers who signs the
Registration Statement, and each person who controls the Company within the
meaning of either
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the Act or the Exchange Act, to the same extent as the foregoing indemnity
from the Company to each Underwriter, but only with reference to written
information relating to such Underwriter furnished to the Company by or on
behalf of such Underwriter specifically for inclusion in the documents
referred to in the foregoing indemnity. This indemnity agreement will be
in addition to any liability which any Underwriter may otherwise have. The
Company acknowledges that the statements set forth in the last paragraph on
the cover page, and under the heading "Underwriting" (except for statements
relating to sales or dispositions of Old Notes (as defined in the
Prospectus) by affiliates of the Company) in any Preliminary Prospectus and
the Prospectus constitute the only information furnished in writing by or
on behalf of the several Underwriters for inclusion in any Preliminary
Prospectus or the Prospectus, and the Underwriters confirm that such
statements are correct.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party
(i) will not relieve it from liability under paragraph (a) or (b) above
unless and to the extent it did not otherwise learn of such action and such
failure results in the forfeiture by the indemnifying party of substantial
rights and defenses and (ii) will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than
the indemnification obligation provided in paragraph (a) or (b) above. The
indemnifying party shall be entitled to appoint counsel of the indemnifying
party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in
which case the indemnifying party shall not thereafter be responsible for
the fees and expenses of any separate counsel retained by the indemnified
party or parties except as set forth below); PROVIDED, HOWEVER, that such
counsel shall be reasonably satisfactory to the indemnified party.
Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall
have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses
of such separate counsel if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the actual or potential
defendants in, or targets of, any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have
reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to
those available to the indemnifying party, (iii) the indemnifying party
shall not have employed counsel reasonably satisfactory to the indemnified
party to represent the indemnified party within a reasonable time after
notice of the institution of such action or (iv) the indemnifying party
shall authorize in writing the indemnified party to
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employ separate counsel at the expense of the indemnifying party. An
indemnifying party will not, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each indemnified
party from all liability arising out of such claim, action, suit or
proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and the Underwriters agree to
contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in connection with
investigating or defending same) (collectively "Losses") to which the
Company and one or more of the Underwriters may be subject in such
proportion as is appropriate to reflect the relative benefits received by
the Company and by the Underwriters from the offering of the Securities;
PROVIDED, HOWEVER, that in no case shall any Underwriter (except as may be
provided in any agreement among underwriters relating to the offering of
the Securities) be responsible for any amount in excess of the underwriting
discount or commission applicable to the Securities purchased by such
Underwriter hereunder. If the allocation provided by the immediately
preceding sentence is unavailable for any reason, the Company and the
Underwriters shall contribute in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the
Company and of the Underwriters in connection with the statements or
omissions which resulted in such Losses as well as any other relevant
equitable considerations. Benefits received by the Company shall be deemed
to be equal to its net proceeds from the offering (before deducting
expenses), and benefits received by the Underwriters shall be deemed to be
equal to the total underwriting discounts and commissions, in each case as
set forth on the cover page of the Prospectus. Relative fault shall be
determined by reference to whether any alleged untrue statement or omission
relates to information provided by the Company or the Underwriters. The
Company and the Underwriters agree that it would not be just and equitable
if contribution were determined by pro rata allocation or any other method
of allocation which does not take account of the equitable considerations
referred to above. Notwithstanding the provisions of this paragraph (d),
no person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 8, each person who controls an Underwriter within the meaning
of either the Act or the Exchange Act and each director, officer, employee
and agent of an Underwriter shall have the same rights to contribution as
such Underwriter, and each person who controls the Company within the
meaning of either the Act or the Exchange Act, each officer of
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the Company who shall have signed the Registration Statement and each
director of the Company shall have the same rights to contribution as the
Company, subject in each case to the applicable terms and conditions of
this paragraph (d).
9. QUALIFIED INDEPENDENT UNDERWRITER. The Company hereby confirms
that at its request Alex. Brown & Sons, Incorporated has without compensation
acted as "qualified independent underwriter" (in such capacity, the "QIU")
within the meaning of Schedule E to the By-Laws of the National Association of
Securities Dealers, Inc. in connection with the offering of the Securities. The
Company will indemnify and hold harmless the QIU against any losses, claims,
damages or liabilities, joint or several, to which the QIU may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any Registration Statement, the Prospectus, or any amendment or supplement
thereto, or any related preliminary prospectus, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the QIU for any legal or other expenses
reasonably incurred by the QIU in connection with investigating or defending
any such loss, claim, damage, liability or action as such expenses are
incurred. The obligations of the Company under this Section shall be in
addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who controls
the QIU within the meaning of the Act.
10. DEFAULT BY AN UNDERWRITER. If any one or more Underwriters shall
fail to purchase and pay for any of the Securities agreed to be purchased by
such Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall be obligated severally to take up
and pay for (in the respective proportions which the amount of Securities set
forth opposite their names in Schedule I hereto bears to the aggregate amount of
Securities set forth opposite the names of all the remaining Underwriters) the
Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase; PROVIDED, HOWEVER, that in the event that the aggregate amount of
Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase shall exceed ___% of the aggregate amount of Securities set forth in
Schedule I hereto, the remaining Underwriters shall have the right to purchase
all, but shall not be under any obligation to purchase any, of the Securities,
and if such nondefaulting Underwriters do not purchase all the Securities, this
Agreement will terminate without liability to any nondefaulting Underwriter or
the Company. In the event of a default by any Underwriter as set forth in this
Section 10, the Closing Date shall be postponed for such period, not exceeding
seven days, as the Underwriters shall determine in order that the required
changes in the Registration Statement and the Prospectus or in any other
documents or arrangements may be effected. Nothing contained in this Agreement
shall relieve any defaulting Underwriter of its liability, if any, to the
Company and any nondefaulting Underwriter for damages occasioned by its default
hereunder.
11. TERMINATION. This Agreement shall be subject to termination in
the absolute discretion of the Underwriters, by notice given to the Company
prior to delivery of and payment for the Securities, if prior to such time (i)
trading in the Company's Common Stock shall have been suspended by the
Commission or on the Nasdaq National Market System ("NMS"), (ii) trading in
securities generally on NMS shall have been suspended or limited or minimum
prices shall have been established on NMS, (iii) a banking moratorium shall have
been declared either by federal or New York state authorities or (iv) there
shall have occurred any outbreak or escalation of hostilities, declaration by
the United States of a national emergency or war or other calamity or crisis the
effect of which on financial markets is such as to make it, in the judgment of
the Underwriters, impracticable or inadvisable to proceed with the offering or
delivery of the Securities as contemplated by the Prospectus (exclusive of any
supplement thereto).
12. REPRESENTATIONS AND INDEMNITIES TO SURVIVE. The respective
agreements, representations, warranties, indemnities and other statements of the
Company or its officers and of the Underwriters set forth in or made pursuant to
this Agreement will
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<PAGE>
remain in full force and effect, regardless of any investigation made by or on
behalf of any Underwriter or the Company or any of the officers, directors or
controlling persons referred to in Section 8 hereof, and will survive delivery
of and payment for the Securities. The provisions of Sections 7 and 8 hereof
shall survive the termination or cancellation of this Agreement.
13. NOTICES. All communications hereunder will be in writing and
effective only on receipt, and, if sent to the Underwriters, will be mailed,
delivered or telegraphed and confirmed to them, care of Salomon Brothers Inc, at
Seven World Trade Center, New York, New York 10048; or, if sent to the Company,
will be mailed, delivered or telegraphed and confirmed to it at 2290 West 8th
Avenue, Hialeah, Florida 33010, Attention: Chief Executive Officer.
14. SUCCESSORS. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the
officers, directors, employees and agents and controlling persons referred to
in, and to the extent referred to in, Section 8 hereof, and no other person
will have any right or obligation hereunder.
15. APPLICABLE LAW. This Agreement will be governed by and construed
in accordance with the laws of the State of New York applicable to contracts
to be entered into and wholly performed in such state.
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<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement among the
Company and you.
Very truly yours,
TELEMUNDO GROUP, INC.
By:
--------------------------------
Chief Executive Officer
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
SALOMON BROTHERS INC
ALEX. BROWN & SONS INCORPORATED
BT SECURITIES CORPORATION
Acting on behalf of themselves
By: Salomon Brothers Inc
By:
------------------------------
Its:
-----------------------------
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<PAGE>
SCHEDULE I
Amount of
Underwriter Securities
- ----------- ----------
Salomon Brothers Inc
Alex. Brown & Sons Incorporated
BT Securities Corporation
Total
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<PAGE>
EXHIBIT A
FORM OF OPINION
(a) each of the Company and its subsidiaries has been duly incorporated
and is validly existing as a corporation in good standing under the laws of
the jurisdiction in which it is organized, with full corporate power and
authority to own and lease its properties and conduct its business as
described in the Prospectus, and is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each
jurisdiction which requires such qualification wherein the Prospectus
states it owns or leases properties or conducts business except where a
failure to be so qualified would not have a Material Adverse Effect on the
Company or any such subsidiary;
(b) the Company's authorized equity capitalization is as set forth in the
Prospectus; the capital stock and indebtedness of the Company conforms to
the descriptions thereof contained in the Prospectus; the outstanding
shares of Common Stock have been duly and validly authorized and issued and
are fully paid and non-assessable; the Company has all requisite power and
authority to execute, deliver and perform its obligations under each of the
Transaction Documents; each of the Transaction Documents to which the
Company or a subsidiary is a party has been duly authorized, executed and
delivered and constitutes a legal, valid and binding obligation of the
Company or its subsidiary, enforceable against the Company or its
subsidiary subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and to general principles
of equity, including principles of commercial reasonableness, good faith
and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity);
(c) all of the outstanding shares of capital stock of each of the
Company's "significant subsidiaries", as defined in Regulation S-X under
the Act, have been duly and validly authorized and issued and are fully
paid and nonassessable, and all such outstanding shares are owned by the
Company either directly or through wholly-owned subsidiaries free and
clear of any perfected security interest and, to the best knowledge of
such counsel, after due inquiry, any other security interests, claims,
liens or encumbrances other than under the Credit Facility (as defined
in the Prospectus);
(d) to the best knowledge of such counsel, except as disclosed in the
Prospectus, there are no outstanding rights, warrants, or options to
acquire, or instruments convertible into or exchangeable for any shares of
capital stock of or equity interest in the Company's subsidiaries;
(e) to the best knowledge of such counsel, there is no pending or
threatened action, suit or proceeding before any court or governmental
agency, authority or body or any arbitrator involving the Company or any of
its subsidiaries of a character required to be disclosed in the
Registration Statement which is not adequately disclosed in the Prospectus,
and there is no franchise, contract or other document of a character
required to be described in the Registration Statement or Prospectus, or to
be filed as an exhibit, which is not described or filed as required; the
descriptions in the Registration Statement and the Prospectus of statutes,
regulations, contracts, franchises,
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<PAGE>
other documents, pending or threatened actions, suits or proceedings before
any court or arbitrator, or brought by any governmental agency, authority
or body fairly present the information required to be shown;
(f) the Registration Statement has become effective under the Act; any
required filing of the Prospectus, and any supplements thereto, pursuant to
Rule 424(b), have been filed in the manner and within the time period
required by Rule 424(b); to the best knowledge of such counsel, no stop
order suspending the effectiveness of the Registration Statement has been
issued, no proceedings for that purpose have been instituted or threatened
and the Registration Statement and the Prospectus (other than the financial
statements, schedules and other financial information contained therein as
to which such counsel need express no opinion) comply as to form in all
material respects with the applicable requirements of the Act, the Exchange
Act and the Trust Indenture Act and the respective rules thereunder;
(g) the descriptions contained in the Prospectus under the heading
"Certain Federal Income Tax Considerations" fairly summarize the matters
therein described; the statements in the Prospectus under the headings
"Principal Stockholders--Related Party Transactions" and "The Acquisition,"
insofar as such statements purport to summarize the provisions of
agreements referred to therein, conform in all material respects to the
terms of the applicable documents;
(h) the Company has all necessary corporate power and authority to
execute, deliver and perform its obligations under the Agreement, and the
Company and its subsidiaries have all necessary corporate power and
authority to enter into and consummate the Transactions and execute,
deliver and perform their respective obligations under each Transaction
Document. The execution, delivery and performance by the Company of its
obligations under the Agreement, the Indenture and each Transaction
Document, and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized by all necessary corporate action on the
part of the Company. The Agreement has been duly executed and delivered by
the Company. Each Transaction Document has been or, by the Closing Date,
will be duly executed and delivered by the Company substantially in the
form previously delivered to you and, when executed and delivered by the
Company and assuming due execution by the other parties thereto, will
constitute legal, valid and binding obligations of the Company, enforceable
against the
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<PAGE>
Company in accordance with their respective terms. At or prior to the
Closing Date, the Company will have duly executed and delivered each
Transaction Document;
(i) the Company has all requisite corporate power and authority to
execute, issue and deliver the Securities and to incur and perform its
obligations thereunder. The Securities have been duly authorized by the
Company and, when executed, authenticated and issued in the manner provided
for in the Indenture and the Securities, as applicable, and delivered
against payment of the purchase price therefor as provided herein, the
Securities will constitute valid and binding obligations of the Company,
entitled to the benefits of the Indenture and enforceable against the
Company in accordance with their terms subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar
laws affecting creditors' rights and remedies generally and to general
principles of equity, including principles of commercial reasonableness,
good faith and fair dealing (regardless of whether enforcement is sought
in a proceeding at law or in equity) and except to the extent that the
provisions of the Indenture purport to waive benefits or advantages of
any stay, extention or usury law. The Securities will conform in all
material respects to the description thereof contained in the Prospectus;
(j) the Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Indenture; the
Indenture has been duly authorized by the Company, will be substantially
in the form heretofore delivered to you, and, when executed and delivered
by the Company and assuming due execution by the Trustee, will constitute
a valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar
laws affecting creditors' rights and remedies generally and to general
principles of equity, including principles of commercial reasonableness,
good faith and fair dealing (regardless of whether enforcement is sought
in a proceeding at law or in equity) and except to the extent that the
provisions of the Indenture purport to waive benefits or advantages of
any stay, extention or usury law. At the Closing Date, the Company
will have duly executed and delivered the Indenture, and the Indenture
will have been duly qualified under the Trust Indenture Act. The
Indenture will conform in all material respects to the description thereof
contained in the Prospectus;
(k) no consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation of the
Offering and the Transactions, except such as have been obtained under the
Act, [in connection with the Acquisition] and such as may be required
under the Blue Sky laws of any jurisdiction in connection with the
purchase and distribution of the Securities by the Underwriters;
(l) neither the issue and sale of the Securities, nor the fulfillment of
the terms hereof will conflict with, result in a breach or violation of,
or constitute a default, under any law (except Blue Sky laws, as to which
such counsel expresses no opinion) or the Restated Certificate of
Incorporation or Amended and Restated Bylaws of the Company or the terms
of any material agreement or instrument known to such counsel and to which
the Company or any of its subsidiaries is a party or bound or any
judgment, order or decree known to such counsel to be applicable to the
Company or any of its subsidiaries of any court, regulatory body,
administrative agency, governmental body or arbitrator having jurisdiction
over the Company or any of its subsidiaries. For the purposes of such
opinion, the term "material agreement" shall mean an agreement that was
filed (or incorporated by reference) as an exhibit to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994;
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<PAGE>
(m) to the best of such counsel's knowledge, except as described in the
Prospectus or the Registration Rights Agreement, no holders of securities
of the Company have rights to the registration of such securities under the
Registration Statement;
(n) the consummation of the Offering and the Transactions and the
execution and delivery by the Company and its subsidiaries of, and the
performance by the Company
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<PAGE>
and its subsidiaries of obligations under the Agreement, the Indenture and
the Transaction Documents (to the extent each is a party thereto), did not
or will not result in a violation of the Federal Communications Act of
1934, as amended, and the rules, regulations and orders promulgated
thereunder (the "Communications Laws") by the Federal Communications
Commission (the "FCC");
(o) except for such approval of the FCC that has already been obtained,
which approval, to such counsel's knowledge, is in full force and effect,
no consent, approval, authorization, order, registration or qualification
of or with any governmental agency or body is required under the
Communications Laws for the transactions contemplated in this Agreement,
the Indenture and the Transaction Documents and the issuance and sale of
the Securities;
(p) The Company, its subsidiaries and Video 44 are the holders of the
licenses issued by the FCC listed in an attachment to such opinion (the
"FCC LICENSES"), all of which have been granted by the FCC; to the
knowledge of counsel, such FCC Licenses constitute all of the FCC Licenses
necessary for the Company, its subsidiaries and Video 44 to own their
properties and to conduct their businesses in the manner and to the full
extent now operated or proposed to be operated as described in either
Prospectus;
(q) Other than matters described in the Prospectus, such counsel does not
know of any proceedings threatened or pending before the FCC against or
involving the properties, businesses or FCC Licenses of the Company, any
of its subsidiaries or Video 44, which could reasonably be expected to
have a Material Adverse Effect excluding laws generally applicable to
the television industry;
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<PAGE>
In addition, such counsel shall state that in the course of the preparation
of the Registration Statement and the Prospectus, such counsel has
participated in conferences with officers and representatives of the
Company and with the Company's independent public accountants, at which
conferences such counsel made inquiries of such officers, representatives
and accountants and discussed the contents of the Registration Statement
and the Prospectus and (without taking any further action to verify
independently the statements made in the Registration Statement and the
Prospectus and, except solely as expressly stated in the foregoing opinion,
without assuming responsibility for the accuracy, completeness or fairness
of such statements) nothing has come to such counsel's attention that
causes such counsel to believe that the Registration Statement as of the
Effective Date and as of the Closing Date or the Prospectus as of the date
thereof and as of the Closing Date contained or contains any untrue
statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading
(it being understood that such counsel need not express any statement with
respect to the financial statements, schedules and other financial
information included in the Registration Statement or the Prospectus).
References to the Prospectus in this Exhibit include any supplements
thereto at the Closing Date.
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<PAGE>
- --------------------------------------------------------------------------------
TELEMUNDO GROUP, INC.
and
BANKERS TRUST COMPANY,
Trustee
-----------------
FIRST SUPPLEMENTAL INDENTURE
Dated as of December 12, 1995
-----------------
$116,889,000
10.25% Senior Notes Due December 30, 2001
- --------------------------------------------------------------------------------
<PAGE>
FIRST SUPPLEMENTAL INDENTURE dated as of December 12, 1995 (the "First
Supplemental Indenture"), between TELEMUNDO GROUP, INC., a Delaware corporation
(the "Company"), and BANKERS TRUST COMPANY, a New York banking corporation, as
trustee (the "Trustee").
RECITALS
WHEREAS, the Company and the Trustee entered into an Indenture, dated as of
December 30, 1994 (the "Indenture"), pursuant to which the Company issued
$116,889,000 in principal amount of 10.25% Senior Notes due December 30, 2001
(the "Securities") (capitalized terms used herein without definition shall have
the respective meanings ascribed to them in the Indenture); and
WHEREAS, Section 10.02 of the Indenture provides that the Company and the
Trustee may amend or supplement the Indenture with the written consent of the
Holders of at least a majority in aggregate principal amount of the outstanding
Securities without notice to any Securityholder; and
WHEREAS, all acts and things prescribed by the Indenture, by law and by the
Certificate of Incorporation and the Bylaws of the Company and of the Trustee
necessary to make this First Supplemental Indenture a valid instrument legally
binding on the Company and the Trustee, in accordance with its terms, have been
duly done and performed; and
WHEREAS, the written consents to the amendments or supplements to the
Indenture have been obtained from the Holders of at least a majority in
aggregate principal amount of the outstanding Securities; and
WHEREAS, all conditions precedent to amend or supplement the Indenture have
been met.
NOW, THEREFORE, each party agrees, for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Securities, to the
amendments set forth below (the "Amendments") which will become operative
pursuant to the terms hereof.
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<PAGE>
ARTICLE 1
AMENDMENTS
Section 1.01. AMENDMENTS AND MODIFICATIONS TO ARTICLE ONE
a. INSERT THE FOLLOWING AS A NEW DEFINITION TO SECTION 1.01.
"ACCRETED VALUE" as of any date means, with respect to the Senior
Notes, the amount determined in accordance with the Senior Indenture.
b. REPLACE THE DEFINITION OF ACQUIRED INDEBTEDNESS IN SECTION 1.01 WITH
THE FOLLOWING DEFINITION.
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person (including an
Unrestricted Subsidiary) existing at the time such Person becomes a
Restricted Subsidiary or assumed in connection with the acquisition of
assets from such Person.
c. REPLACE THE DEFINITION OF AFFILIATE IN SECTION 1.01 WITH THE FOLLOWING
DEFINITION.
"AFFILIATE" of any specified Person means any other Person which
directly or indirectly through one or more intermediaries controls, or
is controlled by, or is under common control with, such specified
Person. For the purposes of this definition, "control" (including,
with correlative meanings, the terms "controlling," "controlled by,"
and "under common control with"), as used with respect to any Person,
means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or
otherwise.
d. INSERT THE FOLLOWING AS A NEW DEFINITION IN SECTION 1.01.
"ASSET DISPOSITION" has the meaning ascribed to the term Asset Sale in
the Senior Indenture as in effect on the Operative Date.
e. REPLACE THE DEFINITION OF AVERAGE LIFE IN SECTION 1.01 WITH THE
FOLLOWING DEFINITION.
"AVERAGE LIFE" means, as of the date of determination, with respect to
any Indebtedness or security, the quotient obtained by dividing (a)
the sum of the product of (i) the number of years from such date to
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<PAGE>
the date of each successive scheduled principal or redemption payment
of such Indebtedness or security multiplied by (ii) the amount of such
principal or redemption payment by (b) the sum of all such principal
or redemption payments.
f. REPLACE THE DEFINITION OF CAPITAL STOCK IN SECTION 1.01 WITH THE
FOLLOWING DEFINITION.
"CAPITAL STOCK" means, with respect to any Person, any and all shares
or other equivalents (however designated) of capital stock,
partnership interests or any other participation, right or other
interest in the nature of an equity interest in such Person or any
option, warrant or other security convertible into any of the
foregoing.
g. REPLACE THE DEFINITION OF CAPITALIZED LEASE OBLIGATION IN SECTION 1.01
WITH THE FOLLOWING DEFINITION.
"CAPITALIZED LEASE OBLIGATIONS" means Indebtedness represented by
obligations under a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP and the amount of
such Indebtedness shall be the capitalized amount of such obligations
determined in accordance with GAAP.
h. REPLACE THE DEFINITION OF CASH EQUIVALENT IN SECTION 1.01 WITH THE
FOLLOWING DEFINITION.
"CASH EQUIVALENTS" means (i) securities with maturities within 365
days of the date of acquisition, issued, fully guaranteed or insured
by the United States Government or any agency thereof; (ii)
certificates of deposit, time deposits, overnight bank deposits,
banker's acceptances and repurchase agreements issued by a Qualified
Issuer having maturities of 270 days or less from the date of
acquisition; (iii) commercial paper of an issuer rated at least A-1 by
S&P or P-1 by Moody's, or carrying an equivalent rating by a
nationally recognized rating agency if both of the two named rating
agencies cease publishing ratings of investments, and having
maturities of 270 days or less from the date of acquisition and (iv)
money market accounts or funds with or issued by Qualified Issuers.
i. INSERT THE FOLLOWING AS A NEW DEFINITION TO SECTION 1.01.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person, for
any period, the aggregate amount of interest which, in conformity with
GAAP, would be set
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<PAGE>
forth opposite the caption "interest expense" or any like caption on
an income statement for such Person and its Subsidiaries on a
consolidated basis (including, but not limited to, Redeemable
Dividends, whether paid or accrued, on Preferred Stock of a Subsidiary
(as defined below in Section 1.01), imputed interest included in
Capitalized Lease Obligations, all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers'
acceptance financing, the net costs associated with hedging
obligations, amortization of other financing fees and expenses, the
interest portion of any deferred payment obligation, amortization of
discount or premium, if any, and all other non-cash interest expense
(other than interest amortized to cost of sales)) plus, without
duplication, all net capitalized interest for such period and all
interest incurred or paid under any guarantee of Indebtedness
(including a guarantee of principal, interest or any combination
thereof) of any Person, plus the amount of all dividends or
distributions paid on Disqualified Capital Stock (other than dividends
paid or payable in shares of Capital Stock of the Company).
j. REPLACE THE DEFINITION OF CONSOLIDATED NET INCOME IN SECTION 1.01 WITH
THE FOLLOWING DEFINITION.
"CONSOLIDATED NET INCOME" means, with respect to any Person, for any
period, the aggregate of the Net Income of such Person and its
Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP; PROVIDED, HOWEVER, that (a) for any Person (the
"other Person") in which the Person in question or any of its
Subsidiaries has less than a 100% interest (which interest does not
cause the net income of such other Person to be consolidated into the
net income of the Person in question in accordance with GAAP) (i) Net
Income of the other Person shall be included only to the extent of the
amount of dividends or distributions paid to the Person in question or
its Subsidiary and (ii) net loss related to the interest of the
Company and its Subsidiaries in TeleNoticias del Mundo, L.P. shall be
included in Net Income of the Company and its Subsidiaries only to the
extent that such net loss is in excess of $10 million and to the
extent the Company or its Subsidiaries have contributed or contribute
amounts to TeleNoticias del Mundo, L.P. in an aggregate amount in
excess of $10 million, (b) the Net Income of any Subsidiary of the
Person in question that is subject to any restriction or limitation on
the payment of dividends or the making of other distributions shall be
excluded to the extent of such restriction or
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<PAGE>
limitation, (c) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such
acquisition shall be excluded, (d) any net gain (but not loss)
resulting from an Asset Disposition by the Person in question or any
of its Subsidiaries other than in the ordinary course of business
shall be excluded, (e) extraordinary, unusual and non-recurring gains
and losses shall be excluded, and (f) all non-cash items increasing
Consolidated Net Income and not otherwise included in the definition
of EBITDA shall be excluded.
k. INSERT THE FOLLOWING AS A NEW DEFINITION TO SECTION 1.01.
"CREDIT FACILITIES" means any credit facility or agreement (including
the Loan and Security Agreement) with a bank or syndicate of banks or
other financial institutions (including working capital or revolving
credit facilities) including any related guarantees, collateral
documents, instruments and agreements executed in connection
therewith, as such agreements may be amended, renewed, extended,
substituted, refinanced, restructured, replaced, supplemented or
otherwise modified from time to time (including without limitation,
any successive renewals, extensions, substitutions, refinancings,
restructurings, replacements, supplementations or other modifications
of the foregoing). For all purposes under this Indenture, "Credit
Facilities" shall include any amendments, renewals, extensions,
substitutions, refinancings, restructurings, replacements, supplements
or any other modifications that increase the principal amount of the
Indebtedness thereunder or commitments to lend thereunder and have
been made in compliance with Section 4.10 of this Indenture; PROVIDED
that for purposes of Section 4.10 of this Indenture, no such increase
may result in the principal amount of Indebtedness of the Company and
the Restricted Subsidiaries under the Credit Facilities exceeding the
amount permitted by clause (a) of the definition of "Permitted
Indebtedness."
l. INSERT THE FOLLOWING AS A NEW DEFINITION TO SECTION 1.01.
"CUMULATIVE CONSOLIDATED INTEREST EXPENSE" means with respect to any
Person, as of any date of determination, Consolidated Interest Expense
from the Operative Date to the end of the Company's most recently
ended full fiscal quarter prior to such date, taken as a single
accounting period.
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<PAGE>
m. INSERT THE FOLLOWING AS A NEW DEFINITION TO SECTION 1.01.
"CUMULATIVE EBITDA" means with respect to any Person, as of any date
of determination, EBITDA from the Operative Date to the end of the
Company's most recently ended full fiscal quarter prior to such date,
taken as a single accounting period.
n. INSERT THE FOLLOWING AS A NEW DEFINITION TO SECTION 1.01.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency
swap agreement or other similar arrangement designed to protect the
Company or any of its Restricted Subsidiaries against fluctuations in
currency values.
o. REPLACE THE DEFINITION OF DISQUALIFIED CAPITAL STOCK IN SECTION 1.01
WITH THE FOLLOWING DEFINITION.
"DISQUALIFIED CAPITAL STOCK" means any Capital Stock of the Company or
a Restricted Subsidiary thereof which, by its terms (or by the terms
of any security into which it is convertible or for which it is
exchangeable at the option of the holder), or upon the happening of
any event, matures or is mandatorily redeemable, pursuant to a sinking
fund obligation or otherwise, or is redeemable at the option of the
holder thereof, in whole or in part, on or prior to the maturity date
of the Securities, for cash or securities constituting Indebtedness.
Without limitation of the foregoing, Disqualified Capital Stock shall
be deemed to include (i) any Preferred Stock of a Restricted
Subsidiary of the Company and (ii) any Preferred Stock of the Company,
with respect to either of which, under the terms of such Preferred
Stock, by agreement or otherwise, such Restricted Subsidiary or the
Company is obligated to pay current dividends or distributions in cash
during the period prior to the maturity date of the Securities.
p. INSERT THE FOLLOWING AS A NEW DEFINITION TO SECTION 1.01.
"EBITDA" means, for any Person, for any period for which it is to be
determined, an amount equal to the sum of, without duplication, (i)
Consolidated Net Income for such period, plus (ii) the provision for
taxes for such period based on income or profits to the extent such
income or profits were included in computing Consolidated Net Income
and any provision for
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<PAGE>
taxes utilized in computing net loss under clause (i) hereof, plus
(iii) Consolidated Interest Expense for such period (including, for
this purpose, Redeemable Dividends to the extent that such dividends
were deducted in determining Net Income), plus (iv) depreciation and
amortization for such period on a consolidated basis, plus (v)
non-cash charges for such period on a consolidated basis, except that
with respect to the Company each of the foregoing items shall be
determined on a consolidated basis with respect to the Company and
its Restricted Subsidiaries only.
q. INSERT THE FOLLOWING AS A NEW DEFINITION TO SECTION 1.01.
"FAIR MARKET VALUE" or "fair value" means, with respect to any asset
or property or Capital Stock, the price which could be negotiated in
an arm's-length, free market transaction, for cash, between an
informed and willing seller and an informed, willing and able buyer,
neither of whom is under undue pressure or compulsion to complete the
transaction.
r. REPLACE THE DEFINITION OF GAAP IN SECTION 1.01 WITH THE FOLLOWING
DEFINITION.
"GAAP" means generally accepted accounting principles consistently
applied as in effect in the United States from time to time.
s. INSERT THE FOLLOWING AS A NEW DEFINITION TO SECTION 1.01.
"GUARANTEE" is defined to mean any obligation, contingent or
otherwise, of any Person directly or indirectly guaranteeing any
Indebtedness of any other Person and, without limiting the generality
of the foregoing, any obligation, direct or indirect, contingent or
otherwise, of such Person (i) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Indebtedness or other
obligation of such other Person (whether arising by virtue of
partnership arrangements, or by agreement to keepwell, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for
purposes of assuring in any other manner the obligee of such
Indebtedness or other obligation of the payment thereof or to protect
such obligee against loss in respect thereof (in whole or in part);
PROVIDED that the term "Guarantee" shall not include endorsements for
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<PAGE>
collection or deposit in the ordinary course of business. The term
"Guarantee" used as a verb has a corresponding meaning.
t. INSERT THE FOLLOWING AS A NEW DEFINITION TO SECTION 1.01.
"INCUR" means, with respect to any Indebtedness or other obligation of
any Person, to create, issue, incur (by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of
such Indebtedness or other obligation or the recording, as required
pursuant to GAAP or otherwise, of any such Indebtedness or other
obligation on the balance sheet of such Person (and "incurrence,"
"incurred," "incurrable," and "incurring" shall have meanings
correlative to the foregoing).
u. REPLACE THE DEFINITION OF INDEBTEDNESS IN SECTION 1.01 WITH THE
FOLLOWING DEFINITION.
"INDEBTEDNESS" is defined to mean, with respect to any Person, at any
date of determination (without duplication), (i) all indebtedness of
such Person for borrowed money, (ii) all obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person in respect of letters of credit
or other similar instruments (including reimbursement obligations with
respect thereto), (iv) all obligations of such Person to pay the
deferred and unpaid purchase price of property (excluding any balances
that constitute accounts payable or trade payables, and other accrued
liabilities arising in the ordinary course of business, including,
without limitation, any and all programming obligations), which
purchase price is due more than six months after the date of placing
such property in service or taking delivery and title thereto, (v) all
obligations of such Person as lessee under Capitalized Lease
Obligations and all Purchase Money Indebtedness, (vi) all Indebtedness
of other Persons secured by a Lien on any asset of such Person,
whether or not such Indebtedness is assumed by such Person, provided
that the amount of such Indebtedness shall be the lesser of (A) the
fair market value of such asset at such date of determination and
(B) the principal amount of such Indebtedness, (vii) all Indebtedness
of other Persons Guaranteed by such Person to the extent such
Indebtedness is Guaranteed by such Person, (viii) to the extent not
otherwise included in this definition, net obligations under Currency
Agreements and Interest Rate Agreements, and (ix) all Disqualified
Capital
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<PAGE>
Stock issued by such Person. The amount of Indebtedness of any Person
at any date shall be the outstanding balance at such date of all
unconditional obligations as described above and, with respect to
contingent obligations, the maximum liability upon the occurrence of
the contingency giving rise to the obligation; PROVIDED that the
amount outstanding at any time of any Indebtedness issued with
original issue discount is the face amount of such Indebtedness less
the remaining unamortized portion of the original issue discount of
such Indebtedness at such time as determined in conformity with GAAP
and for purposes of calculating the amount of the Senior Notes
outstanding at any time, the amount shall be the Accreted Value
thereof as of such time. A Guarantee of (or an obligation with respect
to a letter of credit supporting) Indebtedness permitted by the terms
of this Indenture will not constitute a separate incurrence of
Indebtedness.
v. INSERT THE FOLLOWING AS A NEW DEFINITION TO SECTION 1.01.
