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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
Commission File Number 0-16099
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TELEMUNDO GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3348686
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2290 WEST 8TH AVENUE
HIALEAH, FLORIDA 33010
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (305) 884-8200
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
SERIES A COMMON STOCK, $.01 PAR VALUE
SERIES A COMMON STOCK PURCHASE WARRANTS
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. Yes X No
Indicate by check mark whether the Registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No
As of March 26, 1998, 10,267,090 shares of Common Stock of Telemundo
Group, Inc. were outstanding, and the aggregate market value of the voting stock
held by nonaffiliates was approximately $262,474,000. Directors, officers and
10% or greater stockholders are considered affiliates for purposes of this
calculation but should not be deemed affiliates for any other purpose.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of Telemundo Group, Inc. 1997 Annual Report to Stockholders -
Parts II and IV.
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<PAGE>
TABLE OF CONTENTS
PAGE
PART I
Item 1. BUSINESS...................................................... 2
Item 2. PROPERTIES....................................................12
Item 3. LEGAL PROCEEDINGS.............................................13
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...........14
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.....................................14
Item 6. SELECTED FINANCIAL DATA.......................................14
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION......................14
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...................14
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE......................14
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............14
Item 11. EXECUTIVE COMPENSATION........................................17
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT...............................................24
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................26
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K...........................................27
<PAGE>
PART I
ITEM 1. BUSINESS
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
61 markets in the United States, including the 37 largest Hispanic markets, and
reaches approximately 85% of all U.S. Hispanic households. Hispanics currently
constitute approximately 11% of the U.S. population, or 29.6 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 2005. The Company also
owns and operates the leading full-power television station and related
production facilities in Puerto Rico. References to the U.S. exclude Puerto Rico
unless otherwise noted.
Telemundo owns and operates full power Spanish-language television
stations in the seven largest Hispanic Market Areas in the United States.
"Market Area" or "DMA" refers to Designated Market Area, a term developed by
Nielsen Media Research, Inc. ("Nielsen TV") and used by the television industry
to describe a geographically distinct television market.
The Company also distributes its programming through 15 owned and
operated low-power television stations, 43 affiliated broadcast stations and 101
satellite direct cable affiliates. The Company's programming is carried on an
additional 570 cable systems in markets served by broadcast stations in the
Company's network.
GENERAL DEVELOPMENT OF BUSINESS
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 ("Blair"). The Company began its United States network with three
television stations in January 1987, providing approximately 18 hours per week
of network programming. The Company now transmits Spanish-language programming
24-hours per day and has increased its coverage from 65% of all U.S. Hispanic
households at the beginning of 1989 to approximately 85% of all U.S. Hispanic
households in March 1998. In July 1993 the Company consented to the entry of an
order for relief under chapter 11 of the United States Code (the "Bankruptcy
Code") and on December 30, 1994 consummated a plan of reorganization under the
Bankruptcy Code.
NARRATIVE DESCRIPTION OF BUSINESS
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.
Additionally, the Company sells blocks of air time during non-network
programming hours to independent programmers ("block time programmers").
THE TELEMUNDO NETWORK AND BROADCAST OPERATIONS
The Company's television network covers 61 markets in the United
States, including the 37 largest Hispanic markets, and reaches approximately 85%
of all U.S. Hispanic households. Coverage is achieved through seven full-power
and 15 low-power owned and operated television stations, 43 affiliated broadcast
stations and 101 satellite direct cable systems affiliated with the Company. The
signal from the Company's owned and operated stations and broadcast affiliates
is also carried on an additional 570 cable systems throughout the United States.
THE COMPANY'S TELEVISION STATIONS
The Company owns and operates eight full-power and 15 low-power
Spanish-language television stations in the United States and Puerto Rico.
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FULL-POWER STATIONS
The Company's U.S. owned and operated full-power stations broadcast
network programming and produce and broadcast local news and limited other
programming focused on the audience in each of their respective local markets.
Each full-power station also sells blocks of broadcast time during non-network
programming hours to block time programmers. The following table sets forth
certain information about the Company's owned and operated full-power
Spanish-language television stations.
<TABLE>
RANKING OF NUMBER OF OTHER RANKING OF
APPROXIMATE MARKET AREA BY SPANISH-LANGUAGE MARKET AREA BY
HISPANIC TELEVISION HISPANICS AS A NUMBER OF TELEVISION STATIONS NUMBER OF TOTAL
MARKET AREA SERVED HOUSEHOLDS IN PERCENTAGE OF TOTAL HISPANIC TELEVISION OPERATING IN TELEVISION
AND STATION MARKET AREA(1) POPULATION(2) HOUSEHOLDS(1) MARKET AREA(3) HOUSEHOLDS(1)
- --------------------- -------------- ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Los Angeles, CA
KVEA, Channel 52 1,351,000 37% 1 2 2
New York, NY
WNJU, Channel 47 1,023,000 18% 2 1 1
Miami, FL
WSCV, Channel 51 451,000 37% 3 3 16
San Francisco, CA
KSTS, Channel 48 301,000 18% 4 1 5
Chicago, IL
WSNS, Channel 44 293,000 13% 5 1 3
San Antonio, TX
KVDA, Channel 60 283,000 52% 6 2 38
Houston, TX
KTMD, Channel 48 278,000 23% 7 1 11
San Juan, PR
WKAQ, Channel 2 (4) 1,145,000 - - 6 -
</TABLE>
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(1) Estimated by Nielsen TV as of January 1, 1998.
(2) Claritas, Inc., 1997, derived from U.S. Census Bureau data and other
government statistics.
(3) The Company and each of its Spanish-language competitors broadcast over
UHF, except in Puerto Rico, where WKAQ and its three major competitors broadcast
over VHF. The Company's principal competitor, Univision Communications, Inc.
("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 and San
Antonio Market Areas. The independent station in Los Angeles and one of the
independent stations in Miami are full-power stations.
(4) Source: Mediafax, PUERTO RICO MARKET DATA, DECEMBER 1997.
The information below regarding population growth and country of origin
is from Claritas, Inc., 1997:
LOS ANGELES: The Company owns and operates KVEA, Channel 52, licensed to Corona,
California and serving the Los Angeles market. KVEA began operating as a
Spanish-language station in 1985. Los Angeles is the largest U.S. Hispanic
market, representing approximately 17% of the Hispanic television households in
the United States. An estimated 5.8 million Hispanics reside in the Los Angeles
DMA, constituting approximately 37% of the Los Angeles DMA population. The
Hispanic population in Los Angeles more than doubled between 1980 and 1997, and
immigration trends indicate that the Hispanic population will continue to grow
rapidly. As a reflection of the significance of Spanish-language television,
Spanish-language television programs periodically draw higher overall audience
levels than the competing
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English-language programs in the Los Angeles DMA. 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 3.4 million Hispanics reside in the New York
DMA, constituting approximately 18% of the New York DMA population. The Hispanic
population in New York increased by approximately 64% between 1980 and 1997.
Although almost half of this market is of Puerto Rican origin, the New York
Hispanic community is relatively diverse.
MIAMI: The Company owns and operates WSCV, Channel 51, licensed to Ft.
Lauderdale, Florida and serving the Miami-Ft. Lauderdale market. WSCV began
operating as a Spanish-language station in 1985. Miami is the third largest U.S.
Hispanic market, representing approximately 6% of the Hispanic television
households in the United States. An estimated 1.3 million Hispanics reside in
the Miami DMA, constituting approximately 37% of the Miami DMA population. It
has been estimated that more than half of the population of Miami-Dade County is
comprised of Hispanics. The Hispanic population in Miami more than doubled
between 1980 and 1997. Approximately 54% of Hispanics in Miami are of Cuban
origin.
SAN FRANCISCO: The Company owns and operates KSTS, Channel 48, licensed to San
Jose, California and serving the San Francisco-San Jose market. KSTS began
operating as a Spanish-language station in 1987. The San Francisco-San Jose
Hispanic market is the fourth largest U.S. Hispanic market, representing
approximately 4% of the Hispanic television households in the U.S. An estimated
1.2 million Hispanics reside in the San Francisco DMA (which includes San Jose),
constituting approximately 18% of the San Francisco DMA population. The Hispanic
population in this market grew by approximately 83% from 1980 to 1997 and is
over 68% of Mexican origin.
CHICAGO: The Company owns a 74.5% interest in and operates WSNS, Channel 44,
licensed to and serving the Chicago market. WSNS began operating as a
Spanish-language station in 1985. The Chicago market is the fifth largest
Hispanic market in the United States, representing approximately 4% of the
Hispanic television households in the U.S. An estimated 1.1 million Hispanics
reside in the Chicago DMA, constituting approximately 13% of the Chicago DMA
population. The Hispanic population in Chicago grew by approximately 76% from
1980 to 1997 and is over 69% of Mexican origin.
SAN ANTONIO: The Company owns and operates KVDA, Channel 60, licensed to and
serving the San Antonio, Texas market. KVDA began operating as a
Spanish-language station in 1989. The San Antonio market is the sixth largest
U.S. Hispanic market, representing approximately 4% of the Hispanic television
households in the United States. An estimated 1.0 million Hispanics reside in
the San Antonio DMA, constituting approximately 52% of the San Antonio DMA
population. The Hispanic population in San Antonio, which is principally of
Mexican origin, increased by approximately 54% between 1980 and 1997.
HOUSTON: The Company owns and operates KTMD, Channel 48, licensed to Galveston,
Texas and serving the Houston-Galveston market. KTMD began operating as a
Spanish-language station in 1987. The Houston-Galveston market is the seventh
largest U.S. Hispanic market, representing approximately 4% of the Hispanic
television households in the United States. An estimated 1.0 million Hispanics
reside in the Houston DMA (which includes Galveston), constituting approximately
23% of the Houston DMA population. The Hispanic population in Houston more than
doubled between 1980 and 1997 and is principally of Mexican origin.
SAN JUAN, PUERTO RICO: The Company owns and operates television station WKAQ,
Channel 2, in San Juan, which together with its affiliate, WOLE (channel 12 in
Mayaguez), and its translator facilities, cover virtually all of Puerto Rico.
WKAQ began operating as a Spanish-language television station in 1954. The
current population of Puerto Rico is approximately 3.8 million.
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LOW-POWER STATIONS
The Company owns and operates 15 low-power television stations
("LPTVs") and has received permission from the Federal Communications Commission
("FCC") to build two additional LPTVs. LPTVs and "translator stations" generally
operate at significantly lower levels of power than full-power stations. In
addition, their signals generally cover smaller areas than those covered by
full-power stations and may not cover the full Market Area. LPTVs extend the
network's coverage in areas where a full-power television station was not
available for the network. Under FCC rules, LPTVs operate on a secondary basis
and are subject to displacement. Under the 1992 Cable Act, 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.
APPROXIMATE
HISPANIC TELEVISION
AREA SERVED AND STATION(S) HOUSEHOLDS
- -------------------------- ----------
Albuquerque/Santa Fe, NM (1): K52BS............................. 181,000
Sacramento, CA (1): K47DQ, K52CK, K61FI......................... 154,000
Boston, MA: W32AY............................................... 89,000
Austin, TX (1): K11SF........................................... 79,000
Salinas-Monterey, CA: K15CU..................................... 51,000
Colorado Springs, CO: K49CJ..................................... 40,000
Santa Barbara/Santa Maria, CA: K27EI............................ 40,000
Salt Lake City, UT: K48EJ....................................... 37,000
Odessa/Midland, TX (1): K60EE, K49CD............................ 37,000
Amarillo, TX: K36DV............................................ 28,000
Reno, NV: K52FF................................................. 18,000
Abilene, TX: K40DX.............................................. 14,000
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(1) These areas are served by more than one LPTV, including affiliated LPTVs.
AFFILIATES
The Company currently provides programming to 144 affiliates serving 42
Hispanic markets in the United States. The Company's affiliates in these
markets, which consist of 43 affiliated broadcast stations and 101 satellite
direct cable affiliates that take the network's signal directly from the
satellite, represent approximately 31% 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
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services accounted for less than 1% of the total revenue of the Company in 1997.
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
February 1998, no single affiliated station accounted for more than 2.9% of
total network coverage.
PROGRAMMING
The Company currently makes available Spanish-language programming
24-hours per day to its network, including movies, novelas, talk and
entertainment shows, variety shows, national and international news, music and
sporting events. More than 40% of network programming is produced by the Company
at production facilities near Miami and Mexico City. In addition, the Company's
owned and operated full-power stations and certain affiliates produce and
broadcast local news and limited other programming focused on the audience in
each of their respective local markets. The remainder of the Company's
programming is purchased from various program suppliers primarily in Mexico and
other Latin American countries.
The Company's programming schedule includes OCURRIO ASI, the first news
magazine format program in Spanish-language television. Produced by the Company
since 1990 in its Miami facilities, this show has consistently been one of
Telemundo's highest rated programs. Other Telemundo produced programming with
consistently strong market shares include two talk shows, SEVCEC and EL Y ELLA
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
29 hours of programming weekly, including variety and comedy shows, mini-series,
news and public affairs shows, all primarily directed toward the Puerto Rico
market. In addition, WKAQ has the right of first refusal to purchase novelas and
other programming for the Puerto Rico market, produced by Grupo Televisa, S.A.
de C.V. ("Televisa") pursuant to a programming agreement with approximately
seven 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 2% of the Company's total net revenue in 1997.
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
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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, Houston and Orange County, California.
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.
The Company sells advertising time to a broad and diverse group of
advertisers. No single advertiser accounted for 10% or more of the Company's
1997 total revenue. According to HISPANIC BUSINESS MAGAZINE, the top ten
advertisers in Spanish-language media in 1997, all of which are major
advertisers on the Telemundo network, were The Procter & Gamble Co., AT&T Corp.,
Sears, Roebuck & Co., General Motors Corporation, MCI Communications
Corporation, McDonald's Corporation, Anheuser-Busch Companies Inc., Philip
Morris Companies, Inc., Colgate-Palmolive Company and Ford Motor Company.
Additionally, the network and each of the Company's stations sell
blocks of air time during non-network programming hours to block time
programmers.
RATINGS SYSTEMS
The Company's advertising revenue depends to a large extent on its
ratings and audience share. The Nielsen Hispanic Television Index ("NHTI") which
began in November 1992, and the Nielsen Hispanic Station Index ("NHSI") provide
national network (NHTI) and local (NHSI) television ratings and share data for
the Hispanic audience. Management believes that Spanish-language television has
the potential to garner a larger share of total U.S. television advertising
revenue, and better demographic information and audience research should
continue to accelerate this process.
COMPETITION
The broadcasting industry has become increasingly competitive in recent
years. 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 which ranks first in Spanish-language
television viewership in its DMA. 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 at times attracted
approximately 82% of the overall Spanish-language network television viewing
audience in 1997. Generally, the competing Univision stations have been
operating in their markets longer than have the Company's stations.
Additionally, in 1996, Univision acquired the Galavision cable network
("Galavision"), which has operated primarily as a Spanish-language cable
television network since 1980. Galavision is reported to serve 2.5 million
subscribers and also competes with the Company. Both Televisa and Corporacion
Venezolana de Television, C.A. ("Venevision") have entered into long-term
contracts to supply Spanish-language programming to the Univision and Galavision
networks. Through these program license agreements, Univision has the right of
first refusal to air in the U.S. all Spanish-language programming produced by
Televisa and Venevision until December 2017. 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.
There are also several independent Spanish-language television stations
that broadcast, on a full-time or part-time basis, in markets in which the
Company owns and operates stations. Independent Spanish-language television
stations compete with Company-owned stations in the Los Angeles, Miami and San
Antonio Market Areas.
The Company's owned and operated television stations and affiliates
also face competition for advertising revenue from other sources serving the
same markets and competing for the same target audience, such as other
Spanish-language and English-language media, including television stations,
cable channels, direct broadcast satellites, radio stations,
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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 to date 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 networks has attracted a significant share of the
Puerto Rico audience to date.
Further advances in technology such as video compression and
programming delivered through fiber optic telephone lines could lower entry
barriers for new channels and encourage the development of increasingly
specialized niche programming.
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 of 1934, as amended (the "Communications Act"). The
Communications Act was substantially amended by the Telecommunications Act of
1996 (the "Telecom 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. Pursuant to the terms of the Telecom
Act, the FCC increased the terms of such licenses and their renewals from five
(5) to eight (8) years. FCC licenses of full-power stations held by the Company
have the following expiration dates: KTMD and KVDA - August 1, 1998; KSTS and
KVEA - December 1, 1998; WNJU - June 1, 1999; WKAQ and WSCV - February 1, 2005
and WSNS - December 1, 2005.
ATTRIBUTABLE INTERESTS
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 owning or
controlling 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, to its knowledge, there are presently two
attributable stockholders: TLMD Partners II, L.L.C. and Bastion Capital Fund,
L.P.
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 television stations, located in markets which, in the aggregate,
include more than 35% of total U.S. television households. For purposes of this
rule, UHF stations are attributed with one-half of the television households in
their respective 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
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coverage area of that station, and vice versa. The Commission is conducting
rulemaking proceedings to consider, among other things, changes to its
attribution rules and the modification of the local co-ownership prohibition.
In addition, on March 12, 1998, acting pursuant to the requirements of the
Telecom Act, the FCC commenced a formal inquiry to review all of its broadcast
ownership rules which are not otherwise under review in pending rulemaking
proceedings, including the national audience limitation, the associated 50%
discount for UHF stations and the broadcast/cable cross-ownership rule. It is
not possible at this time to predict what action the FCC may take and how it
may affect the Company. The Company is unable to predict the effect of any
changes resulting from these ownership proceedings.
FOREIGN OWNERSHIP RESTRICTIONS
The Communications Act prohibits the issuance of a broadcast license
to, or the holding of a broadcast license by, any corporation of which more than
20% of the capital stock is owned of record or voted by non-U.S. citizens or
their representatives or by a foreign government or a representative thereof, or
by any corporation organized under the laws of a foreign country (collectively,
"Aliens"). The Communications Act also authorizes the FCC, if the FCC determines
that it would be in the public interest, to prohibit the issuance of a broadcast
license to, or the holding of a broadcast license by, any corporation directly
or indirectly controlled by any other corporation of which more than 25% of the
capital stock is owned of record or voted by Aliens. The FCC has issued
interpretations of existing law under which these restrictions in modified form
apply to other forms of business organizations, including partnerships. 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
Pursuant to the Cable Act of 1992 (the "1992 Cable Act"), television
broadcasters are required to make triennial elections to exercise either certain
"must-carry" or "retransmission consent" rights in connection with their
carriage by cable systems in each broadcaster's local market. By electing
must-carry rights, a broadcaster demands carriage on a specified channel on
cable systems within its Area of Dominant Influence ("ADI"), as defined by the
Arbitron 1991-92 Television Market Guide. However, these must- carry rights are
not absolute, but are dependent on variables such as the number of activated
channels on, and the location and size of, the cable system, the amount of
duplicative programming on a broadcast station, the channel positioning demands
of other broadcast stations and the signal quality of the stations at the cable
system's principal headend. Alternatively, if a broadcaster chooses to exercise
retransmission consent rights, it can prohibit cable systems from carrying its
signal or grant the appropriate cable system the authority to retransmit the
broadcast signal for a fee or other consideration. LPTVs have very limited
must-carry rights, although cable systems cannot retransmit LPTV stations'
signals without their consent. The Company's owned and operated full-power
stations have elected must-carry rights.
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.
RECENT AND PROPOSED LEGISLATION; PROPOSED RULEMAKING
On February 17, 1998, the FCC adopted a final table of digital channel
allotments and rules for the implementation of digital television ("DTV")
service (including high-definition television) in the United States. The digital
table of allotments provides each existing full power television station
licensee or permittee with a second broadcast channel to be used during the
transition to DTV, conditioned upon the surrender of one of the channels at the
end of the DTV transition period. The implementing rules permit broadcasters to
use their assigned digital spectrum flexibly to provide either standard- or
high-definition video signals and additional services, including, for example,
data transfer, subscription video, interactive materials and audio signals,
subject to the requirement that they continue to provide at least one free,
over-the-air television service. The FCC has set a target date of 2006 for
expiration of the transition period, subject to biennial reviews to evaluate the
progress of DTV, including the rate of consumer acceptance. Conversion to DTV
may reduce the geographic reach of the Company's stations or result in increased
interference, with, in either case, a corresponding loss of population coverage.
DTV implementation will impose additional costs on the Company, primarily due to
the capital costs associated with construction of DTV facilities and increased
operating costs both during and after the transition period. In addition, the
Telecom Act requires the FCC to assess and collect a fee for any use of a
broadcaster's DTV channel for which it receives
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subscription fees or other compensation other than advertising revenue. The FCC
has pending a rulemaking proceeding to implement this requirement. The FCC has
maintained the secondary status of LPTV stations in connection with its
implementation of a channel allotment plan for DTV, but has announced steps to
assist LPTV stations that are displaced or otherwise affected by DTV operations,
including affording procedural protections to LPTV stations that seek to
relocate to a new channel to eliminate interference to or from an allotted full
service DTV facility.
Pursuant to the Children's Television Act of 1990, the amount of
commercial matter that may be broadcast during the programming designed for
children 12 years of age and younger has been limited to 12 minutes per hour on
weekdays and 10.5 minutes per hour on weekends. In addition, television stations
are required to broadcast a minimum of three hours per week of "core" children's
educational programming, which the FCC defines as programming that (i) has
serving the educational and informational needs of children 16 years of age and
under as a significant purpose; (ii) is regularly scheduled, weekly and at least
30 minutes in duration; and (iii) is aired between the hours of 7:00 a.m. and
10:00 p.m. A television station found not to have complied with the "core"
programming requirements or the children's commercial limitations could face
sanctions, including monetary fines and the possible non-renewal of its
broadcasting license.
The Telecom Act directed the broadcast and cable television industries
to develop and transmit an encrypted rating in all video programming that, when
used in conjunction with the so-called "V-Chip" technology, would permit the
blocking of programs with a common rating. On March 12, 1998, the FCC voted to
accept an industry proposal providing for a voluntary ratings system of "TV
Parental Guidelines" under which all video programming will be designated in
one of six categories in order to permit the electronic blocking of selected
video programming. The FCC has begun a separate proceeding to address technical
issues related to the "V-Chip." The FCC has directed that all television
receiver models with picture screens 13 inches or greater be equipped with
"V-Chip" technology under a phases implementation beginning on July 1, 1999.
The Company cannot predict how changes in the implementation of the ratings
system and "V-Chip" technology will affect the Company's business.
The FCC's closed captioning rules, which became effective January 1,
1998, provide for the phased implementation of a universal on-screen captioning
requirement with respect to the vast majority of video programming. Program
distributors, including television stations and cable systems, are generally
responsible for compliance with the captioning rules. The FCC has granted a
blanket exemption from the new rules, however, for foreign-language
broadcasters, including the Company's network and its owned stations.
The Congress and the FCC have under consideration, and in the future
may consider and adopt, new laws, regulations and policies regarding a wide
variety of matters that could affect, directly or indirectly, the operation,
ownership and profitability of the Company's broadcast stations and programming
network. In addition to the changes and proposed changes noted above, such
matters include, for example, spectrum use fees, political advertising rates,
potential restrictions on the advertising of certain products (beer, wine and
hard liquor, for example), and the rules and policies to be applied in enforcing
the FCC's equal employment opportunity regulations. Other matters that could
affect the Company's regulated media businesses include technological
innovations and developments generally affecting competition in the mass
communications industry, such as direct radio and television broadcast satellite
service, the continued establishment of wireless cable systems, digital
television and radio technologies, and the advent of telephone company
participation in the provision of video programming service.
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 Telecom Act, other Congressional acts, such regulations
and policies, and the public notices promulgated by the FCC for further
information. The laws, rules, regulations and interpretations governing the
Company's business are revised from time to time and it is not possible to
predict the effect that future regulatory changes will have on the Company's
business.
SEASONALITY OF BUSINESS
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 revenue for the fourth quarter. The seasonality is more
pronounced in Puerto Rico and as a result, the Company experiences seasonal
fluctuations to a greater degree than the U.S. broadcasting industry in general.
Because costs are more
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ratably spread throughout the year, the impact of this seasonality on operating
income is more pronounced.
EMPLOYEES
As of December 31, 1997, the Company and its subsidiaries had
approximately 1,200 full-time employees, approximately 215 of whom were
employees of WKAQ in Puerto Rico. Approximately 60 employees of WNJU, 35
employees of KSTS, 130 employees of WKAQ and 30 employees of WSNS are covered by
union contracts. The Company is currently negotiating a collective bargaining
agreement for the approximately 60 unionized employees of KVEA. The Company
believes its relations with its employees and unions are satisfactory.
STATEMENT REGARDING FORWARD LOOKING DISCLOSURE
Except for the historical information contained in this Annual Report
on Form 10-K, certain matters discussed herein, including (without limitation)
under Part I, Item 1, "Business", Item 3, "Legal Proceedings" and under Part II,
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations", are forward looking disclosures, that involve risks and
uncertainties, including (without limitation) those risks associated with the
effect of economic conditions; the Company's outstanding indebtedness and
leverage; restrictions imposed by the terms of the Company's indebtedness;
changes in advertising revenue which are caused by changes in national and local
economic conditions, the relative popularity of the Company's programming, the
demographic characteristics of the Company's markets and other factors outside
the Company's control; future capital requirements; the impact of competition,
including its impact on market share and advertising revenue in each of the
Company's markets; the loss of key employees; the modification or termination of
network affiliation agreements; the availability of cost-effective programming;
the impact of litigation; the impact of current or pending legislation and
regulations, including FCC rulemaking proceedings; and other factors which may
be described from time to time in filings of the Company with the Securities and
Exchange Commission (the "Commission").
RECENT DEVELOPMENTS
On November 24, 1997, the Company, TLMD Station Group, Inc.
("Purchaser") and TLMD Acquisition Co. ("Sub") entered into a merger agreement
(the "Merger Agreement"). The Merger Agreement provides that following the
approval of the stockholders of the Company and the satisfaction of certain
other conditions, Sub will be merged with and into the Company with the Company
surviving the merger as a wholly-owned subsidiary of Purchaser (the "Merger").
In the Merger, each outstanding share of Common Stock (other than shares of
Common Stock held by Purchaser, Sub or any other wholly owned subsidiary of
Purchaser, or in the treasury of the Company or by any wholly-owned subsidiary
of the Company, all of which will be canceled with no payment being made with
respect thereto, or by stockholders of the Company who exercise and perfect
their statutory appraisal rights under Delaware law) will be converted into the
right to receive $44.00 in cash. Subject to certain conditions, if the Merger
has not been completed by July 30, 1998, the purchase price per share of the
Common Stock will increase at the rate of 8% per annum (approximately $0.29 per
share per month) during the period commencing on July 30, 1998 and ending on the
day before the date on which the Merger is completed.
Purchaser will be beneficially owned by (i) Apollo Investment Fund III,
L.P. ("Apollo Investment") which may be deemed to be an affiliate of TLMD
Partners II ("TLMD II"), a significant stockholder of the Company, (ii) Bastion
Capital Fund, L.P. ("Bastion"), which is also a significant stockholder of the
Company, (iii) Liberty Media Corporation ("Liberty") and (iv) Sony Pictures
Entertainment, Inc. ("SPE"). Following the completion of the Merger, the
Company, as a wholly-owned subsidiary of the Purchaser, will be owned
beneficially 24.95% by SPE, 24.95% by Liberty and 50.1% by Station Partners,
LLC, an entity to be owned 68% by Apollo Investment and 32% by Bastion.
A special committee of the Company's Board of Directors, whose members
have no financial interest in Purchaser, Apollo Investment, Bastion or their
respective affiliates, unanimously recommended approval of the Merger Agreement
and the transactions contemplated thereby (the "Transactions") to the Board of
Directors which, relying upon such recommendation, approved the Merger Agreement
and the Transactions.
Completion of the Merger is subject to various conditions, including
approval by the FCC of the transfer of the Company's broadcast licenses without
the imposition of certain specified conditions or restrictions that are not
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acceptable to Purchaser, approval of the Merger by the holders of a majority of
the outstanding shares of Common Stock (voting together as a single class),
Purchaser's securing the financing required to accommodate the transaction under
the debt and equity commitments that have been arranged (or pursuant to
alternative financing arrangements), and the expiration of the applicable
Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR Act") waiting period.
Under certain conditions, the Company may terminate the Merger
Agreement and accept a proposal determined by its Board of Directors (as
provided in the Merger Agreement) to be superior, from a financial point of view
to the stockholders of the Company (other than stockholders affiliated with
Purchaser or its affiliates), to the Merger, subject to the payment of a
termination fee of $15 million to Purchaser and the reimbursement of up to an
aggregate $2.5 million in expenses incurred by Purchaser in connection with the
transactions contemplated by the Merger Agreement. Purchaser will be required to
pay a termination fee of $17.5 million to the Company if, solely as a result of
the failure of Purchaser to obtain an FCC order regarding the transfer
of the Company's broadcast licenses which is satisfactory to Purchaser, the
Merger has not been consummated on or before December 31, 1998 and the Merger
Agreement is at such time or thereafter terminated by either the Company or
Purchaser.
On December 30, 1997, the Company and Purchaser filed applications with
the FCC seeking FCC approval of the transfer of control of the Company and its
subsidiaries holding FCC broadcast licenses. On February 18, 1998, the Company
was informed that Univision had filed a "Petition to Deny" with the FCC with
respect to the FCC's consideration of the Merger and the resulting change of
control of the Company's FCC broadcasting licenses. On March 4, 1998, the
Company and Purchaser each filed an "Opposition to Petition to Deny" and on
March 16, 1998, Univision filed a reply to the "Opposition to Petition to
Deny". While the Company believes that Univision's petitions are without merit,
there can be no assurance that the FCC will so find, that the FCC will not
condition its approval of the change of control in a manner unacceptable to
Purchaser or that the Merger will be consummated.
On February 18, 1998, the Company filed with the Commission a
preliminary Proxy Statement on Schedule 14A (the "Preliminary Proxy") pursuant
to Rule 14a-1 of the Securities Exchange Act of 1934, as amended, with respect
to a special meeting of the stockholders of the Company to, among other things,
vote on the approval and adoption of the Merger Agreement and the Transactions.
Concurrently with such filing, the Company, Purchaser, Sub, Apollo Investment
and Bastion filed with the Commission a Schedule 13E-3 Transaction Statement
pursuant to Rule 13e-3 of the Securities Exchange Act of 1934, as amended with
respect to the Merger.
On February 20, 1998, the Company, Purchaser and certain affiliates of
Purchaser filed with the Antitrust Division of the Department of Justice and the
Federal Trade Commission, certain notification and report forms with respect to
the Merger and certain related transactions pursuant to the requirements of the
HSR Act and the rules and regulations promulgated thereunder. The Company has
received notice of the early termination of the waiting periods with respect to
each of such applications so filed.
ITEM 2. PROPERTIES
The Company has its executive offices in a location near Miami, Florida
where it has production studios, its network operations center and its Miami
station, WSCV. These facilities are located in approximately 120,000 square feet
of space under a lease which expires in December 1998, with options to renew
through December 2004. The Company sub-leases certain space in these facilities.
The Company has additional executive offices located in approximately
7,100 square feet of leased premises in Glendale, California under a sublease
which expires in July 1998.
In February 1998, the Company's New York network and national spot
sales and marketing offices and WNJU's sales and business offices were relocated
in New York City to approximately 25,000 square feet of leased space. The term
of the lease runs through July 2008, with an option to renew through July 2013.
The offices and studios of KVEA are located in approximately 32,000
square feet of leased premises in Glendale, California. The leases currently
extend through January 2002. KVEA also leases its transmitter and broadcast
tower site on Mount Wilson in the Los Angeles area, with a new lease currently
being negotiated.
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The offices and studios of WNJU are located in approximately 15,000
square feet of leased premises in Hasbrouck Heights, New Jersey under a lease
that expires in June 1999, with options to renew through June 2004. WNJU's sales
force and business office occupies office space in the Company's New York sales
and marketing offices. 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
2004.
The offices and studio 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 April 2004, with options to renew through April
2011.
The offices and studio of KSTS are located in approximately 16,000
square feet of leased premises in San Jose, California under leases that expire
in December 1998, with an option to renew through December 2003. The transmitter
and antenna of KSTS are located on leased property on Monument Peak, outside of
San Jose, under a lease that expires in December 1998. The Company will be
relocating its transmitter and antenna in 1998.
The offices and studio of WSNS are located in owned premises consisting
of approximately 21,000 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 September 1999, with an option to renew through September 2009.
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 studio of KTMD are located in approximately 17,000
square feet of leased premises in Houston, Texas. The lease covering these
premises expired on December 31, 1997. KTMD is negotiating with the landlord on
the terms of a new lease and continues to explore its other options in the event
the parties are unable to enter into a satisfactory lease. KTMD's tower and
transmitter are located on property owned by KTMD between Houston and Galveston.
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 June 2009. WKAQ
also operates several translator facilities to cover small towns in the
mountainous regions of Puerto Rico.
In addition, the Company leases various properties throughout the
country for LPTVs and sales offices. None of these lease commitments are
material to the Company.
ITEM 3. LEGAL PROCEEDINGS
The Company is aware of six lawsuits that have been filed relating to
the Merger. The Company and its directors are defendants in all of the lawsuits.
Certain of the Company's significant stockholders are defendants in two of the
lawsuits. All of the lawsuits were filed by stockholders of the Company not
affiliated with the Purchaser or its affiliates, seeking to represent a
punitive class of all such stockholders. All of the lawsuits were filed in the
Delaware Court of Chancery.
While the allegations of each complaint are not identical, all of the
lawsuits assert that the $44.00 per share price to be paid to the stockholders
of the Company not affiliated with the Purchaser or its affiliates is inadequate
and does not represent the value of the assets and future prospects of the
Company and that the Merger Agreement serves no legitimate business purpose. The
complaints also allege that the defendants engaged in self-dealing without
regard to conflicts of interest and that the defendants breached their fiduciary
duties in approving the Merger Agreement.
All of the complaints seek preliminary and injunctive relief
prohibiting the Company from, among other things, consummating the Merger. To
date no motion to enjoin any of the proceedings contemplated by the Merger
Agreement has been made. The complaints also seek unspecified damages,
attorneys' fees and other relief. The Company believes that the allegations
contained in the complaints are without merit and intends to contest the actions
vigorously. The individual defendants have advised the Company that they also
believe that the allegations in the complaints are without merit and that they
intend to contest the actions vigorously.
On March 5, 1998, the six actions were consolidated for all purposes.
To date none of the defendants has been required to answer, move or otherwise
respond to the complaints and no discovery has been taken.
In a complaint filed in the United States District Court for the
Southern District of New York on March 2, 1998, Reliance Insurance Company
("Reliance") alleges that the Company breached a registration rights agreement
(the "Registration Rights Agreement") dated as of December 30, 1994 among the
Company, Reliance and certain other parties by failing to file, by February 27,
1998, a registration statement for the 416,667 shares of Series A Common Stock
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of the Company, which Reliance alleges that it is entitled to purchase by
virtue of its ownership of certain warrants issued by the Company. The Company
believes that it has meritorious defenses to the claim it has breached the
agreement and intends to contest the action vigorously. See Item 13 "Certain
Relationships and Related Transactions" below.