"INDEPENDENT FINANCIAL ADVISOR" means an accounting, appraisal, expert
or investment banking firm of nationally recognized standing that is,
in the reasonable and good faith judgment of the Board of Directors of
the Company, qualified to perform the task for which such firm has
been engaged and disinterested and independent with respect to the
Company and its Affiliates.
w. INSERT THE FOLLOWING AS A NEW DEFINITION TO SECTION 1.01.
"INTEREST RATE PROTECTION AGREEMENT" means, for any Person, any
interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement or other similar agreement designed to protect
the party therein against fluctuations in interest rates.
x. REPLACE THE DEFINITION OF INVESTMENT IN SECTION 1.01 WITH THE
FOLLOWING DEFINITION.
"INVESTMENTS" means, directly or indirectly, any advance, account
receivable (other than an account receivable arising in the ordinary
course of business), loan or capital contribution to (by means of
transfers of property to others, payments for property or services for
the account or use of others or otherwise), the purchase of any stock,
bonds, notes, debentures, partnership or joint venture interests or
other securities of, the acquisition, by purchase or
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otherwise, of all or substantially all of the business or assets or
stock or other evidence of beneficial ownership of, any Person or the
making of any investment in any Person. Investments shall exclude
extensions of trade credit in the ordinary course of business,
repurchases or redemptions of the Senior Notes by the Company, prepaid
expenses (including television programming) arising in the ordinary
course of business, endorsements for collection or deposit in the
ordinary course of business, worker's compensation, utility, lease and
similar deposits made in the ordinary course of business, and loans
and advances to employees, other than officers and directors of the
Company or any Restricted Subsidiary, made in the ordinary course of
business.
y. INSERT THE FOLLOWING AS A NEW DEFINITION TO SECTION 1.01.
"JOINT VENTURE AGREEMENT" means the Amended and Restated Partnership
Agreement of Video 44, dated as of November 8, 1995.
z. REPLACE THE DEFINITION OF LIEN IN SECTION 1.01 WITH THE FOLLOWING
DEFINITION.
"LIEN" means with respect to any property or assets of any Person, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance,
preference, priority, or other security agreement or preferential
arrangement of any kind or nature whatsoever on or with respect to
such property or assets (including without limitation, any Capitalized
Lease Obligations, conditional sales, or other title retention
agreement having substantially the same economic effect as any of the
foregoing).
aa. INSERT THE FOLLOWING AS A NEW DEFINITION TO SECTION 1.01.
"LOAN AND SECURITY AGREEMENT" means the Loan and Security Agreement by
and between the Company, certain of its Subsidiaries and Foothill
Capital Corporation dated December 30, 1994, as amended to the
Operative Date.
ab. INSERT THE FOLLOWING AS A NEW DEFINITION TO SECTION 1.01.
"LOCAL MARKETING AGREEMENT" means a local marketing arrangement, sale
agreement, time brokerage agreement,
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management agreement or similar arrangement pursuant to which a Person
(which, if not the Company, shall be a single-purpose entity which
cannot conduct any other business operations but those which are to be
purchased or managed pursuant to the following provisions):
(i) obtains the right to sell at least a majority of the advertising
inventory of a television station on behalf of a third party,
(ii) purchases at least a majority of the air time of a television
station to exhibit programming and sell advertising time,
(iii) manages the selling operations of a television station with
respect to at least a majority of the advertising inventory of such
station, (iv) manages the acquisition of programming for a television
station, (v) acts as a program consultant for a television station, or
(vi) manages the operation of a television station generally.
ac. INSERT THE FOLLOWING AS A NEW DEFINITION TO SECTION 1.01.
"MATURITY" means the date on which the principal of the Securities
becomes due and payable in full as provided therein or herein, whether
at its Stated Maturity or by declaration of acceleration, call for
redemption or otherwise.
ad. INSERT THE FOLLOWING AS A NEW DEFINITION TO SECTION 1.01.
"MOODY'S" means Moody's Investors Service, Inc.
ae. INSERT THE FOLLOWING AS A NEW DEFINITION TO SECTION 1.01.
"NET INCOME" means, with respect to any Person for any period, the net
income (loss) of such Person determined in accordance with GAAP.
af. INSERT THE FOLLOWING AS A NEW DEFINITION TO SECTION 1.01.
"NET PROCEEDS" means (a) in the case of any sale of Capital Stock by
the Company, the aggregate net proceeds received by the Company, after
payment of expenses, commissions and the like incurred in connection
therewith, whether such proceeds are in cash or in property (valued at
the fair market value thereof, as determined in good faith by the
Board of Directors, at the time of receipt) and (b) in the case of any
exchange, exercise, conversion or surrender of outstanding securities
of any kind for or into shares
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of Capital Stock of the Company which is not Disqualified Capital
Stock, the net book value of such outstanding securities on the date
of such exchange, exercise, conversion or surrender (plus any
additional amount required to be paid by the holder to the Company
upon such exchange, exercise, conversion or surrender, less any and
all payments made to the holders, e.g., on account of fractional
shares and less all expenses incurred by the Company in connection
therewith).
ag. INSERT THE FOLLOWING AS A NEW DEFINITION TO SECTION 1.01.
"OPERATIVE DATE" means the date that the Repurchase Offer and the
Consent Solicitation (as such terms are defined in the Offer to
Purchase referred to below) are completed pursuant to the terms and
conditions set forth in the Company's Offer to Purchase and Consent
Solicitation Statement, dated November 27, 1995 and as amended from
time to time.
ah. INSERT THE FOLLOWING AS A NEW DEFINITION TO SECTION 1.01
"PERMITTED INDEBTEDNESS" means, without duplication, (a) Indebtedness
of the Company or, to the extent permitted pursuant to Section 4.15 of
this Indenture, any Restricted Subsidiary, evidenced by or arising
under Credit Facilities, which taken together (without duplication) is
in an aggregate principal amount at any one time not to exceed $75
million; (b) Indebtedness of the Company evidenced by or arising under
the Securities and this Indenture; (c) Indebtedness of the Company or
any Restricted Subsidiary outstanding on the Operative Date (including
the Senior Notes and the Senior Indenture); (d) Indebtedness of the
Company or any Restricted Subsidiary under Currency Agreements and
Interest Rate Protection Agreements which are entered into for the
purpose of protection against risk of currency or interest rate
fluctuations affecting the Company or any of its Subsidiaries in its
ordinary course of business or that are related to payment obligations
of the Company or any of its Subsidiaries otherwise permitted under
this Indenture; (e) unsecured Indebtedness of the Company owing to a
Restricted Subsidiary of the Company which shall be evidenced by an
intercompany promissory note that is subordinated in right of payment
to the payment and performance of the Company's obligations under this
Indenture and the Securities and any subsequent issuance or transfer
of Capital Stock of a Restricted Subsidiary of the Company (the
"Creditor Subsidiary") that results in such
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<PAGE>
Creditor Subsidiary ceasing to be a Restricted Subsidiary of the
Company or any subsequent transfer of Indebtedness owing from the
Company to such Creditor Subsidiary (other than a transfer to another
Restricted Subsidiary of the Company) shall be deemed in each case to
constitute the incurrence of Indebtedness by the Company to the extent
of any such Indebtedness then outstanding; (f) Indebtedness of the
Company incurred in connection with a repurchase of the Senior Notes
pursuant to a Change of Control (as defined in the Senior Indenture),
in whole or in part, provided that the principal amount of such
Indebtedness does not exceed 101% of the Accreted Value of the Senior
Notes repurchased and the reasonable, customary expenses, fees and
costs of the Company, and such Indebtedness (y) has an Average Life to
Stated Maturity equal to or greater than the remaining Average Life to
Maturity of the Senior Notes, and (z) does not mature prior to the
Stated Maturity of the Senior Notes; (g) Purchase Money Indebtedness
and Capitalized Lease Obligations of the Company, or, to the extent
permitted pursuant to Section 4.15 of this Indenture, any Restricted
Subsidiary, incurred in the ordinary course of business in a principal
amount outstanding at the time of incurrence which does not in the
aggregate exceed $15 million at any time outstanding; (h) Indebtedness
of the Company or any Restricted Subsidiary, incurred or incurrable in
respect of reimbursement obligations related to letters of credit,
banker's acceptances or similar facilities entered into in the
ordinary course of business; (i) Indebtedness of the Company and any
Restricted Subsidiary in respect to bids, performance and surety bonds
and obligations provided in the ordinary course of business and appeal
bonds; (j) Acquired Indebtedness, provided that such Indebtedness was
not incurred or issued as a result of, or in connection with, or in
anticipation of, such Person becoming a Restricted Subsidiary of the
Company and immediately after giving effect to such Person becoming a
Restricted Subsidiary of the Company (as if such Indebtedness was
incurred and issued on the first day of the previous four fiscal
quarters), the Company could incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) under Section 4.10 of this
Indenture; (k) Indebtedness incurred by the Company in exchange for,
or the proceeds of which are used to refinance Indebtedness incurred
in compliance with the ratio set forth in Section 4.10(a) of this
Indenture and Indebtedness referred to in clauses (b) through (d) and
(f) through (i) of this paragraph, provided that (i) such Indebtedness
is in an aggregate principal amount not in excess of the aggregate
principal amount
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<PAGE>
then outstanding of the Indebtedness being refinanced, plus the amount
of accrued and unpaid interest, if any, and premiums owed, if any, not
in excess of preexisting payment provisions on such Indebtedness being
refinanced, plus the reasonable, customary expenses, fees, and costs
of the Company incurred in connection with such refinancing, (ii) such
Indebtedness is scheduled to mature either (A) no earlier than the
Indebtedness being refinanced or (B) after the Stated Maturity of the
Securities, and (iii) such Indebtedness has an Average Life at the
time such Indebtedness is incurred that is equal to or greater than
the Average Life of the Indebtedness being refinanced, and (iv) such
Indebtedness is ranked in right of payment to the Securities no more
favorably than the Indebtedness being refinanced is ranked in right of
payment to the Securities; (l) Indebtedness incurred or incurrable, to
the extent permitted pursuant to Section 4.15 of this Indenture, by a
Restricted Subsidiary under any Guarantee of any Restricted Subsidiary
made in the ordinary course of business and not to exceed $10 million
at any one time outstanding; (m) Indebtedness incurred or incurrable
by Telemundo of Chicago, Inc. and Harriscope of Chicago, Inc. pursuant
to Section 3.5(a) of the Joint Venture Agreement; (n) Indebtedness of
the Company not otherwise permitted to be incurred pursuant to this
section, so long as the aggregate principal amount of all such
Indebtedness does not exceed $25 million at any one time outstanding;
(o) Indebtedness of a Restricted Subsidiary for refinancing of certain
Indebtedness as permitted under clause (j) of Section 4.15; (p)
Indebtedness of any Restricted Subsidiary or Preferred Stock of any
Restricted Subsidiary issued to and held by the Company or a Wholly-
Owned Subsidiary of the Company, PROVIDED, that such Indebtedness or
Preferred Stock is at all times held by the Company or a Wholly-Owned
Subsidiary of the Company; and (q) Indebtedness, to the extent
permitted pursuant to Section 4.15 of this Indenture, of any
Restricted Subsidiary pursuant to a Local Marketing Agreement.
ai. INSERT THE FOLLOWING AS A NEW DEFINITION TO SECTION 1.01.
"PERMITTED INVESTMENTS" means, for any Person, Investments made on or
after the date of this Indenture consisting of:
(i) Investments by the Company, or by a Restricted Subsidiary
thereof, in the Company or a Restricted Subsidiary:
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(ii) Temporary Cash Investments;
(iii) Investments in Property used in the ordinary course of
business;
(iv) Investments by the Company, or by a Restricted Subsidiary
thereof, in a Person (or in all or substantially all of the
business or assets of such Person), if as a result of such
Investment (a) such Person becomes a Restricted Subsidiary of
the Company, (b) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or a
Restricted Subsidiary thereof or (c) such business or assets
are owned by the Company or a Restricted Subsidiary;
(v) an Investment that is made by the Company or a Restricted
Subsidiary thereof in the form of any stock, bonds, notes,
debentures, partnership or joint venture interests or other
securities that are issued by a third party to, or otherwise
received by, the Company or Restricted Subsidiary solely as
partial consideration for the consummation of an Asset Sale
that is otherwise permitted under the covenant described under
Section 4.13 of this Indenture;
(vi) Investments pursuant to any agreement or obligation of the
Company or a Restricted Subsidiary, in effect on the Operative
Date, which requires the Company to make such Investments;
(vii) Investments made after the Operative Date in the Primary
Business of the Company not to exceed $25 million at any one
time outstanding;
(viii) Investments made after the Operative Date in majority-owned
Subsidiaries of the Company in the Primary Business of the
Company not to exceed $10 million at any one time outstanding;
(ix) loans and reasonable advances to officers and directors of the
Company or any of its Restricted Subsidiaries made in the
ordinary course of business in an aggregate principal amount
not exceeding $1,000,000;
(x) Investments received in settlement of obligations incurred in
the ordinary course of
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<PAGE>
business owed to the Company or any Restricted Subsidiary
(other than by the Company or any Subsidiary) and as a result
of bankruptcy or insolvency proceedings or upon the
foreclosure, perfection or enforcement of any Lien in favor of
the Company or any Restricted Subsidiary;
(xi) Investments held by any Person on the date such Person becomes
a Restricted Subsidiary and not in excess of 5% of the total
fair market value of the assets of such Person being
transferred in such acquisition; and
(xii) Investments in any Person with which the Company or any of
Restricted Subsidiaries has entered into, or has an agreement
that, subject to consummation of such agreement, entitles the
Company or any of its Restricted Subsidiaries to enter into, a
Local Marketing Agreement and Investments in any Person created
by such a Local Marketing Agreement.
aj. INSERT THE FOLLOWING AS A NEW DEFINITION TO SECTION 1.01.
"PERMITTED LIENS" means, without duplication, (a) Liens securing
Indebtedness incurred under the Credit Facilities incurred in
accordance with Section 4.10 of this Indenture; (b) Liens on property
or assets of, or any shares of stock of or secured debt of, any Person
or corporation existing at the time such Person or corporation becomes
a Restricted Subsidiary of the Company or at the time such Person or
corporation is merged into the Company or any of its Restricted
Subsidiaries, provided that such Liens are not incurred in connection
with, or in contemplation of, such Person or corporation becoming a
Restricted Subsidiary of the Company or merging into the Company or
any of its Restricted Subsidiaries; (c) Liens on Property existing at
the time of acquisition of such Property, provided that such Liens are
not incurred in connection with, or in contemplation of, such Property
being acquired; (d) Liens existing on the Operative Date; (e) Liens
securing Capitalized Lease Obligations permitted to be incurred under
Section 4.15 of this Indenture provided that such Lien does not extend
to any property other than that subject to underlying lease; (f)
charges or levies (other than any Lien imposed by the Employee
Retirement Income Security Act of 1974, as amended) that are not yet
subject to penalties for non-payment or are being contested in good
faith by appropriate proceedings and for which adequate reserves, if
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<PAGE>
required, have been established or other provisions have been made in
accordance with GAAP; (g) statutory mechanics', workmen's,
materialmen's, operators', warehousemen's, repairmen's and bankers'
liens, and similar Liens imposed by law and arising in the ordinary
course of business for sums which are not overdue by more than 15 days
or, if so overdue, are being contested in good faith by appropriate
proceedings and for which adequate reserves, if required, have been
established or other provisions have been made in accordance with
GAAP; (h) minor imperfections of, or encumbrances on, title that do
not impair the value of property for its intended use; (i) Liens
(other than any Lien under the Employee Retirement Income Security Act
of 1974, as amended) incurred or deposits made in the ordinary course
of business in connection with workers' compensation, unemployment
insurance and other types of social security; (j) Liens incurred or
deposits made to secure the performance of tenders, bids, leases,
statutory or regulatory obligations, bankers' acceptances, surety and
appeal bonds, government contracts, performance and return of money
bonds and other obligations of a similar nature incurred in the
ordinary course of business (exclusive of obligations for the payment
of borrowed money); (k) easements, rights-of-way, municipal and zoning
ordinances and similar charges, encumbrances, title defects or other
irregularities that do not materially interfere with the ordinary
course of business of the Company or of any of its Subsidiaries; (l)
Liens to secure Purchase Money Indebtedness that is otherwise
permitted under this Indenture, PROVIDED that (1) any such Lien is
created solely for the purpose of securing Indebtedness representing,
or incurred to finance, refinance or refund the cost (including the
sales and excise taxes, installation and delivery charges and other
direct costs of, and other direct expenses paid or charged in
connection with, such purchase or construction) of the item of
Property subject thereto and such Lien is created prior to, at the
time of or within 365 days after the later of the acquisition, the
completion of construction or the commencement of full operation of
such property, (2) the principal amount of the Indebtedness secured by
such Lien does not exceed 100% of such cost, and (3) any such Lien
shall not extend to or cover any Property other than such item of
Property and any improvements on such item or proceeds thereof; (m)
Liens in favor of the Company or any Wholly-Owned Subsidiary of the
Company; (n) Liens arising from the rendering of a final judgment or
order against the Company or any Subsidiary of the Company that does
not
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<PAGE>
give rise to an Event of Default and that do not interfere with the
ordinary course of business of the Company and its Subsidiaries; (o)
Liens securing reimbursement obligations with respect to letters of
credit incurred in accordance with this Indenture that encumber
documents and other property relating to such letters of credit and
the products and proceeds thereof; (p) Liens encumbering customary
initial deposits and margin deposits, and other Liens that are within
the general parameters customary in the industry and incurred in the
ordinary course of business securing Indebtedness under Interest Rate
Protection Agreements and Currency Agreements constituting
Indebtedness permitted to be incurred pursuant to Section 4.10 of this
Indenture pursuant to clause (d) of the definition of "Permitted
Indebtedness"; (q) Liens securing Permitted Indebtedness incurred in
accordance with subsection (j) of the definition of "Permitted
Indebtedness"; (r) other Liens securing obligations incurred in the
ordinary course of business which obligations do not exceed $250,000
in the aggregate at any one time outstanding; (s) Liens to secure any
permitted extension, renewal, refinancing or refunding (or successive
extensions, renewals, refinancings or refundings), in whole or in
part, of any Indebtedness secured by Liens referred to in the
foregoing clauses (b) through (r), provided that, such Liens do not
extend to any other property or assets and the principal amount of the
debt secured by such Liens is not increased; (t) Liens with respect to
any license of intellectual property entered into in the ordinary
course of business (including programming agreements); and (u) Liens
in connection with Local Marketing Agreements related to the Primary
Business.
ak. REPLACE THE DEFINITION OF PERSON IN SECTION 1.01 WITH THE FOLLOWING
DEFINITION.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated
organization or government (including any agency or political
subdivision thereof).
al. INSERT THE FOLLOWING AS A NEW DEFINITION TO SECTION 1.01.
"PREFERRED STOCK" means any Capital Stock of a Person, however
designated, which entitles the holder thereof to a preference with
respect to dividends, distributions or liquidation proceeds of such
Person
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<PAGE>
over the holders of other Capital Stock issued by such Person.
am. INSERT THE FOLLOWING AS A NEW DEFINITION TO SECTION 1.01.
"PRIMARY BUSINESS" means the ownership and operation of television
stations and networks and production facilities and the creation,
production, development and distribution of products for television.
an. INSERT THE FOLLOWING AS A NEW DEFINITION TO SECTION 1.01.
"PROPERTY" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not
included in the most recent consolidated balance sheet of such Person
and its Subsidiaries under GAAP.
ao. INSERT THE FOLLOWING AS A NEW DEFINITION TO SECTION 1.01.
"PURCHASE MONEY INDEBTEDNESS" means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including
the cost of construction) of an item of property, the principal amount
of which Indebtedness does not exceed the sum of (i) 100% of such cost
and (ii) reasonable fees and expenses of such Person incurred in
connection therewith.
ap. INSERT THE FOLLOWING AS A NEW DEFINITION TO SECTION 1.01.
"QUALIFIED ISSUER" means any commercial bank having capital, surplus
and undivided profits totaling in excess of $100,000,000 and the
outstanding short-term debt securities of which are rated at least A-2
by S&P or at least P-2 by Moody's, or carrying an equivalent rating by
a nationally recognized rating agency if both the two named rating
agencies cease publishing ratings of investments.
aq. INSERT THE FOLLOWING AS A NEW DEFINITION TO SECTION 1.01.
"REDEEMABLE DIVIDEND" means, for any dividend or distribution with
regard to Disqualified Capital Stock, the quotient of the dividend or
distribution divided by the difference between one and the maximum
statutory federal income tax rate (expressed as a decimal number
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between 1 and 0) then applicable to the issuer of such Disqualified
Capital Stock.
ar. REPLACE THE DEFINITION OF RESTRICTED PAYMENT IN SECTION 1.01 WITH THE
FOLLOWING DEFINITION.
"RESTRICTED PAYMENT" means, without duplication, any of the following:
(i) the declaration or payment of any dividend or any other
distribution or payment on Capital Stock of the Company or any
Restricted Subsidiary of the Company or any payment made to the direct
or indirect holders (in their capacities as such) of Capital Stock of
the Company or any Restricted Subsidiary of the Company (other than
(y) dividends or distributions payable solely in Capital Stock (other
than Disqualified Capital Stock) or in options, warrants or other
rights to purchase Capital Stock (other than Disqualified Capital
Stock), and (z) in the case of Restricted Subsidiaries of the Company,
dividends or distributions payable to the Company or to a Wholly-Owned
Subsidiary of the Company), (ii) the purchase, redemption or other
acquisition or retirement for value of any Capital Stock of the
Company or any of its Restricted Subsidiaries (other than Capital
Stock owned by the Company or a Wholly-Owned Subsidiary of the
Company, excluding Disqualified Capital Stock), (iii) the making of
any Investment or guarantee of any Investment in any Person other than
a Permitted Investment, (iv) any designation of a Restricted
Subsidiary as an Unrestricted Subsidiary on the basis of the fair
market value of such Subsidiary utilizing standard valuation
methodologies and approved by the Board of Directors, and (v)
forgiveness of any Indebtedness (other than Indebtedness of a
Wholly-Owned Subsidiary) of an Affiliate of the Company to the Company
or a Restricted Subsidiary. For purposes of determining the amount
expended for Restricted Payments, cash distributed or invested shall
be valued at the face amount thereof and property other than cash
shall be valued at its fair market value as conclusively determined by
the Company's Board of Directors in good faith.
as. INSERT THE FOLLOWING AS A NEW DEFINITION TO SECTION 1.01.
"RESTRICTED SUBSIDIARY" means a Subsidiary of the Company other than
an Unrestricted Subsidiary and includes all of the Subsidiaries of the
Company existing as of the Operative Date, including but not limited
to Telemundo of Chicago, Inc. The Board of Directors of the Company
may designate any Unrestricted
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Subsidiary as a Restricted Subsidiary if immediately after giving
effect to such action (and treating any Acquired Indebtedness as
having been incurred at the time of such action), the Company could
have incurred at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to Section 4.10.
at. INSERT THE FOLLOWING AS A NEW DEFINITION TO SECTION 1.01.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw-Hill, Inc.
au. INSERT THE FOLLOWING AS A NEW DEFINITION TO SECTION 1.01.
"SENIOR INDENTURE" means the indenture between the Company and the
trustee for the Senior Notes, as such indenture may be amended or
supplemented from time to time in accordance with its terms.
av. INSERT THE FOLLOWING AS A NEW DEFINITION TO SECTION 1.01.
"SENIOR NOTES" means senior notes of the Company issued pursuant to an
indenture dated as of the Operative Date.
aw. REPLACE THE DEFINITION OF STATED MATURITY IN SECTION 1.01 WITH THE
FOLLOWING DEFINITION.
"STATED MATURITY" means, with respect to any security or Indebtedness,
the date specified therein as the fixed date on which any principal of
such security or Indebtedness is due and payable, including pursuant
to any mandatory redemption provision (but excluding any provision
providing for the repurchase thereof at the option of the holder
thereof).
ax. REPLACE THE DEFINITION OF SUBSIDIARY IN SECTION 1.01 WITH THE
FOLLOWING DEFINITION.
"SUBSIDIARY" of any specified Person means any corporation,
partnership, joint venture, association or other business entity,
whether now existing or hereafter organized or acquired, (i) in the
case of a corporation, of which more than 50% of the total voting
power of the Capital Stock entitled (without regard to the occurrence
of any contingency) to vote in the election of directors, officers or
trustees thereof is held by such first-named Person or any of its
Subsidiaries; or (ii) in the case of a partnership,
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joint venture, association or other business entity, with respect to
which such first-named Person or any of its Subsidiaries has the power
to direct or cause the direction of the management and policies of
such entity by contract or otherwise or if in accordance with GAAP
such entity is consolidated with the first-named Person for financial
statement purposes.
ay. INSERT THE FOLLOWING AS A NEW DEFINITION IN SECTION 1.01.
"TEMPORARY CASH INVESTMENTS" means (i) Investments in marketable,
direct obligations issued, guaranteed or insured by the United States
of America, or of any governmental agency thereof and backed by the
full faith and credit of the United States, in each case maturing
within 365 days of the date of acquisition thereof; (ii) Investments
in certificates of deposit or Eurodollar deposits, demand deposits,
time deposits, overnight bank deposits, and banker's acceptances
offered by a Qualified Issuer, maturing within 365 days of the date of
acquisition thereof; (iii) commercial paper maturing no more than one
year from the date of creation thereof and, at the time of
acquisition, having a rating of at least A-1 from S&P or at least P-1
from Moody's; (iv) repurchase obligations with a term of not more than
seven (7) days for underlying securities of the type described in
clause (i) above entered into with any Qualified Issuer; (v) deposits
available for withdrawal on demand with a Qualified Issuer; (vi)
Investments not exceeding 365 days in duration in money market funds
that invest substantially all of such funds' assets in the Investments
described in the preceding clauses (i), (ii) and (iii); and (vii)
foreign equivalents of the Investments described in clauses (i), (ii)
and (v) above, provided that such foreign equivalents shall be
permitted by the Company or a Subsidiary only to the extent that such
Person holds such foreign equivalents in the ordinary course of
business and in the currency of the country where such Person conducts
its business.
az. INSERT THE FOLLOWING AS A NEW DEFINITION IN SECTION 1.01.
"TNNI" means Telemundo News Network, Inc., a Delaware corporation.
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ba. REPLACE THE DEFINITION OF UNRESTRICTED SUBSIDIARY IN SECTION 1.01 WITH
THE FOLLOWING DEFINITION.
"UNRESTRICTED SUBSIDIARY" means (a) any Subsidiary of an Unrestricted
Subsidiary and (b) any Subsidiary of the Company which is classified
after the Operative Date as an Unrestricted Subsidiary by a resolution
adopted by the Board of Directors of the Company, provided that a
Subsidiary organized or acquired after the Operative Date may be so
classified as an Unrestricted Subsidiary only if such classification
is in compliance with the Section 4.05 of this Indenture. The Trustee
shall be given prompt notice by the Company of each resolution adopted
by the Board of Directors of the Company under this provision,
together with a copy of each such resolution adopted.
bb. INSERT THE FOLLOWING AS A NEW DEFINITION IN SECTION 1.01.
"VIDEO 44" means Video 44, an Illinois general partnership.
bc. INSERT THE FOLLOWING AS A NEW DEFINITION IN SECTION 1.01.
"WHOLLY-OWNED SUBSIDIARY" or "WHOLLY-OWNED RESTRICTED SUBSIDIARY"
means any Restricted Subsidiary all of the outstanding voting
securities (other than directors' qualifying shares) of which are
owned, directly or indirectly, by the Company.
Section 1.02. AMENDMENTS AND MODIFICATIONS TO ARTICLE FOUR.
a. SECTION 4.03 OF THE INDENTURE, ENTITLED "COMMISSION REPORTS," IS
REPLACED IN ITS ENTIRETY BY ADDING A NEW SECTION 4.03 THAT READS AS
FOLLOWS:
So long as any of the Securities is outstanding, the Company
shall file with the Commission and, within 15 days after it files them
with the Commission, file with the Trustee and thereafter promptly
mail or promptly cause the Trustee to mail to the Holders of
Securities at their addresses as set forth in the register of
Securities, copies of the periodic reports and the information,
documents and other reports (without exhibits unless requested in
writing by any such Holder) which the Company is required to file with
the Commission pursuant to Section 13 or 15(d) of the Exchange Act or
which the Company would be required to file with the Commission if the
Company then had a
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class of securities registered under the Exchange Act. In addition,
the Company shall cause its annual report to stockholders and any
quarterly or other financial reports furnished to its stockholders
generally to be filed with the Trustee no later than the date such
materials are mailed or made available to the Company's stockholders,
and thereafter mailed promptly to the Holders of Securities at their
addresses as set forth in the register of Securities. The Company
shall also comply with the provisions of TIA Section 314(a).
b. SECTION 4.05 OF THE INDENTURE, ENTITLED "LIMITATION ON RESTRICTED
PAYMENTS," IS REPLACED IN ITS ENTIRETY BY NEW SECTION 4.05 THAT READS
AS FOLLOWS:
Section 4.05. LIMITATION ON RESTRICTED PAYMENTS.
The Company will not make, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, make, any
Restricted Payment, unless:
(a) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to such
Restricted Payment;
(b) immediately after giving pro forma effect to such
Restricted Payment, the Company could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under Section 4.10(a)
of this Indenture; and
(c) immediately after giving effect to such Restricted
Payment, the aggregate of all Restricted Payments declared or made
after the Operative Date does not exceed the sum of (1) 100% of the
Company's Cumulative EBITDA minus 1.4 times the Company's Cumulative
Consolidated Interest Expense, (2) 100% of the aggregate Net Proceeds
in cash (including cash Net Proceeds received upon the conversion of
noncash proceeds) from the issue or sale, after the Operative Date, of
Capital Stock (other than Disqualified Capital Stock or Capital Stock
of the Company issued to any Subsidiary of the Company) of the Company
or any Indebtedness or other securities of the Company convertible
into or exercisable or exchangeable for Capital Stock (other than
Disqualified Capital Stock) of the Company which has been so converted
or exercised or exchanged, as the case may be, and (3) an amount equal
to the net reduction in Investments, subsequent to the Operative Date,
in any Person resulting from payments of interest on debt, dividends,
repayments of
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loans or advances, return of capital, or other transfers of property
(but only to the extent such distributions are not included in the
calculation of Consolidated Net Income), in each case, to the Company
or any Restricted Subsidiary from any Person, not to exceed in the
case of any Person, the amount of Investments previously made by the
Company or any Restricted Subsidiary in such Person and which was
treated as a Restricted Payment.
The provisions of this section shall not prohibit: (i) the payment of
any distribution within 60 days after the date of declaration thereof, if
at such date of declaration such payment would comply with the provisions
of this Indenture; (ii) so long as no Default or Event of Default shall
have occurred and be continuing, the purchase, redemption, acquisition,
cancellation or other retirement for value of shares of Capital Stock of
the Company held by present or former officers, directors or employees (or
their estates or beneficiaries under their estates) and which payments, in
the aggregate to all such Persons do not exceed $4,000,000; (iii) so long
as no Default or Event of Default shall have occurred and be continuing,
the acquisition, redemption or retirement of any shares of Capital Stock of
the Company or a Restricted Subsidiary or by conversion into, or by or in
exchange for, shares of Capital Stock (other than Disqualified Capital
Stock) of the Company, provided that the proceeds of any sale of Capital
Stock shall not increase the amount available for Restricted Payments or
(iv) distributions by Video 44 to a minority partner (other than a
Restricted Subsidiary) pursuant to the Joint Venture Agreement. The amounts
expended to purchase, redeem, retire or acquire, convert or exchange or
make distributions on Capital Stock as set forth in the immediately
preceding clauses (ii), (iii) and (iv) (other than distributions funded by
capital contributions of Telemundo of Chicago, Inc. or Harriscope of
Chicago, Inc. pursuant to Section 3.5(a) of the Joint Venture Agreement)
shall be excluded from the calculation of the amount available for
Restricted Payments under the previous paragraph. No payments made or paid
pursuant to clause (c) of the previous paragraph shall be counted for
purposes of calculating the amounts utilized for Restricted Payments
pursuant to clause (c) of the previous paragraph to the extent that such
amount was already counted for such purpose.
Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by Section 4.09 of this Indenture were
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computed, which calculations may be based upon the Company's latest
available financial statements, and that no Default or Event of Default
exists and is continuing and no Default or Event of Default will occur
immediately after giving effect to any Restricted Payment.
c. SECTION 4.09 OF THE INDENTURE, ENTITLED "LIMITATION ON TRANSACTIONS
WITH AFFILIATES," IS REPLACED IN ITS ENTIRETY BY A NEW SECTION 4.09
THAT READS AS FOLLOWS:
Section 4.09. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, conduct any business or enter
into any transaction or series of related transactions (including,
without limitation, the sale, purchase, exchange or lease of assets or
property or rendering of services) with or for the benefit of any
Affiliate (other than the Company or a Wholly-Owned Restricted
Subsidiary or a majority-owned Restricted Subsidiary (so long as no
minority interest is owned by an entity which is otherwise an
Affiliate) and including entities in which the Company or any of its
Restricted Subsidiaries own a minority interest) (an "Affiliate
Transaction") or extend, renew, waive or otherwise modify the terms of
any Affiliate Transaction entered into prior to the Operative Date
unless the terms of such Affiliate Transaction are fair and reasonable
to the Company or such Restricted Subsidiary, as the case may be, and
the terms of such Affiliate Transaction are at least as favorable as
the terms which could be obtained by the Company or such Restricted
Subsidiary, as the case may be, in a comparable transaction made on an
arm's-length basis between unaffiliated parties. With respect to any
Affiliate Transaction involving an amount or having a value in excess
of $5 million, the Company must obtain a resolution of the Board of
Directors (including a majority of the disinterested directors)
certifying that, in their good faith judgment, such Affiliate
Transaction complies with the preceding sentence and with respect to
any Affiliate Transaction involving an amount or having a value in
excess of $10 million, such certificate shall be accompanied by a
written opinion from an Independent Financial Advisor that the
transaction is fair from a financial point of view to the Company or
such Restricted Subsidiary. A certificate evidencing such resolution
shall be delivered to the Trustee within five Business Days after the
consummation of such Affiliate Transaction.
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The foregoing provisions will not apply to (i) any Restricted
Payment that is not prohibited by the provisions described under
Section 4.05 of this Indenture; or (ii) any transaction, approved by
the Board of Directors of the Company, with an officer or director of
the Company or of any Subsidiary in his or her capacity as officer or
director entered into in the ordinary course of business, including
compensation and employee benefit arrangements with any officer or
director of the Company.
d. SECTION 4.10 OF THE INDENTURE, ENTITLED "LIMITATION ON INCURRENCES OF
ADDITIONAL INDEBTEDNESS AND ISSUANCES OF DISQUALIFIED CAPITAL STOCK,"
IS REPLACED IN ITS ENTIRETY WITH A NEW SECTION 4.10 THAT READS AS
FOLLOWS:
Section 4.10. LIMITATION ON ADDITIONAL INDEBTEDNESS.
(a) The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, incur any
Indebtedness (including Acquired Indebtedness) unless (a) after giving
effect to the incurrence of such Indebtedness and the receipt and
application of the proceeds thereof, the ratio of the total
Indebtedness of the Company and its Restricted Subsidiaries, on a
consolidated basis, to the Company's EBITDA (determined on a pro forma
basis for the preceding four full fiscal quarters of the Company for
which financial statements are available at the date of determination)
is less than 7.0 to 1 if the Indebtedness is incurred prior to
eighteen months from the Operative Date and 6.5 to 1 if the
Indebtedness is incurred thereafter, determined by giving pro forma
effect to (i) the incurrence of such Indebtedness and (if applicable)
the application of the net proceeds therefrom, including to refinance
other Indebtedness, as if such Indebtedness was incurred, and the
application of such proceeds occurred, at the beginning of such four
fiscal quarters; (ii) the incurrence, repayment or retirement of any
other Indebtedness by the Company and its Restricted Subsidiaries
since the first day of such four full fiscal quarters (and all
Indebtedness incurred and the receipt and application of proceeds
thereof and all Indebtedness repaid or retired since the end of the
most recently completed fiscal quarter of the Company for which a
balance sheet is available preceding the date of determination) as if
such incurrence (and, if applicable, the application of proceeds),
repayment and retirement occurred at the beginning of such four fiscal
quarters; (iii) in the case of Acquired Indebtedness, the related
acquisition as if such acquisition had occurred at the beginning of
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such four fiscal quarters; and (iv) any acquisition or disposition by
the Company and its Restricted Subsidiaries of any company or any
business or any assets out of the ordinary course of business, or any
related repayment of Indebtedness, in each case since the first day of
such four fiscal quarters, assuming such acquisition, disposition or
repayment had been consummated on the first day of such four fiscal
quarters, and (b) no Default or Event of Default shall have occurred
and be continuing at the time or as a consequence of the incurrence of
such Indebtedness.
(b) Notwithstanding the foregoing, the Company and any of its
Restricted Subsidiaries, may incur Permitted Indebtedness, as
specified, provided, that the Company will not incur any Permitted
Indebtedness that ranks junior in right of payment to the Securities
that has a maturity or mandatory sinking fund payment prior to the
Stated Maturity of the Securities.
e. SECTION 4.11 OF THE INDENTURE, ENTITLED "LIMITATION ON PAYMENT
RESTRICTIONS AFFECTING SUBSIDIARIES," IS REPLACED IN ITS ENTIRETY BY
ADDING A NEW SECTION 4.11 THAT READS AS FOLLOWS:
Section 4.11. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
RESTRICTED SUBSIDIARIES.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (i)(a) pay dividends or
make any other distributions to the Company or any other Restricted
Subsidiary on its Capital Stock or with respect to any other interest
or participation in, or measured by, its profits or (b) pay any
Indebtedness owed to the Company or any other Restricted Subsidiary,
(ii) make loans or advances to the Company or any other Restricted
Subsidiary, or (iii) transfer any of its properties or assets to the
Company or any other Restricted Subsidiary, except for such
encumbrances or restrictions existing under or by reason of:
(a) any agreement existing on the Operative Date, including
the Loan and Security Agreement, the Senior Indenture and this
Indenture;
(b) any agreement governing Acquired Indebtedness or Capital
Stock of a Person acquired by the Company or any of its Restricted
Subsidiaries as in effect at the time of such acquisition (except to
the
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extent such Indebtedness was incurred in connection with or in
anticipation of such acquisition), provided that such restriction does
not extend to or cover any Person, or the properties or assets of any
Person, other than the Person so acquired;
(c) agreements relating to an acquisition of Property,
provided that such encumbrances or restrictions relate solely to the
Property so acquired;
(d) agreements relating to Indebtedness incurred to refinance
Indebtedness set forth in preceding clauses (a)-(c) and which
Indebtedness incurred to refinance Indebtedness set forth in preceding
clauses (a)-(c) is refinancing Indebtedness permitted under Sections
4.10 and 4.15 of this Indenture, provided that the encumbrances or
restrictions contained in the agreements governing such permitted
refinancing are no more restrictive in the aggregate than such
encumbrances or restrictions contained in the agreements governing the
Indebtedness being refinanced immediately prior to such refinancing
and do not extend to or cover any other Person or the property of any
other Person other than the Person in respect of whom such encumbrance
or restriction relating to the Indebtedness being refinanced applied;
(e) applicable law;
(f) customary non-assignment provisions in leases and any
license of intellectual property entered into in the ordinary course
of business (including programming agreements) and Local Marketing
Agreements;
(g) agreements for the sale of any assets of any Restricted
Subsidiary, provided that such restriction is only applicable to the
assets to be sold by such Restricted Subsidiary;
(h) Purchase Money Indebtedness for property acquired in the
ordinary course of business that only imposes restrictions on the
Property so acquired and any improvements on such Property; and
(i) Capitalized Lease Obligations that are otherwise permitted
hereunder, provided that such encumbrance or restriction does not
extend to any Property other than that subject to the underlying
lease.
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f. SECTION 4.12 OF THE INDENTURE, ENTITLED "LIMITATION ON LIENS," IS
REPLACED IN ITS ENTIRETY BY ADDING A NEW SECTION 4.12 THAT READS AS
FOLLOWS:
Section 4.12. LIMITATION ON LIENS.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, create, incur or otherwise cause or suffer to exist
or become effective any Liens of any kind (other than Permitted Liens)
upon any property or asset of the Company or any Restricted Subsidiary
or any shares of stock or debt of any Restricted Subsidiary, now owned
or hereafter acquired, unless (i) if such Lien secures Indebtedness
which is PARI PASSU with the Securities, then the Securities are
secured on an equal and ratable basis with the obligations so secured
until such time as such obligation is no longer secured by a Lien or
(ii) if such Lien secures Indebtedness which is subordinated to the
Securities, then the Securities are secured prior to the obligations
so secured, and such Lien shall be subordinated to the Lien granted to
the Holders of the Securities to the same extent as such subordinated
Indebtedness is subordinated to the Securities until such time as such
obligation is no longer secured by a Lien.
g. SECTION 4.15 OF THE INDENTURE, ENTITLED "LIMITATION ON INVESTMENTS,"
IS DELETED AND REPLACED IN ITS ENTIRETY BY ADDING A NEW SECTION 4.15
THAT READS AS FOLLOWS:
Section 4.15. LIMITATION ON RESTRICTED SUBSIDIARY DEBT AND PREFERRED
STOCK
The Company will not permit any of its Restricted Subsidiaries
to, directly or indirectly, incur any Indebtedness (including Acquired
Indebtedness) or issue any Preferred Stock other than, without
duplication:
(a) (1) Indebtedness of any Restricted Subsidiary evidenced
by or arising under the Credit Facilities, which taken together with
any Indebtedness of the Company or any Restricted Subsidiary evidenced
by or arising under the Credit Facilities (without duplication) is in
an aggregate principal amount at any one time not to exceed
$75 million less any amounts incurred pursuant to clause (a)(4) of
this covenant;
(2) Purchase Money Indebtedness and Capitalized Lease
Obligations incurred in the ordinary course of business in a principal
amount outstanding at
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the time of incurrence which does not in the aggregate exceed $15
million at any time outstanding;
(3) Indebtedness incurred or incurrable under any
Guarantee of any Restricted Subsidiary made in the ordinary course of
business and not to exceed $10 million at any time outstanding; and
(4) Indebtedness incurred or incurrable pursuant to a
Local Marketing Agreement, for a television station located outside of
the continental United States and operated in a country, a territory
or a possession in which the Company owns and operates a television
station on the Operative Date, in an amount as determined in
accordance with GAAP, not to exceed $50 million at any time
outstanding;
provided, however, that (A) after giving effect to the incurrence of
any Indebtedness pursuant to this clause (a) and the receipt and
application of the proceeds thereof, the ratio of the total
Indebtedness of the Company's Restricted Subsidiaries (excluding any
guarantee of the Credit Facilities by any Restricted Subsidiary
pursuant to clause (b), Indebtedness under clause (f) or Indebtedness
under clause (h) of this covenant), on a combined consolidated basis,
to the Company's EBITDA (determined on a pro forma basis for the
preceding four fiscal quarters of the Company for which financial
statements are available at the date of determination) is less than
3.0 to 1, determined by giving pro forma effect to (i) the incurrence
of such Indebtedness and (if applicable) the application of the net
proceeds therefrom, including to refinance other Indebtedness, as if
such Indebtedness was incurred, and the application of such proceeds
occurred, at the beginning of such four fiscal quarters; (ii) the
incurrence, repayment or retirement of any other Indebtedness by the
Company and its Restricted Subsidiaries since the first day of such
four full fiscal quarters (and all Indebtedness incurred and the
receipt and application of proceeds thereof and all Indebtedness
repaid or retired since the end of the most recently completed fiscal
quarter of the Company for which a balance sheet is available
preceding the date of determination) as if such incurrence (and, if
applicable, the application of proceeds), repayment and retirement
occurred at the beginning of such four fiscal quarters; (iii) in the
case of Acquired Indebtedness, the related acquisition as if such
acquisition had occurred at the beginning of such four fiscal
quarters; and (iv) any acquisition or disposition by the Company and
its Restricted
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Subsidiaries of any company or any business or any assets out of the
ordinary course of business, or any related repayment of Indebtedness,
in each case since the first day of such four fiscal quarters,
assuming such acquisition, disposition or repayment had been
consummated on the first day of such four fiscal quarters, and (B) no
Default or Event of Default shall have occurred and be continuing at
the time or as a consequence of the incurrence of such Indebtedness;
(b) Indebtedness of any Restricted Subsidiary or Preferred
Stock of any Restricted Subsidiary issued to and held by the Company
or a Wholly-Owned Restricted Subsidiary of the Company, provided that
such Indebtedness or Preferred Stock is at all times held by the
Company or a Wholly-Owned Restricted Subsidiary of the Company;
(c) Indebtedness of any Restricted Subsidiary under Currency
Agreements and Interest Rate Protection Agreements which are entered
into for the purpose of protection against risk of currency or
interest rate fluctuations affecting any Restricted Subsidiary in its
ordinary course of business or that are related to payment obligations
of any Restricted Subsidiary otherwise permitted under this Indenture;
(d) Indebtedness or Preferred Stock of any Restricted
Subsidiary remaining outstanding on the Operative Date;
(e) Indebtedness incurred or incurrable in respect of
reimbursement obligations related to letters of credit, banker's
acceptances or similar facilities entered into in the ordinary course
of business;
(f) Indebtedness incurred or incurrable by Telemundo of
Chicago, Inc. and Harriscope of Chicago, Inc. pursuant to Section
3.5(a) of the Joint Venture Agreement;
(g) Indebtedness in respect to bids, performance and surety
bonds and obligations provided in the ordinary course of business and
appeal bonds;
(h) Acquired Indebtedness, provided that such Indebtedness was
not incurred or issued as a result of or in connection with or in
anticipation of such Person becoming a Restricted Subsidiary of the
Company and immediately after giving effect to such Person becoming a
Restricted Subsidiary of the Company (as if such Indebtedness was
incurred and issued on the first day
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of the four quarter period) the Company could incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) under
Section 4.10 of this Indenture; and
(i) Indebtedness incurred by a Restricted Subsidiary in
exchange for, or the proceeds of which are used to refinance
Indebtedness referred to in clauses (a)(2), (c) - (g) of this Section,
provided that (i) such Indebtedness is in an aggregate principal
amount not in excess of the aggregate principal amount then
outstanding of the Indebtedness being refinanced, plus the amount of
accrued and unpaid interest, if any, and premiums owed, if any, not in
excess of preexisting payment provisions on such Indebtedness being
refinanced, plus the reasonable, customary expenses, fees, and costs
of the Company incurred in connection with such refinancing, (ii) such
Indebtedness is scheduled to mature either (A) no earlier than the
Indebtedness being refinanced or (B) after the Stated Maturity of the
Securities, and (iii) such Indebtedness has an average life at the
time such Indebtedness is incurred that is equal to or greater than
the average life of the Indebtedness being refinanced.
Section 1.03. AMENDMENTS AND MODIFICATIONS TO ARTICLE FIVE
a. SECTION 5.01 OF THE INDENTURE, ENTITLED "LIMITATIONS ON MERGERS,
CONSOLIDATIONS OR SALE OF ASSETS," IS RESTATED IN ITS ENTIRETY TO READ
AS FOLLOWS:
Section 5.01. MERGER, CONSOLIDATION OR SALE OF ASSETS.
The Company will not consolidate with, merge with or into, or
transfer all or substantially all of its assets (as an entirety or
substantially as an entirety in one transaction or a series of related
transactions), to any Person (other than the merger or transfer of
assets of a Wholly-Owned Restricted Subsidiary of the Company into
another Wholly-Owned Restricted Subsidiary of the Company or into the
Company) unless: (i) the Company shall be the continuing Person, or
the Person (if other than the Company) formed by such consolidation or
into which the Company is merged or to which the properties and assets
of the Company are transferred shall be a corporation organized and
existing under the laws of the United States or any State thereof or
the District of Columbia and shall expressly assume, by a supplemental
indenture, executed and delivered to the Trustee, in form satisfactory
to the Trustee, all of the obligations of the Company under the
Securities and this Indenture, and the obligations under this
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Indenture shall remain in full force and effect; (ii) immediately
before and immediately after giving effect to such transaction on a
pro forma basis, no Default or Event of Default (and no event that,
after notice or lapse of time, or both, would become an Event of
Default) shall have occurred and be continuing, and (iii) immediately
after giving effect to such transaction on a pro forma basis the
Company or such Person could incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under Section 4.10,
and immediately after such transaction, the Company or the surviving
Person holds all material permits, licenses, certifications or
approvals required for operation of the business of the Company as the
same is conducted prior to such transaction and immediately
thereafter.
In connection with any consolidation, merger or transfer of
assets contemplated by this section, the Company shall deliver, or
cause to be delivered, to the Trustee, in form and substance
reasonably satisfactory to the Trustee, an Officers' Certificate and
an opinion of counsel, each stating that such consolidation, merger or
transfer and the supplemental indenture in respect thereto comply with
this provision and that all conditions precedent herein provided for
relating to such transaction or transactions have been complied with.
Section 1.05. MUTATIS MUTANDIS EFFECT. The Indenture is hereby amended
MUTATIS MUTANDIS to reflect the addition or amendment of the definitional terms
incorporated into the Indenture pursuant to Section 1.01 hereof.
ARTICLE 2
MISCELLANEOUS
Section 2.01. EFFECT OF THIS FIRST SUPPLEMENTAL INDENTURE. This First
Supplemental Indenture is supplemental to the Indenture and does and shall be
deemed to form a part of, and shall be construed in connection with and as part
of, the Indenture for any and all purposes, including but not limited to
discharge of the Indenture as provided in Article Eight of the Indenture.
Except as specifically modified herein, the Indenture and the Securities are in
all respects ratified and confirmed and shall remain in full force and effect in
accordance with their terms.
Section 2.02. TRUSTEE. Except as otherwise expressly provided herein, no
duties, responsibilities or liabilities are
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assumed, or shall be construed to be assumed, by the Trustee by reason of this
First Supplemental Indenture. This First Supplemental Indenture is executed and
accepted by the Trustee subject to all the terms and conditions set forth in the
Indenture with the same force and effect as if those terms and conditions were
repeated at length herein and made applicable to the Trustee with respect
hereto. The Trustee assumes no responsibility for the recitals contained
herein, which shall be taken as statements of the Company, and makes no
representation as to the validity or sufficiency of this First Supplemental
Indenture.
Section 2.03. GOVERNING LAW. The laws of the State of New York shall
govern this First Supplemental Indenture without regard to principles of
conflicts of law. The Trustee and the Company agree to submit to the
jurisdiction of the courts of the State of New York in any action or proceeding
arising out of or relating to this First Supplemental Indenture.
Section 2.04. COUNTERPARTS. The parties may sign any number of copies of
this First Supplemental Indenture. Each signed copy shall be an original, but
all of such executed copies together shall represent the same agreement.
Section 2.05. SEVERABILITY. In case one or more of the provisions in this
First Supplemental Indenture shall be held invalid, illegal or unenforceable, in
any respect for any reason, the validity, illegality and enforceability of any
such provision in every other respect and of the remaining provisions shall not
in any way be affected or impaired thereby, it being intended that all of the
provisions hereof shall be enforceable to the full extent permitted by law.
Section 2.06. EFFECTIVE DATE OF THIS FIRST SUPPLEMENTAL INDENTURE. This
First Supplemental Indenture and the Amendments to Sections 1.01, 4.03, 4.05,
4.09, 4.10, 4.11, 4.12, 4.15 and 5.01, shall be effective pursuant to Section
10.02 of the Indenture immediately upon execution by the Company and delivery to
and execution by the Trustee of this First Supplemental Indenture. The
Amendments shall not become operative until such date that the Company delivers
to the Trustee an Officer's Certificate that the following events have occurred:
(i) the Company has paid to Holders who consented to the Amendments a Consent
Fee, if required pursuant to the Company's Offer to Purchase and Consent
Solicitation Statement dated November 27, 1995, and as amended from time to time
("Offer to Purchase"), (ii) the Repurchase Offer (as defined in the Offer to
Purchase) for the Securities by the Company pursuant to the Offer to Purchase
has been completed, (iii) the Company's acquisition of a 74.5% interest in Video
44 has been completed or terminated, and (iv) the Operative Date has occurred;
PROVIDED that if the Operative Date has not occurred on or before May 15, 1996,
the
-35-
<PAGE>
Amendments shall not ever become operative thereafter. On the Operative Date,
the Company shall deliver to the Trustee a certified copy of the Senior
Indenture as in effect on the Operative Date.
-36-
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental
Indenture to be duly executed, all as of the date first written above.
TELEMUNDO GROUP, INC.
By: /s/ PETER J. HOUSMAN II
-------------------------------
Name: Peter J. Housman II
Title: Chief Financial Officer and
Treasurer
(SEAL)
Attest:
/s/ Horace G. Dawson III
- -------------------------
Horace G. Dawson III
Assistant General Counsel and
Assistant Secretary
BANKERS TRUST COMPANY,
as Trustee
By: /s/ Jacqueline Bartnick
-------------------------
Name: Jacqueline Bartnick
Title: Assistant Vice President
(SEAL)
Attest:
/s/ Jenna Kaufman
- --------------------
Name: Jenna Kaufman
Title: Vice President
-37-
<PAGE>
TELEMUNDO GROUP, INC.
AND
BANK OF MONTREAL TRUST COMPANY
TRUSTEE
----------------------------
$___________________
___% SENIOR NOTES DUE 2006
----------------------------
INDENTURE
DATED AS OF FEBRUARY __, 1996
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1
DEFINITIONS
Section 1.01 Definitions. . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02 Other Definitions. . . . . . . . . . . . . . . . . . . . .20
Section 1.03 Incorporation by Reference of Trust Indenture Act. . . . .21
Section 1.04 Rules of Construction. . . . . . . . . . . . . . . . . . .21
ARTICLE 2
THE SENIOR NOTES
Section 2.01 Form and Dating. . . . . . . . . . . . . . . . . . . . . .22
Section 2.02 Execution and Authentication . . . . . . . . . . . . . . .22
Section 2.03 Registrar and Paying Agent . . . . . . . . . . . . . . . .23
Section 2.04 Paying Agent To Hold Money in Trust. . . . . . . . . . . .23
Section 2.05 Holder Lists . . . . . . . . . . . . . . . . . . . . . . .24
Section 2.06 Transfer and Exchange. . . . . . . . . . . . . . . . . . .24
Section 2.07 Replacement Senior Notes . . . . . . . . . . . . . . . . .25
Section 2.08 Outstanding Senior Notes . . . . . . . . . . . . . . . . .25
Section 2.09 When Treasury Senior Notes Disregarded . . . . . . . . . .26
Section 2.10 Temporary Senior Notes . . . . . . . . . . . . . . . . . .26
Section 2.11 Cancellation . . . . . . . . . . . . . . . . . . . . . . .26
Section 2.12 Defaulted Interest . . . . . . . . . . . . . . . . . . . .26
Section 2.13 CUSIP Number . . . . . . . . . . . . . . . . . . . . . . .27
Section 2.14 Global Securities. . . . . . . . . . . . . . . . . . . . .27
ARTICLE 3
REDEMPTION
Section 3.01 Notice to Trustee. . . . . . . . . . . . . . . . . . . . .27
Section 3.02 Selection of Senior Notes To Be Redeemed . . . . . . . . .28
Section 3.03 Notice of Redemption . . . . . . . . . . . . . . . . . . .28
Section 3.04 Effect of Notice of Redemption . . . . . . . . . . . . . .29
Section 3.05 Deposit of Redemption Price. . . . . . . . . . . . . . . .29
Section 3.06 Senior Notes Redeemed in Part. . . . . . . . . . . . . . .29
(i)
<PAGE>
ARTICLE 4
COVENANTS
Section 4.01 Payment of Senior Notes. . . . . . . . . . . . . . . . . .30
Section 4.02 Commission Reports . . . . . . . . . . . . . . . . . . . .30
Section 4.03 Compliance Certificate . . . . . . . . . . . . . . . . . .30
Section 4.04 Maintenance of Office or Agency. . . . . . . . . . . . . .31
Section 4.05 Limitation on Additional Indebtedness. . . . . . . . . . .32
Section 4.06 Limitation on Restricted Payments. . . . . . . . . . . . .32
Section 4.07 Limitation on Liens. . . . . . . . . . . . . . . . . . . .34
Section 4.08 Limitation on Transactions with Affiliates . . . . . . . .34
Section 4.09 Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries. . . . . . . . . . . . . . . . . .35
Section 4.10 Limitation on Certain Asset Sales. . . . . . . . . . . . .36
Section 4.11 Limitation on Capital Stock of Restricted Subsidiaries . .39
Section 4.12 Limitation on Restricted Subsidiary Debt and Preferred
Stock. . . . . . . . . . . . . . . . . . . . . . . . . . .39
Section 4.13 Limitation on Sale and Lease-Back Transactions . . . . . .41
Section 4.14 Change of Control. . . . . . . . . . . . . . . . . . . . .41
Section 4.15 Continued Existence. . . . . . . . . . . . . . . . . . . .44
Section 4.16 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . .44
Section 4.17 Stay, Extension and Usury Laws . . . . . . . . . . . . . .44
Section 4.18 Investment Company Act . . . . . . . . . . . . . . . . . .44
Section 4.19 Appointments to Fill Vacancies in Trustee's Office . . . .44
Section 4.20 Further Instruments and Acts . . . . . . . . . . . . . . .44
ARTICLE 5
SUCCESSORS
Section 5.01 When the Company May Merge, Etc. . . . . . . . . . . . . .45
Section 5.02 Successor Corporation Substituted. . . . . . . . . . . . .46
Section 5.03 Purchase Option on Change of Control . . . . . . . . . . .46
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01 Events of Default. . . . . . . . . . . . . . . . . . . . .46
Section 6.02 Acceleration . . . . . . . . . . . . . . . . . . . . . . .48
Section 6.03 Other Remedies . . . . . . . . . . . . . . . . . . . . . .48
Section 6.04 Waiver of Past Defaults. . . . . . . . . . . . . . . . . .48
Section 6.05 Control by Majority. . . . . . . . . . . . . . . . . . . .49
Section 6.06 Limitation on Suits. . . . . . . . . . . . . . . . . . . .49
Section 6.07 Rights of Holders To Receive Payment . . . . . . . . . . .49
(ii)
<PAGE>
Section 6.08 Collection Suit by Trustee . . . . . . . . . . . . . . . .50
Section 6.09 Trustee May File Proofs of Claim . . . . . . . . . . . . .50
Section 6.10 Priorities . . . . . . . . . . . . . . . . . . . . . . . .50
Section 6.11 Undertaking for Costs. . . . . . . . . . . . . . . . . . .51
ARTICLE 7
THE TRUSTEE
Section 7.01 Duties of the Trustee. . . . . . . . . . . . . . . . . . .51
Section 7.02 Rights of the Trustee. . . . . . . . . . . . . . . . . . .52
Section 7.03 Individual Rights of the Trustee . . . . . . . . . . . . .53
Section 7.04 Trustee's Disclaimer . . . . . . . . . . . . . . . . . . .53
Section 7.05 Notice of Defaults . . . . . . . . . . . . . . . . . . . .53
Section 7.06 Reports by the Trustee to Holders. . . . . . . . . . . . .54
Section 7.07 Compensation and Indemnity . . . . . . . . . . . . . . . .54
Section 7.08 Replacement of the Trustee . . . . . . . . . . . . . . . .55
Section 7.09 Successor Trustee by Merger, Etc . . . . . . . . . . . . .56
Section 7.10 Eligibility, Disqualification. . . . . . . . . . . . . . .56
Section 7.11 Preferential Collection of Claims Against Company. . . . .56
ARTICLE 8
SATISFACTION AND DISCHARGE OF INDENTURE
Section 8.01 Termination of Company's Obligations . . . . . . . . . . .56
Section 8.02 Application of Trust Money . . . . . . . . . . . . . . . .60
Section 8.03 Repayment to Company . . . . . . . . . . . . . . . . . . .60
Section 8.04 Reinstatement. . . . . . . . . . . . . . . . . . . . . . .61
ARTICLE 9
AMENDMENTS
Section 9.01 Without the Consent of Holders . . . . . . . . . . . . . .61
Section 9.02 With the Consent of Holders. . . . . . . . . . . . . . . .62
Section 9.03 Compliance with the Trust Indenture Act. . . . . . . . . .63
Section 9.04 Revocation and Effect of Consents. . . . . . . . . . . . .63
Section 9.05 Notation on or Exchange of Senior Notes. . . . . . . . . .63
Section 9.06 Trustee Protected. . . . . . . . . . . . . . . . . . . . .64
(iii)
<PAGE>
ARTICLE 10
GENERAL PROVISIONS
Section 10.01 Trust Indenture Act Controls . . . . . . . . . . . . . . .64
Section 10.02 Notices. . . . . . . . . . . . . . . . . . . . . . . . . .64
Section 10.03 Communication by Holders With Other Holders. . . . . . . .65
Section 10.04 Certificate and Opinion as to Conditions Precedent . . . .65
Section 10.05 Statements Required in Certificate or Opinion. . . . . . .65
Section 10.06 Rules by Trustee and Agents. . . . . . . . . . . . . . . .66
Section 10.07 Legal Holidays . . . . . . . . . . . . . . . . . . . . . .66
Section 10.08 No Recourse Against Others . . . . . . . . . . . . . . . .66
Section 10.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . .67
Section 10.10 Other Provisions . . . . . . . . . . . . . . . . . . . . .67
Section 10.11 Governing Law. . . . . . . . . . . . . . . . . . . . . . .67
Section 10.12 No Adverse Interpretation of Other Agreements. . . . . . .68
Section 10.13 Successors . . . . . . . . . . . . . . . . . . . . . . . .68
Section 10.14 Severability . . . . . . . . . . . . . . . . . . . . . . .68
Section 10.15 Table of Contents, Headings, Etc . . . . . . . . . . . . .68
(iv)
<PAGE>
CROSS-REFERENCE TABLE *
TRUST INDENTURE ACT SECTION INDENTURE SECTION
- --------------------------- -----------------
Section 310 (a)(1). . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2). . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3). . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4). . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . .7.08, 7.10, 10.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
Section 311 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
Section 312 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.05
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 10.03
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 10.03
Section 313 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(1). . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b)(2). . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(c) . . . . . . . . . . . . . . . . . . . . . . .7.06, 10.02
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
Section 314 (a) . . . . . . . . . . . . . . . . . . . .4.02, 4.03, 10.02
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1). . . . . . . . . . . . . . . . . . . . . . . . . 10.04
(c)(2). . . . . . . . . . . . . . . . . . . . . . . . . 10.04
(c)(3). . . . . . . . . . . . . . . . . . . . . . . . . .N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . .N.A.
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . 10.05
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . .N.A.
Section 315 (a) . . . . . . . . . . . . . . . . . . . . . . . . . 7.01(b)
(b) . . . . . . . . . . . . . . . . . . . . . . . 7.05, 10.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . . 7.01(a)
(d) . . . . . . . . . . . . . . . . . . . . . . . . . 7.01(c)
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
Section 316 (a)(last sentence). . . . . . . . . . . . . . . . . . . 2.09
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . 6.05
(a)(2)(B) . . . . . . . . . . . . . . . . . . . . . . . 6.04
(a)(2). . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 6.02
Section 317 (a)(1). . . . . . . . . . . . . . . . . . . . . . . . . 6.08
(a)(2). . . . . . . . . . . . . . . . . . . . . . . . . 6.09
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.04
Section 318 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . 10.01
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 10.01
N.A. means not applicable
- ----------------
*This Cross-Reference Table is not part of the Indenture.
(v)
<PAGE>
THIS INDENTURE, dated as of February __, 1996, is between Telemundo Group, Inc.,
a Delaware corporation (the "Company"), and Bank of Montreal Trust Company, a
New York banking corporation ("Trustee"). The Company has duly authorized the
creation of its ____% Senior Notes due 2006 (the "Senior Notes") and to provide
therefor the Company has duly authorized the execution and delivery of this
Indenture. Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the holders from time to time of the Senior
Notes.
ARTICLE 1
DEFINITIONS
Section 1.01 DEFINITIONS.
"ACCRETED VALUE" as of any date (the "specified date") means, with
respect to each $1,000 face amount of Senior Notes, the following amount:
(a) if the specified date is one of the following dates (each an
"accrual date"), the amount set forth opposite such date below:
SEMI-ANNUAL ACCRUAL DATE ACCRETED VALUE
$
$
$
$
$
$
$
$
(b) if the specified date occurs between two semi-annual accrual dates,
the sum of (i) the accreted value for the semi-annual accrual date
immediately preceding the specified date and (ii) an amount equal to the
product of (A) the accreted value for the immediately following semi-annual
accrual date less the accreted value for the immediately preceding semi-
annual accrual date and (B) a fraction, the numerator of which is the
number of days (not to exceed 180 days) from the immediately preceding
semi-annual accrual date to the specified date, using a 360-day year of
twelve 30-day months, and the denominator of which is 180.
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person (including an
Unrestricted Subsidiary) existing at the time such Person becomes a Restricted
Subsidiary or assumed in connection with the acquisition of assets from such
Person.
"ACQUISITION" means the closing of the transactions pursuant to that
certain Agreement to Purchase NST Venture Interest and Capital Stock by and
among The
<PAGE>
Stockholders of Harriscope of Chicago, Inc. and National Subscription Television
of Chicago, Inc. and Telemundo of Chicago, Inc. dated as of November 8, 1995,
as amended or supplemented to the date hereof.
"AFFILIATE" of any specified Person means any other Person which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. For the
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlling," "controlled by," and "under common control with"), as
used with respect to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by agreement or
otherwise. With respect to the Company, Affiliate will also include any
Permitted Holder or its Affiliates so long as such Permitted Holder or its
Affiliates own shares of the Capital Stock of the Company or would otherwise be
an Affiliate.
"AGENT" means any Registrar, Paying Agent or co-registrar.