The Company and its subsidiaries are involved in a number of other actions
arising out of the ordinary course of business and are contesting the
allegations of the complaints in each pending action and believe, based on
current knowledge, that the outcome of all such actions will not have a
material adverse effect on the Company or its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders in the fourth
quarter of the fiscal year covered by this Annual Report on Form 10-K.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
See the information in Note 14 to the Notes to Consolidated Financial
Statements appearing on page 24 and the inside back cover of the Telemundo
Group, Inc. 1997 Annual Report to Stockholders, which information is
incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
See the information under the caption "Selected Financial Data" on page
2 of the Telemundo Group, Inc. 1997 Annual Report to Stockholders, which
information is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
See the information under the caption "Management's Discussion and
Analysis of Results of Operations and Financial Condition" on pages 3 through 7
of the Telemundo Group, Inc. 1997 Annual Report to Stockholders, which
information is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of the Company and Subsidiaries,
including the independent auditors' report thereon, included on pages 8 through
25 of the Telemundo Group, Inc. 1997 Annual Report to Stockholders, which
information is incorporated herein by reference, are listed in Item 14 below.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
At the last Annual Meeting of Stockholders of Telemundo, the following
directors were elected until the next Annual Meeting of Stockholders or until
their respective successors are duly elected and qualified. The name, business
address and principal occupation or employment during the last five years of the
directors and executive officers of Telemundo are set forth below. Unless
otherwise indicated, the business address of each person is that of Telemundo
at
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2290 West 8th Avenue, Hialeah, Florida 33010. Each person listed below is a
citizen of the United States.
<TABLE>
DIRECTORS OF THE COMPANY
<CAPTION>
<S> <C>
NAME AND BUSINESS ADDRESS PRINCIPAL OCCUPATIONS OR
POSITIONS DURING THE PAST FIVE YEARS
Leon D. Black Mr. Black, 46, became Chairman of the Board of Directors of Telemundo as of
Apollo Management, L.P. December 30, 1994. Mr. Black is one of the founding principals and a limited
1301 Avenue of the Americas, 38th Floor partner of Apollo Management L.P., a Delaware limited partnership ("Apollo
New York, NY 10019 Management") which, together with an affiliate, acts as managing general
partner of Apollo Investment AIF II, a Delaware limited partnership ("AIF II")
and Apollo Investment, private securities investment funds. AIF II is the
manager of TLMD II. Mr. Black also is a founding principal of Lion Advisors
L.P., a Delaware limited partnership ("Lion Advisors") which acts as
financial advisor to and representative for certain institutional investors
with respect to securities investments. Mr. Black is also a director of
Converse, Inc., Culligan Water Technologies, Inc., Samsonite Corporation, and
Vail Resorts, Inc.
Guillermo Bron Mr. Bron, 46, became a director of Telemundo as of December 30, 1994. From
Bastion Capital Fund, L.P. July 1994 to present, Mr. Bron has been an officer, director and principal
1999 Avenue of the Stars, Suite 2960 stockholder of the corporate general partner of Bastion Partners L.P., a
Los Angeles, CA 90067 Delaware limited partnership ("Bastion Partners"), which is the general
partner of Bastion, an investment fund and a principal stockholder of
Telemundo. Mr. Bron is a director of United PanAm Financial Corp.
Roland A. Hernandez Mr. Hernandez, 40, has been a director of Telemundo since 1989, and has been
President and Chief Executive Officer of Telemundo since March 1995. Since
1987, Mr. Hernandez has been an executive officer of the corporate general
partner of Interspan Communications, a California limited partnership that
owns Spanish-language television station KFWD, Channel 52, a Telemundo
affiliate serving the Dallas/Fort Worth market ("Interspan"). Mr. Hernandez is
a director of Beneficial Corporation and has been nominated to be a director
of Wal-Mart Stores, Inc.
Bruce H. Spector Mr. Spector, 55, became a director of Telemundo as of December 30, 1994.
Apollo Management, L.P. Since October 1992, Mr. Spector has been a consultant to Apollo Management. In
1999 Avenue of the Stars, Suite 1900 March 1995, Mr. Spector became a principal of Apollo Management. For 25 years
Los Angeles, CA 90067 prior to 1992, Mr. Spector was a member of the Los Angeles law firm of Stutman
Triester & Glatt. Mr. Spector is also a director of Metropolis Realty Trust,
Inc., Nexthealth, Inc., United International Holdings, Inc. and Vail Resorts,
Inc.
Edward M. Yorke Mr. Yorke, 39, became a director of Telemundo as of June 1995. Since 1992, Mr.
Apollo Management, L.P. Yorke has been a principal of Apollo Management and Lion Advisors and since
1301 Avenue of the Americas March 1995 of Apollo Advisors II L.P., a Delaware limited partnership
New York, NY 10019 ("Advisors II"). Mr. Yorke is also a director of Avis Industries, Inc. and
Salant Corporation.
Alan Kolod Mr. Kolod, 49, became a director of Telemundo as of December 30, 1994. Mr.
Moses & Singer Kolod has been a member of the New York law firm Moses & Singer LLP since
1301 Avenue of the Americas, 40th Floor December 1989.
New York, NY 10019
</TABLE>
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<TABLE>
<S> <C>
Barry W. Ridings Mr. Ridings, 46, became a director of Telemundo as of March 1995. Mr. Ridings
BT Alex. Brown Incorporated has been a Managing Director of the investment banking firm of BT Alex. Brown
1290 Avenue of the Americas, 10th Floor Incorporated since March 1990. Mr. Ridings is a director of Noodle Kidoodle,
New York, NY 10104 Inc., New Valley Corporation, Norex Industries, Inc., SubMicron Systems
Corporation, Search Capital Group, Inc. and TransCor Waste Services Inc.
Daniel D. Villanueva Mr. Villanueva, 60, became a director of Telemundo as of April 1996. From July
Bastion Capital Fund, L.P. 1994 to the present, Mr. Villanueva has been an officer, director and principal
1999 Avenue of the Stars, Suite 2960 stockholder of the corporate general partner of Bastion Partners, which is the
Los Angeles, CA 90067 general partner of Bastion, an investment fund and a principal stockholder of
Telemundo. Since 1990, Mr. Villanueva also has been Chairman of Bastion Capital
Corp., which manages the affairs of Bastion pursuant to a management agreement.
Mr. Villanueva has over 25 years of experience as an executive in
Spanish-language television, having served in various capacities at Univision
or its predecessor from 1964 to 1990. Mr. Villanueva is a director of
Renaissance Cosmetics, Inc. and is a trustee of Metropolitan West Group of
mutual funds.
David E. Yurkerwich Mr. Yurkerwich, 45, became a director of Telemundo as of March 1995. Mr.
Peterson Consulting LLC Yurkerwich is a founder and Vice Chairman of Peterson Consulting LLC, a
450 Lexington Avenue litigation, dispute and economic consulting firm of which Mr. Yurkerwich has
Suite 1920 been a member since 1980.
New York, NY 10017
</TABLE>
<TABLE>
EXECUTIVE OFFICERS OF THE COMPANY
<CAPTION>
<S> <C>
PRINCIPAL OCCUPATIONS OR
NAME AND BUSINESS ADDRESS POSITIONS DURING THE PAST FIVE YEARS
Roland A. Hernandez Mr. Hernandez's background is described under the caption "Directors of the
Company" above.
Stephen J. Levin Mr. Levin, 49, has been an Executive Vice President of Telemundo since 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, Mr. Levin was a marketing consultant to various radio
and television broadcasting companies.
Donald J. Tringali Mr. Tringali, 40, has been an Executive Vice President of Telemundo since June
1996. From May 1995 to May 1996 Mr. Tringali served as a consultant to
Telemundo. From March 1993 to April 1995. Mr. Tringali was a consultant to
various entities involved in media and entertainment businesses.
Jose C. Cancela Mr. Cancela, 40, has been an Executive Vice President of Telemundo since April
1995. From June 1992 to April 1995, Mr. Cancela served as President, Station
Group of Telemundo.
Peter J. Housman II Mr. Housman, 46, has been the Chief Financial Officer and Treasurer of
Telemundo since February 1987.
</TABLE>
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<TABLE>
<S> <C>
Stuart Livingston Mr. Livingston, 40, has been Senior Vice President, Operations and Business
Affairs of Telemundo since November 1996. From April 1995 to November 1996,
Mr. Livingston was Senior Vice President, Operations and Administration of
Telemundo. 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.
Osvaldo F. Torres Mr. Torres, 36, has been Vice President, General Counsel and Secretary of
Telemundo since May 1997. From May 1996 to May 1997, Mr. Torres served as
Associate General Counsel and Secretary of Telemundo. From February 1995 to
May 1996, Mr. Torres served as an associate in the law firm of Gunster,
Yoakley, Valdes-Fauli & Stewart, P.A., in West Palm Beach, Florida. From
February 1989 to February 1995, Mr. Torres served as an associate in the law
firm of Schulte Roth & Zabel in New York City.
</TABLE>
Officers are not elected for a fixed term of office but serve at the discretion
of the Board of Directors. Certain directors have been nominated pursuant to the
Shareholders Agreement described in footnote (3) of Item 12 "Security Ownership
of Certain Beneficial Owners and Management" below.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the compensation for
services in all capacities to Telemundo for the years ended December 31, 1997,
1996, and 1995 paid to (a) the Chief Executive Officer and (b) the other four
most highly compensated executive officers of Telemundo during 1997
(collectively, the "Named Executive Officers"). Roland A. Hernandez became the
Chief Executive Officer of Telemundo and Stephen J. Levin became an executive
officer of Telemundo in early 1995. Mr. Tringali became an executive officer in
1996. The amounts shown in the table for 1995, with respect to Messrs. Hernandez
and Levin, and for 1996, with respect to Mr. Tringali, reflect payments from the
dates they became executive officers.
<TABLE>
LONG TERM
COMPENSATION
NAME AND PRINCIPAL POSITION DURING ANNUAL COMPENSATION AWARDS(#)
1997 ----------------------- ---------
YEAR SALARY ($) ANNUAL SECURITIES ALL OTHER
------ ---------- BONUS UNDERLYING COMPENSATION
($)(1) OPTIONS(#) ($)(2)
------ ------------ ------
<S> <C> <C> <C> <C> <C>
Roland A. Hernandez 1997 700,000 0 30,000 8,438
President and Chief Executive Officer 1996 700,000 913,889 0 8,615
1995 616,799 624,400 512,500 962
Stephen J. Levin 1997 344,900 0 30,000 6,233
Executive Vice President 1996 315,500 331,566 0 7,733
1995 247,610 174,870 50,000 2,250
Donald J. Tringali 1997 344,900 0 30,000 3,502
Executive Vice President 1996 177,000(3) 261,486 75,000 742(3)
1995 --(3) -- -- --(3)
</TABLE>
17
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Jose C. Cancela 1997 342,300 0 0 6,233
Executive Vice President 1996 400,000 229,620 0 7,733
1995 400,000 0 50,000 7,391
Peter J. Housman II 1997 325,000 0 30,000 6,233
Chief Financial Officer and Treasurer 1996 325,000 186,506 0 7,733
1995 325,000 50,000 50,000 7,391
</TABLE>
- ----------
(1) Bonus amounts represent compensation for services rendered for the
respective years shown and were paid at the beginning of the subsequent
year.
(2) The following amounts are included in the above table. Retirement
contributions and matching 401(k) contributions: Mr. Hernandez--$4,750
for 1997, $6,250 for 1996 and $0 for 1995; Mr. Levin--$4,750 for 1997,
$6,250 for 1996 and $1,288 for 1995; Mr. Tringali--$2,019 for 1997 and
$0 for 1996 and 1995; Mr. Cancela--$4,750 for 1997, $6,250 for 1996 and
$5,908 for 1995; Mr. Housman--$4,750 for 1997, $6,250 for 1996, and
$5,908 for 1995. Life insurance premiums paid by Telemundo: Mr.
Hernandez--$3,688 for 1997, $3,848 in 1996 and $962 in 1995; Mr.
Levin--$1,483 in each of 1997, 1996 and 1995; Mr. Tringali--$1,483 in
1997, $742 in 1996 and $0 for 1995; Mr. Cancela--$1,483 in each of
1997, 1996 and 1995; and Mr. Housman--$1,483 in each of 1997, 1996 and
1995.
(3) From May 1995 through May 1996, Mr. Tringali served as a consultant to
Telemundo. Consulting fees paid to Mr. Tringali in 1996 and 1995
amounted to $130,800 and $163,100, respectively.
EMPLOYMENT AGREEMENTS OF EXECUTIVE OFFICERS
Mr. Hernandez's employment agreement, dated as of March 9, 1995, as
amended, remains in effect until February 28, 2001. The amended employment
agreement provides for an annual base salary of $700,000 until February 28, 1998
and $800,000 during the remainder of his term of employment. If the Management
Incentive Compensation Plan (the "Incentive Plan") is approved and adopted by
the stockholders at the next Special Meeting of Stockholders (the "Special
Meeting"), Mr. Hernandez will be eligible for annual bonuses for each of the
1998, 1999, 2000 and 2001 fiscal years of up to 100% of his base salary, in each
case, if Telemundo achieves certain performance targets.
Mr. Levin's employment agreement, dated as of February 27, 1995, as
amended, remains in effect until February 28, 2001. The agreement provides for
an annual base salary of $350,000 until February 28, 1998 and $400,000 during
the remainder of his term of employment. If the Incentive Plan is approved and
adopted by the stockholders at the Special Meeting, Mr. Levin will be eligible
for annual bonuses for each of the 1998, 1999, 2000 and 2001 fiscal years of up
to 100% of his base salary, in each case, if Telemundo achieves certain
performance targets.
Mr. Tringali's employment agreement, dated as of June 11, 1996, as
amended, remains in effect until February 28, 2001. The agreement provides for
an annual base salary of $350,000 until February 28, 1998 and $400,000 during
the remainder of his term of employment. If the Incentive Plan is approved and
adopted by the stockholders at the Special Meeting, Mr. Tringali will be
eligible for annual bonuses for each of the 1998, 1999, 2000 and 2001 fiscal
years of up to 100% of his base salary, in each case, if Telemundo achieves
certain performance targets.
Mr. Cancela's employment agreement, dated as of March 7, 1997, expired
on December 31, 1997. Telemundo is currently in the process of renegotiating Mr.
Cancela's employment agreement and he continues to be employed by Telemundo.
Mr. Housman's employment agreement, dated as of March 7, 1997, as
amended, remains in effect until February 28, 2001. The agreement provides for
an annual base salary of $325,000 until February 28, 1998 and $400,000 during
the remainder of his term of employment. If the Incentive Plan is approved and
adopted by the stockholders at the Special Meeting, Mr. Housman
18
<PAGE>
will be eligible for annual bonuses of up to 100% of his base salary for the
1998, 1999, 2000 and 2001 fiscal years, in each case, if Telemundo achieves
certain performance targets.
In addition to the specific provisions described above, the employment
agreements, as amended, for Messrs. Hernandez, Levin, Tringali and Housman each
contain the provisions set forth below. If such executive's employment is
terminated because of death, disability or other event rendering the applicable
executive unable to perform his duties and obligations under the agreement, in
addition to his base salary and certain benefits through the date of
termination, Telemundo is obligated to pay such executive a bonus, if earned,
for the year in which such termination occurred. If such an executive is
terminated for "cause" (as defined in the applicable employment agreement) or
such an executive resigns without "good reason" (as defined in the applicable
employment agreement) pursuant to a resignation that is not a "specified
resignation" (as defined in the applicable employment agreement), Telemundo is
obligated to pay such executive only his base salary and certain other benefits
through the date of termination or resignation. The agreements provide that if
the executive is terminated by Telemundo "without cause" or by an executive for
"good reason" (each as defined in the applicable employment agreement), the
executive will be entitled to receive through an entitlement date that is the
later of February 28, 2001 or the first anniversary of the date of termination
of the executive's employment, (i) his base salary, (ii) his bonus for the
fiscal year in which such termination occurs and (iii) his benefits (or
reimbursement of the cost thereof) under his employment agreement. These
employment agreements also provide that if (a) there is a "change of control
transaction" (as defined in the applicable employment agreement), (b) the
applicable executive is offered a position allowing him to keep his title with
the successor to all or any part of Telemundo's business and (iii) a "diminution
in duty" (as defined in the applicable employment agreement) would have occurred
but for the offer of a position as described in clause (b) above, then the
applicable executive will have the option of declining the position offered as
described in clause (b) above and instead modifying his position to a position
(but not senior to that offered) that has such work location, time commitment,
duties, responsibilities and terms as the applicable executive officer may
specify in his sole and absolute discretion after consultation with Telemundo.
In addition, the employment agreements provide for "specified resignation
rights" (as defined in the applicable employment agreement) which allow the
executive, during the one-month period beginning 14 months after a change of
control transaction, to terminate his employment for any reason whatsoever; any
such termination will be treated as if it were a termination for "good reason"
(the consequences of which are described above).
OPTION GRANTS IN 1997
The following table sets forth certain information with respect to the
grant of options to purchase Series A Common Stock made during 1997 to each of
the Named Executive Officers.
<TABLE>
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE
SECURITIES OPTIONS VALUE AT ASSUMED
UNDERLYING GRANTED TO EXERCISE ANNUAL RATES OF STOCK
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION PRICE APPRECIATION FOR
NAME GRANTED(#) FISCAL YEAR SHARE($) DATE OPTION TERM($)(2)
- ------------------- ---------- ----------- -------- ---- -------------------------
5% 10%
-- ---
<S> <C> <C> <C> <C> <C> <C>
Roland A. Hernandez 30,000(1) 12.7% 33.75 9/10/2007 636,800 1,613,700
Stephen J. Levin 30,000(1) 12.7% 33.75 9/10/2007 636,800 1,613,700
Donald J. Tringali 30,000(1) 12.7% 33.75 9/10/2007 636,800 1,613,700
Peter J. Housman II 30,000(1) 12.7% 33.75 9/10/2007 636,800 1,613,700
</TABLE>
- ----------
(1) These options have a three year vesting schedule, becoming exercisable in
three equal installments on each of February 28, 1999, February 28, 2000,
and February 28, 2001, in each case if the applicable executive is employed
by Telemundo on such date. These options also become fully exercisable upon
the occurrence of a "change of control transaction" (as defined in the
applicable stock option agreement) or other accelerating event.
(2) Amounts represent the future market price of the Series A Common Stock,
assuming the market price at the grant date appreciates at compound
annualized rates of 5% and 10% (prescribed by the Commission rules) over
the 10 year term of the options, less the exercise price, multiplied by the
number of shares under grant. These amounts are not
19
<PAGE>
intended to forecast possible future appreciation, if any, of
Telemundo's stock price. However, if the Merger is consummated, all of
the unexercised options outstanding immediately prior to the effective
time of the Merger (whether or not such option is then presently
exercisable) will be converted into the right to receive, subject to
any required withholding taxes, a cash payment equal to the product of
(a) the total number of shares then subject to each such option
MULTIPLIED BY (ii) the excess of the Merger consideration over the
exercise price per share subject to such option. By virtue of the
foregoing treatment of such options, at the effective time of the
Merger all such options will cease to exist.
AGGREGATED OPTION EXERCISES IN 1997 AND YEAR-END OPTION VALUE
The following table sets forth the number of shares of Series A Common
Stock covered by stock options held by the Named Executive Officers at December
31, 1997 and also shows the value of "in-the-money" options at that date. No
Named Executive Officers exercised stock options during 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
NAME OPTIONS AT YEAR-END(#) OPTIONS AT YEAR-END($)(1)
--------------------- ---------------------- ----------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Roland A. Hernandez 416,407 126,093 12,856,500 3,180,700
Stephen J. Levin 40,625 39,375 1,205,600 492,000
Donald J. Tringali 56,250 48,750 984,400 541,900
Jose C. Cancela 0 50,000 0 1,312,500
Peter J. Housman II 16,667 63,333 437,500 1,088,700
</TABLE>
- ----------
(1) Based upon the closing sale price of Telemundo's Series A Common Stock of
$40.875 per share on December 31, 1997, less the exercise price. However,
if the Merger is consummated, all of the unexercised options outstanding
immediately prior to the effective time of the Merger (whether or not such
option is then presently exercisable) will be converted into the right to
receive, subject to any required withholding taxes, a cash payment equal to
the product of (a) the total number of shares then subject to each such
option MULTIPLIED BY (ii) the excess of the Merger consideration over the
exercise price per share subject to such option. By virtue of the foregoing
treatment of such options, at the effective time of the Merger all such
options will cease to exist.
PERFORMANCE GRAPH
On December 30, 1994, in connection with the consummation of the
Company's Plan of Reorganization, the Company's then-existing common stock was
canceled and the now-outstanding Series A and Series B Common Stock were issued.
A performance graph as required by the proxy rules of the Commission therefore
is not relevant for periods prior to December 30, 1994 and is not included for
those periods. The following graph sets forth the cumulative total return to the
Company's shareholders for the three year period ended December 31, 1997 based
upon the change in the quoted market price of the Company's Series A Common
Stock from January 3, 1995 to December 31, 1997, as well as comparable returns
for an overall stock market index (Nasdaq Stock Market-US) and the Company's
peer group index (S&P Broadcast Media).
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN *
--------------------------------------------------------------
JANUARY 3, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1995 1996 1997
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Telemundo Group, Inc. 100 145 297 419
NASDAQ Stock Market-US 100 141 174 213
S&P Broadcast Media 100 131 107 177
</TABLE>
* $100 invested on 1/3/95 in stock or on 12/31/94 in index-including
reinvestment of dividends.
DIRECTORS COMPENSATION
Each of the Company's directors, other than Mr. Hernandez, receives for
services as a director (i) $10,000 as an annual retainer, (ii) $2,500 for each
regularly scheduled Board meeting attended, (iii) $1,000 annual fee for serving
on each committee such director serves on, (iv) $1,000 for each extraordinary
meeting of the Board attended and (v) an annual grant of options to purchase
2,500 shares of Series A Common Stock, which options are granted on the date of
20
<PAGE>
Telemundo's annual meeting, vest over a period of three years and are
exercisable at the market price on the grant date. Upon the consummation of the
Merger, all such options shall become immediately exercisable. By virtue of the
foregoing treatment of such options, at the effective time of the Merger, all
such options will cease to exist.
COMMITTEES OF THE BOARD OF DIRECTORS AND MEETING ATTENDANCE
The Board of Directors met eight times during 1997. The Board of
Directors has an Audit Committee comprised of three members and a Compensation
and Stock Option Committee comprised of three members. The Board of Directors
does not have a nominating committee. In addition, in November 1997 the Board of
Directors created a Special Committee, comprised of only those directors having
no financial interest in the Purchaser or its affiliates, charged with the
authority to consider any strategic transaction proposals, such as the Merger.
The Audit Committee includes Bruce H. Spector, Chairman, Alan Kolod and
Guillermo Bron. The Audit Committee recommends engagement of the independent
auditors, considers the fee proposal and scope of the audit, reviews the
financial statements and the independent auditors' report, considers comments
made by the independent auditors with respect to the Company's internal control
structure, reviews the activities and recommendations of Company employees
performing internal audit functions, reviews current developments in financial
reporting and accounting, and reviews internal accounting procedures and
controls with the Company's financial and accounting staff. The Audit Committee
met one time during the last fiscal year. Management of the Company periodically
consults with the Chairman and other members of the Audit Committee regarding
the above matters throughout the year.
The Compensation and Stock Option Committee includes Barry W. Ridings,
Bruce H. Spector and Edward M. Yorke who are nonemployee directors. The
Committee met four times during the last fiscal year. The Compensation and Stock
Option Committee reviews and approves the Company's executive compensation
policies. In addition, the Compensation and Stock Option Committee selects the
officers and key employees of the Company who are to receive grants of options,
stock appreciation rights or restricted stock under the 1994 Stock Plan and the
number of shares that would be subject thereto, the exercise price, if any, and
the other terms and conditions of the grant. The Compensation and Stock Option
Committee certifies whether performance targets were met for bonus and stock
option purposes.
The Special Committee includes Roland A. Hernandez, Barry W. Ridings,
David E. Yurkerwich and Alan Kolod. The Special Committee met two times during
the fiscal year. The Special Committee's only purpose was to consider any
strategic transaction proposals, such as the Merger.
Other than Mr. Villanueva, each of the directors attended at least 75%
of the meetings of the Board of Directors and their respective committees held
during the period each was a director during the last fiscal year.
COMPENSATION AND STOCK OPTION COMMITTEE REPORT
The Compensation and Stock Option Committee reviews and approves the
Company's executive compensation policies and the compensation of the Company's
executive officers. In addition, the Compensation and Stock Option Committee
selects the officers and key employees of the Company who are to receive grants
of options, stock appreciation rights or restricted stock under the 1994 Stock
Plan and the terms and conditions of the grants. The Compensation and Stock
Option Committee certifies whether performance targets were met for bonus and
stock option purposes.
Compensation paid to Roland A. Hernandez, Donald J. Tringali, Stephen
J. Levin and Peter J. Housman II was pursuant to employment agreements entered
into with them and the Company as of or before 1997 and amended and restated
employment agreements entered into with them and the Company on September 10,
1997. Compensation paid to Jose C. Cancela was pursuant to employment agreements
entered into between him and the Company in 1997 and prior to 1997.
The following report addresses the Company's compensation policies for
1997 with respect to the Company's executive officers, including the Named
Executive Officers.
21
<PAGE>
EXECUTIVE COMPENSATION POLICIES. In the highly competitive environment
of television broadcasting and the entertainment industry as a whole, decisions
made by key executives can have a substantial impact on a company's financial
performance. The Company faces competition not only from other Spanish-language
and English-language television networks, but also from other Spanish-language
and English-language media, including cable channels, radio stations, movies and
other forms of entertainment.
The Company's executive compensation policies are structured to meet
this competitive challenge and to help the Company achieve its business
objectives by providing levels of annual base compensation designed to attract
and retain talented executives and by providing annual incentive compensation
that varies directly with Company financial performance and may also take into
account individual executive performance and contribution.
RELATIONSHIP OF PERFORMANCE UNDER COMPENSATION POLICIES. The components
of 1997 executive compensation included base salary and annual bonus amounts
and, in the case of Messrs. Hernandez, Tringali, Levin and Housman, stock
options. As described below, executive compensation for 1997 reflected the
Company's emphasis on tying pay to performance criteria in addition to providing
salary levels consistent with competitive practices and level of responsibility.
BASE SALARIES. An executive's base salary for 1997 was determined based
on the executive's individual level of responsibility and competitive practices
in the industry. For the Named Executives, base salaries were set in employment
agreements between the Company and each of those executives.
ANNUAL BONUSES. The Company generally pays cash bonuses, if any, to its
executives during the first quarter of the year for services rendered during the
preceding year. The Company believes that its ability to pay bonuses is
important to attract and retain superior executives. For those executives
employed pursuant to employment agreements, bonus amounts are based solely on
meeting objective performance criteria, such as EBITDA targets. For other
executives, bonuses are based on a combination of objective Company financial
performance criteria together with objective and subjective individual criteria.
Individual subjective performance criteria can include, to a greater or lesser
degree, depending on the executive, evaluation of initiative and contribution to
overall corporate performance, managerial ability, and adherence to Company
policies and procedures. The bonus amount generally is calculated as a
percentage of base salary earned in the year.
STOCK OPTIONS. The Company's 1994 Stock Plan, which was adopted by the
Stock Option Committee of the previous Board of Directors in 1994 and approved
by the Company's stockholders at the 1995 Annual Meeting, provides for the
granting of stock options, either alone or together with stock appreciation
rights, and restricted stock.
Under a stock option agreement, dated as of March 9, 1995, as amended,
Mr. Hernandez was granted options to purchase 512,500 shares of Series A Common
Stock at an exercise price of $10.00 per share. The options have fully vested
and are exercisable with respect to 416,407 shares. On each of December 31,
1998, December 31, 1999 and December 31, 2000, an additional 32,032, 32,032 and
32,029 shares, respectively, will, in each case, become exercisable, so long as
Mr. Hernandez is employed with Telemundo on such date. However, all options that
are not otherwise exercisable will become immediately exercisable upon a "change
of control transaction" (as defined in the amended stock option agreement) if
Mr. Hernandez is still employed with Telemundo on such date. Under a separate
stock option agreement, dated as of September 10, 1997, Mr. Hernandez, was
granted options to purchase an additional 30,000 shares of Series A Common Stock
at an exercise price of $33.75 per share. These options become exercisable in
three equal installments on each of February 28, 1999, February 28, 2000 and
February 28, 2001, in each case, if Mr. Hernandez is employed by Telemundo on
such date. However, all options granted on September 10, 1997 that are not
otherwise exercisable will become immediately exercisable upon the occurrence of
a "change of control transaction" (as defined in the stock option agreement) if
Mr. Hernandez is still employed with Telemundo on such date. The consummation of
the Merger would constitute a "change of control transaction" under both of Mr.
Hernandez's stock
22
<PAGE>
option agreements.
Under two stock option agreements, both dated as of February 27, 1995,
as amended, Mr. Levin was granted options to purchase an aggregate of 50,000
shares of Series A Common Stock. The first stock option agreement granted Mr.
Levin options to purchase 30,000 shares at an exercise price of $10.00 per
share, and the second option agreement granted additional options to purchase
20,000 shares at an exercise price of $13.00 per share. The options have fully
vested and are exercisable with respect to 24,375 and 16,250 shares of the first
and second option grants, respectively. On each of December 31, 1998, December
31, 1999 and December 31, 2000, an additional 1,875 and 1,250 shares from each
of the first and second option grants, respectively, will, in each case, become
exercisable so long as Mr. Levin is employed with Telemundo on such date.
However, all options that are not otherwise exercisable will become exercisable
upon a "change of control transaction" (as defined in the amended stock option
agreement) if Mr. Levin is still employed with Telemundo on such date. Under a
third stock option agreement dated September 10, 1997, Mr. Levin was granted
options to purchase an additional 30,000 shares of Series A Common Stock at an
exercise price of $33.75 per share. These options become exercisable in three
equal installments on each of February 28, 1999, February 28, 2000 and February
28, 2001, in each case, if Mr. Levin is employed by Telemundo on such date.
However, all options granted on September 10, 1997 that are not otherwise
exercisable will become immediately exercisable upon the occurrence of a "change
of control transaction" (as defined in the stock option agreement) if Mr. Levin
is still employed with Telemundo on such date. The consummation of the Merger
would constitute a "change of control transaction" under all of Mr. Levin's
stock option agreements.
Under a stock option agreement, dated as of June 11, 1996, as amended,
Mr. Tringali was granted options to purchase 75,000 shares of Series A Common
Stock at an exercise price of $23.375 per share. The options have fully vested
and are immediately exercisable with respect to 56,250 shares. On each of
December 31, 1998, December 31, 1999 and December 31, 2000, an additional 6,250
shares will, in each case, become exercisable so long as Mr. Tringali is
employed with Telemundo on such date. However, all options that are not
otherwise exercisable will become exercisable upon a "change of control
transaction" (as defined in the amended stock option agreement) if Mr. Tringali
is still employed with Telemundo on such date. Under a separate stock option
agreement dated September 10, 1997, Mr. Tringali was granted options to purchase
an additional 30,000 shares of Series A Common Stock at an exercise price of
$33.75 per share. These options become exercisable in three equal installments
on each of February 28, 1999, February 28, 2000 and February 28, 2001, in each
case, if Mr. Tringali is employed by Telemundo on such date. However, all
options granted on September 10, 1997 that are not otherwise exercisable will
become immediately exercisable upon the occurrence of a "change of control
transaction" (as defined in the stock option agreement) if Mr. Tringali is still
employed with Telemundo on such date. The consummation of the Merger would
constitute a "change of control transaction" under both of Mr. Tringali's stock
option agreements.
Under a stock option agreement, dated as of June 30, 1995, Mr. Cancela was
granted options to purchase 50,000 shares of Series A Common Stock at an
exercise price of $14.625 per share. These options become exercisable in three
equal installments on each of June 30, 1998, June 30, 1999 and June 30, 2000, in
each case, if Mr. Cancela is employed by Telemundo on such date. However, all
options that are not otherwise exercisable will become exercisable upon a
"change of control" (as defined in the 1994 Stock Option Plan) if Mr. Cancela is
still employed with Telemundo on such date.
Under a stock option agreement, dated as of June 30, 1995, as amended,
Mr. Housman was granted options to purchase 50,000 shares of Series A Common
Stock at an exercise price of $14.625 per share. The options have fully vested
and are exercisable with respect to 16,667 shares. On each of June 30, 1999 and
June 30, 2000, options with respect to an additional 16,667 and 16,666 shares,
respectively, will, in each case, become exercisable so long as Mr. Housman is
employed with Telemundo on such date. However, all options that are not
otherwise exercisable will become exercisable upon a "change of control
transaction" (as defined in the amended stock option agreement) if Mr. Housman
is still employed with Telemundo on such date. Under a separate stock option
agreement dated September 10, 1997, Mr. Housman was granted options to purchase
an additional 30,000 shares of Series A Common Stock at an exercise price of
$33.75 per share. These options become exercisable in three equal installments
on each of February 28, 1999, February 28, 2000 and February 28, 2001, in each
case, if Mr. Housman is employed by Telemundo on such date. However, all options
granted on September 10, 1997 that are not otherwise exercisable will become
immediately exercisable upon the
23
<PAGE>
occurrence of a "change of control transaction" (as defined in the stock option
agreement) if Mr. Housman is still employed with Telemundo on such date. The
consummation of the Merger would constitute a "change of control transaction"
under both of Mr. Housman's stock option agreements.
Under certain circumstances, options granted pursuant to certain of the
stock option agreements referred to above that are not otherwise exercisable
will fully vest and become immediately exercisable upon the termination of the
applicable employee's employment with Telemundo.
OTHER COMPENSATION PLANS. The Company has adopted a broad-based
employee benefit plan in which executives are permitted to participate on the
same terms as nonexecutive employees who meet applicable eligibility criteria,
subject to any legal limitations on the amounts that may be contributed or the
benefits that may be payable under the plan. The Company also provides term life
insurance coverage for all employees, including executives. An executive's
coverage is determined based on salary, up to a maximum coverage amount of
$300,000, except where an employment agreement provides for different coverage.
CEO 1997 COMPENSATION. As noted above, Mr. Hernandez's 1997
compensation as President and Chief Executive Officer reflects a contractual
obligation entered into in March 1995 and September 1997. Mr. Hernandez's
employment agreement provides for a base salary plus the opportunity to earn a
bonus based solely on the Company achieving certain performance goals based on
Adjusted EBITDA of the Company. In addition, pursuant to his employment
agreement, Mr. Hernandez was granted options to purchase 512,500 shares of the
Company's Series A Common Stock in 1995 and 30,000 shares of the Company's
Series A Common Stock in 1997, certain of which options become exercisable only
upon the Company achieving certain performance goals. Mr. Hernandez's total
compensation package, therefore, was consistent with the policies discussed
above.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M). Section 162(m) of
the Internal Revenue Code of 1986, as amended, which took effect January 1,
1994, limits the federal income tax deduction that the Company may take for
compensation paid to the corporation's Chief Executive Officer and other four
most highly compensated executive officers to $1 million unless such
compensation is based solely on the attainment of "objective" performance goals
established in advance by a committee of two or more outside directors. The
Compensation and Stock Option Committee in 1997 attempted to structure the
performance-based compensation in a manner that complies with the rules.
SUBMITTED BY:
Barry W. Ridings Bruce H. Spector Edward M. Yorke
THE COMPENSATION AND STOCK OPTION COMMITTEE OF THE BOARD OF DIRECTORS
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee are Messrs. Ridings,
Spector and Yorke. None of the members of the Compensation Committee has ever
served as an officer or employee of Telemundo, nor has any such member served as
a member of a compensation committee or other board of directors' committee
performing similar functions of any other entity in 1997 except that Mr. Spector
served on the Compensation Committee for United International Holdings, Inc.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
At March 26, 1998 there were approximately 100 holders of record of
the Common Stock, which is the only class of capital stock of Telemundo
outstanding and approximately 300 holders of record of warrants. At March 26,
1997 there were 7,180,592 shares of Series A Common Stock, 3,086,498 shares of
Series B Common Stock and 939,329 warrants outstanding.
The following table sets forth, to the knowledge of Telemundo, based upon
information provided by the stockholders set forth below or publicly available
filings, information regarding the ownership of the Common Stock at
24
<PAGE>
March 26, 1998 by (a) all persons known to Telemundo to be the beneficial
owners of more than 5% of Telemundo's Series A Common Stock or Series B Common
Stock outstanding, (b) each director and Named Executive Officer of Telemundo,
and (c) all directors and executive officers of Telemundo as a group. Except as
noted below, to Telemundo's knowledge, each such owner has sole voting and
investment power for the shares indicated as beneficially owned by them.