"APOLLO" means collectively, Apollo Advisors, L.P., a Delaware limited
partnership, Lion Advisors, L.P., a Delaware limited partnership, Apollo
Investment Fund, L.P., a Delaware limited partnership, Apollo Investment Fund
II, L.P., a Delaware limited partnership, or any investment fund, investment
account or other entity whose investing manager, investment advisor or general
partner, or any principal thereof, is any of the foregoing entities or
individuals or any principal or Affiliate of any of them; provided, however,
that no entity or individual shall be deemed within the definition of Apollo
when that entity or individual ceases to be an Affiliate of any of the foregoing
entities or individuals or an investment fund, investment account or other
entity whose investing manager, investment advisor or general partner, or any
principal thereof, is any of the foregoing entities or individuals or any
principal or Affiliate of any of them.
"ASSET SALE" means the sale, issuance, conveyance, transfer, lease, or
other disposition (including without limitation, by way of merger, consolidation
or Sale and Lease-Back transaction) (collectively, a "transfer"), directly or
indirectly, in any single transaction or series of related transactions
involving assets with a fair market value in excess of $1,000,000 (other than to
the Company or any of its Restricted Subsidiaries) of (a) any Capital Stock of
or other equity interest in any Restricted Subsidiary of the Company, (b) all or
substantially all of the assets of any division or line of business of the
Company or of any Restricted Subsidiary thereof, or (c) any other properties of
the Company or any Restricted Subsidiary, other than in the ordinary course of
business; provided that Asset Sales shall not include (i) transfers to the
Company or to a Restricted Subsidiary or to any other Person if after giving
effect to such sale, lease, conveyance, transfer or other disposition such other
Person becomes a Restricted Subsidiary; (ii) transfers governed by Section 5.01
of this Indenture; (iii) sales of Permitted Investments permitted under clause
(b) of the definition of "Permitted Investments;" and (iv) the sale, issuance,
conveyance, transfer, lease, or other disposition of an Investment described in
clause (c) of the definition of "Restricted Payment," provided that such
Investment was permitted by the terms of this Indenture, unless such disposition
constitutes the transfer of all of the Capital Stock of a Wholly-Owned
Restricted Subsidiary.
2
<PAGE>
"ASSET SALE PROCEEDS" means, with respect to any Asset Sale, (a) cash
received by the Company or any Restricted Subsidiary from such Asset Sale, after
(i) provision for all income or other taxes measured by or resulting from such
Asset Sale, (ii) payment of all brokerage commissions, underwriting, accounting,
legal and other fees and expenses related to such Asset Sale, (iii) provision
for minority interest holders in any Restricted Subsidiary as a result of such
Asset Sale and (iv) deduction of appropriate amounts to be provided by the
Company or a Restricted Subsidiary as a reserve, in accordance with GAAP,
against any liabilities associated with the assets sold or disposed of in such
Asset Sale and retained by the Company or a Restricted Subsidiary after such
Asset Sale, including, without limitation, pension and other post employment
benefit liabilities and liabilities related to environmental matters or against
any indemnification obligations associated with the assets sold or disposed of
in such Asset Sale, and (b) promissory notes and other noncash consideration
received by the Company or any Restricted Subsidiary from such Asset Sale or
other disposition upon the liquidation or conversion of such notes or non-cash
consideration into cash, provided however that any Asset Sale Proceeds with
respect to the assets of Telemundo News Network, Inc. shall be after deduction
for amounts actually contributed to TeleNoticias del Mundo, L.P. by the Company.
"ASSET SWAP" means an asset sale by the Company or any Restricted
Subsidiary in exchange for properties or assets that will be used in the Primary
Business of the Company and its Restricted Subsidiaries.
"ATTRIBUTABLE INDEBTEDNESS" under this Indenture in respect of a Sale
and Lease-Back Transaction means, as at the time of determination, the greater
of (i) the fair value of the property subject to such arrangement (as determined
by the Board of Directors) and (ii) the present value (discounted at the
interest rate borne by the Senior Notes, compounded annually) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale and Lease-Back Transaction (including any period for
which such lease has been extended).
"AVAILABLE ASSET SALE PROCEEDS" means, with respect to any Asset Sale,
the aggregate Asset Sale Proceeds from such Asset Sales that have not been
applied in accordance with clauses (a) or (b), and which have not yet been the
basis for an Excess Proceeds Offer in accordance with clause (c), of the second
paragraph of Section 4.10 of this Indenture.
"AVERAGE LIFE" means, as of the date of determination, with respect to
any Indebtedness or security, the quotient obtained by dividing (a) the sum of
the product of (i) the number of years from such date to the date of each
successive scheduled principal or redemption payment of such Indebtedness or
security multiplied by (ii) the amount of such principal or redemption payment
by (b) the sum of all such principal or redemption payments.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or
any authorized committee of the Board of Directors.
3
<PAGE>
"CAPITAL STOCK" means, with respect to any Person, any and all shares
or other equivalents (however designated) of capital stock, partnership
interests or any other participation, right or other interest in the nature of
an equity interest in such Person or any option, warrant or other security
convertible into any of the foregoing.
"CAPITALIZED LEASE OBLIGATIONS" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
"CASH EQUIVALENTS" means (a) securities with maturities within 365
days of the date of acquisition, issued, fully guaranteed or insured by the
United States Government or any agency thereof; (b) certificates of deposit,
time deposits, overnight bank deposits, banker's acceptances and repurchase
agreements issued by a Qualified Issuer having maturities of 270 days or less
from the date of acquisition; (c) commercial paper of an issuer rated at least
A-1 by S&P or P-1 by Moody's, or carrying an equivalent rating by a nationally
recognized rating agency if both of the two named rating agencies cease
publishing ratings of investments and having maturities of 270 days or less from
the date of acquisition; and (d) money market accounts or funds with or issued
by Qualified Issuers.
A "CHANGE OF CONTROL" of the Company will be deemed to have occurred
at such time as (i) any Person (including a Person's Affiliates and associates),
other than a Permitted Holder, becomes the beneficial owner (as defined under
Rule 13d-3 or any successor rule or regulation promulgated under the Exchange
Act) of 50% or more of the total voting or economic power of the Company's
Common Stock, (ii) during any period of two consecutive years, individuals who
at the beginning of such period constituted the Board of Directors of the
Company (together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of the Company
has been approved by 66-2/3% of the directors then still in office who either
were directors at the beginning of such period or whose election or
recommendation for election was previously so approved) cease to constitute a
majority of the Board of Directors of the Company; or (iii) so long as
$10,000,000 principal amount of Old Notes remains outstanding, any "change in
control" occurs (as defined at such time) with respect to the Old Notes.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" of any Person means all Capital Stock of such Person
that is generally entitled to (i) vote in the election of directors of such
Person or (ii) if such Person is not a corporation, vote or otherwise
participate in the selection of the governing body, partners, managers or others
that will control the management and policies of such Person.
"COMMON STOCK OFFERING" means a public offering by the Company of
shares of its Common Stock (however designated and whether voting or non-voting)
and any and all rights, warrants or options to acquire such Common Stock.
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"COMPANY" means the party named as such above until a successor
replaces it in accordance with Article 5 and thereafter means the successor.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person, for
any period, the aggregate amount of interest which, in conformity with GAAP,
would be set forth opposite the caption "interest expense" or any like caption
on an income statement for such Person and its Subsidiaries on a consolidated
basis (including, but not limited to, Redeemable Dividends, whether paid or
accrued, on Preferred Stock of a Subsidiary (as defined below in this
Article 1), imputed interest included in Capitalized Lease Obligations, all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing, the net costs associated with
hedging obligations, amortization of other financing fees and expenses, the
interest portion of any deferred payment obligation, amortization of discount
or premium, if any, and all other non-cash interest expense (other than interest
amortized to cost of sales)) plus, without duplication, all net capitalized
interest for such period and all interest incurred or paid under any guarantee
of Indebtedness (including a guarantee of principal, interest or any combination
thereof) of any Person, plus the amount of all dividends or distributions paid
on Disqualified Capital Stock (other than dividends paid or payable in shares of
Capital Stock of the Company).
"CONSOLIDATED NET INCOME" means, with respect to any Person, for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
PROVIDED, HOWEVER, that (a) for any Person (the "other Person") in which the
Person in question or any of its Subsidiaries has less than a 100% interest
(which interest does not cause the net income of such other Person to be
consolidated into the net income of the Person in question in accordance with
GAAP) (i) Net Income of the other Person shall be included only to the extent of
the amount of dividends or distributions paid to the Person in question or its
Subsidiary, and (ii) net loss related to the interest of the Company and its
Subsidiaries in TeleNoticias del Mundo, L.P. shall be included in Net Income of
the Company and its Subsidiaries only to the extent that such net loss is in
excess of $10,000,000 and to the extent the Company or its Subsidiaries have
contributed or contribute amounts to TeleNoticias del Mundo, L.P in an aggregate
amount in excess of $10,000,000, (b) the Net Income of any Subsidiary of the
Person in question that is subject to any restriction or limitation on the
payment of dividends or the making of other distributions shall be excluded to
the extent of such restriction or limitation, (c) the Net Income of any Person
acquired in a pooling of interests transaction for any period prior to the date
of such acquisition shall be excluded, (d) any net gain (but not loss) resulting
from an Asset Sale by the Person in question or any of its Subsidiaries other
than in the ordinary course of business shall be excluded, (e) extraordinary,
unusual and non-recurring gains and losses shall be excluded, and (f) all non-
cash items increasing Consolidated Net income and not otherwise included in the
definition of EBITDA shall be excluded.
"CREDIT FACILITIES" means any credit facility or agreement (including
the Loan and Security Agreement) with a bank or syndicate of banks or other
financial institutions (including working capital or revolving credit
facilities) including any related guarantees, collateral documents, instruments
and agreements executed in connection therewith, as such
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agreements may be amended, renewed, extended, substituted, refinanced,
restructured, replaced, supplemented or otherwise modified from time to time
(including without limitation, any successive renewals, extensions,
substitutions, refinancings, restructurings, replacements, supplementations or
other modifications of the foregoing). For all purposes under this Indenture,
"Credit Facilities" shall include any amendments, renewals, extensions,
substitutions, refinancings, restructurings, replacements, supplements or any
other modifications that increase the principal amount of the Indebtedness
thereunder or commitments to lend thereunder and have been made in compliance
with Section 4.05 of this Indenture; PROVIDED that for purposes of the
definition of "Permitted Indebtedness," no such increase may result in the
principal amount of Indebtedness of the Company under the Credit Facilities
exceeding the amount permitted by clause (a) of the definition of "Permitted
Indebtedness."
"CUMULATIVE CONSOLIDATED INTEREST EXPENSE" means with respect to any
Person, as of any date of determination, Consolidated Interest Expense from the
Issue Date to the end of the Company's most recently ended full fiscal quarter
prior to such date, taken as a single accounting period.
"CUMULATIVE EBITDA" means with respect to any Person, as of any date
of determination, EBITDA from the Issue Date to the end of the Company's most
recently ended full fiscal quarter prior to such date, taken as a single
accounting period.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency
swap agreement or other similar arrangement designed to protect the Company or
any of its Restricted Subsidiaries against fluctuations in currency values.
"DEFAULT" means any event that is, or after notice or passage of time
or both would be, an Event of Default (as defined in Section 6.01 of this
Indenture).
"DISQUALIFIED CAPITAL STOCK" means any Capital Stock of the Company or
a Restricted Subsidiary thereof which, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable at the
option of the holder), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the maturity date of the Senior Notes, for cash or securities
constituting Indebtedness. Without limitation of the foregoing, Disqualified
Capital Stock shall be deemed to include (i) any Preferred Stock of a Restricted
Subsidiary of the Company and (ii) any Preferred Stock of the Company, with
respect to either of which, under the terms of such Preferred Stock, by
agreement or otherwise, such Restricted Subsidiary or the Company is obligated
to pay current dividends or distributions in cash during the period prior to the
maturity date of the Senior Notes.
"EBITDA" means, for any Person, for any period for which it is to be
determined, an amount equal to the sum of, without duplication, (a) Consolidated
Net Income for such period, plus (b) the provision for taxes for such period
based on income or profits to the extent such income or profits were included in
computing Consolidated Net Income and
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any provision for taxes utilized in computing net loss under clause (a) hereof,
plus (c) Consolidated Interest Expense for such period (including, for this
purpose, Redeemable Dividends to the extent that such dividends were deducted in
determining Net Income), plus (d) depreciation and amortization for such period
on a consolidated basis, plus (e) non-cash charges for such period on a
consolidated basis, except that with respect to the Company each of the
foregoing items shall be determined on a consolidated basis with respect to the
Company and its Restricted Subsidiaries only.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FAIR MARKET VALUE" or "fair value" means, with respect to any asset
or property or Capital Stock, the price which could be negotiated in an arm's-
length, free market transaction, for cash, between an informed and willing
seller and an informed, willing and able buyer, neither of whom is under undue
pressure or compulsion to complete the transaction.
"GAAP" means generally accepted accounting principles consistently
applied as in effect in the United States from time to time.
"GUARANTEE" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness of any other Person
and, without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or
other obligation of such other Person (whether arising by virtue of partnership
arrangements, or by agreement to keepwell, to purchase assets, goods, securities
or services, to take-or-pay, or to maintain financial statement conditions or
otherwise) or (ii) entered into for purposes of assuring in any other manner the
obligee of such Indebtedness or other obligation of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
PROVIDED that the term "Guarantee" shall not include endorsements for collection
or deposit in the ordinary course of business. The term "Guarantee" used as a
verb has a corresponding meaning.
"INCUR" means, with respect to any Indebtedness or other obligation of
any Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, guarantee or otherwise become liable in respect of such Indebtedness or
other obligation or the recording, as required pursuant to GAAP or otherwise, of
any such Indebtedness or other obligation on the balance sheet of such person
(and "incurrence," "incurred," "incurrable," and "incurring" shall have meanings
correlative to the foregoing); provided, however, that a change in GAAP that
results in an obligation of such Person that exists at such time becoming
Indebtedness shall not be deemed an incurrence of such Indebtedness.
"INDEBTEDNESS" means, with respect to any Person, at any date of
determination (without duplication), (a) all indebtedness of such Person for
borrowed money; (b) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments; (c) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto); (d) all obligations of such
Person to pay the deferred and unpaid purchase price of property (excluding any
balances that
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constitute accounts payable or trade payables, and other accrued liabilities
arising in the ordinary course of business, including, without limitation, any
and all programming obligations), which purchase price is due more than six
months after the date of placing such property in service or taking delivery and
title thereto; (e) all obligations of such Person as lessee under Capitalized
Lease Obligations and all Purchase Money Indebtedness; (f) all Indebtedness of
other Persons secured by a Lien on any asset of such Person, whether or not such
Indebtedness is assumed by such Person; provided that the amount of such
Indebtedness shall be the lesser of (i) the fair market value of such asset at
such date of determination and (ii) the principal amount of such Indebtedness;
(g) all Indebtedness of other Persons Guaranteed by such Person to the extent
such Indebtedness is Guaranteed by such Person; (h) to the extent not otherwise
included in this definition, net obligations under Currency Agreements and
Interest Rate Agreements; and (i) all Disqualified Capital Stock issued by such
Person. The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and, with respect to contingent obligations, the maximum liability upon
the occurrence of the contingency giving rise to the obligation; PROVIDED that
the amount outstanding at any time of any Indebtedness issued with original
issue discount is the face amount of such Indebtedness less the remaining
unamortized portion of the original issue discount of such Indebtedness at such
time as determined in conformity with GAAP and for purposes of calculating the
amount of the Senior Notes outstanding at any time, the amount shall be the
Accreted Value thereof as of such time. A Guarantee of (or an obligation with
respect to a letter of credit supporting) Indebtedness permitted by the terms of
this Indenture will not constitute a separate incurrence of Indebtedness.
"INDENTURE" means this Indenture, as amended or supplemented from time
to time.
"INDEPENDENT FINANCIAL ADVISOR" means an accounting, appraisal, expert
or investment banking firm of nationally recognized standing that is, in the
reasonable and good faith judgment of the Board of Directors of the Company,
qualified to perform the task for which such firm has been engaged and
disinterested and independent with respect to the Company and its Affiliates.
"INTEREST RATE PROTECTION AGREEMENT" means, for any Person, any
interest rate swap agreement, interest rate cap agreement, interest rate collar
agreement or other similar agreement designed to protect the party therein
against fluctuations in interest rates.
"INVESTMENTS" means, directly or indirectly, any advance, account
receivable (other than an account receivable arising in the ordinary course of
business), loan or capital contribution to (by means of transfers of property to
others, payments for property or services for the account or use of others or
otherwise), the purchase of any stock, bonds, notes, debentures, partnership or
joint venture interests or other securities of, the acquisition, by purchase or
otherwise, of all or substantially all of the business or assets or stock or
other evidence of beneficial ownership of, any Person or the making of any
investment in any Person. Investments shall exclude extensions of trade credit
in the ordinary course of
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business, repurchases or redemptions of the Senior Notes by the Company, prepaid
expenses (including television programming) arising in the ordinary course of
business, endorsements for collection or deposit in the ordinary course of
business, worker's compensation, utility, lease and similar deposits made in the
ordinary course of business, and loans and advances to employees, other than
officers and directors of the Company or any Restricted Subsidiary, made in the
ordinary course of business.
"ISSUE DATE" means the date the Senior Notes are first issued by the
Company and authenticated by the Trustee under this Indenture.
"JOINT VENTURE AGREEMENT" means the Partnership Agreement of Video 44,
dated as of November 8, 1995 by and among Essaness Theatres Corporation,
Telemundo of Chicago, Inc. and Harriscope of Chicago, Inc., as in effect on
the date of this Indenture, without regard to any amendments or supplements
thereto.
"LIEN" means with respect to any property or assets of any Person, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance, preference,
priority, or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including
without limitation, any Capitalized Lease Obligation, conditional sales, or
other title retention agreement having substantially the same economic effect as
any of the foregoing).
"LOAN AND SECURITY AGREEMENT" means the Loan and Security Agreement by
and between the Company, certain of its Subsidiaries and Foothill Capital
Corporation dated December 30, 1994, as such agreement may be amended, renewed,
extended, substituted, refinanced, restructured, replaced, supplemented or
otherwise modified from time to time (including without limitation, any
successive renewals, extensions, substitutions, refinancings, restructurings,
replacements, supplementations or other modifications of the foregoing, provided
that any amendments, renewals, extensions, substitutions, refinancings,
restructurings, replacements, supplements or modifications do not increase the
principal amount of the Indebtedness thereunder exceeding $20,000,000.
"LOCAL MARKETING AGREEMENT" means a local marketing arrangement, sale
agreement, time brokerage agreement, management agreement or similar arrangement
pursuant to which a Person (which, if not the Company, shall be a single-purpose
entity which cannot conduct any other business operations but those which are to
be purchased or managed pursuant to the following provisions): (a) obtains the
right to sell at least a majority of the advertising inventory of a television
station on behalf of a third party, (b) purchases at least a majority of the air
time of a television station to exhibit programming and sell advertising time,
(c) manages the selling operations of a television station with respect to at
least a majority of the advertising inventory of such station, (d) manages the
acquisition of programming for a television station, (e) acts as a program
consultant for a television station, or (f) manages the operation of a
television station generally.
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"MATURITY" means the date on which the principal of a Senior Note
becomes due and payable in full as provided therein or herein, whether at its
Stated Maturity or by declaration of acceleration, call for redemption or
otherwise.
"MOODY'S" means Moody's Investors Service, Inc.
"NET INCOME" means, with respect to any Person for any period, the net
income (loss) of such Person determined in accordance with GAAP
"NET PROCEEDS" means (a) in the case of any sale of Capital Stock by
the Company, the aggregate net proceeds received by the Company, after payment
of expenses, commissions and the like incurred in connection therewith, whether
such proceeds are in cash or in property (valued at the fair market value
thereof, as determined in good faith by the Board of Directors, at the time of
receipt) and (b) in the case of any exchange, exercise, conversion or surrender
of outstanding securities of any kind for or into shares of Capital Stock of the
Company which is not Disqualified Capital Stock, the net book value of such
outstanding securities on the date of such exchange, exercise, conversion or
surrender (plus any additional amount required to be paid by the holder to the
Company upon such exchange, exercise, conversion or surrender, less any and all
payments made to the holders, e.g., on account of fractional shares and less all
expenses incurred by the Company in connection therewith).
"OFFICER" means the Chairman of the Board, the Chief Executive
Officer, the President, the Chief Financial Officer, the Chief Accounting
Officer, any Executive Vice President, Senior Vice President or Vice President,
the Treasurer, any other executive officer, the Secretary and any Assistant
Treasurer or any Assistant Secretary of the Company.
"OFFICERS' CERTIFICATE" means a certificate signed by two officers,
one of whom must be the principal executive officer, principal financial
officer, the treasurer or principal accounting officer of the Company.
"OLD NOTE INDENTURE" means the Indenture, dated as of December 30,
1994, between the Company and Bankers Trust Company, as Trustee, pursuant to
which the Old Notes were issued, as amended or supplemented from time to time.
"OLD NOTES" means the 10.25% Senior Notes due December 30, 2001 of the
Company as such may be amended from time to time.
"OPINION OF COUNSEL" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee except to the extent otherwise indicated
in this Indenture.
"PERMITTED HOLDERS" means Apollo, TLMD, Bastion Capital Fund L.P or
Hernandez Partners or any of their respective Affiliates.
"PERMITTED INDEBTEDNESS" means, without duplication:
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(a) Indebtedness of the Company or, to the extent permitted in clause
(j) of Section 4.12 of this Indenture, any Restricted Subsidiary, evidenced
by or arising under Credit Facilities, which taken together (without
duplication) is in an aggregate principal amount at any one time not to
exceed $75,000,000;
(b) Indebtedness of the Company evidenced by or arising under the
Senior Notes and this Indenture;
(c) Indebtedness of the Company or any Restricted Subsidiary remaining
outstanding immediately after the Issue Date after giving effect to the
consummation of the transactions described in the Prospectus under "Use of
Proceeds";
(d) Indebtedness of the Company or any Restricted Subsidiary under
Currency Agreements and Interest Rate Protection Agreements which are
entered into for the purpose of protection against risk of currency or
interest rate fluctuations affecting the Company or any of its Subsidiaries
in its ordinary course of business or that are related to payment
obligations of the Company or any of its Subsidiaries otherwise permitted
under this Indenture;
(e) unsecured Indebtedness of the Company owing to a Restricted
Subsidiary of the Company which shall be evidenced by an intercompany
promissory note that is subordinated in right of payment to the payment and
performance of the Company's obligations under this Indenture and the
Senior Notes and any subsequent issuance or transfer of Capital Stock of a
Restricted Subsidiary of the Company (the "Creditor Subsidiary") that
results in such Creditor Subsidiary ceasing to be a Restricted Subsidiary
of the Company or any subsequent transfer of Indebtedness owing from the
Company to such Creditor Subsidiary (other than a transfer to another
Restricted Subsidiary of the Company) shall be deemed in each case to
constitute the incurrence of Indebtedness by the Company to the extent of
any such Indebtedness then outstanding;
(f) Indebtedness of the Company incurred in connection with a
repurchase of the Senior Notes pursuant to a Change of Control, in whole or
in part, provided that the principal amount of such Indebtedness does not
exceed 101% of the Accreted Value of the Senior Notes repurchased and the
reasonable, customary expenses, fees and costs of the Company, and such
Indebtedness (x) has an Average Life to Stated Maturity equal to or greater
than the remaining Average Life to Maturity of the Senior Notes, and (y)
does not mature prior to the Stated Maturity of the Senior Notes;
(g) Purchase Money Indebtedness and Capitalized Lease Obligations of
the Company or, to the extent permitted pursuant to Section 4.12 of this
Indenture, any Restricted Subsidiary, incurred in the ordinary course of
business in a principal amount outstanding at the time of incurrence which
does not in the aggregate exceed $15,000,000 at any time outstanding;
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(h) Indebtedness of the Company or any Restricted Subsidiary incurred
or incurrable in respect of reimbursement obligations related to letters of
credit, banker's acceptances or similar facilities entered into in the
ordinary course of business;
(i) Indebtedness of the Company and any Restricted Subsidiary in
respect to bids, performance and surety bonds and obligations provided in
the ordinary course of business and appeal bonds;
(j) Acquired Indebtedness, provided that such Indebtedness was not
incurred or issued as a result of, or in connection with, or in
anticipation of, such Person becoming a Restricted Subsidiary of the
Company and immediately after giving effect to such Person becoming a
Restricted Subsidiary of the Company (as if such Indebtedness was incurred
and issued on the first day of the previous four fiscal quarters), the
Company could incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) under Section 4.05 of this Indenture;
(k) Indebtedness incurred by the Company in exchange for, or the
proceeds of which are used to refinance Indebtedness incurred in compliance
with the ratio set forth in the first paragraph of Section 4.05 of this
Indenture and Indebtedness referred to in clauses (b) through (d) and (f)
through (i) of this definition, provided that (i) such Indebtedness is in
an aggregate principal amount not in excess of the aggregate principal
amount then outstanding of the Indebtedness being refinanced, plus the
amount of accrued and unpaid interest, if any, and premiums owed, if any,
not in excess of preexisting payment provisions on such Indebtedness being
refinanced, plus the reasonable, customary expenses, fees, and costs of the
Company incurred in connection with such refinancing, (ii) such
Indebtedness is scheduled to mature either (A) no earlier than the
Indebtedness being refinanced or (B) after the Stated Maturity of the
Senior Notes, and (iii) such Indebtedness has an Average Life at the time
such Indebtedness is incurred that is equal to or greater than the Average
Life of the Indebtedness being refinanced, and (iv) such Indebtedness is
ranked in right of payment to the Senior Notes no more favorably than the
Indebtedness being refinanced is ranked in right of payment to the Senior
Notes;
(l) Indebtedness incurred or incurrable, to the extent permitted
pursuant to Section 4.12 of this Indenture, by a Restricted Subsidiary
under any Guarantee of any Restricted Subsidiary made in the ordinary
course of business and not to exceed $10,000,000 at any one time
outstanding;
(m) Indebtedness incurred or incurrable by Telemundo of Chicago, Inc.
and Harriscope of Chicago, Inc. pursuant to Section 3.5(a) of the Joint
Venture Agreement;
(n) Indebtedness of the Company not otherwise permitted to be incurred
pursuant to this section, so long as the aggregate principal amount of all
such Indebtedness does not exceed $25,000,000 at any one time outstanding;
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(o) Indebtedness of a Restricted Subsidiary for refinancing of certain
Indebtedness as permitted under clause (i) of Section 4.12 of this
Indenture;
(p) Indebtedness of any Restricted Subsidiary or Preferred Stock of any
Restricted Subsidiary issued to and held by the Company or a Wholly-Owned
Restricted Subsidiary of the Company, provided that such Indebtedness or
Preferred Stock is at all times held by the Company or a Wholly-Owned
Restricted Subsidiary of the Company; and
(q) Indebtedness, to the extent permitted pursuant to Section 4.12 of
this Indenture, of any Restricted Subsidiary pursuant to a Local Marketing
Agreement.
"PERMITTED INVESTMENTS" means, for any Person, Investments made on or
after the date of the Indenture consisting of:
(a) Investments by the Company, or by a Restricted Subsidiary thereof,
in the Company or a Restricted Subsidiary:
(b) Temporary Cash Investments;
(c) Investments in Property used in the ordinary course of business;
(d) Investments by the Company, or by a Restricted Subsidiary thereof,
in a Person (or in all or substantially all of the business or assets of
such Person), if as a result of such Investment (i) such Person becomes a
Restricted Subsidiary of the Company, (ii) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or a
Restricted Subsidiary thereof or (iii) such business or assets are owned by
the Company or a Restricted Subsidiary;
(e) an Investment that is made by the Company or a Restricted
Subsidiary thereof in the form of any stock, bonds, notes, debentures,
partnership or joint venture interests or other securities that are issued
by a third party to, or otherwise received by, the Company or Restricted
Subsidiary solely as partial consideration for the consummation of an Asset
Sale that is otherwise permitted under Section 4.10 of this Indenture;
(f) Investments pursuant to any agreement or obligation of the Company
or a Restricted Subsidiary, in effect on the Issue Date, which requires the
Company to make such Investments;
(g) Investments made after the Issue Date in the Primary Business of
the Company not to exceed $25,000,000 at any one time outstanding;
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(h) Investments made after the Issue Date in majority-owned
Subsidiaries of the Company in the Primary Business of the Company not to
exceed $10,000,000 at any one time outstanding;
(i) loans and reasonable advances to officers and directors of the
Company or any of its Restricted Subsidiaries made in the ordinary course
of business in an aggregate principal amount not exceeding $1,000,000;
(j) Investments received in settlement of obligations incurred in the
ordinary course of business owed to the Company or any Restricted
Subsidiary (other than by the Company or any Subsidiary) and as a result of
bankruptcy or insolvency proceedings or upon the foreclosure, perfection or
enforcement of any Lien in favor of the Company or any Restricted
Subsidiary;
(k) Investments held by any Person on the date such Person becomes a
Restricted Subsidiary and not in excess of 5% of the total fair market
value of the assets of such Person being transferred in such acquisition;
and
(l) Investments in any Person with which the Company or any of the
Restricted Subsidiaries has entered into, or has an agreement that, subject
to consummation of such agreement, entitles the Company or any of its
Restricted Subsidiaries to enter into, a Local Marketing Agreement and
investments in any Person created by such a Local Marketing Agreement.
"PERMITTED LIENS" means, without duplication:
(a) Liens securing Indebtedness incurred under the Credit Facilities
incurred in accordance with Section 4.05 of this Indenture;
(b) Liens on property or assets of, or any shares of stock of or
secured debt of, any Person or corporation existing at the time such Person
or corporation becomes a Restricted Subsidiary of the Company or at the
time such Person or corporation is merged into the Company or any of its
Restricted Subsidiaries, provided that such Liens are not incurred in
connection with, or in contemplation of, such Person or corporation
becoming a Restricted Subsidiary of the Company or merging into the Company
or any of its Restricted Subsidiaries;
(c) Liens on Property existing at the time of acquisition of such
Property, provided that such Liens are not incurred in connection with, or
in contemplation of, such Property being acquired;
(d) Liens existing on the date of this Indenture;
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(e) Liens securing Capitalized Lease Obligations permitted to be
incurred under Section 4.05 of this Indenture provided that such Lien does
not extend to any property other than that subject to underlying lease;
(f) charges or levies (other than any Lien imposed by the Employee
Retirement Income Security Act of 1974, as amended) that are not yet
subject to penalties for non-payment or are being contested in good faith
by appropriate proceedings and for which adequate reserves, if required,
have been established or other provisions have been made in accordance with
GAAP;
(g) statutory mechanics', workmen's, materialmen's, operators',
warehousemen's, repairmen's and bankers' liens, and similar Liens imposed
by law and arising in the ordinary course of business for sums which are
not overdue by more than 15 days or, if so overdue, are being contested in
good faith by appropriate proceedings and for which adequate reserves, if
required, have been established or other provisions have been made in
accordance with GAAP;
(h) minor imperfections of, or encumbrances on, title that do not
impair the value of property for its intended use;
(i) Liens (other than any Lien under the Employee Retirement Income
Security Act of 1974, as amended) incurred or deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security;
(j) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory or regulatory obligations, bankers'
acceptances, surety and appeal bonds, government contracts, performance and
return of money bonds and other obligations of a similar nature incurred in
the ordinary course of business (exclusive of obligations for the payment
of borrowed money);
(k) easements, rights-of-way, municipal and zoning ordinances and
similar charges, encumbrances, title defects or other irregularities that
do not materially interfere with the ordinary course of business of the
Company or of any of its Subsidiaries;
(l) Liens to secure Purchase Money Indebtedness that is otherwise
permitted under this Indenture, provided that (1) any such Lien is created
solely for the purpose of securing Indebtedness representing, or incurred
to finance, refinance or refund the cost (including the sales and excise
taxes, installation and delivery charges and other direct costs of, and
other direct expenses paid or charged in connection with, such purchase or
construction) of the item of Property subject thereto and such Lien is
created prior to, at the time of or within 365 days after the later of the
acquisition, the completion of construction or the commencement of full
operation of such property, (2) the principal amount of the Indebtedness
secured by such Lien does not exceed 100%
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of such cost, and (3) any such Lien shall not extend to or cover any
Property other than such item of Property and any improvements on such item
or proceeds thereof;
(m) Liens in favor of the Company or any Wholly-Owned Subsidiary of the
Company;
(n) Liens arising from the rendering of a final judgment or order
against the Company or any Subsidiary of the Company that does not give
rise to an Event of Default and that do not interfere with the ordinary
course of the Company and its Subsidiaries;
(o) Liens securing reimbursement obligations with respect to letters of
credit incurred in accordance with this Indenture that encumber documents
and other property relating to such letters of credit and the products and
proceeds thereof;
(p) Liens encumbering customary initial deposits and margin deposits,
and other Liens that are within the general parameters customary in the
industry and incurred in the ordinary course of business securing
Indebtedness under Interest Rate Protection Agreements and Currency
Agreements constituting Indebtedness permitted to be incurred pursuant to
Section 4.05 of this Indenture pursuant to clause (d) of the definition of
"Permitted Indebtedness";
(q) Liens securing Permitted Indebtedness incurred in accordance with
subsection (j) of the definition of "Permitted Indebtedness";
(r) other Liens securing obligations incurred in the ordinary course of
business which obligations do not exceed $250,000 in the aggregate at any
one time outstanding;
(s) Liens to secure any permitted extension, renewal, refinancing or
refunding (or successive extensions, renewals, refinancings or refundings),
in whole or in part, of any Indebtedness secured by Liens referred to in
the foregoing clauses (b) through (r), provided that such Liens do not
extend to any other property or assets and the principal amount of the debt
secured by such Liens is not increased;
(t) Liens with respect to any license of intellectual property entered
into in the ordinary course of business (including programing agreements);
and
(u) Liens in connection with Local Marketing Agreements related to the
Primary Business.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government (including any agency or political subdivision thereof).
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"PLAN OF LIQUIDATION" means a plan (including by operation of law)
that provides for, contemplates or the effectuation of which is preceded or
accompanied by (whether or not substantially contemporaneously) (a) the sale,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company otherwise than as an entirety or substantially as an entirety and
(b) the distribution of all or substantially all of the proceeds of such sale,
lease, conveyance or other disposition and all or substantially all of the
remaining assets of the Company to holders of Capital Stock of the Company.
"PREFERRED STOCK" means any Capital Stock of a Person, however
designated, which entitles the holder thereof to a preference with respect to
dividends, distributions or liquidation proceeds of such Person over the holders
of other Capital Stock issued by such Person.
"PRIMARY BUSINESS" means the ownership and operation of television
stations and networks and production facilities and the creation, production,
development and distribution of products for television.
"PROPERTY" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in the
most recent consolidated balance sheet of such Person and its Subsidiaries under
GAAP.
"PROSPECTUS" means the Company's final prospectus dated February __,
1996 in respect of the public offering of the Senior Notes.
"PURCHASE MONEY INDEBTEDNESS" means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including the cost
of construction) of an item of property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such Person incurred in connection therewith.
"QUALIFIED ISSUER" means any commercial bank having capital, surplus
and undivided profits totaling in excess of $100,000,000 and the outstanding
short-term debt securities of which are rated at least A-2 by S&P or at least P-
2 by Moody's, or carrying an equivalent rating by a nationally recognized rating
agency if both the two named rating agencies cease publishing ratings of
investments.
"REDEEMABLE DIVIDEND" means, for any dividend or distribution with
regard to Disqualified Capital Stock, the quotient of the dividend or
distribution divided by the difference between one and the maximum statutory
federal income tax rate (expressed as a decimal number between 1 and 0) then
applicable to the issuer of such Disqualified Capital Stock.
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"REDEMPTION DATE" when used with respect to any of the Senior Notes to
be redeemed, means the date fixed by the Company for such redemption pursuant to
this Indenture and the Senior Notes.
"REDEMPTION PRICE" when used with respect to any of the Senior Notes
to be redeemed, means the price fixed for such redemption pursuant to this
Indenture and the Senior Notes.
"RESTRICTED PAYMENT" means, without duplication, any of the following:
(a) the declaration or payment of any dividend or any other distribution or
payment on Capital Stock of the Company or any Restricted Subsidiary of the
Company or any payment made to the direct or indirect holders (in their
capacities as such) of Capital Stock of the Company or any Restricted Subsidiary
of the Company (other than (x) dividends or distributions payable solely in
Capital Stock (other than Disqualified Capital Stock) or in options, warrants or
other rights to purchase Capital Stock (other than Disqualified Capital Stock),
and (y) in the case of Restricted Subsidiaries of the Company, dividends or
distributions payable to the Company or to a Wholly-Owned Subsidiary of the
Company), (b) the purchase, redemption or other acquisition or retirement for
value of any Capital Stock of the Company or any of its Restricted Subsidiaries
(other than Capital Stock owned by the Company or a Wholly-Owned Subsidiary of
the Company, excluding Disqualified Capital Stock), (c) the making of any
Investment or guarantee of any Investment in any Person other than a Permitted
Investment, (d) any designation of a Restricted Subsidiary as an Unrestricted
Subsidiary on the basis of the fair market value of such Subsidiary utilizing
standard valuation methodologies and approved by the Board of Directors and (e)
forgiveness of any Indebtedness (other than Indebtedness of a Wholly-Owned
Restricted Subsidiary) of an Affiliate of the Company to the Company or a
Restricted Subsidiary. For purposes of determining the amount expended for
Restricted Payments, cash distributed or invested shall be valued at the face
amount thereof and property other than cash shall be valued at its fair market
value determined as conclusively determined by the Company's Board of Directors
in good faith.
"RESTRICTED SUBSIDIARY" means a Subsidiary of the Company other than
an Unrestricted Subsidiary and includes all of the Subsidiaries of the Company
existing as of the Issue Date, including but not limited to Telemundo of
Chicago, Inc. The Board of Directors of the Company may designate any
Unrestricted Subsidiary as a Restricted Subsidiary if immediately after giving
effect to such action (and treating any Acquired Indebtedness as having been
incurred at the time of such action), the Company could have incurred at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to
Section 4.05 of this Indenture.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw-Hill, Inc.
"SALE AND LEASE-BACK TRANSACTION" means any arrangement with any
Person providing for the leasing by the Company or any Restricted Subsidiary of
the Company of any real or tangible personal property, which property has been
or is to be sold or transferred by the Company or such Restricted Subsidiary to
such Person in contemplation of such leasing.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
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"SENIOR INDEBTEDNESS" means any Indebtedness of the Company that ranks
PARI PASSU in right of payment with the Senior Notes.
"SENIOR NOTES" means the Senior Notes issued under this Indenture.
"STATED MATURITY" means, with respect to any security or Indebtedness,
the date specified therein as the fixed date on which any principal of such
security or Indebtedness is due and payable, including pursuant to any mandatory
redemption provision (but excluding any provision providing for the repurchase
thereof at the option of the holder thereof).
"SUBSIDIARY" of any specified Person means any corporation,
partnership, joint venture, association or other business entity, whether now
existing or hereafter organized or acquired, (a) in the case of a corporation,
of which more than 50% of the total voting power of the Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, officers or trustees thereof is held by such first-named Person or
any of its Subsidiaries; or (b) in the case of a partnership, joint venture,
association or other business entity, with respect to which such first-named
Person or any of its Subsidiaries has the power to direct or cause the direction
of the management and policies of such entity by contract or otherwise or if in
accordance with GAAP such entity is consolidated with the first-named Person for
financial statement purposes.
"TEMPORARY CASH INVESTMENTS" means (a) Investments in marketable,
direct obligations issued, guaranteed or insured by the United States of
America, or of any governmental agency thereof and backed by the full faith and
credit of the United States, in each case maturing within 365 days of the date
of acquisition thereof; (b) Investments in certificates of deposit or Eurodollar
deposits, demand deposits, time deposits, overnight bank deposits, and banker's
acceptances offered by a Qualified Issuer, maturing within 365 days of the date
of acquisition thereof; (c) commercial paper maturing no more than one year from
the date of creation thereof and, at the time of acquisition, having a rating of
at least A-1 from S&P or at least P-1 from Moody's; (d) repurchase obligations
with a term of not more than seven (7) days for underlying securities of the
type described in clause (a) above entered into with any Qualified Issuer; (e)
deposits available for withdrawal on demand with a Qualified Issuer; (f)
Investments not exceeding 365 days in duration in money market funds that invest
substantially all of such funds' assets in the Investments described in the
preceding clauses (a), (b) and (c); and (g) foreign equivalents of the
Investments described in clauses (a), (b) and (e) above, provided that such
foreign equivalents shall be permitted by the Company or a Restricted Subsidiary
only to the extent that such Person holds such foreign equivalents in the
ordinary course of its business and in the currency of the country where such
Person conducts its business.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb) as in effect on the date of execution of this Indenture, except as
provided in Section 9.03 of this Indenture.
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"TLMD" means TLMD Partners II, L.L.C., a Delaware limited liability
company, and its Affiliates, members (including voting committee members),
investing managers and investment advisors, or any investment fund, investment
account or other entity whose investing manager, investment advisor or general
partner, or any principal thereof, is any of the foregoing entities or
individuals or any principal or Affiliate of any of them; provided, however,
that no entity or individual shall be deemed within the definition of TLMD when
that entity or individual ceases to be an Affiliate of any of the foregoing
entities or individuals or an investment fund, investment account or other
entity whose investing manager, investment advisor or general partner, or any
principal thereof, is any of the foregoing entities or individuals or any
principal or Affiliate of any of them.
"TRUSTEE" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor.
"TRUST OFFICER" means any officer within the Corporate Trust
Department (or any successor department) of the Trustee, including any vice
president, assistant vice president or assistant secretary; any other officer of
the Trustee customarily performing functions similar to those performed by any
officer of the Corporate Trust Department; and any other officer of the Trustee
to whom any corporate trust matter is referred because of such person's
knowledge of and familiarity with the particular subject.
"UNRESTRICTED SUBSIDIARY" means (a) any Subsidiary of an Unrestricted
Subsidiary and (b) any Subsidiary of the Company which is classified after the
Issue Date as an Unrestricted Subsidiary by a resolution adopted by the Board of
Directors of the Company, provided that a Subsidiary organized or acquired after
the Issue Date may be so classified as an Unrestricted Subsidiary only if such
classification is in compliance with Section 4.06 of this Indenture. The
Trustee shall be given prompt notice by the Company of each resolution adopted
by the Board of Directors of the Company under this provision, together with a
copy of each such resolution adopted.
"WHOLLY-OWNED SUBSIDIARY" or "WHOLLY-OWNED RESTRICTED SUBSIDIARY"
means any Restricted Subsidiary all of the outstanding voting securities (other
than directors' qualifying shares) of which are owned, directly or indirectly,
by the Company.
Section 1.02 OTHER DEFINITIONS.
Defined in
Term Section
- ---- ----------
"Affiliate Transaction" . . . . . . . . . . . . . . . . 4.08
"Asset Sale Trigger Date" . . . . . . . . . . . . . . . 4.10
"Bankruptcy Law". . . . . . . . . . . . . . . . . . . . 6.01
"Business Day". . . . . . . . . . . . . . . . . . . . . 10.07
"Change of Control Offer" . . . . . . . . . . . . . . . 4.14
"Change of Control Payment Date". . . . . . . . . . . . 4.14
"Change of Control Purchase Price" . . . . . . . . . . 4.14
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"Custodian" . . . . . . . . . . . . . . . . . . . . . . 6.01
"Event of Default". . . . . . . . . . . . . . . . . . . 6.01
"Excess Proceeds Offer" . . . . . . . . . . . . . . . . 4.10
"Excess Proceeds Offer Payment Date". . . . . . . . . . 4.10
"Excess Proceeds Offer Termination Date". . . . . . . . 4.10
"Legal Holiday" . . . . . . . . . . . . . . . . . . . . 10.07
"New York Office" . . . . . . . . . . . . . . . . . . . 2.03
"Paying Agent". . . . . . . . . . . . . . . . . . . . . 2.03
"Registrar". . . . . . . . . . . . . . . . . . . . . . 2.03
"United States Government Obligations". . . . . . . . . 8.01
Section 1.03 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"Commission" means the Commission;
"indenture securities" means the Senior Notes;
"indenture security holder" means a holder of a Senior Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Senior Notes means the Company or any other obligor
on the Senior Notes.
All other terms in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by Commission rule under the TIA
have the meanings so assigned to them.
Section 1.04 RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(c) "or" is not exclusive;
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(d) words in the singular include the plural, and in the plural
include the singular;
(e) the male, female and neuter genders include one another;
(f) provisions apply to successive events and transactions; and
(g) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article,
Section or other Subdivision.
ARTICLE 2
THE SENIOR NOTES
Section 2.01 FORM AND DATING.
The Senior Notes and the Trustee's certificate of authentication
relating thereto shall be substantially in the form set forth in Exhibit A,
which is hereby incorporated in and expressly made a part of this Indenture,
with such appropriate insertions, omissions, substitutions and other variations
as are required or permitted by this Indenture. The Senior Notes may have
notations, legends or endorsements required by law, stock exchange rule or usage
(provided that any such notation, legend or endorsement is in a form acceptable
to the Company). The Company shall furnish any such legend not contained in
Exhibit A to the Trustee in writing. Each Senior Note shall be dated the date
of its authentication. The terms of the Senior Notes set forth in Exhibit A are
part of the terms of this Indenture.
Section 2.02 EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Senior Notes for the Company by manual or
facsimile signature. The Company's seal shall be impressed, affixed, imprinted
or reproduced on the Senior Notes.
If an Officer whose signature is on a Senior Note no longer holds that
office at the time the Senior Note is authenticated, the Senior Note shall
nevertheless be valid.
A Senior Note shall not be valid until an authorized signatory of the
Trustee manually signs the Certificate of Authentication on the Senior Note.
The signature shall be conclusive evidence that the Senior Note has been
authenticated under this Indenture.
Upon a written order of the Company signed by two Officers of the
Company, the Trustee shall authenticate and deliver Senior Notes for original
issue up to the aggregate principal amount of $_________________. Such order
shall specify the amount of the Senior Notes to be authenticated and the date on
which the original issue of Senior Notes is to be authenticated and shall
further provide instructions concerning registration, amounts for each
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Holder and delivery. The aggregate principal amount of Senior Notes outstanding
at any time may not exceed that amount except as provided in Section 2.07 of
this Indenture.
The Senior Notes shall be issuable only in registered form without
coupons and only in denominations of $1,000 or any integral multiple thereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Senior Notes. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Senior Notes whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same right as an Agent for service of notices and demands.
Section 2.03 REGISTRAR AND PAYING AGENT.
The Company shall maintain or cause to be maintained in the Borough of
Manhattan, New York, New York (the "New York Office"), and in such other
locations as it shall determine, an office or agency: (a) where Senior Notes may
be presented for registration of transfer or for exchange (the "Registrar"); (b)
where Senior Notes may be presented for payment (the "Paying Agent"); and (c)
where notices and demand to or upon the Company in respect of Senior Notes and
this Indenture may be served by the holders of Senior Notes. The Registrar
shall keep a register of the Senior Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Paying Agent" includes any additional paying agent.
The Company may change any Paying Agent, Registrar or co-registrar without prior
notice. The Company shall notify the Trustee of the name and address of any
Agent not a party to this Indenture and shall enter into an appropriate agency
agreement with any Registrar, Paying Agent or co-registrar not a party to this
Indenture. The agreement shall implement the provisions of this Indenture and
the terms of the TIA that relate to such Agent. The Company or any of its
domestically incorporated Wholly-Owned Subsidiaries may act as Paying Agent,
Registrar or co-registrar, except that for purposes of Articles 3 and 8 and
Sections 4.10 and 4.14 of this Indenture, neither the Company nor any of its
Subsidiaries shall act as Paying Agent. If the Company fails to appoint or
maintain another entity as Registrar or Paying Agent, the Trustee shall act as
such, and the Trustee shall initially act as such. The Trustee shall cause the
New York Office to be maintained as long as it acts as Registrar or Paying
Agent.
Section 2.04 PAYING AGENT TO HOLD MONEY IN TRUST.
On or prior to each due date of the principal and interest on any
Senior Note, the Company shall deposit with the Paying Agent a sum sufficient
to pay such principal and interest when so becoming due. The Company shall
require each Paying Agent (other than the Trustee, who hereby so agrees), to
agree in writing that the Paying Agent will hold in trust for the benefit of
holders of Senior Notes or the Trustee all money held by the Paying Agent for
the payment of principal or interest on the Senior Notes, and will notify the
Trustee of any default by the Company in respect of making any such payment.
While any such default continues, the Trustee may require a Paying Agent to pay
all money held by it to the Trustee.
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The Company at any time may require a Paying Agent to pay all money held by it
to the Trustee and to account for any funds disbursed by the Paying Agent. Upon
payment over to the Trustee, the Paying Agent (if other than the Company or a
Subsidiary of the Company) shall have no further liability for the money. If
the Company or a Subsidiary of the Company acts as Paying Agent, it shall
segregate and hold in a separate trust fund for the benefit of the holders of
Senior Notes all money held by it as Paying Agent.
Section 2.05 HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
holders of Senior Notes. If the Trustee is not the Registrar, the Company shall
furnish to the Trustee, in writing at least five Business Days before each
interest payment date and at such other times as the Trustee may request in
writing, a list in such form and as of such date as the Trustee may reasonably
require of the names and addresses of holders of Senior Notes.
Section 2.06 TRANSFER AND EXCHANGE.
The Senior Notes shall be issued in registered form and shall be
transferable only upon surrender of a Senior Note for registration of transfer.
When a Senior Note is presented to the Registrar or a co-registrar with a
request to register a transfer or to exchange it for an equal principal amount
of Senior Notes of other denominations, the Registrar shall register the
transfer or make the exchange if its requirements for such transactions are met;
PROVIDED, HOWEVER, that the Senior Notes surrendered for transfer or exchange
shall be duly endorsed or accompanied by a written instrument of transfer in
form reasonably satisfactory to the Company and the Registrar or co-registrar,
duly executed by the holder or his attorney duly authorized in writing. To
permit registrations of transfers and exchanges, the Company shall issue and the
Trustee shall authenticate Senior Notes at the Registrar's request. The Company
may require payment of a sum sufficient to pay all taxes, assessments or other
governmental charges in connection with any transfer or exchange pursuant to
this Section 2.06 (other than any such transfer, tax assessment or other
governmental charge payable upon exchanges pursuant to Sections 2.10, 3.06 or
9.05 of this Indenture, which the Company shall pay).
The Company shall not be required (a) to issue, register the transfer
of or exchange Senior Notes during a period beginning at the opening of business
15 days before the day of any selection of Senior Notes for redemption under
Section 3.02 of this Indenture and ending at the close of business on the day of
selection, (b) to register the transfer of or exchange any Senior Note so
selected for redemption in whole or in part, except the unredeemed portion of
any Senior Note being redeemed in part, (c) to register the transfer of or
exchange of any Senior Note for a period beginning 15 days before the mailing of
a notice of an offer to repurchase pursuant to Section 4.10 or Section 4.14 of
this Indenture and ending at the close of business on the day of such mailing;
or (d) to register the transfer of or exchange of any Senior Note 15 days before
an Interest Payment Date.
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Prior to the due presentation for registration of transfer of any
Senior Note, the Company, the Trustee, and each Agent may deem and treat the
person in whose name a Senior Note is registered as the absolute owner of such
Senior Note for the purpose of receiving payment of principal of and interest on
such Senior Note and for all other purposes whatsoever, whether or not such
Senior Note is overdue, and neither the Company, the Trustee nor any Agent shall
be affected by notice to the contrary.
All Senior Notes issued upon any transfer or exchange pursuant to the
terms of this Indenture will evidence the same debt and will be entitled to the
same benefits under this Indenture as the Senior Notes surrendered upon such
transfer or exchange.
Section 2.07 REPLACEMENT SENIOR NOTES.
If a mutilated Senior Note is surrendered to the Trustee or the
Registrar or a holder of a Senior Note submits an affidavit or other evidence
satisfactory to the Registrar and the Company that the Senior Note has been
lost, destroyed or wrongfully taken, the Company shall issue and the Trustee
shall authenticate a replacement Senior Note if the Trustee's requirements are
met. If required by the Trustee or the Company as a condition of receiving a
replacement Senior Note, the holder of Senior Note must provide an indemnity
bond sufficient, in the judgment of both the Company and the Trustee, to fully
protect the Company, the Trustee, any Agent and any authenticating agent from
any loss which any of them may suffer if the Senior Note is replaced. The
Company and the Trustee may charge the relevant holder for their expenses in
replacing any Senior Note.
Every replacement Senior Note is an additional obligation of the
Company.
Section 2.08 OUTSTANDING SENIOR NOTES.
The Senior Notes outstanding at any time are all the Senior Notes
properly authenticated by the Trustee except for those cancelled by the Trustee,
those delivered to it for cancellation, and those described in this Section 2.08
as not outstanding.
If a Senior Note is replaced pursuant to Section 2.07 of this
Indenture, it ceases to be outstanding unless the Trustee and the Company
receive proof satisfactory to them that the replaced Senior Note is held by a
bona fide purchaser.
If Senior Notes are considered paid under Section 4.01 of this
Indenture, they cease to be outstanding and interest on them ceases to accrue.
A Senior Note does not cease to be outstanding because the Company or
an Affiliate of the Company holds the Senior Note.
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Section 2.09 WHEN TREASURY SENIOR NOTES DISREGARDED.
In determining whether the holders of the required principal amount of
Senior Notes have concurred in any direction, waiver or consent or any
amendment, modification or other change to the Indenture, Senior Notes owned by
the Company or by an Affiliate of the Company shall be disregarded and deemed
not to be outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent
or any amendment, modification or other change to the Indenture, only Senior
Notes which the Trustee knows are so owned shall be so disregarded. Senior
Notes so owned which have been pledged in good faith shall not be disregarded if
the pledgee establishes to the satisfaction of the Trustee the pledgee's right
so to act with respect to the Senior Notes and that the pledgee is not the
Company or an Affiliate of the Company.
Section 2.10 TEMPORARY SENIOR NOTES.
Until definitive Senior Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Senior Notes. Temporary
Senior Notes shall be substantially in the form of definitive Senior Notes but
may have variations that the Company considers appropriate for temporary Senior
Notes. If temporary senior Notes are issued, the Company will cause definitive
Senior Notes to be prepared without unreasonable delay. After the preparation
of definitive Senior Notes, the temporary Senior Notes shall be exchangeable for
definitive Senior Notes upon surrender of the temporary Senior Notes at any
office or agency of the Company designated pursuant to Section 2.03 of this
Indenture without charge to the holder. Upon surrender for cancellation of any
one or more temporary Senior Notes the Company shall execute and the Trustee
shall authenticate and deliver in exchange therefor a like principal amount of
definitive Senior Notes of authorized denominations. Until so exchanged, the
temporary Senior Notes shall in all respects be entitled to the same benefits
under this Indenture as definitive Senior Notes.
Section 2.11 CANCELLATION.
The Company at any time may deliver Senior Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Senior Notes surrendered to them for registration of transfer, exchange or
payment. The Trustee and no one else shall cancel all Senior Notes surrendered
for registration of transfer, exchange, payment, replacement or cancellation.
All cancelled Senior Notes held by the Trustee shall be disposed of in
accordance with the Trustee's standard procedures, unless the Company directs
the Trustee to deliver cancelled Senior Notes to the Company. The Company may
not issue new Senior Notes to replace Senior Notes that it has paid or that have
been delivered to the Trustee for cancellation.
Section 2.12 DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Senior Notes,
the Company shall pay such defaulted interest (plus interest on such defaulted
interest to the extent
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lawful) in any lawful manner. The Company may pay such defaulted interest, plus
any such interest payable on it, to the persons who are holders on a subsequent
special record date. The Company shall fix any such defaulted special record
date and special payment date to the reasonable satisfaction of the Trustee. At
least 15 days before any such record date, the Company shall mail to holders of
Senior Notes a notice that states the record date, payment date and amount of
such defaulted interest to be paid.
Section 2.13 CUSIP NUMBER.
The Company in issuing the Senior Notes may use a "CUSIP" number, and
if so, such CUSIP number shall be included in notices of redemption or exchange
as a convenience to holders of Senior Notes; provided, however, that any such
notice may state that no representation is made as to the correctness or
accuracy of the CUSIP number printed in the notice or on the Senior Notes and
that reliance may be placed only on the other identification numbers printed on
the Senior Notes. The Company will promptly notify the Trustee of any change in
the CUSIP number.
Section 2.14 GLOBAL SECURITIES.
The Company may issue some or all of the Senior Notes in temporary or
permanent global form. The Company may issue a global Senior Note only to a
depository or the nominee of such depository and be delivered to the Trustee
as custodian for such depository. A depository may transfer a global Senior
Note only to its nominee or to a successor depository. A global Senior Note
shall represent the amount of Senior Notes specified in the global Senior Note.
A global Senior Note may have variations that the depository requires or that
the Company considers appropriate for such a security.
Transfers of the global Senior Note shall be limited to transfers of
such global Senior Note in whole, but not in part, to the depository, its
successors or their respective nominees. Interests of beneficial owners in
the global Senior Note may be transferred in accordance with the rules
and procedures of the depository. The Company will issue Senior Notes
in definitive form in exchange for the global Senior Notes if (1) the
depository notifies the Company that it is at any time unwilling or unable
to continue as depository and a successor depository is not appointed by
the Company within 90 days, (2) an Event of Default has occurred and is
continuing and the Trustee or other registrar has received a request from
the depository to issue Senior Notes in definitive form in lieu of all or
a portion of the global Senior Note (in which case the Company shall deliver
Senior Notes within 30 days of such request) or (c) the Company determines not
to have the Senior Notes represented by a global Senior Note.
In connection with any transfer of a portion of the beneficial
interest in the global Senior Note to beneficial owners pursuant to this
Section 2.14, the Registrar shall reflect on its books and records the date
and a decrease in the principal amount of the global Senior Notes in an amount
equal to the principal amount of the beneficial interest in the global
Senior Note to be transferred, and the Company shall execute, and the
Trustee shall authenticate and deliver, one or more Senior Notes in definitive
form of like tenor and amounts.
In connection with the transfer of the entire global Senior Note
to beneficial owners pursuant to this Section, the global Senior Note shall
be deemed to be surrendered to the Trustee for cancellation, and the Company
shall execute, and the Trustee shall authenticate and deliver, to each
beneficial owner identified by the depository, in exchange for its beneficial
interest in the global Senior Note, an equal aggregate principal amount of
definitive Senior Notes of authorized denominations.
Beneficial owners of a global Senior Note are subject to the rules of
the depository as in effect from time to time.
The Company, the Trustee and the Agents shall not be responsible for
any acts or omissions of a depository, for any depository records of beneficial
ownership interests or for any transactions between the depository and
beneficial owners.
ARTICLE 3
REDEMPTION
Section 3.01 NOTICE TO TRUSTEE.
If the Company elects to redeem Senior Notes pursuant to paragraph 5
of the Senior Notes, it shall notify the Trustee at least 15 days before notice
of the Redemption Date is to be mailed to holders of the Senior Notes, in
writing of the Redemption Date (unless a shorter notice period shall be
satisfactory to the Trustee). Such notice shall be accompanied by an Officers'
Certificate that the Company has elected to redeem Senior Notes pursuant to
paragraph 5(a) or 5(b) of the Senior Notes, as the case may be, the date notice
of redemption
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is to be mailed to holders of the Senior Notes, the Redemption Date, the
aggregate principal amount of the Senior Notes to be redeemed, the Redemption
Price for such Senior Notes, the amount of accrued and unpaid interest on such
Senior Notes as of the Redemption Date and the manner in which Senior Notes are
to be selected for redemption if less than all outstanding Senior Notes are to
be redeemed and an Opinion of Counsel from the Company to the effect that such
redemption will comply with the conditions herein.
The Company will also provide the Trustee with any additional
information that the Trustee reasonably requests in connection with any
redemption.
Section 3.02 SELECTION OF SENIOR NOTES TO BE REDEEMED.
If less than all of the Senior Notes are to be redeemed, the Trustee
shall select the Senior Notes to be redeemed by lot or by any other
method that complies with applicable legal and securities exchange requirements,
if any, and that the Trustee considers fair and appropriate and in accordance
with methods generally used at the time of selection by fiduciaries in similar
circumstances. The Trustee shall make the selection from Senior Notes
outstanding not previously called for redemption. The Trustee may select for
redemption a portion of the principal of Senior Notes that have denominations
larger than $1,000. Senior Notes and portions thereof selected by the Trustee
will be redeemed in the amount of $1,000 or whole multiples of $1,000.
Provisions of this Indenture that apply to Senior Notes called for redemption
also apply to portions of Senior Notes called for redemption. The Trustee shall
notify the Company promptly of the Senior Notes or portions of Senior Notes to
be called for redemption.
Section 3.03 NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a Redemption Date,
the Company shall mail a notice of redemption to each holder whose Senior Notes
are to be redeemed.
The notice shall identify the Senior Notes to be redeemed and shall
state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) if any Senior Note is being redeemed in part, the portion of the
principal amount of such Senior Note to be redeemed and that, after the
Redemption Date, upon surrender of such Senior Note, a new Senior Note or Senior
Notes in principal amount equal to the unredeemed portion will be issued;
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(d) the name and address of the Paying Agent;
(e) that Senior Notes called for redemption must be surrendered to
the Paying Agent to collect the Redemption Price;
(f) that interest on Senior Notes called for redemption and for which
funds have been set apart for payment, ceases to accrue on and after the
Redemption Date (unless the Company defaults in the payment of the Redemption
Price or the Paying Agent is prohibited from making such payment pursuant to the
terms of this Indenture);
(g) the paragraph of the Senior Notes and the section of this
Indenture pursuant to which the Senior Notes are being redeemed; and
(h) the aggregate principal amount of Senior Notes that are being
redeemed.
At the Company's request, the Trustee shall give notice of redemption
in the Company's name and at its expense. In such event, the Company shall
provide the Trustee with the information required by this Section 3.03.
Section 3.04 EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed, Senior Notes called for
redemption become due and payable on the Redemption Date at the Redemption Price
set forth in the notice, plus accrued and unpaid interest. Upon surrender
to the Trustee or the Paying Agent, such Senior Notes shall be paid at the
Redemption Price stated in the notice, plus accrued and unpaid interest to
the Redemption Date, provided that if the Redemption Date is subsequent to a
record date with respect to any interest payment date specified in the Senior
Notes and on or prior to such interest payment date, then any accrued and unpaid
interest will be paid to the Person in whose name the Senior Note is registered
at the close of business on such record date. Failure to give notice or any
defect in the notice to any holder of Senior Notes shall not affect the validity
of the notice to any other holder.
Section 3.05 DEPOSIT OF REDEMPTION PRICE.
On or prior to the Redemption Date, the Company shall deposit with the
Paying Agent money sufficient to pay the Redemption Price of and accrued and
unpaid interest on all Senior Notes to be redeemed on that date (other than
Senior Notes or portions thereof called for redemption on that date that have
been delivered by the Company to the Trustee for cancellation). The Trustee or
the Paying Agent shall return to the Company any money not required for that
purpose.
Section 3.06 SENIOR NOTES REDEEMED IN PART.
Upon surrender of a Senior Note that is redeemed in part, the Company
shall issue and the Trustee shall authenticate for the holder of a Senior Note
at the expense of the
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Company a new Senior Note equal in principal amount to the unredeemed portion of
the Senior Note surrendered.
ARTICLE 4
COVENANTS
Section 4.01 PAYMENT OF SENIOR NOTES.
The Company shall promptly pay the principal of and interest on the
Senior Notes on the dates and in the manner provided in the Senior Notes and in
this Indenture. Principal and interest shall be considered paid on the date due
if the Paying Agent holds as of 1:00 p.m. Eastern Time on that date money
designated for and sufficient to pay all principal and interest then due.
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on (a) overdue principal, at the rate
borne by Senior Notes, compounded semiannually; and (b) overdue installments of
interest (without regard to any applicable grace period) at the same rate,
compounded semiannually, to the extent lawful.
Section 4.02 COMMISSION REPORTS.
So long as any Senior Note is outstanding, the Company shall file with
the Commission and, within 15 days after it files them with the Commission, file
with the Trustee and mail or promptly cause the Trustee to mail to the holders
of the Senior Notes at their addresses as set forth in the register of the
Senior Notes, copies of the periodic reports and of the information, documents
and other reports (without exhibits, unless requested in writing by any such
holder) which the Company is required to file with Commission pursuant to
Section 13 or 15(d) of the Exchange Act or which the Company would be required
to file with the Commission if the Company then had a class of securities
registered under the Exchange Act. In addition, the Company shall cause its
annual report to stockholders and any quarterly or other financial reports
furnished to its stockholders generally to be filed with the Trustee, no later
than the date such materials are mailed or made available to the Company's
stockholders, and thereafter mailed promptly to the holders of Senior Notes at
their addresses as set forth in the register of Senior Notes. The Company shall
also comply with the other provisions of TIA Section 314(a).
Section 4.03 COMPLIANCE CERTIFICATE.
The Company shall deliver to the Trustee, within 60 days after the end
of the first three fiscal quarters and within 105 days after the end of each
fiscal year of the Company, an Officers' Certificate stating that a review of
the activities of the Company and its Subsidiaries during the preceding fiscal
period has been made under the supervision of the signing Officers with a view
to determining whether the Company has fully performed its
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obligations under this Indenture and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Company
has kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and is not in default in the performance or observance of any of
the terms and conditions hereof (or, if any Default or Event of Default shall
have occurred, describing all such Defaults or Events of Default of which he or
she may have knowledge and the status of each), and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest on the Senior Notes are
prohibited.
The Company shall, so long as any of the Senior Notes are outstanding,
deliver to the Trustee, forthwith upon becoming aware of any Default or Event of
Default, an Officers' Certificate specifying such Default or Event of
Default and the status of each.
So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, at the time the Officers'
Certificate described in the second preceding paragraph is filed with respect to
any fiscal year end of the Company, the Company also shall file with the Trustee
a letter or statement of the independent accountants who shall have certified
the financial statements of the Company for its preceding fiscal year in
connection with the annual report of the Company to its stockholders for such
year to the effect that, in making the examination necessary for certification
of such financial statements, nothing came to their attention that would lead
them to believe that the Company has violated any of the terms or conditions
contained in Sections 4.05, 4.06 and 4.12 of this Indenture, which Default
remains uncured at the date of such letter or statement or, if they shall have
obtained knowledge of any such uncured Default, specifying in such letter or
statement such Default or Defaults and the nature thereof, it being understood
that such accountants shall not be liable directly or indirectly for failure to
obtain knowledge of any such Default or Defaults and that their examination was
not directed primarily toward obtaining knowledge of such noncompliance.
Section 4.04 MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain or cause to be maintained the office or
agency required under Section 2.03 of this Indenture. The Company shall give
prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency not maintained by the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Senior Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designation;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain or cause to be maintained a
New York Office for such purpose.