<TABLE>
NAME OF BENEFICIAL OWNER SERIES A COMMON STOCK SERIES B COMMON STOCK TOTAL COMMON STOCK
- ------------------------ ----------------------------------- ------------------------- ----------------------
AMOUNT & NATURE OF PERCENTAGE AMOUNT & PERCENTAGE AMOUNT & PERCENTAGE
BENEFICIAL OWNERSHIP OF CLASS(1) NATURE OF OF CLASS NATURE OF OF TOTAL(1)
-------------------- ----------- BENEFICIAL -------- BENEFICIAL -----------
OWNERSHIP OWNERSHIP
--------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
5% OR GREATER STOCKHOLDERS
Bastion Capital Fund, L.P. 964,997 13.4% 882,688 28.6% 1,847,685(2)(3) 18.0%
Suite 2960
1999 Avenue of the Stars
Los Angeles, CA 90067
TLMD Partners, II, L.L.C. 41,776(4) * 1,550,465 50.2% 1,592,241(3)(4) 15.4%
c/o Apollo Management, L.P.
1301 Avenue of the Americas
38th Floor
New York, NY 10019
Hernandez Partners 49,998(5) * 450,001 14.6% 499,999(3)(5) 4.9%
900 S. Garfield Avenue
Alhambra, CA 91801
Reliance Group Holdings, Inc. 416,705(6) 5.5% -- -- 416,705(6) 3.9%
55 East 52nd Street
New York, NY 10055
Canyon Capital Management LP 432,375 6.0% -- -- 432,375 4.2%
9665 Wilshire Boulevard
Suite 200
Beverly Hills, CA 90212
Morgan Stanley, Dean Witter,
Discover & Co. 400,900 5.6% -- -- 400,900 3.9%
1585 Broadway
New York, NY 10036
DIRECTORS AND NOMINEES FOR DIRECTOR
Leon D. Black 3,766(7) * 200,000 6.5% 203,766(3)(7) 2.0%
Guillermo Bron 965,830(7) 13.4% 882,688 28.6% 1,848,518(2)(3)(7) 18.0%
Alan Kolod 1,333(7) * -- -- 1,333(7) *
Barry W. Ridings 833(7) * -- -- 833(7) *
Bruce H. Spector 833(7) * -- -- 833(7) *
Daniel D. Villanueva 965,830(7) 13.4% 882,688 28.6% 1,848,518(2)(3)(7) 18.0%
Edward M. Yorke 833(7) * -- -- 833(7) *
David E. Yurkerwich 1,833(7)(8) * -- -- 1,833(7)(8) *
NAMED EXECUTIVE OFFICERS
Roland A. Hernandez(9) 466,405(5)(10) 6.1% 450,001 14.6% 916,406(5)(10) 8.6%
Stephen J. Levin 40,625(10) * -- -- 40,625(10) *
Donald J. Tringali 57,750(10) * -- -- 57,750(10) *
Jose C. Cancela --(10) -- -- -- -- (10) --
Peter J. Housman II 16,667(10) * -- -- 16,667(10) *
ALL DIRECTORS AND EXECUTIVE OFFICERS
AS A GROUP 1,565,874 20.3% 1,532,689 49.6% 3,098,563 28.7%
</TABLE>
* Less than 1%
(1) All percentages assume that the options or warrants of the particular
person or group in question, and of no other person or group, have been
exercised to the extent such options or warrants are exercisable as of
March 26, 1997 or within 60 days thereafter.
(2) 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 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. Messrs. Bron and Villanueva
have shared voting power as to 1,847,685 shares of Common Stock.
(3) TLMD II, Bastion, Hernandez Partners and Mr. Black (collectively, the
"Major Stockholders"), collectively own 1,017,930 shares of Series A
Common Stock, constituting 14.2% of the Series A Common Stock outstanding
(excluding shares subject to warrants and
25
<PAGE>
options described in footnotes 4 and 7, respectively), and 3,083,154 shares
of Series B Common Stock, constituting 99.9% of the Series B Common Stock
outstanding. In total, the Major Stockholders own 4,101,084 shares,
constituting 39.9% of the Common Stock outstanding.
The Major Stockholders have entered into a shareholders agreement dated as
of December 20, 1994, as amended (the "Shareholders Agreement") pursuant
to which each of them has agreed, among other things, to use its reasonable
best efforts to cause Mr. Black (or his nominee), two nominees of TLMD II,
a nominee of Bastion and a nominee of Hernandez Partners to be elected to
the Board of Directors of Telemundo. Pursuant to the Shareholders
Agreement, the Major Stockholders have agreed that all of the shares owned
by each of them will be voted by a voting committee comprised of three
members. Each Major Stockholder disclaims beneficial ownership of any
shares of Common Stock which it does not directly own.
(4) Includes creditors' warrants expiring December 30, 1999 representing the
immediate right to purchase 41,774 shares of Series A Common Stock.
Creditors' warrants to purchase 29,242 shares of Series A Common Stock are
beneficially owned by Lion Advisors for the benefit of an investment
account under management over which Lion Advisors has exclusive voting,
dispositive and investment power. The remaining creditors' warrants to
purchase 12,532 shares of Series A Common Stock are owned by AIF II. AIF II
is the manager of TLMD II and has sole dispositive power with respect to
the securities held by TLMD II. TLMD II, Mr. Black, Mr. Spector and Mr.
Yorke disclaim beneficial ownership of all securities not held directly by
any of them.
(5) The general partners of Hernandez Partners are Roland A. Hernandez and, his
brother, Enrique Hernandez, Jr. Each of the general partners of Hernandez
Partners has voting and dispositive power with respect to the shares held
by Hernandez Partners, except as described in footnote (3) above. Amounts
for Mr. Hernandez include options representing the immediate right to
purchase 416,407 shares of Series A Common Stock.
(6) Includes creditors' warrants to purchase 32 shares of Series A Common Stock
owned by Reliance and warrants to purchase six shares of Series A Common
Stock owned by Reliance Group Holdings, Inc., both at an exercise price of
$7.00 per share, which creditors' warrants are immediately exercisable
until December 30, 1999. Also includes Reliance warrants beneficially owned
by Reliance to purchase 416,667 shares of Series A Common Stock at an
exercise price of $7.19 per share, which Reliance warrants are immediately
exercisable and one-third of which expire on each of December 30, 2000,
2001 and 2002.
(7) Includes an option to purchase 833 shares of Series A Common Stock at
$24.75 per share which is currently exercisable.
(8) Mr. Yurkerwich has shared voting power with his wife Victoria
Yurkerwich as to 1,000 shares of Series A Common Stock.
(9) Mr. Hernandez is also a director of Telemundo.
(10) Messrs. Hernandez, Levin, Tringali, Cancela and Housman are named in the
"Summary Compensation Table" under the section captioned "Executive
Compensation." Messrs. Hernandez, Levin, Tringali, Cancela and Housman are
presently executive officers of Telemundo. Shares held include options
representing the immediate right to purchase the following shares of Series
A Common Stock: Messrs. Hernandez--416,407, Levin--40,625,
Tringali--56,250, Cancela--0 and Housman--16,667.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Major Stockholders have entered into a Shareholders Agreement
relating to the transfer and voting of shares of Common Stock owned by each of
the Major Stockholders. See "Security Ownership of Certain Beneficial Owners and
Management" above.
Interspan owns and operates television station KFWD, Channel 52, the
Company's Dallas/Fort Worth network affiliate. Roland A. Hernandez, the
Company's President and Chief Executive Officer and a director, is a director
and
26
<PAGE>
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 $1,433,000 in network
compensation during 1997 and paid the Company approximately $233,000 for the
Company's services as the exclusive national sales representative for KFWD.
Management believes that these transactions were on terms no less favorable to
the Company than could be obtained from unaffiliated parties.
On December 30, 1994, in connection with the consummation of the
Company's second amended plan of reorganization, the Company, Apollo Advisors,
L.P. ("Advisors") and Reliance entered into a registration rights agreement
pursuant to which the Company agreed to register Common Stock held by Advisors
and Reliance and certain of their respective affiliates and transferees
("Holders") under the Securities Act of 1933, as amended (the "Securities Act").
Under the Registration Rights Agreement, the Company is obligated, subject to
certain terms and conditions and upon demand by the 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. A demand for registration under the agreement must be made by a
Holder within five years of the date of the agreement in the case of (a) Common
Stock acquired other than through the exercise of warrants and (b) the Company's
10.25% Senior Notes due December 30, 2001, and within the later of five years
from the date of the agreement and two years after the exercise of warrants in
the case of Common Stock acquired through the exercise of warrants. During the
term of the Registration Rights Agreement, Telemundo is not required to effect
(i) more than one registration of the 10.25% Senior Notes due December 30, 2001
held by Advisors and its affiliates, (ii) more than two registrations of the
Common Stock held by Advisors and its affiliates and (iii) more than two
registrations of Common Stock held by Reliance and its affiliates. In addition,
so long as any of the registrable securities are outstanding, if the Company
proposes to register any of its securities under the Securities Act, whether or
not for its own account, the Holders have the right to request the Company to
include the Holders' registrable securities in such registration, subject to
certain terms and conditions. See Item 3 "Legal Proceedings" above.
On November 24, 1997, the Company, Purchaser and Sub entered into the
Merger Agreement which provides that Sub will be merged with and into the
Company with the Company surviving the merger as a wholly-owned subsidiary of
Purchaser. See Items 1c "Recent Developments" above.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements.
The Consolidated Financial Statements of Telemundo Group, Inc. and
Subsidiaries, including the independent auditor's report thereon, which appear
on pages 8 through 25 of the Telemundo Group, Inc. 1997 Annual Report to
Stockholders, are incorporated herein by reference.
1997 ANNUAL
REPORT PAGE NO.
---------------
TELEMUNDO GROUP, INC. AND SUBSIDIARIES:
Consolidated Statements of Operations...................................... 8
Consolidated Balance Sheets................................................ 9
Consolidated Statements of Changes in Common Stockholders' Equity.......... 10
Consolidated Statements of Cash Flows...................................... 11
Notes to Consolidated Financial Statements (1-14).......................... 12
Independent Auditors' Report............................................... 25
2. Financial Statement Schedule.
II. Valuation and Qualifying Accounts
27
<PAGE>
All other schedules have been omitted because they are inapplicable, not
required, or the information is included elsewhere in the consolidated financial
statements or notes thereto.
3. Exhibits.
EXHIBIT INDEX
EXHIBIT
NUMBER
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.
2.5 Merger Agreement dated as of November 24, 1997 by and among TLMD
Station Group, Inc., TLMD Acquisition Co. and the Company, filed
as Exhibit 1 to the Company's Current Report on Form 8-K dated
November 26, 1997 and incorporated herein by reference.
3.1 The Company's Restated Certificate of Incorporation, filed as
Exhibit 4.1 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.
3.2 The Company's Restated Bylaws, filed as Exhibit 3.2 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1994 ("1994 10-K") and incorporated herein by reference.
4.1 Warrant Agreement dated as of December 30, 1994 between the
Company and Shawmut Bank Connecticut, National Association, filed
as Exhibit 4.3 to the Company's Current Report on Form 8-K dated
December 30, 1994 and incorporated herein by reference.
4.2 Warrant Agreement dated as of December 30, 1994 between the
Company and Reliance Insurance Company, filed as Exhibit 4.4 to
the Company's Current Report on Form 8-K dated December 30, 1994
and incorporated herein by reference.
4.3 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 Company's Current Report on
Form 8-K dated December 30, 1994 and incorporated herein by
reference.
4.4 First Supplemental Indenture dated as of December 12, 1995 between
the Company and Bankers Trust Company, as trustee, with respect to
the 10.25% Senior Notes Due December 30, 2001, filed as an exhibit
in Registration Statement No. 33-64599 of the Company under the
Securities Act of 1933, as amended, filed November 27, 1995 and
incorporated herein by reference.
<PAGE>
4.5 Indenture dated as of February 26, 1996 between the Company and
Bank of Montreal Trust Company, as trustee, with respect to the
10.5% Senior Notes Due 2006, filed as Exhibit 1 to the Company's
Current Report on Form 8-K dated February 26, 1996 and
incorporated herein by reference.
10.1 Amended and Restated Loan and Security Agreement dated as of
December 31, 1996 between the Company and Foothill Capital
Corporation.
10.2 Asset Purchase Agreement dated as of June 26, 1996, by and among
Telenoticias del Mundo, L.P., Telemundo Group, Inc. and CBS Inc.,
filed as Exhibit 2(a) to the Company's Current Report on Form 8-K
dated June 26, 1996 and incorporated herein by reference.
10.3 Agreement 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.
10.4 Amended and Restated Partnership Agreement, dated February 26,
1996, by and among Essaness Theatres Corporation, Telemundo of
Chicago, Inc. and Harriscope of Chicago, Inc., a form of which was
filed as Exhibit 10.2 to the Form 10-Q/A filed November 27, 1995
and incorporated herein by reference.
10.5 Employment Agreement dated as of March 9, 1995 between the Company
and Roland A. Hernandez, filed as Exhibit 10.1 to the Company's
Form 10-Q for the quarter ended March 31, 1995 (the "March 31,
1995 10-Q") and incorporated herein by reference.*
10.6 Nonqualified Stock Option Agreement dated as of March 9, 1995
between the Company and Roland A. Hernandez, filed as Exhibit 10.2
to the March 31, 1995 10-Q and incorporated herein by reference.*
10.7 Employment Agreement dated as of February 27, 1995 between the
Company and Stuart Livingston, filed as Exhibit 10.18 to the
Company's Annual Report on Form 10-K dated December 31, 1995 and
incorporated herein by reference.*
10.8 Employment Agreement dated as of February 27, 1995 between the
Company and Stephen J. Levin and Amendment to Employment Agreement
dated May 30, 1995, filed as Exhibit 10.19 to the Company's Annual
Report on Form 10-K dated December 31, 1995 and incorporated
herein by reference.*
10.9 Nonqualified Stock Option Agreement dated as of March 9, 1995
between the Company and Stuart Livingston, filed as Exhibit 10.20
to the Company's Annual Report on Form 10-K dated December 31,
1995 and incorporated herein by reference.*
10.10 Nonqualified Stock Option Agreements dated as of March 9, 1995
and May 30, 1995 between the Company and Stephen J. Levin, filed
as Exhibit 10.21 to the Company's Annual Report on Form 10-K dated
December 31, 1995 and incorporated herein by reference.*
10.11 Nonqualified Stock Option Agreement dated as of June 30, 1995
between the Company and Jose C. Cancela, filed as Exhibit 10.1 to
the Company's Form 10-Q for the quarter ended June 30, 1995 (the
"June 30, 1995 10-Q") and incorporated herein by reference.*
10.12 Nonqualified Stock Option Agreement dated as of June 30, 1995
between the Company and Peter J. Housman II, filed as Exhibit 10.2
to the June 30, 1995 10-Q and incorporated herein by reference.*
10.13 The Company's 1994 Stock Plan filed as Exhibit 10.1 to the
Company's Annual Report on Form 10-K dated December 31, 1994 and
incorporated herein by reference.*
- ----------
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit pursuant to Item 14(c) of this form.
<PAGE>
10.14 Employment Agreement dated as of June 11, 1996 between the Company
and Donald J. Tringali, filed as Exhibit 10.1 to the September 30,
1996 10-Q and incorporated herein by reference.*
10.15 Nonqualified Stock Option Agreement dated as of June 11, 1996
between the Company and Donald J. Tringali, filed as Exhibit 10.1
to the September 30, 1996 10-Q and incorporated herein by
reference.*
10.16 Employment Agreement dated as of February 28, 1996 between the
Company and Stuart Livingston, filed as Exhibit 10.28 to the
Company's Annual Report on Form 10-K dated December 31, 1996 and
incorporated herein by reference.*
10.17 Nonqualified Stock Option Agreement dated as of November 15, 1996
between the Company and Stuart Livingston, filed as Exhibit 10.29
to the Company's Annual Report on Form 10-K dated December 31,
1996 and incorporated herein by reference.*
10.18 Employment Agreement dated as of March 7, 1997 between the Company
and Jose C. Cancela filed as Exhibit 10.30 to the December 31,
1996 10-K and incorporated by reference.*
10.19 Employment Agreement dated as of March 7, 1997 between the Company
and Peter J. Housman II filed as Exhibit 10.31 to the December 31,
1996 10-K and incorporated herein by reference.*
10.20 Amended and Restated Employment Agreement dated as of September
10, 1997 between the Company and Roland A. Hernandez.*
10.21 Amended and Restated Nonqualified Stock Option Agreement dated
as of September 10, 1997 between the Company and Roland A.
Hernandez.*
10.22 Nonqualified Stock Option Agreement dated as of September 10, 1997
between the Company and Roland A. Hernandez.*
10.23 Amended and Restated Employment Agreement dated as of September
10, 1997 between the Company and Donald J. Tringali.*
10.24 Amended and Restated Nonqualified Stock Option Agreement dated as
of September 10, 1997 between the Company and Donald J. Tringali.*
10.25 Nonqualified Stock Option Agreement dated as of September 10, 1997
between the Company and Donald J. Tringali.*
10.26 Amended and Restated Employment Agreement dated as of September
10, 1997 between the Company and Peter J. Housman II.*
10.27 Amended and Restated Nonqualified Stock Option Agreement dated
as of September 10, 1997 between the Company and Peter J. Housman
II.*
10.28 Nonqualified Stock Option Agreement dated as of September 10, 1997
between the Company and Peter J. Housman II.*
10.29 Amended and Restated Employment Agreement dated as of September
10, 1997 between the Company and Stephen J. Levin.*
10.30 Amended and Restated Nonqualified Stock Option Agreement dated as
of September 10, 1997 between the Company and Stephen J. Levin.*
- ----------
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit pursuant to Item 14(c) of this form.