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Section 4.05 LIMITATION ON ADDITIONAL INDEBTEDNESS.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, incur any Indebtedness
(including Acquired Indebtedness) unless (a) after giving effect to the
incurrence of such Indebtedness and the receipt and application of the proceeds
thereof, the ratio of the total Indebtedness of the Company and its Restricted
Subsidiaries, on a consolidated basis, to the Company's EBITDA (determined on a
pro forma basis for the preceding four full fiscal quarters of the Company for
which financial statements are available at the date of determination) is less
than 7.0 to 1 if the Indebtedness is incurred prior to eighteen months from the
Issue Date and 6.5 to 1 if the Indebtedness is incurred thereafter, determined
by giving pro forma effect to (i) the incurrence of such Indebtedness and (if
applicable) the application of the net proceeds therefrom, including to
refinance other Indebtedness, as if such Indebtedness was incurred, and the
application of such proceeds occurred, at the beginning of such four fiscal
quarters; (ii) the incurrence, repayment or retirement of any other Indebtedness
by the Company and its Restricted Subsidiaries since the first day of such four
full fiscal quarters (and all Indebtedness incurred and the receipt and
application of proceeds thereof and all Indebtedness repaid or retired since the
end of the most recently completed fiscal quarter of the Company for which a
balance sheet is available preceding the date of determination) as if such
incurrence (and, if applicable, the application of proceeds), repayment and
retirement occurred at the beginning of such four fiscal quarters; (iii) in the
case of Acquired Indebtedness, the related acquisition as if such acquisition
had occurred at the beginning of such four fiscal quarters; and (iv) any
acquisition or disposition by the Company and its Restricted Subsidiaries of any
company or any business or any assets out of the ordinary course of business, or
any related repayment of Indebtedness, in each case since the first day of such
four fiscal quarters, assuming such acquisition, disposition or repayment had
been consummated on the first day of such four fiscal quarters, and (b) no
Default or Event of Default shall have occurred and be continuing at the time or
as a consequence of the incurrence of such Indebtedness.
Notwithstanding the foregoing, the Company and any of its Restricted
Subsidiaries, may incur Permitted Indebtedness, as specified, provided, that the
Company will not incur any Permitted Indebtedness that ranks junior in right of
payment to the Senior Notes that has a maturity or mandatory sinking fund
payment prior to the Stated Maturity of the Senior Notes.
Section 4.06 LIMITATION ON RESTRICTED PAYMENTS.
The Company will not make, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, make, any Restricted Payment, unless:
(a) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to such Restricted
Payment;
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(b) immediately after giving pro forma effect to such Restricted
Payment, the Company could incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under the first paragraph of Section 4.05 of this
Indenture; and
(c) immediately after giving effect to such Restricted Payment, the
aggregate of all Restricted Payments declared or made after the Issue Date does
not exceed the sum of (1) 100% of the Company's Cumulative EBITDA minus 1.4
times the Company's Cumulative Consolidated Interest Expense, (2) 100% of the
aggregate Net Proceeds in cash (including cash Net Proceeds received upon the
conversion of noncash proceeds) from the issue or sale, after the Issue Date, of
Capital Stock (other than Disqualified Capital Stock or Capital Stock of the
Company issued to any Subsidiary of the Company) of the Company or any
Indebtedness or other securities of the Company convertible into or exercisable
or exchangeable for Capital Stock (other than Disqualified Capital Stock) of the
Company which has been so converted or exercised or exchanged, as the case may
be, and (3) an amount equal to the net reduction in Investments, subsequent to
the Issue Date, in any Person resulting from payments of interest on debt,
dividends, repayments of loans or advances, return of capital, or other
transfers of property (but only to the extent such distributions are not
included in the calculation of Consolidated Net Income), in each case, to the
Company or any Restricted Subsidiary from any Person, not to exceed in the case
of any Person, the amount of Investments previously made by the Company or any
Restricted Subsidiary in such Person and which was treated as a Restricted
Payment.
The provisions of this Section 4.06 shall not prohibit: (i) the
payment of any distribution within 60 days after the date of declaration
thereof, if at such date of declaration such payment would comply with the
provisions of this Indenture; (ii) so long as no Default or Event of Default
shall have occurred and be continuing, the purchase, redemption, acquisition,
cancellation or other retirement for value of shares of Capital Stock of the
Company held by present or former officers, directors or employees (or their
estates or beneficiaries under their estates) and which payments, in the
aggregate to all such Persons do not exceed $4,000,000; (iii) so long as no
Default or Event of Default shall have occurred and be continuing, the
acquisition, redemption or retirement of any shares of Capital Stock of the
Company or a Restricted Subsidiary or by conversion into, or by or in exchange
for, shares of Capital Stock (other than Disqualified Capital Stock) of the
Company, provided that the proceeds of any sale of Capital Stock shall not
increase the amount available for Restricted Payments; or (iv) distributions by
Video 44, an Illinois general partnership, to a minority partner (other than a
Restricted Subsidiary) pursuant to the Joint Venture Agreement. The amounts
expended to purchase, redeem, retire or acquire, convert or exchange or make
distributions on Capital Stock as set forth in the immediately preceding clauses
(ii), (iii) and (iv) (other than distributions funded by capital contributions
of Telemundo of Chicago, Inc. or Harriscope of Chicago, Inc. pursuant to Section
3.5(a) of the Joint Venture Agreement) shall be excluded from the calculation of
the amount available for Restricted Payments under the previous paragraph. No
payments made or paid pursuant to clause (c) of the previous paragraph shall be
counted for purposes of calculating the amounts utilized for Restricted Payments
pursuant to clause (i) of this paragraph to the extent that such amount was
already counted for such purpose.
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Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this Section 4.06 were computed, which calculations may
be based upon the Company's latest available financial statements, and that no
Default or Event of Default exists and is continuing and no Default or Event of
Default will occur immediately after giving effect to any Restricted Payment.
Section 4.07 LIMITATION ON LIENS.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, create, incur or otherwise cause or suffer to exist or become
effective any Liens of any kind (other than Permitted Liens and Liens created by
Section 7.07 of this Indenture) upon any property or asset of the Company or any
Restricted Subsidiary or any shares of stock or debt of any Restricted
Subsidiary, now owned or hereafter acquired, unless (i) if such Lien secures
Indebtedness which is PARI PASSU with the Senior Notes, then the Senior Notes
are secured on an equal and ratable basis with the obligations so secured until
such time as such obligation is no longer secured by a Lien or (ii) if such Lien
secures Indebtedness which is subordinated to the Senior Notes, then the Senior
Notes are secured prior to the obligations so secured, and such Lien shall be
subordinated to the Lien granted to the holders of the Senior Notes to the same
extent as such subordinated Indebtedness is subordinated to the Senior Notes
until such time as such obligation is no longer secured by a Lien.
Section 4.08 LIMITATION ON TRANSACTIONS WITH AFFILIATES.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, conduct any business or enter into any
transaction or series of related transactions (including, without limitation,
the sale, purchase, exchange or lease of assets or property or rendering of any
services) with or for the benefit of any Affiliate (other than the Company or a
Wholly-Owned Restricted Subsidiary or a majority-owned Restricted Subsidiary (so
long as no minority interest is owned by an entity which is otherwise an
Affiliate) and including entities in which the Company or any of its Restricted
Subsidiaries own a minority interest) (an "Affiliate Transaction") or extend,
renew, waive or otherwise modify the terms of any Affiliate Transaction entered
into prior to the Issue Date unless the terms of such Affiliate Transaction are
fair and reasonable to the Company or such Restricted Subsidiary, as the case
may be, and the terms of such Affiliate Transaction are at least as favorable as
the terms which could be obtained by the Company or such Restricted Subsidiary,
as the case may be, in a comparable transaction made on an arm's-length basis
between unaffiliated parties. With respect to any Affiliate Transaction
involving an amount or having a value in excess of $5,000,000, the Company must
obtain a resolution of the Board of Directors (including a majority of the
disinterested directors) certifying that, in their good faith judgment, such
Affiliate Transaction complies with the preceding sentence and with respect to
any Affiliate Transaction involving an amount or having a value in excess of
$10,000,000, such certificate shall be accompanied by a written opinion from an
Independent Financial Advisor that the transaction is fair from a financial
point of view to the Company or such Restricted
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Subsidiary. A certificate evidencing such resolution shall be delivered to the
Trustee within five Business Days after the consummation of such Affiliate
Transaction.
The foregoing provisions will not apply to (i) any Restricted Payment
that is not prohibited by Section 4.06 of this Indenture; or (ii) any
transaction, approved by the Board of Directors of the Company, with an officer
or director of the Company or of any Subsidiary in his or her capacity as
officer or director entered into in the ordinary course of business, including
compensation and employee benefit arrangements with any officer or director of
the Company.
Section 4.09 DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
RESTRICTED SUBSIDIARIES.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (a)(i) pay dividends or make any other distributions to
the Company or any other Restricted Subsidiary on its Capital Stock or with
respect to any other interest or participation in, or measured by, its profits
or (ii) pay any Indebtedness owed to the Company or any other Restricted
Subsidiary, (b) make loans or advances to the Company or any other Restricted
Subsidiary, or (c) transfer any of its properties or assets to the Company or
any other Restricted Subsidiary, except for such encumbrances or restrictions
existing under or by reason of:
(i) any agreement existing on the Issue Date, including the Loan and
Security Agreement, this Indenture and the Old Note Indenture (if Old Notes
are still outstanding), as in effect on the Issue Date;
(ii) any agreement governing Acquired Indebtedness or Capital Stock
of a Person acquired by the Company or any of its Restricted Subsidiaries
as in effect at the time of such acquisition (except to the extent such
Indebtedness was incurred in connection with or in anticipation of such
acquisition), provided that such restriction does not extend to or cover
any Person, or the properties or assets of any Person, other than the
Person so acquired;
(iii) agreements relating to an acquisition of Property, provided
that such encumbrances or restrictions relate solely to the Property so
acquired;
(iv) agreements relating to Indebtedness incurred to refinance
Indebtedness set forth in preceding clauses (i)-(iii) and which
Indebtedness incurred to refinance Indebtedness set forth in preceding
clause (i)-(iii) is refinancing Indebtedness permitted under Sections 4.05
and 4.12 of this Indenture, provided that the encumbrances or restrictions
contained in the agreements governing such permitted refinancing are no
more restrictive in the aggregate than such encumbrances or restrictions
contained in the agreements governing the Indebtedness being refinanced
immediately prior to such refinancing and do not extend to or cover any
other Person or the property of any other
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Person other than the Person in respect of whom such encumbrance or restriction
relating to the Indebtedness being refinanced applied;
(v) applicable law;
(vi) customary non-assignment provisions in leases and any
license of intellectual property entered into in the ordinary course of
business (including programming agreements) and Local Marketing Agreements;
(vii) agreements for the sale of any assets of any Restricted
Subsidiary, provided that such restriction is only applicable to the assets
to be sold by such Restricted Subsidiary;
(viii) Purchase Money Indebtedness for property acquired in the
ordinary course of business that only imposes restrictions on the Property
so acquired and any improvements on such Property; and
(ix) Capitalized Lease Obligations that are otherwise permitted
hereunder, provided that such encumbrance or restriction does not extend to
any Property other than that subject to the underlying lease.
Section 4.10 LIMITATION ON CERTAIN ASSET SALES.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (a) the Company or such
Restricted Subsidiary, as the case may be, receives consideration at the time of
such sale or other disposition at least equal to the Fair Market Value (as
conclusively evidenced by an Officers' Certificate for amounts up to $5,000,000
and by a resolution of the Company's Board of Directors set forth in an
Officers' Certificate and delivered to the Trustee for amounts in excess of
$5,000,000) of the assets sold or otherwise disposed of, and (b)(i) at least 75%
of the consideration therefor received by the Company or its Restricted
Subsidiary, as the case may be, is in the form of cash or Cash Equivalents, or
(ii) the consideration therefor received by the Company or such Restricted
Subsidiary in an Asset Swap is determined by an Independent Financial Advisor to
be substantially comparable in type to the asset being sold; provided that any
liabilities (as shown on the Company's or such Restricted Subsidiary's most
recent balance sheet or in the notes thereto) of the Company or any Restricted
Subsidiary (other than liabilities that are by their terms subordinated to the
Senior Notes) that are assumed by the transferee of any such assets shall be
deemed to be Cash Equivalents (to the extent of the lesser of the Fair Market
Value or book value of such liabilities); and provided further that any Asset
Sale with respect to the stock or assets of Telemundo News Network, Inc. shall
not be subject to clause (b)(i) of this paragraph.
The Company or any Restricted Subsidiary, as the case may be, may
cause the Asset Sale Proceeds from such Asset Sale to be applied (a) to the
extent the Company elects, or is required, to prepay, repay or purchase debt
under any then existing Senior Indebtedness
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of the Company or Indebtedness of any Restricted Subsidiary within 360 days
following the receipt of the Asset Sale Proceeds from any Asset Sale; (b) to the
extent of the balance of Asset Sale Proceeds after application as described
above, to the extent the Company elects, to an investment in assets acquired by
the Company or any Restricted Subsidiary (including Capital Stock or other
securities purchased in connection with the acquisition of Capital Stock or
Property of another Person) used or useful in businesses similar or related to
the business of the Company or Restricted Subsidiary as conducted at the time of
such Asset Sale, and the Asset Sale Proceeds are applied within 360 days
following the receipt of such Asset Sale Proceeds (the "Asset Sale Trigger
Date"); and (c) if on the Asset Sale Trigger Date with respect to any Asset
Sale, the Available Asset Sale Proceeds exceed $10,000,000, the Company shall
apply an amount equal to such Available Asset Sale Proceeds to an offer to
repurchase the Senior Notes, at a purchase price in cash equal to 100% of the
Accreted Value thereof plus accrued and unpaid interest, if any, to the date of
repurchase (an "Excess Proceeds Offer"). If an Excess Proceeds Offer is not
fully subscribed, the Company may retain the portion of the Available Asset Sale
Proceeds not required to repurchase Senior Notes and use such amount for general
corporate purposes. Upon completion of an Excess Proceeds Offer, the amount of
Available Asset Sale Proceeds shall be reset to zero.
Notice of each Excess Proceeds Offer shall be mailed to the holders of
the Senior Notes at the addresses shown on the register of holders maintained by
the Registrar with a copy to the Trustee and the Paying Agent, within 30 days
following the applicable Asset Sale Trigger Date, and shall comply with each of
the procedures for notice set forth below. Each Excess Proceeds Offer shall
remain open until a specified date (the "Excess Proceeds Offer Termination
Date") which is at least 20 Business Days from the date such Excess Proceeds
Offer is mailed. During the period specified in the Excess Proceeds Offer,
holders of Senior Notes may elect to tender their Senior Notes in whole or in
part in integral multiples of $1,000 in exchange for cash. Payment shall be
made by the Company (or applicable Subsidiary) in respect of Senior Notes
properly tendered pursuant to this Section 4.10 on a specified Business Day (the
"Excess Proceeds Offer Payment Date") which shall be no earlier than three
Business Days after the Excess Proceeds Offer Termination Date and not
earlier than 30 days and not later than 60 days from the date the Excess
Proceeds Offer is mailed. To the extent holders of Senior Notes properly tender
Senior Notes in an amount exceeding the Available Asset Sale Proceeds,
Senior Notes of tendering holders will be repurchased on a pro rata basis
(based on amounts tendered).
The notice, which shall govern the terms of the Excess Proceeds Offer,
shall include such disclosures as are required by law and shall state:
(a) that the Excess Proceeds Offer is being made pursuant to this
Section 4.10;
(b) the purchase price (including the amount of the accrued interest,
if any) for each Senior Note, the Excess Proceeds Offer Termination Date and the
Excess Proceeds Offer Payment Date;
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(c) that any Senior Note or portion thereof not validly tendered or
accepted for payment will continue to accrue interest in accordance with the
terms thereof;
(d) that, unless the Company defaults in making payment as provided
for in this Indenture and the Senior Notes, any Senior Note or portion thereof
accepted for payment pursuant to the Excess Proceeds Offer shall cease to
accrue interest after the Excess Proceeds Offer Payment Date;
(e) that holders electing to have Senior Notes or portions thereof
purchased pursuant to an Excess Proceeds Offer will be required to surrender
their Senior Notes to the Paying Agent at the address specified in the notice
prior to 5:00 p.m., New York City time, on the Excess Proceeds Offer Termination
Date, with the form entitled "Option of Holder to Elect Purchase" on the reverse
side of the Senior Notes completed, and must complete any form of letter of
transmittal proposed by the Company and acceptable to the Trustee and the Paying
Agent;
(f) that holders of Senior Notes will be entitled to withdraw their
election if the Paying Agent receives, not later than 5:00 p.m., New York City
time, on the Excess Proceeds Offer Termination Date, a tested telex, facsimile
transmission or letter setting forth the name of the holder, the principal
amount of the Senior Notes the holder delivered for purchase, the Senior Note
certificate number (if any) and a statement that such holder is withdrawing his
election to have such Senior Notes purchased;
(g) that if Senior Notes in a principal amount in excess of the
Available Asset Sale Proceeds are validly tendered pursuant to the Excess
Proceeds Offer, the Company shall purchase Senior Notes on a pro rata basis
among the Senior Notes tendered (with such adjustments as may be deemed
appropriate by the Company so that only Senior Notes in denominations of $1,000
or integral multiples of $1,000 shall be acquired);
(h) that holders whose Senior Notes are purchased only in part will
be issued new Senior Notes equal in principal amount to the unpurchased portion
of the Senior Notes surrendered;
(i) the instructions that holders must follow in order to tender
their Senior Notes; and
(j) the calculation used in determining the amount of Available Asset
Sale Proceeds to be applied to the repurchase of such Senior Notes.
On the Excess Proceeds Offer Payment Date, the Company shall (i)
accept for payment Senior Notes or portions thereof validly tendered pursuant to
the Excess Proceeds Offer, (ii) deposit with the Paying Agent money sufficient
to pay the purchase price of all Senior Notes or portions thereof so tendered
and accepted and (iii) deliver to the Trustee the Senior Notes so accepted
together with an Officers' Certificate setting forth the Senior Notes or
portions thereof tendered to and accepted for payment by the Company. The
Paying Agent shall promptly mail or deliver to the holders
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of Senior Notes so accepted payment in an amount equal to the purchase price,
and the Company shall execute and issue and the Trustee shall promptly
authenticate and mail or deliver to such holders a new Senior Note equal in
principal amount to any unpurchased portion of the Senior Note surrendered. Any
Senior Notes not so accepted shall be promptly mailed or delivered by the
Company to the holder thereof.
In the event an offer is made to repurchase the Senior Notes pursuant
to an Excess Proceeds Offer, and holders of Senior Notes exercise their right to
require the Company to purchase Senior Notes, if such purchase constitutes a
"tender offer" for purposes of Rule 14e-1 under the Exchange Act at that time,
the Company will comply with the requirement of Rule 14e-1 as then in effect
with respect to such repurchase.
Section 4.11 LIMITATION ON CAPITAL STOCK OF RESTRICTED SUBSIDIARIES.
The Company will not (a) sell, pledge, hypothecate or otherwise convey
or dispose of any Capital Stock of a Restricted Subsidiary (other than in
connection with Indebtedness incurred pursuant to Section 4.05 of this Indenture
as permitted by clause (a) of the definition of "Permitted Indebtedness") or (b)
permit any of its Restricted Subsidiaries to issue any Capital Stock, other than
to the Company or a Wholly-Owned Subsidiary of the Company (other than
director's qualifying shares in an amount not in excess of 1% of the total
outstanding shares of such Person). The foregoing restrictions shall not apply
to an asset sale made in compliance with Section 4.10 of this Indenture or the
issuance of Preferred Stock in compliance with Section 4.12 of this Indenture.
Section 4.12 LIMITATION ON RESTRICTED SUBSIDIARY DEBT AND PREFERRED
STOCK.
The Company will not permit any of its Restricted Subsidiaries to,
directly or indirectly, incur any Indebtedness (including Acquired Indebtedness)
or issue any Preferred Stock other than, without duplication:
(a) (1) Purchase Money Indebtedness and Capitalized Lease
Obligations incurred in the ordinary course of business in a principal amount
outstanding at the time of incurrence which does not in the aggregate exceed
$15,000,000 at any time outstanding;
(2) Indebtedness incurred or incurrable under any Guarantee of any
Restricted Subsidiary made in the ordinary course of business and not to exceed
$10,000,000 at any time outstanding; and
(3) Indebtedness incurred or incurrable pursuant to a Local
Marketing Agreement, for a television station located outside of the continental
United States and operated in a country, a territory or a possession in which
the Company owns and operates a television station on the date of this
Indenture, in an amount as determined in accordance with GAAP, not to exceed
$50,000,000 at any time outstanding;
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provided, however, that (A) after giving effect to the incurrence of any
Indebtedness pursuant to this clause (a) of this Section 4.12 and the receipt
and application of the proceeds thereof, the ratio of the total Indebtedness of
the Company's Restricted Subsidiaries (excluding Indebtedness incurred by any
Restricted Subsidiary pursuant to clause (b), (f) or (h) of this Section 4.12),
on a combined consolidated basis, to the Company's EBITDA (determined on a pro
forma basis for the preceding four fiscal quarters of the Company for which
financial statements are available at the date of determination) is less than
3.0 to 1 , determined by giving pro forma effect to (i) the incurrence of such
Indebtedness and (if applicable) the application of the net proceeds therefrom,
including to refinance other Indebtedness, as if such Indebtedness was incurred,
and the application of such proceeds occurred, at the beginning of such four
fiscal quarters; (ii) the incurrence, repayment or retirement of any other
Indebtedness by the Company and its Restricted Subsidiaries since the first day
of such four full fiscal quarters (and all Indebtedness incurred and the receipt
and application of proceeds thereof and all Indebtedness repaid or retired since
the end of the most recently completed fiscal quarter of the Company for which a
balance sheet is available preceding the date of determination) as if such
incurrence (and, if applicable, the application of proceeds), repayment and
retirement occurred at the beginning of such four fiscal quarters; (iii) in the
case of Acquired Indebtedness, the related acquisition as if such acquisition
had occurred at the beginning of such four fiscal quarters; and (iv) any
acquisition or disposition by the Company and its Restricted Subsidiaries of any
company or any business or any assets out of the ordinary course of business, or
any related repayment of Indebtedness, in each case since the first day of such
four fiscal quarters, assuming such acquisition, disposition or repayment had
been consummated on the first day of such four fiscal quarters, and (B) no
Default or Event of Default shall have occurred and be continuing at the time or
as a consequence of the incurrence of such Indebtedness;
(b) Indebtedness of any Restricted Subsidiary or Preferred Stock of
any Restricted Subsidiary issued to and held by the Company or a Wholly-Owned
Restricted Subsidiary of the Company, provided that such Indebtedness or
Preferred Stock is at all times held by the Company or a Wholly-Owned Restricted
Subsidiary of the Company;
(c) Indebtedness of any Restricted Subsidiary under Currency
Agreements and Interest Rate Protection Agreements which are entered into for
the purpose of protection against risk of currency or interest rate fluctuations
affecting any Restricted Subsidiary in its ordinary course of business or that
are related to payment obligations of any Restricted Subsidiary otherwise
permitted under this Indenture;
(d) Indebtedness or Preferred Stock of any Restricted Subsidiary
remaining outstanding immediately after the Issue Date after giving effect to
the consummation of the transactions described in the Prospectus under "Use of
Proceeds";
(e) Indebtedness incurred or incurrable in respect of reimbursement
obligations related to letters of credit, banker's acceptances or similar
facilities entered into in the ordinary course of business;
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(f) Indebtedness incurred or incurrable by Telemundo of Chicago, Inc.
and Harriscope of Chicago, Inc. pursuant to Section 3.5(a) of the Joint Venture
Agreement;
(g) Indebtedness in respect to bids, performance and surety bonds and
obligations provided in the ordinary course of business and appeal bonds;
(h) Acquired Indebtedness, provided that such Indebtedness was not
incurred or issued as a result of or in connection with or in anticipation of
such Person becoming a Restricted Subsidiary of the Company and immediately
after giving effect to such Person becoming a Restricted Subsidiary of the
Company (as if such Indebtedness was incurred and issued on the first day of the
four quarter period) the Company could incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) under Section 4.05 of this Indenture;
(i) Indebtedness incurred by a Restricted Subsidiary in exchange for,
or the proceeds of which are used to refinance Indebtedness referred to in
clause (a)(1) and clauses (c) through (g) of this Section 4.12, provided that
(i) such Indebtedness is in an aggregate principal amount not in excess of the
aggregate principal amount then outstanding of the Indebtedness being
refinanced, plus the amount of accrued and unpaid interest, if any, and premiums
owed, if any, not in excess of preexisting payment provisions on such
Indebtedness being refinanced, plus the reasonable, customary expenses, fees,
and costs of the Company incurred in connection with such refinancing, (ii) such
Indebtedness is scheduled to mature either (A) no earlier than the Indebtedness
being refinanced or (B) after the Stated Maturity of the Senior Notes, and (iii)
such Indebtedness has an Average Life at the time such Indebtedness is incurred
that is equal to or greater than the Average Life of the Indebtedness being
refinanced; and
(j) Indebtedness of any Restricted Subsidiary evidenced by or arising
under the Loan and Security Agreement.
Section 4.13 LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS
The Company will not, and will not permit any Restricted Subsidiary
to, enter into any Sale and Lease-Back Transaction unless (a) the net proceeds
received in such Sale and Lease-Back Transaction are at least equal to the fair
market value of the property sold; (b) the Company could incur the Attributable
Indebtedness in respect of such Sale and Lease-Back Transaction in compliance
with Section 4.05 of this Indenture; and (c) the Company shall apply or cause to
be applied the Asset Sale Proceeds of such transaction in accordance with
Section 4.10 of this Indenture.
Section 4.14 CHANGE OF CONTROL.
Within 30 days of the occurrence of a Change of Control, the Company
shall notify the Trustee in writing of such occurrence and shall make an offer
to purchase (the "Change of Control Offer") the outstanding Senior Notes at a
purchase price equal to 101% of the Accreted Value thereof plus any accrued and
unpaid interest thereon to the Change of
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Control Payment Date (as hereinafter defined) (such purchase price being
hereinafter referred to as the "Change of Control Purchase Price") in accordance
with the procedures set forth in this Section 4.14.
Within 30 days of the occurrence of a Change of Control, the Company
also shall (a) cause a notice of the Change of Control Offer to be sent at least
once to the Dow Jones News Service or similar business news service in the
United States and (b) send by first-class mail, postage prepaid, to the Trustee
and to each holder of the Senior Notes, at the address appearing in the register
maintained by the Registrar of the Senior Notes, a notice stating:
(i) that the Change of Control Offer is being made pursuant to this
Section 4.14 and that all Senior Notes validly tendered will be accepted
for payment, and otherwise subject to the terms and conditions set forth
herein;
(ii) the Change of Control Purchase Price and the purchase date (which
shall be a Business Day no earlier than 20 Business Days from the date such
notice is mailed (the "Change of Control Payment Date"));
(iii) that any Senior Note or portion thereof not validly tendered will
continue to accrue interest in accordance with the terms thereof;
(iv) that, unless the Company defaults in the payment of the Change of
Control Purchase Price, any Senior Notes accepted for payment pursuant to
the Change of Control Offer shall cease to accrue interest after the Change
of Control Payment Date;
(v) that holders accepting the offer to have their Senior Notes
purchased pursuant to a Change of Control Offer will be required to
surrender the Senior Notes to the Company, a depository if appointed
by the Company, or the Paying Agent at the address specified in the notice
prior to the close of business on the Business Day preceding the
Change of Control Payment Date with the form entitled "Option of Holder to
Elect Purchase" on the reverse side of the Senior Notes completed, and must
complete any form of letter of transmittal proposed by the Company and
acceptable to the Trustee and the Paying Agent;
(vi) that holders will be entitled to withdraw their acceptance if the
Paying Agent receives, not later than 5:00 p.m., New York City time, on the
third Business Day preceding the Change of Control Payment Date, a tested
telex, facsimile transmission or letter setting forth the name of the
holder, the principal amount of the Senior Notes delivered for purchase,
and a statement that such holder is withdrawing his election to have such
Senior Notes purchased;
(vii) that holders whose Senior Notes are being purchased only in part
will be issued new Senior Notes equal in principal amount to the
unpurchased portion of the Senior Notes surrendered, provided that each
Senior Note purchased and each such
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new Senior Note issued shall be in denominations of $1,000 and integral
multiples thereof;
(viii) any other procedures that a holder must follow to accept a Change
of Control Offer or effect withdrawal of such acceptance; and
(ix) the name and address of the Paying Agent.
On the Change of Control Payment Date, the Company shall, to the
extent lawful, (i) accept for payment Senior Notes or portions thereof validly
tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying
Agent money sufficient to pay the purchase price of all Senior Notes or portions
thereof so tendered and (iii) deliver or cause to be delivered to the Trustee
Senior Notes so accepted together with an Officers' Certificate stating the
Senior Notes or portions thereof validly tendered to the Company. The Paying
Agent shall promptly mail or deliver to each holder of Senior Notes so accepted
payment in an amount equal to the purchase price for such Senior Notes, and the
Company shall execute and issue, and the Trustee shall promptly authenticate and
mail or deliver to such holder, a new Senior Note equal in principal amount to
any unpurchased portion of the Senior Notes surrendered; provided that each such
new Senior Note shall be issued in denominations of $1,000 and integral
multiples thereof.
If the Company or any Subsidiary thereof has issued any outstanding
(i) Indebtedness that is subordinated in right of payment to the Senior Notes or
(ii) Preferred Stock and the Company or such Subsidiary is required to
repurchase, or make an offer to repurchase, such Indebtedness, or redeem, or
make the offer to redeem, such Preferred Stock, in the event of a Change of
Control or to make a distribution with respect to such subordinated Indebtedness
or Preferred Stock in the event of a Change of Control, the Company shall not
consummate any such offer or distribution with respect to such subordinated
Indebtedness or Preferred Stock until such time as the Company shall have paid
the Change of Control Purchase Price in full to the holders of Senior Notes that
have accepted the Company's Change of Control Offer and shall otherwise have
consummated the Change of Control Offer made to holders of the Senior Notes.
The Company will not issue Indebtedness or Preferred Stock that is subordinated
in right of payment to the Senior Notes or Preferred Stock with change of
control provisions requiring the payment of such Indebtedness or Preferred Stock
prior to the payment of the Senior Notes in the event of a Change of Control
under this Indenture.
In the event that a Change of Control occurs and the holders of Senior
Notes exercise their right to require the Company to purchase Senior Notes, if
such purchase constitutes a "tender offer" for purposes of Rule 14e-1 under the
Exchange Act at that time, the Company will comply with the requirements of Rule
14e-1 as then in effect with respect to such repurchase.
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Section 4.15 CONTINUED EXISTENCE.
Subject to Article 5, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence.
Section 4.16 TAXES.
The Company shall pay prior to delinquency all taxes, assessments and
governmental levies, except as contested in good faith and by appropriate
proceedings or where the failure to do so (together with all other such
failures) would not have a material adverse effect on the financial condition or
results of operations of the Company and its Subsidiaries, taken as a whole.
Section 4.17 STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the Company's
obligation to pay the Senior Notes; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
insofar as such law applies to the Senior Notes, and covenants that it shall
not, by resort to any such law, hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law has been enacted.
Section 4.18 INVESTMENT COMPANY ACT.
The Company, as of the Issue Date, is not and shall not become an
investment company subject to registration under the Investment Company Act of
1940, as amended.
Section 4.19 APPOINTMENTS TO FILL VACANCIES IN TRUSTEE'S OFFICE.
The Company, whenever necessary to avoid or fill a vacancy in the
office of Trustee, will appoint, in the manner provided in Section 7.08 of this
Indenture, a Trustee, so that there shall at all times be a Trustee hereunder.
Section 4.20 FURTHER INSTRUMENTS AND ACTS.
Upon request of the Trustee, the Company will execute and deliver such
further instruments and do such further acts as may be reasonably necessary
to carry out more effectively the purpose of this Indenture.
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ARTICLE 5
SUCCESSORS
Section 5.01 WHEN THE COMPANY MAY MERGE, ETC.
The Company will not consolidate with, merge with or into, or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its assets (as an entirety or substantially as an entirety in one transaction
or a series of relation transactions), to any Person (other than the merger or
transfer of assets of a Wholly-Owned Restricted Subsidiary of the Company into
another Wholly-Owned Restricted Subsidiary of the Company or into the Company)
unless:
(a) the Company shall be the surviving or continuing Person or the
Person (if other than the Company) formed by such consolidation or into which
the Company is merged or to which the properties and assets of the Company are
sold, assigned, transferred, leased, conveyed or disposed of shall be a
corporation organized and validly existing under the laws of the United States
or any State thereof or the District of Columbia and shall expressly assume, by
a supplemental indenture, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all of the obligations of the Company under the
Senior Notes and this Indenture, and the obligations under this Indenture shall
remain in full force and effect;
(b) immediately before and immediately after giving effect to such
transaction on a pro forma basis, no Default or Event of Default shall have
occurred and be continuing; and
(c) immediately after giving effect to such transaction on a pro
forma basis, the Company or such Person could incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under Section 4.05 of this
Indenture and immediately after such transaction, the Company or the surviving
Person holds all material permits, licenses, certifications or approvals
required for operation of the business of the Company as the same is conducted
prior to such transaction and immediately thereafter.
In connection with any consolidation, merger or transfer of assets
contemplated by this Section 5.01, the Company or such Person shall deliver, or
cause to be delivered, to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that such consolidation, merger, sale,
assignment, conveyance, transfer or lease and, if a supplemental indenture is
required in connection with such transaction, such supplemental indenture,
comply with the provisions of this Indenture and that all conditions precedent
in this Indenture relating to such transaction have been satisfied.