<PAGE>
10.31 Nonqualified Stock Option Agreement dated as of September 10, 1997
between the Company and Stephen J. Levin.*
10.32 Employment Agreement dated as of September 10, 1997 between the
Company and Osvaldo F. Torres.*
10.33 Nonqualified Stock Option Agreement dated as of June 12, 1997
between the Company and Osvaldo F. Torres.*
10.34 Nonqualified Stock Option Agreement dated as of September 10, 1997
between the Company and Osvaldo F. Torres.*
10.35 Form of Nonqualified Stock Option Agreement for Certain Key
Employees.*
10.36 Form of Severance Agreement for Certain Key Employees.*
10.37 1996 Non-Employee Directors' Stock Option Plan.
10.38 Management Incentive Compensation Plan.*
10.39 Network Affiliation and Representation Agreement dated as of
August 31, 1993 by and between Telemundo Group, Inc. and Interspan
Communications.
10.40 Modification Agreement dated as of September 10, 1997 between
Telemundo Group, Inc. and Interspan Communications.
13.1 Portions of Telemundo Group, Inc. 1997 Annual Report to
Stockholders.
24.1 Power of Attorney (included on signature page of this Annual
Report on Form 10-K).
27.1 Financial Data Schedule.
(b) Reports on Form 8-K.
A report on Form 8-K was filed on November 26, 1997.
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit pursuant to Item 14(c) of this form.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Hialeah, Florida, on the 30th day of March, 1998.
TELEMUNDO GROUP, INC.
(Registrant)
By /S/ROLAND A. HERNANDEZ
-----------------------
Roland A. Hernandez
President and Chief
Executive Officer
The undersigned directors and officers of Telemundo Group, Inc. hereby
constitute and appoint Peter J. Housman II and Roland A. Hernandez, and each of
them, with full power to act without the other and with full power of
substitution and resubstitution, our true and lawful attorneys-in-fact with full
power to execute in our name and behalf in the capacities indicated below this
Annual Report on Form 10-K and any and all amendments thereto and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission and hereby ratify and confirm all
that such attorneys-in-fact, or any of them, or their substitutes shall lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed by the following persons in the capacities indicated
on March 30, 1998.
<TABLE>
SIGNATURE TITLE
<S> <C>
Chairman of the Board and Director
----------------------------------------------------
Leon D. Black
/S/ ROLAND A. HERNANDEZ President, Principal Executive Officer and
---------------------------------------------------- Director
Roland A. Hernandez
/S/ PETER J. HOUSMAN II Principal Financial Officer
----------------------------------------------------
Peter J. Housman II
/S/ VINCENT L. SADUSKY Principal Accounting Officer
----------------------------------------------------
Vincent L. Sadusky
/S/ GUILLERMO BRON Director
----------------------------------------------------
Guillermo Bron
/S/ ALAN KOLOD Director
----------------------------------------------------
Alan Kolod
Director
----------------------------------------------------
Barry W. Ridings
/S/ BRUCE H. SPECTOR Director
----------------------------------------------------
Bruce H. Spector
</TABLE>
<PAGE>
/S/ EDWARD M. YORKE Director
-----------------------------------------------------
Edward M. Yorke
/S/ DAVID E. YURKERWICH Director
-----------------------------------------------------
David E. Yurkerwich
/S/ DANIEL D. VILLANUEVA Director
------------------------------------------------------
Daniel D. Villanueva
<PAGE>
<TABLE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS OF DOLLARS)
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ----------------------------- ------------- ------------------------------------ ------------- -------------
ADDITIONS
------------------------------------
BALANCE AT CHARGED TO OTHER DEDUCTED
BEGINNING OF CHARGED TO PROFIT AND ACCOUNTS FROM RESERVES -BALANCE AT
DESCRIPTION PERIOD AND LOSS OR INCOME - DESCRIBE -DESCRIBE (a) END OF PERIOD
- ---------------------------- ------ ------------------ ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1997:
Allowance for doubtful accounts...........$5,943 $3,479 $ - $1,839 $7,583
====== ====== === ====== ======
Year Ended December 31, 1996:
Allowance for doubtful accounts..........$2,650 $5,522 $ - $2,229 $5,943
====== ====== === ====== ======
Year Ended December 31, 1995:
Allowance for doubtful accounts.........$2,845 $2,020 $ - $2,215 $2,650
====== ====== === ====== ======
Year Ended December 31, 1997:
Reserve for TV Program
Exhibition Rights...................$ 612 $1,152 $ - $ 386 $1,378
====== ====== ==== ===== ======
Year Ended December 31, 1996:
Reserve for TV Program
Exhibition Rights...................$1,251 $ 295 $ - $ 934 $ 612
====== ====== ==== ===== ======
Year Ended December 31, 1995:
Reserve for TV Program
Exhibition Rights...................$1,249 $ 835 $ - $ 833 $1,251
====== ===== === ===== ======
</TABLE>
- -----------
(a) Amounts written off, net of recoveries
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
10.1 Amended and Restated Loan and Security Agreement dated as of December
31, 1996 between the Company and Foothill Capital Corporation.
10.20 Amended and Restated Agreement dated as of September 10, 1997 between
the Company and Roland A. Hernandez.
10.21 Amended and Restated Nonqualified Stock Option Agreement dated as of
September 10, 1997 between the Company and Roland A. Hernandez.
10.22 Nonqualified Stock Option Agreement dated as of September 10, 1997
between the Company and Roland A. Hernandez.
10.23 Amended and Restated Employment Agreement dated as of September 10,
1997 between the Company and Donald J. Tringali.
10.24 Amended and Restated Nonqualified Stock Option Agreement dated as of
September 10, 1997 between the Company and Donald J. Tringali.
10.25 Nonqualified Stock Option Agreement dated as of September 10, 1997
between the Company and Donald J. Tringali.
10.26 Amended and Restated Employment Agreement Employment Agreement dated as
of September 10, 1997 between the Company and Peter J. Housman II.
10.27 Amended and Restated Nonqualified Stock Option Agreement dated as of
September 10, 1997 between the Company and Peter J. Housman II.
10.28 Nonqualified Stock Option Agreement dated as of September 10, 1997
between the Company and Peter J. Housman II.
10.29 Amended and Restated Employment Agreement dated as of September 10,
1997 between the Company and Stephen J. Levin.
10.30 Amended and Restated Nonqualified Stock Option Agreement dated as of
September 10, 1997 between the Company and Stephen J. Levin.
10.31 Nonqualified Stock Option Agreement dated as of September 10, 1997
between the Company and Stephen J. Levin.
10.32 Employment Agreement dated as of September 10, 1997 between the Company
and Osvaldo F. Torres.
10.33 Nonqualified Stock Option Agreement dated as of June 12, 1997 between
the Company and Osvaldo F. Torres.
10.34 Nonqualified Stock Option Agreement dated as of September 10, 1997
between the Company and Osvaldo F. Torres.
10.35 Form of Nonqualified Stock Option Agreement for Certain Key Employees.
10.36 Form of Severance Agreement for Certain Key Employees.
10.37 1996 Non-Employee Directors' Stock Option Plan.
10.38 Management Incentive Compensation Plan.
10.39 Network Affiliation and Representative Agreement dated as of August 31,
1993 by and between Telemundo Group, Inc. and Interspan Communciations.
10.40 Modification Agreement dated as of September 10, 1997 between Telemundo
Group, Inc. and Interspan Communications.
13.1 Portions of Telemundo Group, Inc. 1997 Annual Report to Stockholders.
27.1 Financial Data Schedule.
EXHIBIT 10.1
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT, is entered into
as of December 31, 1996, between FOOTHILL CAPITAL CORPORATION, a California
corporation ("Foothill"), with a place of business located at 11111 Santa Monica
Boulevard, Suite 1500, Los Angeles, California 90025-3333, on the one hand, and,
on the other hand, TELEMUNDO GROUP, INC., a Delaware corporation ("Group"), with
its chief executive office located at 2290 West 8th Avenue, Hialeah, Florida
33010, ESTRELLA COMMUNICATIONS, INC., a Delaware corporation ("Estrella"), with
its chief executive office located at 2290 West 8th Avenue, Hialeah, Florida
33010, ESTRELLA LICENSE CORPORATION, a Delaware corporation
("Estrella/License"), with its chief executive office located at 2290 West 8th
Avenue, Hialeah, Florida 33010, NEW JERSEY TELEVISION BROADCASTING CORPORATION,
a New York corporation ("New Jersey"), with its chief executive office located
at 2290 West 8th Avenue, Hialeah, Florida 33010 TELEMUNDO NETWORK, INC., a
Delaware corporation ("Network"), with its chief executive office located at
2290 West 8th Avenue, Hialeah, Florida 33010, TELEMUNDO OF AUSTIN, INC., a
Delaware corporation ("Tel/Aus"), with its chief executive office located at
2290 West 8th Avenue, Hialeah, Florida 33010, TELEMUNDO OF FLORIDA, INC., a
Delaware corporation ("Tel/FL"), with its chief executive office located at 2290
West 8th Avenue, Hialeah, Florida 33010, TELEMUNDO OF FLORIDA LICENSE
CORPORATION, a Delaware corporation ("FL/License"), with its chief executive
office located at 2290 West 8th Avenue, Hialeah, Florida 33010, TELEMUNDO OF
GALVESTON-HOUSTON, INC., a Delaware corporation ("Tel/Hou"), with its chief
executive office located at 2290 West 8th Avenue, Hialeah, Florida 33010,
TELEMUNDO OF GALVESTON-HOUSTON LICENSE CORPORATION, a Delaware corporation
("Hou/License"), with its chief executive office located at 2290 West 8th
Avenue, Hialeah, Florida 33010, TELEMUNDO OF MEXICO, INC., a Delaware
corporation ("Tel/Mex"), with its chief executive office located at 900 Market
Street, Suite 200, Wilmington, Delaware 19801, TELEMUNDO OF NORTHERN CALIFORNIA,
INC., a California corporation ("Tel/NorCal"), with its chief executive office
located at 2290 West 8th Avenue, Hialeah, Florida 33010, TELEMUNDO OF NORTHERN
CALIFORNIA LICENSE CORPORATION, a Delaware corporation ("NorCal/License"), with
its chief executive office located at 2290 West 8th Avenue, Hialeah, Florida
33010, TELEMUNDO OF SAN ANTONIO, INC., a Texas corporation ("Tel/SanAn"), with
its chief executive office located at 2290 West 8th Avenue, Hialeah, Florida
33010, TELEMUNDO OF SAN ANTONIO LICENSE CORPORATION, a Delaware corporation
("SanAn/License"), with its chief executive office located at 2290 West 8th
Avenue, Hialeah, Florida 33010, TELEMUNDO OF SANTA FE, INC., a Delaware
corporation ("Tel/SanFe"), with its chief executive office located at 2290 West
8th Avenue, Hialeah, Florida 33010, TU MUNDO MUSIC, INC., a Delaware corporation
("Tu Mundo"), with its chief executive office located at 2290 West 8th
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Avenue, Hialeah, Florida 33010, SACC ACQUISITION CORPORATION, a Delaware
corporation ("SACC/Acq"), with its chief executive office located at 2290 West
8th Avenue, Hialeah, Florida 33010, SAT CORPORATION, a Delaware corporation
("SAT"), with its chief executive office located at 2290 West 8th Avenue,
Hialeah, Florida 33010, SPANISH AMERICAN COMMUNICATIONS CORPORATION, a Delaware
corporation ("SACC"), with its chief executive office located at 2290 West 8th
Avenue, Hialeah, Florida 33010, WNJU-TV BROADCASTING CORPORATION, a New Jersey
corporation ("WNJU"), with its chief executive office located at 2290 West 8th
Avenue, Hialeah, Florida 33010, and WNJU LICENSE CORPORATION, a Delaware
corporation ("WNJU/License"), with its chief executive office located at 2290
West 8th Avenue, Hialeah, Florida 33010.
WHEREAS, Foothill and Borrower are parties to that certain Loan and
Security Agreement, entered into as of December 31, 1994 (the "Existing Loan
Agreement");
WHEREAS, Borrower has certain outstanding obligations consisting of
Advances, L/Cs, or L/C Guarantees (the "Existing Loans") that are owed to
Foothill under the Existing Loan Agreement and the related real and personal
property collateral security documents (the "Existing Loan Documents");
WHEREAS, Foothill and Borrower desire to amend and restate the Existing
Loan Agreement and to reaffirm their obligations under the Existing Loan
Documents, but preserving the continuity and outstanding nature of such
obligations, it being understood that no repayment of the Existing Loans is
being effected hereby, but merely an amendment and restatement in accordance
with the terms hereof;
NOW, the parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1 Definitions. As used in this Agreement, the following
terms shall have the following definitions:
"ACCOUNT DEBTOR" means any Person who is or who may become
obligated under, with respect to, or on account of an Account.
"ACCOUNTS" means all currently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to a Debtor
arising out of the sale or lease of goods or the rendition of services by such
Debtor, irrespective of whether earned by performance, and any and all credit
insurance, guaranties, or security therefor.
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"ADVERTISING AGENCY ACCOUNT DEBTOR" means any Account Debtor
that is an advertising agency.
"AFFILIATE" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person, PROVIDED, HOWEVER, that Puerto Rico, PR/License, and Studios shall
not be deemed to be an Affiliate of any Borrower, Debtor, or of group sub for
the purposes hereof. For purposes of this definition, "control" as applied to
any Person means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of that Person, whether
through the ownership of voting securities, by contract, or otherwise.
"AGREEMENT" means this Amended and Restated Loan and Security
Agreement and any extensions, riders, supplements, joinders, notes, amendments,
or modifications to or in connection with this Amended and Restated Loan and
Security Agreement.
"AIF" means Apollo Investment Fund, L.P., a Delaware limited
partnership.
"AIF II" means Apollo Investment Fund II, L.P., a Delaware
limited partnership.
"ALLOWED" means, with respect to claims and interests, (a) any
claim against or interest in Group, proof of which was timely filed or by order
of the Bankruptcy Court was not required to be filed, or (b) any claim or
interest that was listed in the schedules of liabilities filed by Group as
liquidated in amount and not disputed or contingent and, in each such case in
(a) and (b) above, as to which either (i) no objection to the allowance thereof
was interposed within the applicable period of time fixed by the Plan, the
Bankruptcy Code, the Bankruptcy Rules, or the Bankruptcy Court, or (ii) such an
objection was so interposed and the claim or interest has been allowed by a
Final Order (but only to the extent so allowed).
"APOLLO" means, collectively, AIF, AIF II, Lion, Apollo
Advisors, L.P., or any investment fund, investment account, or other entity
whose investing manager, investment advisor, or general partner, or any
principal thereof, is Apollo Advisors, L.P., AIF, AIF II, Lion, or any principal
or Affiliate of any of them; PROVIDED, HOWEVER, that no Person shall be deemed
to be within the definition of Apollo when the Person ceases to be an Affiliate
of AIF, AIF II, Apollo Advisors, L.P. or Lion, or an investment fund, investment
account, or other entity whose investing manager, investment advisor, or general
partner, or any principal thereof, is AIF, AIF II, Apollo Advisors, L.P. or
Lion, or any principal or Affiliate of any of them.
"AUTHORIZED OFFICER" means any officer of Borrower.
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"AVERAGE UNUSED PORTION OF MAXIMUM AMOUNT" means (a) the
Maximum Amount; LESS (b) the sum of: (i) the average Daily Balance of advances
made by Foothill under SECTION 2.1 that were outstanding during the immediately
preceding month, PLUS (ii) the average Daily Balance of the undrawn L/Cs and L/C
Guarantees issued by Foothill under SECTION 2.2 that were outstanding during the
immediately preceding month.
"BANKRUPTCY CODE" means the United States Bankruptcy Code (11
U.S.C./section/ 101 ET SEQ.), as amended, and any successor statute.
"BANKRUPTCY COURT" means the United State Bankruptcy Court for
the Southern District of New York.
"BANKRUPTCY RULES" means the Federal Rules of Bankruptcy
Procedure, as amended from time to time.
"BENEFIT PLAN" means an employee benefit plan (as defined in
Section 3(3) of ERISA) which Borrower or any ERISA Affiliate sponsors or
maintains or to which Borrower or any ERISA Affiliate makes, is making, or is
obligated to make contributions, including any Multiemployer Plan or Qualified
Plan.
"BLAIR SETTLEMENT AGREEMENT" means that settlement agreement
by and between, INTER ALIA, the Blair Entities, Group, Reliance Capital Group,
L.P., Reliance Associates, L.P., Reliance Capital Group, Inc., Reliance Group
Holdings, Inc., Deloitte & Touche, Mr. Henry R. Silverman, Mr. Donald G. Raider,
Mr. Peter J. Housman II, and the Creditors' Committee, a copy of which is
attached to the Plan as Exhibit P-1 thereto.
"BLAIR ENTITIES" means any one or more of John Blair
Communications, Inc., John Blair & Company, Inc., Blair Entertainment
Corporation, and JHR Acquisition Corp.
"BORROWER" means Group, Estrella, Estrella/License, New
Jersey, Network, Tel/Aus, Tel/FL, FL/License, Tel/Hou, Hou/License, Tel/Mex,
Tel/NorCal, NorCal/License, Tel/SanAn, SanAn/License, Tel/SanFe, Tu Mundo,
SACC/Acq, SAT, SACC, WNJU, and WNJU/License, individually and collectively, and
jointly and severally.
"BORROWER'S BOOKS" means all of each Debtor's books and
records including: ledgers; records indicating, summarizing, or evidencing such
Debtor's properties or assets (including the Collateral or the Real Property) or
liabilities; all information relating to such Debtor's business operations or
financial condition; and all computer programs, disc or tape files, printouts,
runs, or other computer prepared information.
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"BORROWING BASE" has the meaning set forth in SECTION 2.1.
"BROADCAST SYSTEM" means all of the properties and operating
rights constituting a complete, fully integrated system for transmitting full
power televisions signals from a transmitter licensed by the FCC, together with
any sub-system which is ancillary to any such system.
"BUSINESS DAY" means any day which is not a Saturday, Sunday,
or other day on which national banks are authorized or required to close.