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Section 5.02 SUCCESSOR CORPORATION SUBSTITUTED.
Upon any such consolidation, merger, sale, assignment, conveyance,
lease or transfer in accordance with Section 5.01 of this Indenture, the
successor Person formed by such consolidation or into which the Company is
merged or to which such conveyance, lease or transfer is made will succeed to,
and be substituted for, and may exercise every right and power of, the Company
under this Indenture with the same effect as if such successor had been named as
the Company therein, and thereafter (except in the case of a sale, assignment,
transfer, lease, conveyance or other disposition) the predecessor corporation
will be relieved of all further obligations and covenants under this Indenture
and the Senior Notes.
Section 5.03 PURCHASE OPTION ON CHANGE OF CONTROL.
This Article 5 does not affect the obligations of the Company
(including without limitation any successor to the Company) under Section 4.14
of this Indenture.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01 EVENTS OF DEFAULT.
An "Event of Default" with respect to any Senior Notes occurs if:
(a) the Company defaults in the payment of principal of, or premium,
if any, on the Senior Notes when the same becomes due and payable at its Stated
Maturity, upon redemption, upon acceleration or otherwise, including, without
limitation, failure of the Company to redeem or purchase Senior Notes on the
date required pursuant to Section 4.10 or 4.14 of this Indenture or failure to
make any optional redemption payment when due; or
(b) the Company defaults in any payment of any interest on the Senior
Notes when the same becomes due and payable (including any interest payable in
connection with any optional redemption payment) and continuance of such default
for more than 30 days; or
(c) the Company or any Restricted Subsidiary fails to observe,
perform or comply with any covenant or agreement (other than the obligations
specified in clauses (a) and (b) of this Section 6.01) in the Senior Notes or
this Indenture for a period of 60 days after the receipt of written notice
from the Trustee or the holders of not less than 25% in aggregate principal
amount of the then outstanding Senior Notes; or
(d) default in the payment when due after any applicable grace period
of principal, interest or premium with respect to any Indebtedness of the
Company or any
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Restricted Subsidiary thereof or the acceleration of any Indebtedness of the
Company or any Restricted Subsidiary, and, in either case, the total amount of
such unpaid or accelerated debt exceeds $5,000,000; or
(e) the rendering of any judgment or judgments (not subject to appeal
and other than any judgment as to which an insurance company rated A - or better
by A. M. Best has accepted full liability) against the Company or any Restricted
Subsidiary thereof in an aggregate principal amount in excess of $5,000,000
which remains unstayed, in effect and unpaid for a period of 60 consecutive days
thereafter; or
(f) the Company or any Restricted Subsidiary, pursuant to or within
the meaning of any Bankruptcy Law:
(1) commences a voluntary case,
(2) consents to the entry of an order for relief against it in
an involuntary case,
(3) consents to the appointment of a Custodian of it or for all
or substantially all of its property, or
(4) makes a general assignment for the benefit of its creditors;
or
(g) a court of competent jurisdiction enters a judgment, order or
decree under any Bankruptcy Law that:
(1) is for relief against the Company or any Restricted
Subsidiary in an involuntary case,
(2) appoints a Custodian of the Company or any Restricted
Subsidiary for all or substantially all of its property, or
(3) orders the liquidation of the Company or any Restricted
Subsidiary,
and the order or decree remains unstayed and in effect for 60 days.
The term "Bankruptcy Law" means title 11, U.S. Code or any similar
Federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
A notice under clause (c) of this Section 6.01 must specify the
Default, demand that it be remedied and state that such notice is a
"Notice of Default."
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Section 6.02 ACCELERATION.
If an Event of Default (other than an Event of Default specified in
clauses (f) and (g) of Section 6.01 of this Indenture) occurs and is continuing,
then and in every such case the Trustee, by written notice to the Company, or
the holders of at least 25% in aggregate principal amount of the then
outstanding Senior Notes, by written notice to the Company and the Trustee, may
declare to be immediately due and payable the entire Accreted Value of all the
Senior Notes then outstanding, plus accrued interest to the date of
acceleration. Upon such declaration such principal amount, premium, if any, and
accrued and unpaid interest shall be immediately due and payable notwithstanding
anything contained in this Indenture or the Senior Notes to the contrary. If an
Event of Default with respect to the Company specified in clauses (f) or (g) of
Section 6.01 of this Indenture shall occur, Accreted Value, premium, if any,
and accrued and unpaid interest with respect to all of the Senior Notes then
outstanding shall automatically become and be immediately due and payable
without any declaration or other act on the part of the Trustee or the holders
of Senior Notes.
The holders of a majority in principal amount of the then outstanding
Senior Notes by notice to the Trustee may rescind an acceleration and its
consequences if all existing Events of Default, other than the nonpayment of
principal and premium, if any, and interest on the Senior Notes which has become
due solely by virtue of such acceleration have been cured or waived and if the
rescission would not conflict with any judgment or decree of any court of
competent jurisdiction obtained by the Trustee. No such rescission shall
affect any subsequent Default or impair any right consequent thereto.
Section 6.03 OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on the Senior Notes or to enforce the
performance of any provision of the Senior Notes or this Indenture. The Trustee
may maintain a proceeding even if it does not possess any of the Senior Notes or
does not produce any of them in the proceeding. A delay or omission by the
Trustee or any holder of a Senior Note in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
Section 6.04 WAIVER OF PAST DEFAULTS.
The holders of a majority in aggregate principal amount of the Senior
Notes then outstanding may, on behalf of the holders of all the Senior Notes,
waive an existing Default or Event of Default and its consequences, except a
Default or an Event of Default in the payment of the principal of or interest on
the Senior Notes held by non-consenting holders (other than nonpayment of
principal of and premium, if any, or interest on the Senior Notes which has
become due solely by virtue of an acceleration which has been duly rescinded, as
provided above), or in respect of a covenant or provision of this Indenture
which cannot be
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modified or amended without the consent of all holders of Senior Notes. When a
Default is waived, it shall cease to exist and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose under this
Indenture. No waiver shall extend to any subsequent or other Default or impair
any right consequent thereon.
Section 6.05 CONTROL BY MAJORITY.
The holders of a majority in principal amount of the then outstanding
Senior Notes may direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture, that the Trustee determines may be unduly
prejudicial to the rights of other holders of Senior Notes or that may involve
the Trustee in personal liability; provided that the Trustee may take any other
action the Trustee deems proper that is not inconsistent with such directions.
Section 6.06 LIMITATION ON SUITS.
A holder of a Senior Note may not pursue any remedy with respect to
this Indenture or the Senior Notes unless:
(a) the holder gives to the Trustee notice of a continuing Event of
Default;
(b) the holders of at least 25% in principal amount of the then
outstanding Senior Notes make a written request to the Trustee to pursue the
remedy;
(c) such holder or holders offer and, if requested, provide to the
Trustee reasonable indemnity satisfactory to the Trustee against any loss,
liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the holders of a majority in principal
amount of the then outstanding Senior Notes do not give the Trustee a direction
inconsistent with the request.
A holder of a Senior Note may not use this Indenture to prejudice the
rights of another holder or to obtain a preference or priority over another
holder.
Section 6.07 RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any holder of a Senior Note to receive payment of principal and interest on the
Senior Note, on or after such respective due dates expressed in the Senior Note,
or to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of the
holder of a Senior Note.
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Section 6.08 COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b) of this
Indenture occurs and is continuing, the Trustee may recover judgment in its own
name and as trustee of an express trust against the Company for the whole amount
of principal and interest remaining unpaid on the Senior Notes and interest on
overdue principal and interest and such further amount as shall be sufficient to
cover the costs and, to the extent lawful, expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
Section 6.09 TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee and the holders of Senior Notes allowed in any judicial proceedings
relative to the Company, its creditors or its property and, unless prohibited by
law or applicable regulations, may vote on behalf of the holders of the Senior
Notes in any election of a trustee in bankruptcy or other Person performing
similar functions, and any custodian in any such judicial proceeding is hereby
authorized by each holder of Senior Notes to make payments to the Trustee and,
in the event that the Trustee shall consent to the making of such payments
directly to the holders, to pay to the Trustee any amount due it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and its counsel, and any other amounts due the Trustee under Section
7.07 of this Indenture. Nothing contained herein shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
holder of a Senior Note any plan of reorganization, arrangement, adjustment or
composition affecting the Senior Notes or the rights of any holder thereof, or
to authorize the Trustee to vote in respect of the claim of any holder in any
such proceeding.
Section 6.10 PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07 of this
Indenture, including payment of all compensation, expenses and liabilities
incurred, and all advances made, by the Trustee, and the costs and expenses of
collection;
Second: to holders of Senior Notes for amounts due and unpaid on the
Senior Notes for principal, premium, if any, and interest, ratably, without
preference or priority of any kind, according to the amounts due and payable on
the Senior Notes for principal, premium, if any, and interest, respectively; and
Third: to the Company.
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Except as otherwise provided in Section 2.12 of this Indenture, the
Trustee may fix a record date and payment date for any payment to holders of
Senior Notes.
Section 6.11 UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys fees, against any party litigant in the suit, having due regard to the
merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a holder
pursuant to Section 6.07 of this Indenture or a suit by holders of more than 10%
in principal amount of the then outstanding Senior Notes.
ARTICLE 7
THE TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this Indenture
and covenants and agrees to perform the same, as herein expressed.
Section 7.01 DUTIES OF THE TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) The duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. However, the Trustee shall examine the
certificates and opinions to determine whether or not they conform to
the requirements of this Indenture.
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(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) This paragraph does not limit the effect of paragraph (b) of
this Section 7.01;
(ii) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 of this Indenture.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that is in any way relates to the Trustee is subject to
paragraphs (a), (b) and (c) of this Section 7.01.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk is not reasonably assured
to it. The Trustee may refuse to perform any duty or exercise any right or
power unless it receives indemnity satisfactory to it against any loss,
liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
(g) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section 7.01 and to the provisions of the TIA.
Section 7.02 RIGHTS OF THE TRUSTEE.
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate, an Opinion of Counsel or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel.
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(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any attorney or agent
appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers; provided, however, that the Trustee's conduct does not constitute wilful
misconduct or negligence.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by Officers of the Company.
(f) The Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder.
(g) The Trustee may consult with counsel, and the advice or opinion
of counsel with respect to legal matters relating to this Indenture and the
Senior Notes shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such counsel.
Section 7.03 INDIVIDUAL RIGHTS OF THE TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Senior Notes and may otherwise deal with the Company or an
Affiliate with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights. However, the Trustee is subject to and must
comply with Sections 7.10 and 7.11 of this Indenture.
Section 7.04 TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Senior Notes, it shall
not be accountable for the Company's use of the proceeds from the Senior Notes
and it shall not be responsible for any statement or recital herein or any
statement in the Senior Notes or any other document in connection with the sale
of the Senior Notes or pursuant to this Indenture other than its certificate of
authentication.
Section 7.05 NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to each holder of a Senior Note a
notice of the Default or Event of Default within 60 days after it occurs. A
Default or an Event of Default shall not be considered known to the Trustee
unless it is a Default or Event of Default in the payment of principal or
interest when due under Section 6.01(a) or (b) of this Indenture or the Trustee
shall have received notice thereof, in accordance with this Indenture, from the
Company or
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from the holders of a majority in principal amount of the outstanding Senior
Notes. Except in the case of a Default or Event of Default in payment of
principal or premium, if any, or interest on any Senior Note, the Trustee may
withhold the notice if and so long as a committee of its Trust officers in good
faith determines that withholding the notice is in the interest of the holders
of Senior Notes.
Section 7.06 REPORTS BY THE TRUSTEE TO HOLDERS.
Within 60 days after the reporting date stated in Section 10.10 of
this Indenture, the Trustee shall mail to holders of Senior Notes a brief report
dated as of such reporting date that complies with TIA Section 313(a) (but if no
event described in TIA Section 313(a) has occurred within twelve months
preceding the reporting date, no report need be transmitted). The Trustee shall
also comply with TIA Section 313(b) and TIA Section 313(c).
A copy of each report at the time of its mailing to holders of Senior
Notes shall be filed with the Commission and each stock exchange, if any, on
which the Senior Notes are listed. The Company shall notify the Trustee when
the Senior Notes are listed on any stock exchange.
Section 7.07 COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and its services hereunder.
The Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable out-of-pocket expenses incurred or made by it,
in addition to the compensation for its services. Such expenses may include the
reasonable compensation, disbursements and expenses of the Trustee's agents and
counsel.
The Company shall indemnify the Trustee against any loss, liability or
expense incurred by it arising out of or in connection with the acceptance or
administration of its duties under this Indenture, except as set forth in the
next paragraph. The Trustee shall notify the Company promptly of any claim for
which it may seek indemnity. Failure by the Trustee to so notify the Company
shall not relieve the Company of its obligations hereunder. The Company shall
defend the claim with counsel designated by the Company, who may be outside
counsel to the Company, and the Trustee shall cooperate in the defense. In
addition, the Trustee may retain one separate counsel and the Company shall pay
the reasonable fees and expenses of such separate counsel. The indemnification
herein extends to any settlement, provided that the Company will not be liable
for any settlement made without its consent.
The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee through its own wilful misconduct,
negligence or bad faith.
To secure the Company's payment obligations in this Section 7.07 of
this Indenture, the Trustee shall have a Lien prior to the Senior Notes on all
money or property
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held or collected by the Trustee, except that held in trust to pay principal and
interest on particular Senior Notes. Such Liens shall survive the satisfaction
and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(f) or (g) of this Indenture occurs, the
expenses and the compensation for the services (including the fees and expenses
of its agents and counsel) are intended to constitute expenses of administration
under any Bankruptcy Law.
Section 7.08 REPLACEMENT OF THE TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.08.
The Trustee may resign at any time by so notifying the Company. The
holders of a majority in principal amount of the Senior Notes may remove the
Trustee by so notifying the Trustee and the Company. The Company may remove the
Trustee if:
(a) the Trustee fails to comply with Section 7.10 of this Indenture;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a receiver or other public officer takes charge of the Trustee or
its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the holders
of a majority in principal amount of the then outstanding Senior Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
holders of at least 25% in principal amount of the then outstanding Senior Notes
may petition any court of competent jurisdiction for the appointment of a
successor Trustee provided such corporation or association shall be otherwise
eligible and qualified under this Article.
If the Trustee after written request by any holder of a Senior Note
who has been a holder for at least six months fails to comply with Section 7.10
of this Indenture, such holder may petition any court of competent jurisdiction
for the removal of the Trustee and the appointment of a successor Trustee.
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A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to holders of Senior Notes. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, provided
that all sums owing to the retiring Trustee hereunder have been paid and subject
to the lien provided for in Section 7.07 of this Indenture. Notwithstanding the
replacement of the Trustee pursuant to this Section 7.08 of this Indenture, the
Company's obligations under Section 7.07 of this Indenture shall continue for
the benefit of the retiring Trustee.
Section 7.09 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation or national banking association, the resulting, surviving or
transferee corporation or national banking association without any further act
shall be the successor Trustee provided such corporation or association shall be
otherwise eligible and qualified under this Article.
Section 7.10 ELIGIBILITY, DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a) of this Indenture. The Trustee shall always
have a combined capital and surplus as stated in Section 10.10 of this
Indenture. The Trustee is subject to TIA Section 310(b) regarding the
disqualification of a trustee upon acquiring a conflicting interest; provided,
however, that there shall be excluded from the operation of TIA Section
310(b)(1) any indenture or indentures under which other securities or
certificates of interest or participation in other securities of the Company are
outstanding if the requirements for such exclusion set forth in TIA Section
310(b)(1) are met.
Section 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship set forth in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated therein.
ARTICLE 8
SATISFACTION AND DISCHARGE OF INDENTURE
Section 8.01 TERMINATION OF COMPANY'S OBLIGATIONS.
(a) This Indenture shall cease to be of further effect (except that the
Company's obligations under Section 7.07 and 8.03 of this Indenture shall
survive) when all outstanding
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Senior Notes theretofore authenticated and issued have been delivered (other
than destroyed, lost or stolen Senior Notes that have been replaced or paid) to
the Trustee for cancellation and the Company has paid all sums payable
hereunder. In addition, the Company may terminate its obligations under this
Indenture (except the Company's obligations under Sections 7.07 and 8.03 of this
Indenture) if, under terms satisfactory to the Trustee: (a) the Senior Notes
have either become due and payable or are by their terms due and payable within
one year (or scheduled for redemption, or are to be called for redemption under
arrangements satisfactory to the Trustee for the giving of a notice of
redemption in the name of the Company, within one year); and (b) the Company
irrevocably deposits in trust with the Trustee money or United States Government
Obligations (defined below in this Section 8.01), or a combination thereof,
sufficient, without consideration of the reinvestment of interest,
to pay principal and interest on the Senior Notes to maturity or upon
redemption, as the case may be. The Company may make the deposit only
during the one year period.
However, the Company's obligations in Sections 2.03, 2.04, 2.05, 2.06,
2.07, 4.01, 4.04, 7.07, 7.08, 8.03 and 8.04 of this Indenture shall survive
until the Senior Notes are no longer outstanding. Thereafter, only the
Company's obligations in Sections 7.07 and 8.03 of this Indenture shall survive.
After a deposit made pursuant to this Section 8.01, the Trustee upon
request of the Company shall acknowledge in writing the discharge of the
Company's obligations under this Indenture except for those surviving
obligations specified above and the Trustee's and Paying Agent's obligations
in Section 8.03 of this Indenture shall survive.
In addition, the Company may elect to have either clause (b) or clause
(c) below be applied to the outstanding Senior Notes upon compliance with the
conditions set forth in clause (d) below.
(b) Upon the Company's exercise under the last sentence of paragraph
(a) above of the option applicable to this paragraph (b), the Company shall be
deemed to have been released and discharged from its obligations with respect to
the outstanding Senior Notes on the date the conditions set forth below are
satisfied ("legal defeasance"). For this purpose, legal defeasance means that
the Company shall be deemed to have paid and discharged the entire Indebtedness
represented by the outstanding Senior Notes, which shall thereafter be deemed to
be "outstanding" only for the purpose of the Sections of and matters under this
Indenture referred to in subclauses (i), (ii), (iii) and (iv) of this clause
(b), and to have satisfied all its other obligations under such Senior Notes and
this Indenture insofar as such Senior Notes are concerned (and the Trustee, at
the expense of the Company, shall execute proper instruments acknowledging the
same), except for the following, which shall survive until otherwise terminated
or discharged hereunder: (i) the rights of holders of outstanding Senior Notes
to receive solely from the trust fund described in clause (d) below and as more
fully set forth in such clause, payments in respect of the principal of, and
premium, if any, and interest on such Senior Notes when such payments are due,
(ii) the Company's obligations with respect to such Senior Notes when such
payments are due, (iii) the Company's obligations with respect to such Senior
Notes under Sections 2.03, 2.05, 2.06, 2.07 and 4.04 of this Indenture, and,
with respect to the Trustee, under Section 7.07 of this Indenture, (iv) the
rights, powers,
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trusts, duties and immunities of the Trustee hereunder, (v) the right of the
Company to redeem the Senior Notes pursuant to clauses 5(a) or 5(b) of the
Senior Notes, and (vi) this Section 8.01 and Sections 8.03 and 8.04 of this
Indenture. Subject to compliance with this Section 8.01, the Company may
exercise its option under this clause (b) notwithstanding the prior exercise
of its option under paragraph (c) below with respect to the Senior Notes.
(c) Upon the Company's exercise under the last sentence of clause (a)
of the option applicable to this clause (c), the Company shall be released and
discharged from its obligations under any covenant contained in Article 4
(except for Sections 4.01 and 4.04 of this Indenture) and Article 5 with respect
to the outstanding Senior Notes on and after the date the conditions set forth
below are satisfied ("covenant defeasance"), and the Senior Notes shall
thereafter be deemed to be not "outstanding" for the purpose of any direction,
waiver, consent or declaration or act of holders of Senior Notes (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder. For this
purpose, such covenant defeasance means that, with respect to the outstanding
Senior Notes, the Company may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such covenant or by reason of any reference in any such covenant to any
other provision herein or in any other document and such omission to comply
shall not constitute a Default or an Event of Default under Section 6.01 of this
Indenture but, except as specified above, the remainder of this Indenture
(including without limitation obligations set forth in Sections 8.03 and 8.04 of
this Indenture) and such Senior Notes shall be unaffected thereby.
(d) The following shall be the conditions to the application of
either clause (b) or (c) above to the outstanding Senior Notes:
(i) the Company has irrevocably deposited in trust with the
Trustee or, at the option of the Trustee, with a trustee, satisfactory
to the Trustee and the Company, under terms of an irrevocable trust
agreement in form and substance satisfactory to the Trustee, cash in
United States dollars, United States Government Obligations, or a
combination thereof, sufficient, without consideration of the
reinvestment of interest, in the opinion of a nationally recognized
firm of independent certified public accountants expressed in a
written certificate delivered to the Trustee, to pay at maturity
principal and interest on the Senior Notes; provided that (A) the
trustee of the irrevocable trust shall have been irrevocably
instructed to pay such money or the proceeds of such United States
Government Obligations to the Trustee and (B) the Trustee shall have
been irrevocably instructed to apply such money or the proceeds of
such United States Government Obligations to the payment of said
principal and interest with respect to the Senior Notes;
(ii) in the case of an election under clause (b) above, the
Company shall have delivered to the Trustee an Opinion of Counsel from
nationally recognized counsel reasonably acceptable to the Trustee
stating that (A) the Company has received from, or there has been
published by, the Internal
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Revenue Service a ruling or (B) since the date of this Indenture, there has been
a change in the applicable federal income tax law, in either case to the effect
that the holders of the outstanding Senior Notes will not recognize income, gain
or loss for federal income tax purposes as a result of such legal defeasance and
will be subject to federal income tax on the same amount and in the same manner
and at the same time as would have been the case if such legal defeasance had
not occurred;
(iii) in the case of an election under clause (c) above, the
Company shall have delivered to the Trustee an Opinion of Counsel from
nationally recognized counsel reasonably acceptable to the Trustee (A)
to the effect that the holders of the outstanding Senior Notes will
not recognize income, gain or loss for federal income tax purposes as
a result of such covenant defeasance and will be subject to federal
income tax on the same amount and in the same manner and at the same
time as would have been the case if such covenant defeasance had not
occurred or (B) that the Company has received from, or there has been
published by, the Internal Revenue Service a ruling to the foregoing
effect;
(iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit;
(v) such legal defeasance or covenant defeasance shall not
result in a breach or violation of, or constitute a Default or Event
of Default under any material agreement or instrument to which the
Company or any of its subsidiaries is bound;
(vi) The Company shall deliver to the Trustee an Opinion of
Counsel to the effect that after the ninety-first day following the
deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally except that if a court were to
rule under any such law in any case or proceeding that the trust funds
remained property of the Company, no opinion is given as to the effect
of such laws on the trust funds except the following: (A) assuming
such trust funds remained in the Trustee's possession prior to such
court ruling to the extent not paid to holders of the Senior Notes,
the Trustee will hold, for the benefit of such holders, a valid and
perfected security interest in such trust funds that is not avoidable
in bankruptcy or otherwise and (B) such holders will be entitled to
receive adequate protection of their interest in such trust funds if
such trust funds are used.
(vii) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the holders over the other
creditors of the Company with the intent
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of defeating, hindering, delaying or defrauding creditors of the Company or
others;
(viii) The Company shall have delivered to the Trustee an
Opinion of Counsel stating that neither the trust nor the Trustee will
be required to register as an investment company under the Investment
Company Act of 1940, as amended; and
(ix) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel stating that all conditions
precedent provided for relating to the legal defeasance under clause
(b) above or the covenant defeasance under clause (c) above, as the
case may be, have been complied with.
After such irrevocable deposit made pursuant to this Section 8.01 (and
satisfaction of the other conditions set forth herein), the Trustee upon request
shall acknowledge in writing the discharge of the Company's obligations under
this Indenture except for those surviving obligations specified above.
As used herein, "United States Government Obligations" means
obligations for which the full faith and credit of the United States of America
is pledged and which are not callable at the issuer's option.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Senior Notes at a future date
in accordance with Article 3.
Section 8.02 APPLICATION OF TRUST MONEY.
The Trustee shall hold in trust money or United States Government
Obligations deposited with it pursuant to Section 8.01 of this Indenture. It
shall apply the deposited money and the money from United States Government
Obligations through the Paying Agent and in accordance with this Indenture to
the payment of principal and interest on the Senior Notes.
Section 8.03 REPAYMENT TO COMPANY.
The Trustee and the Paying Agent shall promptly pay to the Company
upon request any excess money or securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Company upon request any money held by them for
the payment of principal or interest that remains unclaimed for two years after
the date upon which such payment shall have become due; provided, however, that
the Company shall have first caused notice of such payment to the Company to be
mailed to each holder entitled thereto no less than 30 days prior to such
payment. After payment to the Company, holders entitled to the
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money must look to the Company for payment as general creditors unless an
applicable abandoned property law designates another person and all liability of
the Trustee and such Paying Agent with respect to such money shall cease.
Section 8.04 REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any money in
accordance with Section 8.02 of this Indenture by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Senior Notes shall be revived and reinstated as though no
deposit had occurred pursuant to Section 8.01 of this Indenture until such time
as the Trustee or Paying Agent is permitted to apply all such money or United
States Government Obligations in accordance with Section 8.02 of this Indenture;
provided, however, that if the Company makes any payment of interest on or
principal of any Senior Note following the reinstatement of its obligations, the
Company shall be subrogated to the rights of the holders of such Senior Notes to
receive such payment from the money or United States Government Obligations held
by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENTS
Section 9.01 WITHOUT THE CONSENT OF HOLDERS.
The Company and the Trustee may amend or modify this Indenture
(including the terms and conditions of the Senior Notes) without notice to or
the consent of any holder of Senior Notes for the purpose of:
(a) adding to the covenants of the Company for the benefit of the
holders of Senior Notes;
(b) surrendering any right or power conferred upon the Company;
(c) evidencing the succession of another Person to the Company and
the assumption of such successor of the covenants and obligations of the Company
hereunder and in the Senior Notes as permitted herein;
(d) curing any ambiguity, or correcting or supplementing any
defective provision contained herein or making any changes in any other
provisions of this Indenture which the Company and the Trustee deem necessary or
desirable and which, in either case, will not adversely affect the interests of
the holders of Senior Notes.
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Section 9.02 WITH THE CONSENT OF HOLDERS.
Subject to Section 6.07 of this Indenture, the Company and the Trustee
may amend this Indenture or the Senior Notes with the written consent of the
holders of not less than a majority in aggregate principal amount of the then
outstanding Senior Notes.
Subject to Sections 6.04 and 6.07 of this Indenture, the holders of a
majority in principal amount of the Senior Notes then outstanding may also waive
compliance in a particular instance by the Company with any provision of this
Indenture or the Senior Notes.
However, without the consent of each holder of a Senior Note affected,
an amendment or waiver under this Section 9.02 may not:
(a) reduce the amount of Senior Notes whose holders must consent to
an amendment, supplement or waiver;
(b) reduce the rate of or extend the time for payment of, interest,
including defaulted interest, on any Senior Notes;
(c) reduce the principal of or premium on or change the fixed
maturity of any Senior Note or alter the redemption provisions with respect
thereto;
(d) make the principal of or premium, if any, or interest on, any
Senior Note payable in money other than as provided for in this Indenture and
the Senior Notes;
(e) waive a continuing default in the payment of the principal of or
premium, if any, interest on, or redemption or repurchase payment with respect
to, any Senior Note, including, without limitation, a continuing failure to make
payment when required upon a Change of Control or after an Asset Sale Offer
Trigger Date;
(f) after the Company's obligation to purchase the Senior Notes
arises hereunder, to then amend, modify or change the obligation of the Company
to make or consummate a Change of Control Offer in the event of a Change of
Control or an Asset Sale Offer in the event of an Asset Sale offer Trigger Date
or waive any default in the performance thereof or modify any of the provisions
or definitions with respect to any such offers; or
(g) make any change in provisions relating to waivers of defaults,
the abilities of holders of Senior Notes to enforce their rights hereunder or
the provisions of clauses (a) through (g) of this Section 9.02.
To secure a consent of the holders under this Section 9.02, it shall
not be necessary for such holders to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
62
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After an amendment or waiver under this Section 9.02 becomes
effective, the Company shall mail to holders of Senior Notes a notice briefly
describing the amendment or waiver. Any failure of the Company to mail such
notices or any defect therein, shall not, however in any way impair or affect
the validity of such amendment or waiver.
Section 9.03 COMPLIANCE WITH THE TRUST INDENTURE ACT.
Every amendment to this Indenture or the Senior Notes shall be set
forth in a supplemental indenture that complies with the TIA as then in effect.
Section 9.04 REVOCATION AND EFFECT OF CONSENTS.
Until an amendment or waiver becomes effective, a consent to it by a
holder of a Senior Note is a continuing consent by the holder and every
subsequent holder, of a Senior Note or portion of a Senior Note that evidences
the same debt as the consenting holder's Senior Note, even if notation of the
consent is not made on any Senior Note. However, any such holder or subsequent
holder may revoke the consent as to his or her Senior Note or portion of a
Senior Note if the Trustee receives the notice of revocation before the date on
which the Trustee receives an Officers' Certificate certifying that the holders
of the requisite principal amount of Senior Notes have consented to the
amendment or waiver.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the holders entitled to consent to any amendment or
waiver. If a record date is fixed, then notwithstanding the provisions of the
immediately preceding paragraph, those persons who were holders at such record
date (or their duly designated proxies), and only those persons, shall be
entitled to consent to such amendment or waiver or to revoke any consent
previously given, whether or not such persons continue to be holders after such
record date. No consent shall be valid or effective for more than 90 days after
such record date unless consents from holders of the principal amount of Senior
Notes required hereunder for such amendment or waiver to be effective shall have
also been given and not revoked within such 90-day period.
After an amendment or waiver becomes effective it shall bind every
holder, unless it is of the type described in any of clauses (a) through (g) of
Section 9.02 of this Indenture. In such case, the amendment or waiver shall
bind each holder of a Senior Note who has consented to it.
Section 9.05 NOTATION ON OR EXCHANGE OF SENIOR NOTES.
Senior Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article 9 may, and shall if required by
the Trustee, bear a notation in the form approved by the Trustee as to any
matter provided for in such supplemental indenture. If the Company shall so
determine, new Senior Notes so modified as to conform, in the opinion of the
Company and the Trustee, to any such supplemental
63
<PAGE>
indenture may be prepared and executed by the Company and authenticated and
delivered by the Trustee in exchange for outstanding Senior Notes. Any failure
to make the appropriate notation or issue a new Senior Note shall not affect
the validity of the supplemental indenture.
Section 9.06 TRUSTEE PROTECTED.
The Trustee shall sign any amendment or supplemental indenture
authorized pursuant to this Article 9 if such amendment, waiver or supplemental
indenture does not adversely affect the rights, duties, liabilities or
immunities of the Trustee. If it does, the Trustee may, but need not, sign it.
In signing such amendment, waiver or supplemental indentures the Trustee shall
be entitled to receive, and shall be fully protected in relying upon, an
Officers' Certificate and an Opinion of Counsel as conclusive evidence that such
amendment, waiver or supplemental indenture is authorized or permitted by this
Indenture, that it is not inconsistent herewith, and that it will be valid and
binding upon the Company in accordance with its terms.
ARTICLE 10
GENERAL PROVISIONS
Section 10.01 TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA Section 318(c), the imposed duties shall control.
Section 10.02 NOTICES.
Any notice or communication by the Company or the Trustee to the other
is duly given if in writing and delivered in person or mailed by first-class
mail, with postage prepaid (registered or certified, return receipt requested),
facsimile or overnight air couriers guaranteeing next day delivery, to the
other's address stated in Section 10.10 of this Indenture. The Company or the
Trustee by notice to the other may designate additional or different addresses
for subsequent notices or communications.
All notices and communications (other than those sent to holders of
Senior Notes) shall be deemed to have been duly given at the time delivered by
hand, if personally delivered; five Business Days after being deposited in the
mail, postage prepaid, if mailed; when transmission confirmed, if transmitted by
facsimile; and the next Business Day after timely delivery to the courier, if
sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a holder of a Senior Note shall be
mailed by first-class mail, with postage prepaid, to his or her address shown on
the register kept by the Registrar. Failure to mail a notice or communication
to a holder or any defect in it shall not affect its sufficiency with respect to
other holders.
64
<PAGE>
If a notice or communication is sent in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company sends a notice or communication to holders of Senior
Notes, it shall send a copy to the Trustee and each Agent at the same time.
All other notices or communications shall be in writing.
Section 10.03 COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Holders of Senior Notes may communicate pursuant to TIA Section 312(b)
with other holders with respect to their rights under this Indenture or the
Senior Notes. The Company, the Trustee, the Registrar and anyone else shall
have the protection of TIA Section 312(c).
Section 10.04 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 10.05 of this Indenture) stating that, in the opinion of such person,
all conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 10.05 of this Indenture) stating that, in the opinion of such counsel,
all such conditions precedent and covenants have been complied with.
Section 10.05 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall include:
(a) a statement that the person making such certificate or opinion
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such person, he or she has
made such examination or investigation as is necessary to enable him or her to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and
65
<PAGE>
(d) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with.