"CASH EQUIVALENTS" means and refers to: (a) marketable direct
obligations issued or unconditionally guaranteed by the United States or issued
by any agency thereof and backed by the full faith and credit of the United
States, in each case maturing within one (1) year from the date of acquisition
thereof; (b) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any public
instrumentality thereof maturing within one (1) year from the date of
acquisition thereof and, at the time of acquisition, having the highest rating
obtainable from either S&P or Moody's; (c) commercial paper maturing no more
than one (1) year from the date of acquisition thereof and, at the time of
acquisition, having a rating of A-1 or P-1, or better, from S&P or Moody's; (d)
certificates of deposit or bankers' acceptances maturing within one (1) year
from the date of acquisition thereof either (i) issued by any bank organized
under the laws of the United States or any state thereof or the District of
Columbia which bank has a rating of A or A2, or better, from S&P or Moody's, or
(ii) certificates of deposit less than or equal to One Hundred Thousand Dollars
($100,000) in the aggregate issued by any other bank insured by the Federal
Deposit Insurance Corporation.
"CHANGE OF CONTROL" means an event or series of events by
which (i) any "Person" or "group" (as such terms are used in Section 13(d) and
14(d) of the Exchange Act) becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly of indirectly, of more than 50% of the
aggregate voting power of all the capital stock of Group normally entitled to
vote in the election of directors, or (ii) during any period of two consecutive
calendar years, individuals who at the beginning of such period constituted the
board of directors of Group (together with any new directors whose election by
the board of directors of Group or whose nomination for election by Group's
stockholders was approved by a vote of at least a majority of the directors then
still in office who either were directors at the beginning of such period or
whose election or nomination was previously so approved) cease for any reason to
constitute a majority of the directors then in office, unless either the
nomination or election of such new directors that would otherwise cause a Change
of Control under clause (ii) above was approved by a vote of at least a majority
of the directors then still in office who were either directors at the beginning
of such period or whose nomination or
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election was previously so approved; PROVIDED, HOWEVER, that it shall not
constitute a Change of Control for purposes of this Agreement if, in the case of
clause (i) above, Apollo or TLMD or Reliance (collectively, the "Reliance
Parties") become the beneficial owners, directly or indirectly, of more than 50%
of the aggregate voting power of all the capital stock of Group entitled to vote
in the election of directors or, in the case of clause (ii) above, such Change
of Control would be caused by the designation of directors by Apollo, TLMD, or
the Reliance Parties. Anything set forth above in this definition to the
contrary notwithstanding, a "Change of Control" shall not be deemed to have
occurred for purposes of this Agreement upon the happening of any of the events
specified in clauses (i) and (ii) of this definition, if and so long as any
shares of Series B Common Stock are issued and outstanding and the holders of
such shares have the power to elect at least a majority of the board of
directors of Group.
"CHAPTER 11 CASE" means the case under chapter 11 of the
Bankruptcy Code that was commenced by Group on the Filing Date.
"CLOSING DATE" means December 31, 1994.
"CODE" means the California Uniform Commercial Code.
"COLLATERAL" means each of the following: the Accounts;
Borrower's Books; the Equipment; the General Intangibles; the Inventory; the
Negotiable Collateral; any money, or other assets of Borrower which now or
hereafter come into the possession, custody, or control of Foothill; and the
proceeds and products, whether tangible or intangible, of any of the foregoing
including proceeds of insurance covering any or all of the Collateral, and any
and all Accounts, Borrower's Books, Equipment, General Intangibles, Inventory,
Negotiable Collateral, money, deposit accounts, or other tangible or intangible
property resulting from the sale, exchange, collection, or other disposition of
any of the foregoing, or any portion thereof or interest therein, and the
proceeds thereof. Anything contained herein to the contrary notwithstanding, (i)
the Excluded Equipment (as hereinafter defined) shall not constitute a portion
of the Collateral and Foothill's security interest therein shall not attach
thereto unless and until such Excluded Equipment, or any portion thereof, is no
longer being provided to New News Service pursuant to Section 6.17 of the
Agreement of Limited Partnership regarding New News Service at which time the
Excluded Equipment automatically shall be included within Collateral and
Foothill's security interest therein automatically shall attach, and (ii) the
Collateral shall not include the assets or shares of Puerto Rico, PR/License,
and Studios.
"COLLATERAL ASSIGNMENTS OF KEY LEASES" means a mortgage or
deed of trust, in form and substance reasonably satisfactory to Foothill,
between one of the FPTV Debtors or Network, as applicable, and Foothill
respecting the hypothecation of such FPTV Debtor's or Network's, as applicable,
rights under the Key Leases.
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"COLLATERAL ASSIGNMENTS OF TOWER LEASES" means a mortgage or
deed of trust, in form and substance reasonably satisfactory to Foothill,
between one of the FPTV Debtors and Foothill respecting the hypothecation of
such FPTV's rights under the Tower Leases.
"COMMUNICATIONS FRANCHISE" means a franchise, license, right,
permit, authorization, consent, or other instrument granted by the United
States, or any state, city, town, county, or other municipality or other
political subdivision thereof, whether pursuant to or in any franchise,
ordinance, license or other agreement or otherwise, pursuant to which a Person
has, or is given, the right to construct, maintain or operate a Communications
System, or any part thereof.
"COMMUNICATION FRANCHISE AGREEMENTS" means all of Borrower's
agreements related to any Communications Franchise or Communication System.
"COMMUNICATIONS SYSTEM" means any Broadcast System or any
business or activity (including the ownership or leasing of property) directly
relating to the ownership or operation thereof other than the development or
syndication of programming for others.
"CONCENTRATION ACCOUNT" shall mean (a) the depositary accounts
of Group at the Concentration Account Bank bearing account numbers 31732984 and
01017904, respectively, (b) the New Concentration Account, or (c) any substitute
concentration deposit account of Borrower established pursuant to SECTION 6.17
hereof.
"CONCENTRATION ACCOUNT BANK" means Citibank, N.A., New
Concentration Account Bank, or any substitute depositary at which any
Concentration Account is maintained pursuant to SECTION 6.17 hereof.
"CONFIRMATION ORDER" means the order of the Bankruptcy Court
dated July 20, 1994 confirming the Plan.
"CONSOLIDATED CURRENT ASSETS" means, as of any date of
determination, the aggregate amount of all current assets of Borrower and its
Subsidiaries calculated on a consolidated basis that would, in accordance with
GAAP, be classified on a balance sheet as current assets.
"CONSOLIDATED CURRENT LIABILITIES" means, as of any date of
determination, the aggregate amount of all current liabilities of Borrower and
its Subsidiaries, calculated on a consolidated basis that would, in accordance
with GAAP, be classified on a balance sheet as current liabilities. For purposes
of this definition, all advances outstanding under this
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Agreement shall be deemed to be long term liabilities without regard to whether
they would be deemed to be so under GAAP.
"CONSUMMATION DATE" means the date that is the first Business
Day on which all conditions to consummation of the Plan shall have been
satisfied; PROVIDED, HOWEVER, that no stay of the Confirmation Order is then in
effect or, in the event a stay of the Confirmation Order is then in effect, the
first Business Day after such stay of the Confirmation Order is no longer in
effect.
"CREDITORS' COMMITTEE" means the Official Committee of
Unsecured Creditors in the Chapter 11 Case.
"DAILY BALANCE" means the amount of an Obligation owed at the
end of a given day.
"DEBTOR" means any one of Group, Estrella, Estrella/License,
New Jersey, Network, Tel/Aus, Tel/FL, FL/License, Tel/Hou, Hou/License, Tel/Mex,
Tel/NorCal, NorCal/License, Tel/SanAn, SanAn/License, Tel/SanFe, Tu Mundo,
SACC/Acq, SAT, SACC, WNJU, or WNJU/License.
"EARLY TERMINATION PREMIUM" has the meaning set forth in
SECTION 3.6.
"EFFECTIVE DATE" means the date on which this Agreement is
executed and delivered by Borrower and Foothill.
"ELIGIBLE ACCOUNTS" means those Accounts created by an Obligee
in the ordinary course of business that arise out of such Obligee's sale of
goods or rendition of services, that strictly comply with all of Borrower's
representations and warranties to Foothill; PROVIDED, HOWEVER, that, from and
after the occurrence and during the continuation of an Event of Default,
standards of eligibility may be fixed and revised from time to time by Foothill
in Foothill's reasonable credit judgment. Eligible Accounts shall not include
the following:
(a) Accounts that the Account Debtor has failed
to pay within ninety (90) days of invoice date or Accounts with selling terms of
more than thirty (30) days, all Accounts owed by an Account Debtor that has
failed to pay fifty percent (50%) or more of its Accounts owed to Borrower,
taken as a whole, within ninety (90) days of invoice date;
(b) Accounts with respect to which the Account
Debtor is an officer, employee, Affiliate, or agent of such Obligee;
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(c) Accounts with respect to which the payment
by the Account Debtor may be conditional, except for the obligation to make
additional advertising time available in certain circumstances;
(d) Accounts with respect to which the Account
Debtor is not a resident of the United States, and which are not either (i)
covered by credit insurance in form and amount, and by an insurer, satisfactory
to Foothill, or (ii) supported by one or more letters of credit that are
assignable by their terms and have been delivered to Foothill in an amount, of a
tenor, and issued by a financial institution, acceptable to Foothill;
(e) Accounts with respect to which the Account
Debtor is the United States;
(f) Accounts with respect to which Borrower,
taken as a whole, is or may become liable to the Account Debtor for goods sold
or services rendered by the Account Debtor, except for the obligation to make
additional advertising time available in certain circumstances;
(g) (i) Accounts with respect to an Account
Debtor whose total obligations owing to Borrower, taken as a whole, exceed
fifteen percent (15%) of all Eligible Accounts owing to Borrower, taken as a
whole, to the extent of the obligations owing by such Account Debtor in excess
of such percentage; PROVIDED, HOWEVER, that in the case of Accounts as to which
either Font & Vaamonde, Focus, DMB&B/Sosa, Casanova, Mendoza, or Young & Rubican
is the Account Debtor, Eligible Accounts only shall exclude Accounts thereof
owing to Borrower to the extent that the total obligations of such Account
Debtor owing to Borrower exceed twenty percent (20%) of all Eligible Accounts
owing to Borrower, taken as a whole, and (ii) Accounts with respect to a Person
whose total obligations owing to Borrower, taken as a whole, together with (but
without duplication) the total obligations of Advertising Agency Account Debtors
created with respect to advertising placed for such Person exceed fifteen
percent (15%) of all Eligible Accounts owing to Borrower, taken as a whole, to
the extent of the obligations owing by such Person or Advertising Agency Account
Debtors on its behalf in excess of such percentage; PROVIDED, HOWEVER, that in
the case of Accounts as to which Procter & Gamble, Co. is such Person, Eligible
Accounts only shall exclude Accounts owing to Borrower to the extent that the
total obligations of such Person or Advertising Agency Account Debtors on its
behalf owing to Borrower exceed twenty percent (20%) of all Eligible Accounts
owing to Borrower, taken as a whole;
(h) Accounts with respect to which the Account
Debtor disputes liability or makes any claim with respect thereto (to the extent
of the amount of the dispute or
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claim), or is subject to any Insolvency Proceeding, or becomes insolvent, or
goes out of business;
(i) Accounts the collection of which Foothill,
in its reasonable credit judgment, believes to be doubtful by reason of the
Account Debtor's financial condition;
(j) Accounts that are payable in other than
United States Dollars; and
(k) Accounts that represent progress payments or
other advance billings that are due prior to the completion of performance by
Borrower of the subject contract for goods or services.
"EQUIPMENT" means all of each Debtor's present and hereafter
acquired machinery, machine tools, motors, equipment, furniture, furnishings,
fixtures, vehicles (including motor vehicles and trailers), tools, parts, dies,
jigs, goods (other than consumer goods, farm products, or Inventory), wherever
located, and any interest of any Debtor in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing, wherever located.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, or any predecessor, successor, or
superseding laws of the United States, together with all regulations promulgated
thereunder.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) which is a member of Borrower's "controlled group" within the
meaning of Section 4001(a)(14) of ERISA.
"ERISA EVENT" means any one or more of the following: (i) a
Reportable Event with respect to a Qualified Plan or a Multiemployer Plan; (ii)
a Prohibited Transaction with respect to any Benefit Plan; (iii) a complete or
partial withdrawal by Borrower or any ERISA Affiliate from a Multiemployer Plan;
(iv) the complete or partial withdrawal of Borrower or an ERISA Affiliate from a
Qualified Plan during a plan year in which it was, or was treated as, a
"substantial employer" as defined in Section 4001(a)(2) of ERISA; (v) a failure
to make full payment when due of all amounts which, under the provisions of any
Benefit Plan or applicable law, Borrower or any ERISA Affiliate is required to
make; (vi) the filing of a notice of intent to terminate, or the treatment of a
plan amendment as a termination, under Sections 4041 or 4041A of ERISA; (vii) an
event or condition which might reasonably be expected to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Qualified Plan or Multiemployer Plan; (viii) the
imposition of any liability under Title IV of ERISA, other than PBGC premiums
due but not delinquent under Section
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4007 of ERISA, upon Borrower or any ERISA Affiliate; and (ix) a violation of the
applicable requirements of Sections 404 or 405 of ERISA, or the exclusive
benefit rule under Section 403(c) of ERISA, by any fiduciary or disqualified
person with respect to any Benefit Plan for which Borrower or any ERISA
Affiliate may be directly or indirectly liable; PROVIDED, HOWEVER, that no ERISA
Event shall be deemed to have occurred if the same would not have a material
adverse effect on Borrower taken as a whole.
"ESTRELLA" has the meaning ascribed thereto in the preamble to
this Agreement.
"ESTRELLA/LICENSE" has the meaning ascribed thereto in the
preamble to this Agreement.
"EVENT OF DEFAULT" has the meaning set forth in SECTION 8.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXCLUDED EQUIPMENT" shall have the meaning ascribed thereto
on SCHEDULE E-1 attached hereto.
"FCC" means the United States Federal Communications
Commission (or any successor agency, commission, bureau, or department).
"FCC LICENSE" means any license, permit, certificate of
compliance, franchise, approval, or authorization, granted, or issued by the FCC
for the operation of a Broadcast System.
"FEIN" means Federal Employer Identification Number.
"FILING DATE" means June 8, 1993.
"FINAL ORDER" means an order, ruling, or judgment that is no
longer subject to review, reversal, modification, or amendment by appeal or writ
of CERTIORARI.
"FL/LICENSE" has the meaning ascribed thereto in the preamble
to this Agreement.
"FOOTHILL" has the meaning set forth in the preamble to this
Agreement.
"FOOTHILL EXPENSES" means all reasonable: costs or expenses
(including taxes, photocopying, notarization, telecommunication and insurance
premiums) required to be paid by
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any Debtor under any of the Loan Documents that are paid or advanced by
Foothill; documentation, filing, recording, publication, and search fees
assessed, paid, or incurred by Foothill in connection with Foothill's
transactions with Borrower; costs and expenses incurred by Foothill in the
disbursement of funds to Borrower (by wire transfer or otherwise); charges paid
or incurred by Foothill resulting from the dishonor of checks; costs and
expenses paid or incurred by Foothill to correct any default or enforce any
provision of the Loan Documents, or in gaining possession of, maintaining,
handling, preserving, storing, shipping, selling, preparing for sale, or
advertising to sell the Collateral or the Real Property, or any portion thereof,
irrespective of whether a sale is consummated; subject to the limitations set
forth in SECTION 2.7(E), costs and expenses paid or incurred by Foothill in
examining Borrower's Books; costs and expenses of third party claims or any
other suit paid or incurred by Foothill in enforcing or defending the Loan
Documents; and Foothill's reasonable attorneys fees and expenses incurred in
advising, structuring, drafting, reviewing, administering, amending,
terminating, enforcing (including attorneys fees and expenses incurred in
connection with a "workout," a "restructuring," or an Insolvency Proceeding
concerning one or more Debtor or any guarantor of the Obligations), defending,
or concerning the Loan Documents, irrespective of whether suit is brought.
"FPTV ACCOUNTS" means shall mean (a) the depositary accounts
of Estrella at its respective FPTV Account Bank bearing account numbers
530582761 and 5300121863, (b) the depositary account of Tel/FL at its respective
FPTV Account Bank bearing account number 1595614069, (c) the depositary account
of Tel/Hou at its respective FPTV Account Bank bearing account number
9350062643, (d) the depositary account of WNJU at its respective FPTV Account
Bank bearing account number 01019272, (e) the depositary account of Tel/NorCal
at its respective FPTV Account Bank bearing account number 12621-04789, and (g)
the depositary account of Tel/SanAn at its respective FPTV Account Bank bearing
account number 01-0339830), or (b) any substitute concentration deposit account
of the FPTV Debtors established pursuant to SECTION 6.17 hereof.
"FPTV ACCOUNT BANKS" means (a) in the case of Estrella, Union
Bank, (b) in the case of Tel/Fl, Barnett Bank, (c) in the case of Tel/Hou,
BankOne, (d) in the case of WNJU, Citibank, N.A., (e) in the case of Tel/NorCal,
Bank of America, and (g) in the case of Tel/SanAn, First National Bank.
"FPTV DEBTOR" means Estrella, WNJU, Tel/Fl, Tel/NorCal,
Tel/SanAn, and Tel/Hou.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, consistently applied.
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"GENERAL CLAIMS" means any Unsecured Claim other than a
Debenture Claim (as those terms are defined in the Plan).
"GENERAL INTANGIBLES" means all of each Debtor's present and
future general intangibles and other personal property (including contract
rights, rights arising under common law, statutes, or regulations, choses or
things in action, goodwill, patents, trade names, trademarks, servicemarks,
copyrights, blueprints, drawings, purchase orders, customer lists, monies due or
recoverable from pension funds, route lists, rights to payment and other rights
under any royalty or licensing agreements (including, all FCC Licenses to the
extent not prohibited by law), leases with respect to personal property,
Communication Franchise Agreements (to the extent not prohibited by law),
infringements, claims, computer programs, computer discs, computer tapes,
literature, reports, catalogs, deposit accounts, insurance premium rebates, tax
refunds, and tax refund claims), other than goods, Accounts, and Negotiable
Collateral.
"GP" means Telenoticias del Mundo, Inc., a Delaware
corporation.