Any Officers' Certificate may be based, insofar as it relates to legal
matters, upon an Opinion of Counsel, unless such officer knows that the opinion
with respect to the matters upon which his certificate may be based as aforesaid
is erroneous. Any Opinion of Counsel may be based, insofar as it relates to
factual matters, upon certificates, statements or opinions of, or
representations by an Officer or Officers of the Company, or other persons or
firms deemed appropriate by such counsel, unless such counsel knows that the
certificates, statements or opinions or representations with respect to the
matters upon which his certificate, statement or opinion may be based as
aforesaid are erroneous.
Any Officers' Certificate, statement or Opinion of Counsel may be
based, insofar as it relates to accounting matters, upon a certificate or
opinion of or representation by an accountant (who may be an employee of the
Company), or firm of accountants, unless such officer or counsel, as the case
may be, knows that the certificate or opinion or representation with respect to
the accounting matters upon which his certificate, statement or opinion may be
based as aforesaid is erroneous.
Section 10.06 RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or a meeting of
holders of Senior Notes. The Registrar or Paying Agent may make reasonable
rules and set reasonable requirements for its functions.
Section 10.07 LEGAL HOLIDAYS.
A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions in The City of New York are not required to be open, and a
"Business Day" is any day that is not a Legal Holiday. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
Section 10.08 NO RECOURSE AGAINST OTHERS.
No director, officer, employee or stockholder, as such, of the Company
from time to time shall have any liability for any obligations of the Company
under the Senior Notes or this Indenture or for any claim based on, in respect
of, or by reason of such obligations or their creation. Each holder by
accepting a Senior Note waives and releases all such liability. This waiver and
release are part of the consideration for the Senior Notes. Each of such
directors, officers, employees and stockholders is a third party beneficiary of
this Section 10.08 of this Indenture.
66
<PAGE>
Section 10.09 COUNTERPARTS.
This Indenture may be executed in any number of counterparts and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
Section 10.10 OTHER PROVISIONS.
The Company initially appoints the Trustee as Paying Agent, Registrar
and authenticating agent.
The first certificate pursuant to Section 4.03 of this Indenture shall
be for the first full fiscal quarter of the Company following the issuance of
Senior Notes hereunder.
The reporting date for Section 7.06 of this Indenture is
______________ of each year. The first reporting date is the first
_________________ following the issuance of Senior Notes hereunder.
The Trustee shall always have, or shall be a Subsidiary of a bank or
bank holding company which has, a combined capital and surplus of at least
$100,000,000 as set forth in its most recent published annual report of
condition.
The Company's address is:
Telemundo Group, Inc.
2290 West 8th Avenue
Hialeah, Florida 33010
Attention: Chief Financial Officer
Facsimile: (305) 889-7999
Telephone: (305) 884-8200
The Trustee's address is:
Bank of Montreal Trust Company
77 Water Street
New York, New York 10005
Attention: Corporate Trust Department
Facsimile: (212) 701-7684
Telephone: (212) 701-7600
Section 10.11 GOVERNING LAW.
The internal laws of the State of New York shall govern this Indenture
and the Senior Notes, without regard to the conflict of laws provisions thereof.
67
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Section 10.12 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or a Subsidiary. Any such other indenture, loan
or debt agreement may not be used to interpret this Indenture.
Section 10.13 SUCCESSORS.
All agreements of the Company in this Indenture and the Senior Notes
shall bind its successor. All agreements of the Trustee in this Indenture shall
bind its successor.
Section 10.14 SEVERABILITY.
In case any provision in this Indenture or in the Senior Notes shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
Section 10.15 TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed and attested, all as of the date first above written, signifying their
agreements contained in this Indenture.
SIGNATURES
TELEMUNDO GROUP, INC.
By:
---------------------------
Name:
Title:
Attest:
- ----------------------------
Secretary
BANK OF MONTREAL TRUST COMPANY
68
<PAGE>
By:
----------------------------
Name:
Title:
Attest:
- ---------------------------
69
<PAGE>
EXHIBIT A
(Face of Security)
No. $
------------------ CUSIP
TELEMUNDO GROUP, INC.
_____% SENIOR NOTE DUE 2006
promises to pay to
or registered assigns,
the principal sum of Dollars on _______, 2006
Interest Payment Dates: _______ and ________
Regular Record Dates: ________ and ________
Certificate of Authentication
This Senior Note is one of the Senior Notes
issued pursuant to the within-mentioned Indenture.
BANK OF MONTREAL TRUST TELEMUNDO GROUP, INC.
COMPANY
as Trustee
By By
---------------------------- ----------------------------
President and Chief
Executive Officer
Dated:
By
----------------------------
Secretary
A-1
<PAGE>
(SEAL)
<PAGE>
(Back of Security)
TELEMUNDO GROUP, INC.
______% SENIOR NOTE DUE 2006
1. INTEREST. Telemundo Group, Inc., a Delaware corporation
(the "Company"), promises to pay interest on the principal amount at Stated
Maturity of this Senior Note semiannually on ________ and ___________ of
each year, at the rate of ___% per annum through and including ____________,
1999, and at the rate of ___% per annum after ______, 1999 until maturity.
Interest on the Senior Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
original issuance of the Senior Notes. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the
Senior Notes (except defaulted interest) to the person in whose name each Senior
Note is registered at the close of business on the ____________ or ____________
immediately preceding the relevant interest payment date even though Senior
Notes are cancelled after such record date and on or before the interest payment
date. Holders must surrender Senior Notes to a Paying Agent to collect
principal payments. The Company will pay principal and interest in money of the
United States that at the time of payment is legal tender for payment of public
and private debts. However, the Company may pay interest by check
payable in such money, and may mail such check to the holder's registered
address.
3. PAYING AGENT AND REGISTRAR. Bank of Montreal Trust Company,
a New York banking corporation (together with any successor trustee under the
Indenture referred to below, the "Trustee"), will act as Paying Agent and
Registrar. The Company may change the Paying Agent, Registrar or co-registrar
without prior notice. Subject to certain limitations in the Indenture, the
Company or any of its Subsidiaries may act in any such capacity.
4. INDENTURE. The Company issued the Senior Notes under an
Indenture dated as of February __, 1996 (the "Indenture") between the Company
and the Trustee. The terms of the Senior Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb), as in effect on the
date of the Indenture. The Senior Notes are subject to, and qualified by, all
such terms, certain of which are summarized hereon, and holders are referred to
the Indenture and such Act for a statement of such terms. The Senior Notes are
unsecured general obligations of the Company limited to $________________ in
aggregate principal amount. Capitalized terms not defined below have the same
meaning as is given to them in the Indenture.
5. REDEMPTION PROVISIONS.
A-3
<PAGE>
(a) Optional Redemption. Except as set forth below, the Senior Notes
are not redeemable at the Company's option prior to _________, 2001.
Thereafter, the Senior Notes will be subject to redemption at the option of the
Company, as a whole at any time or in part from time to time, at the following
Redemption Prices, expressed as percentages of the Accreted Value of the Senior
Notes, set forth below, plus accrued and unpaid interest, if any, to the
Redemption Date:
IF REDEEMED DURING THE PERIOD PERCENTAGE
----------------------------- ----------
From ____________, 2001 through ____________, 2002. . . . %
From ____________, 2002 through ____________, 2003. . . . %
From ____________, 2003 through ____________, 2004. . . . %
From ____________, 2004 and thereafter. . . . . . . . . . 100.00%
(b) Redemption After Common Stock Offerings. Notwithstanding the
foregoing, at any time prior to _____, 1999, the Company may, at its option, on
one or more occasions, redeem up to 35% of the aggregate outstanding principal
amount of the Senior Notes with the Net Proceeds of one or more Common Stock
Offerings at the redemption prices, expressed as percentages of the Accreted
Value of the Senior Notes, set forth below, plus accrued and unpaid interest, if
any, to the date of redemption; provided, however, that after any such
redemption at least $________________ of the aggregate principal amount at
Stated Maturity of the Senior Notes remains outstanding:
IF REDEEMED DURING THE PERIOD PERCENTAGE
----------------------------- ----------
From ____________, 1996 through ____________, 1997 . . . . . . %
From ____________, 1997 through ____________, 1998 . . . . . . %
From ____________, 1998 through ____________, 1999 . . . . . . %
6. NOTICE OF REDEMPTION. Notice of redemption will be mailed
at least 30 days but not more than 60 days before the date fixed for redemption
to each holder of Senior Notes to be redeemed at his or her registered address.
Senior Notes in denominations larger than $1,000 may be redeemed in part but
only in whole multiples of $1,000. In the event of a redemption of less than
all of the Senior Notes, the Senior Notes will be chosen for redemption by the
Trustee by lot or by any other method that complies with applicable
legal and securities exchange requirements, if any, and that the Trustee
considers fair and appropriate and in accordance with methods generally used at
the time of selection by fiduciaries in similar circumstances. On and after the
Redemption Date interest ceases to accrue on Senior Notes or portions of them
called for redemption (unless the Company defaults in the payment of the
Redemption Price). If this Senior Note is redeemed subsequent to a record date
with respect to any interest payment date specified above and on or prior to
such interest payment date, then any accrued interest will be paid to the person
in whose name this Senior Note is registered at the close of business on such
record date.
A-4
<PAGE>
7. CHANGE OF CONTROL. Upon a Change of Control, the Company
shall make a Change of Control Offer to purchase all outstanding securities at a
price equal to 101% of the Accreted Value of the Senior Notes, plus accrued and
unpaid interest to the date of purchase; such offer to be made as provided in
the Indenture. To accept the Change of Control Offer, the holder hereof must
comply with the terms thereof, including surrendering this Senior Note, with the
"Option of Holder to Elect Purchase" portion hereof completed to the Company, a
depositary, if appointed by the Company, or a Paying Agent, at the address
specified in the notice of the Change of Control Offer mailed to holders as
provided in the Indenture, prior to termination of the Change of Control Offer.
8. ASSET SALES. In the event that the Company accumulates more
than $10,000,000 of Available Asset Sale Proceeds, the Company must apply such
Available Asset Sale Proceeds at a purchase price in cash equal to 100% of
the Accreted Value thereof, plus accrued and unpaid interest, if any, to
the date of repurchase; such offer to be made as provided in the Indenture.
To accept such an offer, the holder hereof must comply with the terms thereof
including surrendering this Senior Note, with the "Option of Holder to Elect
Purchase" portion hereof completed to the Paying Agent, at the address
specified in the notice of such offer made to holders as provided in the
Indenture prior to the termination of such offer.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Senior Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Senior Notes may be registered and Senior
Notes may be exchanged as provided in the Indenture. As a condition of
transfer, the Registrar may require a holder, among other things, to furnish
appropriate endorsements and transfer documents and the Company may require a
holder to pay any taxes and fees required by law or permitted by the Indenture.
The Registrar need not exchange or register the transfer of any Senior Note or
portion of a Senior Note selected for redemption. Also, it need not exchange or
register the transfer of any Senior Notes for a period of 15 days before a
selection of Senior Notes to be redeemed or before a mailing of notice of an
offer to repurchase under the Indenture.
10. PERSONS DEEMED OWNERS. The registered holder of a Senior
Note may be treated as its owner for all purposes.
11. AMENDMENTS AND WAIVERS. Subject to certain exceptions, the
Indenture or the Senior Notes may be amended with the consent of the holders of
at least a majority in principal amount of the then outstanding Senior Notes and
any existing default may be waived with the consent of the holders of a majority
in principal amount of the then outstanding Senior Notes. Without the consent
of any holder, the Indenture or the Senior Notes may be amended to: add to the
covenants of the Company for the benefit of the holders; surrender any right or
power conferred upon the Company; evidence the succession of another person to
the Company and the assumption by such successor of the covenants and
obligations of the Company thereunder and in the Senior Notes as permitted in
the Indenture; and cure any ambiguity or correct or supplement any defective
provision herein or make any changes in any other provisions of the Indenture
which the Company and the Trustee deem necessary or desirable and which in
either case will not adversely affect the interest of the holders of the Senior
Notes.
12. DEFAULTS AND REMEDIES. An Event of Default includes in
summary form: default for 30 days in payment of interest on the Senior Notes;
default in
A-5
<PAGE>
payment of principal of or premium if any, on the Senior Notes; failure by the
Company for 60 days after notice to it to comply with any of its other
agreements in the Indenture or the Senior Notes; certain defaults under and
accelerations prior to maturity of certain indebtedness; certain final judgments
which remain undischarged; and certain events of bankruptcy or insolvency. If
an Event of Default occurs and is continuing, the Trustee or the holders of at
least 25% in principal amount of the then outstanding Senior Notes may declare
all the Senior Notes to be due and payable immediately, except that in the case
of an Event of Default arising from certain events of bankruptcy or insolvency,
all outstanding Senior Notes become due and payable without further action or
notice. Holders may not enforce the Indenture or the Senior Notes except as
provided in the Indenture. The Trustee may require indemnity satisfactory to it
before it enforces the Indenture or the Senior Notes. Subject to certain
limitations, holders of a majority in principal amount of the then outstanding
Senior Notes may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from holders notice of any continuing default (except a
default in payment of principal or interest) if it determines that withholding
notice is in their interests. The Company must furnish quarterly compliance
certificates to the Trustee.
13. TRUSTEE DEALINGS WITH THE COMPANY. The Trustee or any of
its Affiliates, in their individual or any other capacities, may make or
continue loans to or guaranteed by, accept deposits from and perform services
for the Company or its Affiliates and may otherwise deal with the Company or its
Affiliates as if it were not Trustee.
14. NO RECOURSE AGAINST OTHERS. No director, officer, employee
or stockholder, as such, of the Company shall have any liability for any
obligations of the Company under the Senior Notes or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each holder by accepting a Senior Note waives and releases all such
liability. The waiver and release are part of the consideration for the Senior
Notes.
15. AUTHENTICATION. This Senior Note Shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the
name of a holder or an assignee, such as: TEN CO = tenants in common, TEN ENT =
tenants by the entireties, JT TEN = joint tenants with right of survivorship
and not as tenants in common, CUST = Custodian and U/G/M/A = Uniform Gifts to
Minors Act.
The Company will furnish to any holder upon written request and
without charge a copy of the Indenture. Requests may be made to: Secretary,
Telemundo Group, Inc., 2290 West 8th Avenue, Hialeah, Florida 33010.
A-6
<PAGE>
ASSIGNMENT FORM
If you the holder want to assign this Senior Note, fill in the form below and
have your signature guaranteed:
I or we assign and transfer this Senior Note to ______________________________
______________________________________________________________________________
(Insert assignee's social security or tax ID number)__________________________
______________________________________________________________________________
______________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint__________________________________ agent to transfer this
Senior Note on the books of the Company. The agent may substitute another to
act for him.
Date: Your signature:
-------------------- ---------------------------------
(Sign exactly as your name appears
on the other side of this Senior
Note)
Signature Guarantee*:
--------------------------------------------------------
- --------------------------------------------------------------------------------
* Your signature must be guaranteed by a commercial bank or trust company
located, or having a correspondent located, in The City of New York or the city
where the principal office of the registrar is located or by a member of a
national securities exchange.
A-7
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Senior Note purchased by the Company pursuant
to Sections 4.10 or 4.14 of the Indenture, check the Box:
If you wish to have a portion of this Senior Note purchased by the
Company pursuant to Sections 4.10 or 4.14 of the Indenture, state the amount in
multiples of $1,000:
$
-------------------
Date:
-------------------------------
Your signature:
-----------------------------------------------
(Sign exactly as your name appears
on the other side of this Senior Note)
Signature Guarantee*:
------------------------------------------
- --------------------------------------------------------------------------------
* Your signature must be guaranteed by a commercial bank or trust company
located, or having a correspondent located, in The City of New York or the city
where the principal office of the registrar is located or by a member of a
national securities exchange.
A-8
<PAGE>
A-9
<PAGE>
EXHIBIT 5.1
February 7, 1996
Telemundo Group, Inc.
2290 West 8th Avenue
Hialeah, Florida 33010
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as counsel to Telemundo Group, Inc., a Delaware corporation
(the "Company"), in connection with the preparation of a Registration Statement
on Form S-3 (No. 33-64599), as amended (as amended through the date hereof, the
"Registration Statement"), filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended (the "Act"), and the rules
and regulations promulgated thereunder (the "Rules and Regulations"), with
respect to the offering and sale of approximately $175,000,000 gross proceeds of
___% Senior Notes due 2006 (the "Senior Notes") of the Company to be issued
under an Indenture, the form of which has been filed as an exhibit to the
Registration Statement (the "Indenture"), between the Company and Bank of
Montreal Trust Company, as Trustee (the "Trustee"), and to be sold pursuant to
an Underwriting Agreement to be entered into by and among the Company and
Salomon Brothers Inc, Alex. Brown & Sons Incorporated and BT Securities
Corporation, as underwriters, the form of which has been filed as an exhibit to
the Registration Statement (the "Underwriting Agreement").
In this regard, we have examined originals or copies authenticated to our
satisfaction of the Registration Statement, the form of the Indenture, the form
of the Senior Notes attached as an exhibit to the Indenture, the form of the
Underwriting Agreement, and such corporate records, agreements, documents and
other instruments, and such certificates or comparable documents of public
officials and of officers and representatives of the Company, and have made such
inquiries of such officers and representatives as we have deemed relevant and
necessary in order to render this opinion. In addition, we have made such other
examinations of law and fact as we have considered necessary in order to form a
basis for the opinions hereinafter expressed.
In our examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified or photostatic
copies and the authenticity of the originals of such latter documents. As to
all questions of fact material to this opinion that have not been independently
established, we have relied upon certificates or comparable documents or
statements of officers and representatives of the Company. In addition, we have
assumed that the Indenture, the Underwriting Agreement and the Senior Notes will
be authorized, executed and delivered by the parties thereto substantially in
the forms examined by us. We further assume that, prior to issuance, the
pricing of the Senior Notes will be approved by appropriate action of the
Company's Board of Directors.
This law firm is a registered limited liability partnership organized under
the laws of the State of Texas. Our opinion relates only to the laws of the
State of New York, the General Corporation Law of the State of Delaware and
applicable federal law of the United States of America. We express no opinion
of the law of any other jurisdiction.
Based upon and subject to the foregoing, we are of the opinion that the
Senior Notes, when duly executed by the Company, authenticated by the Trustee
pursuant to the terms of the Indenture and delivered and paid for in accordance
with the terms of the Underwriting Agreement, will be validly issued and will
constitute legally binding obligations of the Company entitled to the benefits
of the Indenture in accordance with its terms, subject to
<PAGE>
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally
and to general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless of whether enforcement
is sought in a proceeding at law or in equity) and except to the extent that the
provisions of the Indenture purport to waive benefits or advantages of any
stay, extention or usury law.
We hereby consent to the use of our name under the caption "Legal Matters"
and "Certain Federal Income Tax Considerations" in the prospectus included in
the Registration Statement and to the use of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not thereby admit that
we come within the category of persons whose consent is required by the Act or
the Rules and Regulations.
Very truly yours,
AKIN, GUMP, STRAUSS, HAUER &
FELD, L.L.P.
<PAGE>
Exhibit 10.15
CONSENT
CONSENT, dated as of February 2, 1996 (this "Consent"), to the Loan
and Security Agreement, dated as of December 31, 1994, between Foothill Capital
Corporation, a California corporation ("Foothill") and Telemundo Group, Inc.
("Group") and certain of its subsidiaries from time to time party to that
certain Loan and Security Agreement, dated as of December 31, 1994 (as the same
may be amended, restated, supplemented or otherwise modified from time to time,
the "Credit Agreement").
W I T N E S S E T H:
WHEREAS, Group (or its Subsidiaries) has (i) offered to purchase for
cash any and all of its Senior Notes (the "Repurchase Offer"), (ii) solicited
consents to certain amendments to the indenture for the Senior Notes (the
"Consent Solicitation"), (iii) filed with the Securities and Exchange Commission
on November 27, 1995 a registration statement (No. 33-64599) with respect to
the issuance of new senior notes due 2006 (as may be amended from time to time
in accordance with the terms hereof, the "New Notes"), and (iv) entered into a
Agreement to Purchase NST Venture Interest and Capital Stock, dated November 8,
1995 with respect to the acquisition of a 74.5% interest in WSNS-TV (of which
50% will be held by Telemundo of Chicago, Inc., a Delaware corporation and a
wholly-owned subsidiary of Group ("TCI") through its acquisition of Harriscope
of Chicago, Inc., an Illinois corporation ("Harriscope") and 24.5% will be held
directly by TCI) (the "Acquisition");
WHEREAS, the Borrower has requested that Foothill consent to, and
Foothill has agreed to consent to, the consummation of the Repurchase Offer and
the Consent Solicitation, the issuance of the New Notes and the Acquisition
(collectively, the "Transactions");
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by each of the parties hereto, the
parties agree as follows:
SECTION 1. DEFINITIONS. Capitalized terms not herein defined shall
be used as defined in the Credit Agreement.
SECTION 2. CONSENT. Notwithstanding anything else contained in the
Credit Agreement to the contrary, Foothill hereby consents to the foregoing
described Transactions for all purposes of the Credit Agreement (and the other
Loan Documents). For greater specificity, in respect of the foregoing, the
parties
<PAGE>
hereto agree that from the date hereof, the Tangible Net Worth covenant
contained in Section 6.14(b) of the Credit Agreement shall be calculated without
giving effect to the Transactions until such time as a new Tangible Net Worth
covenant is established pursuant to the next sentence hereof. The parties
hereto agree to negotiate reasonably and in good faith to establish a new
Tangible Net Worth covenant (presently reflected in Section 6.14(b) of the
Credit Agreement) based upon Borrower's projected financial performance after
the consummation of the Transactions. In addition, the parties hereto agree
that Schedule 5.16 shall be amended to add the information indicated on Exhibit
1 attached hereto. Furthermore, Group hereby agrees not to amend the terms of
the New Notes unless such amended terms are not materially more onerous or
restrictive to Borrower than those contained in such registration statement.
Without limiting the foregoing, Group hereby agrees that the aggregate principal
amount of the New Notes shall not exceed Two Hundred Million Dollars
($200,000,000) (after giving effect to the refinancing of the existing Senior
Notes by such New Notes) and that no changes to the pro forma cash interest
expense amounts and the interest expense amounts contained in the registration
statement will be made such that such changes would be materially adverse to the
financial position of Borrower in comparison to the amounts contained in such
registration statement.
SECTION 3. ACQUISITION. Foothill hereby agrees that the grant of a
security interest to Foothill pursuant to Section 4 of the Credit Agreement
shall not apply to the Acquisition, and that no security interest shall be
granted to Foothill with respect to (i) the assets (including the assets
acquired after the date hereof) of WSNS-TV or the joint venture owning such
assets, (ii) the partnership interests in such joint venture and (iii) the
shares and assets (including the assets acquired after the date hereof) of TCI
and Harriscope. For greater specificity, in respect of the foregoing, the
parties hereto agree that neither TCI, Harriscope, WSNS-TV, nor the joint
venture shall be a Borrower or Debtor for purposes of the Credit Agreement, and
that neither the assets (including the assets acquired after the date hereof) of
WSNS-TV or the joint venture owning such assets, the partnership interest in
such joint venture, nor the shares and assets (including the assets acquired
after the date hereof) of TCI and Harriscope shall constitute Collateral or Real
Property as defined in the Credit Agreement.
SECTION 4. COUNTERPARTS. This Consent may be executed in any number
of counterparts and by different parties on separate counterparts, each of
which, when executed and delivered, shall be deemed to be an original, and all
of which, when taken together, shall constitute but one and the same instrument.
-2-
<PAGE>
SECTION 5. LIMITED CONSENT. The consent set forth in Section 2
hereof is specific in scope, and intent, and, except as expressly set forth
herein, shall not operate as a waiver or modification of any right, power or
remedy of Foothill, nor as a consent to any further or other matter, under the
Loan Documents.
IN WITNESS WHEREOF, the parties hereto have caused this Consent to be
executed and delivered as of the date first above written.
FOOTHILL CAPITAL CORPORATION,
a California corporation
By /s/ Nancy Perry
-------------------------------------------
Title: Assistant Vice President
---------------------------------------
TELEMUNDO GROUP, INC.,
a Delaware corporation
By /s/ Peter Housman
-------------------------------------------
Title: Chief Financial Officer
---------------------------------------
ESTRELLA COMMUNICATIONS, INC.,
a Delaware corporation
By /s/ Peter Housman
-------------------------------------------
Title: Chief Financial Officer
---------------------------------------
ESTRELLA LICENSE CORPORATION,
a Delaware corporation
By /s/ Peter Housman
-------------------------------------------
Title: Chief Financial Officer
---------------------------------------
NEW JERSEY TELEVISION BROADCASTING
CORPORATION, a New York corporation
By /s/ Peter Housman
-------------------------------------------
Title: Chief Financial Officer
---------------------------------------
-3-
<PAGE>
TELEMUNDO NETWORK, INC.,
a Delaware corporation
By /s/ Peter Housman
-------------------------------------------
Title: Chief Financial Officer
---------------------------------------
TELEMUNDO OF AUSTIN, INC.,
a Delaware corporation
By /s/ Peter Housman
-------------------------------------------
Title: Chief Financial Officer
---------------------------------------
TELEMUNDO OF FLORIDA, INC.,
a Delaware corporation
By /s/ Peter Housman
-------------------------------------------
Title: Chief Financial Officer
---------------------------------------
TELEMUNDO OF GALVESTON-HOUSTON, INC.,
a Delaware corporation
By /s/ Peter Housman
-------------------------------------------
Title: Chief Financial Officer
---------------------------------------
TELEMUNDO OF MEXICO, INC.,
a Delaware corporation
By /s/ Peter Housman
-------------------------------------------
Title: Chief Financial Officer
---------------------------------------
TELEMUNDO OF NORTHERN CALIFORNIA, INC.,
a California corporation
By /s/ Peter Housman
-------------------------------------------
Title: Chief Financial Officer
---------------------------------------
-4-
<PAGE>
TELEMUNDO OF SAN ANTONIO, INC.,
a Texas corporation
By /s/ Peter Housman
-------------------------------------------
Title: Chief Financial Officer
---------------------------------------
TELEMUNDO OF SANTA FE, INC.,
a Delaware corporation
By /s/ Peter Housman
-------------------------------------------
Title: Chief Financial Officer
---------------------------------------
TU MUNDO MUSIC, INC.,
a Delaware corporation
By /s/ Peter Housman
-------------------------------------------
Title: Chief Financial Officer
---------------------------------------
SACC ACQUISITION CORPORATION,
a Delaware corporation
By /s/ Peter Housman
-------------------------------------------
Title: Chief Financial Officer
---------------------------------------
SAT CORPORATION,
a Delaware corporation
By /s/ Peter Housman
-------------------------------------------
Title: Chief Financial Officer
---------------------------------------
SPANISH AMERICAN COMMUNICATIONS CORPORATION,
a Delaware corporation
By /s/ Peter Housman
-------------------------------------------
Title: Chief Financial Officer
---------------------------------------
-5-
<PAGE>
WNJU-TV BROADCASTING CORPORATION,
a New Jersey corporation
By /s/ Peter Housman
-------------------------------------------
Title: Chief Financial Officer
---------------------------------------
WNJU LICENSE CORPORATION,
a Delaware corporation
By /s/ Peter Housman
-------------------------------------------
Title: Chief Financial Officer
---------------------------------------
TELEMUNDO OF FLORIDA LICENSE CORPORATION, a
Delaware corporation
By /s/ Peter Housman
-------------------------------------------
Title: Chief Financial Officer
---------------------------------------
TELEMUNDO OF GALVESTON-HOUSTON LICENSE
CORPORATION, a Delaware corporation
By /s/ Peter Housman
-------------------------------------------
Title: Chief Financial Officer
---------------------------------------
TELEMUNDO OF NORTHERN CALIFORNIA LICENSE
CORPORATION, a Delaware corporation
By /s/ Peter Housman
-------------------------------------------
Title: Chief Financial Officer
---------------------------------------
TELEMUNDO OF PUERTO RICO LICENSE CORPORATION,
a Delaware corporation
By /s/ Peter Housman
-------------------------------------------
Title: Chief Financial Officer
---------------------------------------
-6-
<PAGE>
TELEMUNDO OF SAN ANTONIO LICENSE CORPORATION,
a Delaware corporation
By /s/ Peter Housman
-------------------------------------------
Title: Chief Financial Officer
---------------------------------------
-7-
<PAGE>
EXHIBIT 1
CHART OF SUBSIDIARIES
AMENDMENT TO SCHEDULE 5.16
(AS OF THE CLOSING OF THE ACQUISITION)
<TABLE>
<CAPTION>
Holder of Shares/
Number of Partnership Jurisdiction of
Issuer Shares Interests Incorporation
------ ------ --------- -------------
<S> <C> <C> <C>
Telemundo of
Chicago, Inc. 100 Group Delaware
Harriscope of
Chicago, Inc. 593,494 TCI Illinois
Video 44
Partnership 74.5% TCI - 24.5% Illinois
Harriscope - 50%
</TABLE>
-8-
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement No. 33-64599 of Telemundo Group, Inc. and subsidiaries on
Form S-3 of our report dated March 22, 1995, appearing in the Annual Report on
Form 10-K of Telemundo Group, Inc. for the year ended December 31, 1994 and also
appearing in this Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in the
Prospectus, which is part of this Registration Statement.
Deloitte & Touche LLP
Miami, Florida
February 5, 1996
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement of Telemundo Group, Inc. and Subsidiaries on Form S-3 of
our report dated March 27, 1995 relating to the financial statements of Video 44
as of December 31, 1994 and 1993 and for each of the two years in the period
ended December 31, 1994, which appears in such Prospectus. We also consent to
the reference to us under the heading "Experts" in such Prospectus.
PRICE WATERHOUSE LLP
Chicago, Illinois
February 5, 1996
<PAGE>
CONFORMED
________________________________________________________________________________
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility of a trustee Pursuant to
Section 305(b) ____
BANK OF MONTREAL TRUST COMPANY
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
New York 13-4941093
(JURISDICTION OF INCORPORATION OR ORGANIZATION (I.R.S. EMPLOYER
IF NOT A U.S. NATIONAL BANK) IDENTIFICATION NO.)
77 Water Street
New York, New York 10005
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Mark F. McLaughlin
Bank of Montreal Trust Company
77 Water Street, New York, NY 10005
(212) 701-7602
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------------------
TELEMUNDO GROUP, INC.
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
Delaware 13-3348686
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
2290 West 8th Avenue
Hialeah, Florida 33010
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
--------------------------------------
____% SENIOR NOTES DUE 2006
(TITLE OF THE INDENTURE SECURITIES)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
- 2 -
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Federal Reserve Bank of New York
33 Liberty Street, New York N.Y. 10045
State of New York Banking Department
2 Rector Street, New York, N.Y. 10006
(b) Whether it is authorized to exercise corporate trust powers.
The Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee.
ITEM 16. LIST OF EXHIBITS.
List below all exhibits filed as part of this statement of eligibility.
1. Copy of Organization Certificate of Bank of Montreal Trust Company to
transact business and exercise corporate trust powers; incorporated
herein by reference as Exhibit "A" filed with Form T-1 Statement,
Registration No. 33-46118.
2. Copy of the existing By-Laws of Bank of Montreal Trust Company;
incorporated herein by reference as Exhibit "B" filed with Form T-1
Statement, Registration No. 33-80928.
3. The consent of the Trustee required by Section 321(b) of the Act;
incorporated herein by reference as Exhibit "C" with Form T-1
Statement, Registration No. 33-46118.
4. A copy of the latest report of condition of Bank of Montreal Trust
Company published pursuant to law or the requirements of its
supervising or examining authority, attached hereto as Exhibit "D".
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, Bank of Montreal Trust Company, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 5th day
of February, 1996.
BANK OF MONTREAL TRUST COMPANY
By /S/ Amy Roberts
--------------------------
Amy S. Roberts
Assistant Vice President
<PAGE>
EXHIBIT "D"
STATEMENT OF CONDITION
BANK OF MONTREAL TRUST COMPANY
NEW YORK
---------------------------------
ASSETS
Due From Banks $3,184,115
-----------
Investment Securities:
State & Municipal 15,496,480
Other 100
-----------
TOTAL SECURITIES 15,496,580
-----------
Loans and Advances
Federal Funds Sold 6,100,150
Overdrafts 13,630
-----------
TOTAL LOANS AND ADVANCES 6,113,780
-----------
Investment in Harris Trust, NY 6,437,354
Premises and Equipment 603,140
Other Assets 2,201,150
-----------
TOTAL ASSETS $34,036,119
-----------
-----------
LIABILITIES
Trust Deposits $10,321,656
Other Liabilities 3.694,691
-----------
TOTAL LIABILITIES 14,016,347
-----------
CAPITAL ACCOUNTS
Capital Stock, Authorized, Issued and
Fully Paid - 10,000 Shares of $100 Each 1,000,000
Surplus 4,222,188
Retained Earnings 14,797,583
-----------
TOTAL CAPITAL ACCOUNTS 20,019,772
-----------
TOTAL LIABILITIES
AND CAPITAL ACCOUNTS $34,036,119
-----------
-----------
I, Mark F. McLaughlin, Vice President, of the above-named bank do hereby
declare that this Report of Condition is true and correct to the best of my
knowledge and belief.
Mark F. McLaughlin
September 30, 1995
We, the undersigned directors, attest to the correctness of this statement
of resources and liabilities. We declared that it has been examined by us, and
to the best of our knowledge and belief has been prepared in conformance with
the instructions and is true and correct.
Sanjiv Tandon
Kevin O. Healey
Steven R. Rothbloom