"GROUP" has the meaning ascribed thereto in the preamble to
this Agreement.
"GROUP SUB" means Telemundo News Network, Inc., a Delaware
corporation.
"HAZARDOUS MATERIALS" means all or any of the following: (a)
substances that are defined or listed in, or otherwise classified pursuant to,
any applicable laws or regulations as "hazardous substances," "hazardous
materials," "hazardous wastes," "toxic substances," or any other formulation
intended to define, list, or classify substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity, carcinogenicity,
reproductive toxicity, or "EP toxicity"; (b) oil, petroleum, or petroleum
derived substances, natural gas, natural gas liquids, synthetic gas, drilling
fluids, produced waters, and other wastes associated with the exploration,
development, or production of crude oil, natural gas, or geothermal resources;
(c) any flammable substances or explosives or any radioactive materials; and (d)
asbestos in any form or electrical equipment which contains any oil or
dielectric fluid containing levels of polychlorinated biphenyls in excess of
fifty (50) parts per million.
"HOU/LICENSE" has the meaning ascribed thereto in the preamble
to this Agreement.
"INDEBTEDNESS" means: (a) all obligations of any Debtor for
borrowed money; (b) all obligations of any Debtor evidenced by bonds,
debentures, notes, or other similar instruments and all reimbursement or other
obligations of a Debtor in respect of letters of credit, letter of credit
guaranties, bankers acceptances, interest rate swaps, controlled disbursement
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accounts, or other financial products; (c) all obligations of any Debtor under
capital leases; (d) all obligations or liabilities of others secured by a lien
or security interest (other than a Permitted Lien) on any property or asset of
any Debtor, irrespective of whether such obligation or liability is assumed; and
(e) any obligation of a Debtor guaranteeing or intended to guarantee (whether
guaranteed, endorsed, co-made, discounted, or sold with recourse to such Debtor)
any indebtedness, lease, dividend, letter of credit, or other obligation of any
other Person.
"INSOLVENCY PROCEEDING" means any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code or under any other
bankruptcy or insolvency law, including assignments for the benefit of
creditors, formal or informal moratoria, compositions, extensions generally with
its creditors, or proceedings seeking reorganization, arrangement, or other
similar relief.
"INVENTORY" means all present and future inventory in which
any Debtor has any interest, including goods held for sale or lease or to be
furnished under a contract of service and all of each Debtor's present and
future raw materials, work in process, finished goods, and packing and shipping
materials, wherever located, and any documents of title representing any of the
above.
"IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
"KEY LEASES" means (a) those certain leases between a FPTV
Debtor and a third Person relative to the lease by such FPTV Debtor of the
principal location at which it conducts its broadcasting business, and (b) that
certain lease between Network and a third Person relative to the lease by
Network of the principal location at which it conducts its programming
production business.
"L/C" has the meaning set forth in SECTION 2.2(A).
"L/C GUARANTY" has the meaning set forth in SECTION 2.2(A).
"LICENSE SUBS" mean Estrella/License, WNJU/License, and each
of the Subsidiaries of Borrower formed pursuant to the requirements of SECTION
3.3(F) hereof.
"LION" means Lion Advisors, L.P., a Delaware limited
partnership.
"LOAN DOCUMENTS" means this Agreement, the Collateral
Assignments of the FPTV Leases, the Collateral Assignments of Tower Leases, the
Mortgage, the Notification Letters, the Stock Pledge Agreement, the
Subordination Agreement, the Sweep Letters, the
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Reaffirmation Agreement, any note or notes executed by Borrower and payable to
Foothill, and any other agreement entered into, now or in the future, in
connection with this Agreement.
"MATERIAL CLAIM" means one or more claimed rights to payment
of money asserted against Borrower that, individually or in the aggregate,
involve asserted claims of Two Million Five Hundred Thousand Dollars
($2,500,000), or more.
"MATERIAL PROPERTY" means property or assets of Borrower that,
individually or in the aggregate, have a value of Two Million Five Hundred
Thousand Dollars ($2,500,000), or more.
"MATURITY DATE" means December 31, 1999.
"MAXIMUM AMOUNT" has the meaning set forth in SECTION 2.1.
"MORTGAGE" means a deed of trust executed by Borrower in favor
of Foothill, in form and substance reasonably satisfactory to Foothill and
Borrower, that encumbers the Real Property and the related improvements thereto.
"MULTIEMPLOYER PLAN" means a multiemployer plan as defined in
Sections 3(37) or 4001(a)(3) of ERISA or Section 414 of the IRC in which
employees of Borrower or an ERISA Affiliate participate or to which Borrower or
any ERISA Affiliate contribute or are required to contribute.
"NEGOTIABLE COLLATERAL" means all of each Debtor's present and
future letters of credit, notes, drafts, instruments, certificated and
uncertificated securities (including the shares of stock of Subsidiaries of
Borrower), documents, personal property leases (wherein a Debtor is the lessor),
chattel paper, and Borrower's Books relating to any of the foregoing.
"NETWORK" has the meaning ascribed thereto in the preamble to
this Agreement.
"NETWORK CONCENTRATION ACCOUNT" shall mean (a) the depositary
account of Network at the Network Concentration Account Bank bearing account
number 03601155141, or (b) any substitute concentration deposit account of
Borrower established pursuant to SECTION 6.17 hereof.
"NETWORK CONCENTRATION ACCOUNT BANK" means NationsBank of
Florida, N.A., or any substitute depositary at which any Concentration Account
is maintained pursuant to SECTION 6.17 hereof.
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"NEW CONCENTRATION ACCOUNT" means the depositary account of
Group established at the New Concentration Account Bank pursuant to SECTION
3.3(K) hereof.
"NEW CONCENTRATION ACCOUNT BANK" means NationsBank of Florida,
N.A.
"NEW JERSEY" has the meaning ascribed thereto in the preamble
to this Agreement.
"NEW NEWS SERVICE" means a service provided by Borrower or a
corporation, partnership, joint venture, or similar entity in which Borrower
owns, directly or indirectly, at least a 25% equity interest, which service will
provide Spanish-language news programming.
"NORCAL/LICENSE" has the meaning ascribed thereto in the
preamble to this Agreement.
"NOTIFICATION LETTERS" means letters from Foothill to the
depositaries at which Borrower maintains its deposit accounts in order to
perfect Foothill's security interest in such deposit accounts, which letter or
letters shall be acknowledged and agreed to by Borrower.
"OBLIGEE" means any one of the Debtors.
"O & Y LETTER AGREEMENT" means that certain letter agreement,
dated April 25, 1994, by and between Group and the 1290 Landlord, resolving and
settling all claims related to and arising from 1290 Lease, a copy of which is
attached to the Plan as Exhibit P-5 thereto.
"OBLIGATIONS" means all loans, advances, debts, principal,
interest (including any interest that, but for the provisions of the Bankruptcy
Code, would have accrued), contingent reimbursement obligations owing to
Foothill under any outstanding L/Cs or L/C Guarantees, premiums (including Early
Termination Premiums), liabilities (including all amounts charged to Borrower's
loan account pursuant to any agreement authorizing Foothill to charge Borrower's
loan account), obligations, fees, lease payments, guaranties, covenants, and
duties owing by Borrower (or any Debtor composing Borrower) to Foothill of any
kind and description (whether pursuant to or evidenced by the Loan Documents, by
any note or other instrument, or pursuant to any other agreement between
Foothill and Borrower, and irrespective of whether for the payment of money, but
exclusive of any obligation that arose on or before the Effective Date and that
was not incurred in connection with the financing transaction that is the
subject of this Agreement), whether direct or indirect, absolute or contingent,
due or to become due, now existing or hereafter arising, and including any debt,
liability, or obligation owing from Borrower to others that Foothill may have
obtained by assignment or otherwise,
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and further including all interest not paid when due and all Foothill Expenses
that Borrower is required to pay or reimburse by the Loan Documents, by law, or
otherwise.
"OVERADVANCE" has the meaning set forth in SECTION 2.3.
"PBGC" means the Pension Benefit Guaranty Corporation as
defined in Title IV of ERISA, or any successor thereto.
"PERMITTED ASSET DISPOSITION" means (a) the use of cash in the
ordinary course of business as currently conducted, (b) dispositions of goods
and services to buyers in the ordinary course of business, (c) the sale or other
disposition of obsolete or worn-out Equipment in the ordinary course of business
or the sale or other disposition of Equipment in connection with the purchase of
replacement Equipment, (d) isolated dispositions of any other property or asset
of Borrower that do not exceed $1,000,000 individually or that do not aggregate
in excess of $2,500,000 during any consecutive twelve (12) month period, and (e)
the sale of Telemundo of Colorado Springs, Inc., a Delaware corporation.
"PERMITTED INVESTMENTS" means (a) investments by one Debtor in
another Debtor, (b) investments in Cash Equivalents, (c) investments, directly
or indirectly, in the New News Service and its Subsidiaries in the form of
advances, loans, extensions of credit, equity ownership, or otherwise, in an
amount which shall not exceed $20,000,000 in aggregate principal amount at any
one time outstanding, (d) investments in Indebtedness of one Debtor to another
Debtor, (e) investments in ventures formed to produce or acquire programming, so
long as prior to making any such investment, Borrower shall use its reasonable
best efforts to hypothecate to Foothill, pursuant to agreements in form and
substance reasonably satisfactory to Foothill, the investment to be acquired,
(f) investments made in connection with the acquisition of all or substantially
all of the assets or property of another Person or in the capital stock or other
securities of a Person that becomes a Subsidiary of Group (and becomes a party
to this Agreement by the execution of an appropriate joinder document) in an
aggregate amount not in excess of $7,500,000 in any fiscal year, and (g) other
investments (not in New News Service or the Persons being acquired pursuant to
clause (f) above) not in excess of $5,000,000 in any fiscal year.
"PERMITTED LIENS" means: (a) liens and security interests held
by Foothill; (b) liens for unpaid taxes, assessments, or charges that are not
yet due and payable or that are the subject of a Permitted Protest; (c) liens
and security interests set forth on SCHEDULE P-1 attached hereto; (d) purchase
money security interests and liens of lessors under capital leases to the extent
that the acquisition or lease of the underlying asset was permitted under
SECTION 7.11, and so long as the security interest or lien only secures the
purchase price of the asset; (e) easements, rights of way, reservations,
covenants, conditions, restrictions, zoning restrictions,
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and other similar encumbrances that do not materially interfere with the use or
value of the property subject thereto; (f) obligations and duties as lessee
under any lease existing on the date of this Agreement; (g) mechanics',
materialmen's, warehousemen's, or similar liens that arise by operation of law;
(h) exceptions (other than any with respect to Indebtedness) listed in the title
reports delivered by Borrower pursuant to SECTION 3.3 hereof in respect of the
Real Property; (i) liens to secure pledges or deposits made in the ordinary
course of business to secure nondelinquent obligations arising under statutory
or regulatory requirements, including worker's compensation, unemployment
insurance, and similar legislation; (j) liens to secure the performance of
public statutory obligations that are not delinquent, appeal bonds, judgment
bonds, surety bonds, performance bonds, and other obligations of a like nature
(other than for borrowed money); and (k) extensions, renewals, or substitutions
of the foregoing, provided that the lien permitted by this clause (k) shall not
be spread to cover any additional Indebtedness.
"PERMITTED PROTEST" means the right of Borrower to protest any
lien, tax, rental payment, or other charge, other than any such lien or charge
that secures the Obligations, provided (i) a reserve with respect to such
obligation is established on the books of Borrower in an amount in accordance
with GAAP, or, if GAAP does not require the maintenance of a reserve, that is
reasonably satisfactory to Foothill, (ii) any such protest is instituted and
diligently prosecuted by Borrower in good faith, and (iii) Foothill is
reasonably satisfied that, while any such protest is pending, there will be no
impairment of the enforceability, validity, or priority of the liens or security
interests of Foothill on account of Material Claims and with respect to Material
Property.
"PERSON" means and includes natural persons, corporations,
limited partnerships, general partnerships, joint ventures, trusts, land trusts,
business trusts, or other organizations, irrespective of whether they are legal
entities, and governments and agencies and political subdivisions thereof.
"PLAN" means the second amended chapter 11 plan of Group filed
with the Bankruptcy Court on April 29, 1994, as amended or modified from time to
time pursuant to Section 18.11 of said chapter 11 plan and applicable provisions
of the Bankruptcy Code and the Bankruptcy Rules.
"PR/LICENSE" means Telemundo of Puerto Rico License
Corporation, a Delaware corporation.
"PROHIBITED TRANSACTION" means any transaction described in
Section 406 of ERISA which is not exempt by reason of Section 408 of ERISA, and
any transaction described in Section 4975(c) or (d) of the IRC which is not
exempt by reason of Section 4975(c) of the IRC.
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"PUERTO RICO" means Telemundo of Puerto Rico, Inc., a Puerto
Rico corporation.
"QUALIFIED PLAN" means a pension plan (as defined in Section
3(2) of ERISA) intended to be tax-qualified under Section 401(a) of the IRC
which Borrower or any ERISA Affiliate sponsors, maintains, or to which any such
person makes, is making, or is obligated to make, contributions, or, in the case
of a multiple-employer plan (as described in Section 4064(a) of ERISA), has made
contributions at any time during the immediately preceding period covering at
least five (5) plan years, but excluding any Multiemployer Plan.
"RCG" means Reliance Capital Group, L.P., a New York limited
partnership.
"REAFFIRMATION AGREEMENT" means that certain Reaffirmation
Agreement, dated as of even date herewith, executed by each Debtor in favor of
Foothill, in form and substance reasonably satisfactory to Foothill.
"REAL PROPERTY" means the parcel of real property and the
related improvements thereto identified on SCHEDULE R-1, and any parcels of real
property hereafter acquired by Borrower.
"REFERENCE RATE" means the highest of the variable rates of
interest, per annum, most recently announced by (a) Bank of America, N.T. &
S.A., (b) Mellon Bank, N.A., and (c) Citibank, N.A., or any successor to any of
the foregoing institutions, as its "prime rate" or "reference rate," as the case
may be, irrespective of whether such announced rate is the best rate available
from such financial institution.
"RELIANCE" means Reliance Insurance Company, a Pennsylvania
corporation.
"RELIANCE CAPITAL" means Reliance Capital Group, L.P., a New
York limited partnership.
"RELIANCE ENTITIES" means any one or more of Reliance Capital,
Reliance Associates, L.P., RCG, RGH, and Reliance.
"RGH" means Reliance Group Holdings, Inc., a Delaware
corporation.
"REPORTABLE EVENT" means any event described in Section 4043
(other than for which the notice requirement has been waived by the PBGC) of
ERISA.
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"RIGHTS PLAN" means the rights plan, substantially in the form
of Exhibit P-9 to the Plan.
"SACC" has the meaning ascribed thereto in the preamble to
this Agreement.
"SACC/ACQ" has the meaning ascribed thereto in the preamble to
this Agreement.
"SANAN/LICENSE" has the meaning ascribed thereto in the
preamble to this Agreement.
"SAT" has the meaning ascribed thereto in the preamble to this
Agreement.
"SENIOR NOTES" means the approximately $117,000,000 of 10.25%
senior notes due 2001 that are issued under the Plan pursuant to the terms of
the Senior Notes Indenture.
"SENIOR NOTES INDENTURE" means the Indenture, by and between
Group and Bankers Trust Company as trustee, substantially in the form of Exhibit
P-3 to the Plan, to be dated as of the Consummation Date relative to the Senior
Notes.
"SERIES B COMMON STOCK" means the Series B Common Stock, par
value $.01 per share, of Group.
"SOLVENT" means, with respect to any Person on a particular
date, that on such date (a) at fair valuations, all of the properties and assets
of such Person are greater than the sum of the debts, including contingent
liabilities, of such Person, (b) the present fair salable value of the
properties and assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person is able to realize upon its
properties and assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course of
business, (d) such Person does not intend to, and does not believe that it will,
incur debts beyond such Person's ability to pay as such debts mature, and (e)
such Person is not engaged in business or a transaction, and is not about to
engage in business or a transaction, for which such Person's properties and
assets would constitute unreasonably small capital after giving due
consideration to the prevailing practices in the industry in which such Person
is engaged. In computing the amount of contingent liabilities at any time, it is
intended that such liabilities will be computed at the amount that, in light of
all the facts and circumstances existing at such time, represents the amount
that reasonably can be expected to become an actual or matured liability. In
computing the amount of assets of a Person there shall be included such Person's
intangible assets at a fair valuation.
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"STANDBY PURCHASE AGREEMENT" means the standby purchase
agreement, by and between Group and Reliance, substantially in the form of
Exhibit P-10 to the Plan.
"STOCK PLEDGE AGREEMENT" means a Stock Pledge Agreement, in
form and substance reasonably satisfactory to Foothill, dated as of December 31,
1994, between Group, Estrella, SACC/Acq, SACC, WNJU, and Foothill pursuant to
which such entities grant a first priority perfected security interest in all of
the issued and outstanding shares of stock of Group's Subsidiaries (other than
the shares of Tel/Colorado, Group Sub, GP, Puerto Rico, PR/License, and Studios)
in order to secure the obligations of Borrower owing to Foothill.
"STUDIOS" means Telemundo Studios of Mexico, S.A. de C.V.
"SUBORDINATION AGREEMENT" means that certain Subordination
Agreement, dated as of December 31, 1994, executed by Group in favor of
Foothill, in form and substance reasonably satisfactory to Foothill and Group.
"SUBSIDIARY" means any corporation, association, partnership,
joint venture, or other business entity of which Borrower, directly or
indirectly, either (i) with respect to a corporation, owns or controls fifty
percent (50%) or more of the voting power and has the ability to elect at least
a majority of the board of directors or similar managing body, irrespective of
whether a class or classes shall or might have voting power by reason of the
happening of any contingency, or (ii) with respect to an association,
partnership, joint venture or other business entity, is entitled to share in
fifty percent (50%) or more of the profits and losses, however determined, and
has voting control with respect thereto, PROVIDED, HOWEVER, that the generality
of the forgoing to the contrary not withstanding, "Subsidiary" shall not include
Puerto Rico or PR/License
"SWEEP LETTERS" means (a) an irrevocable letter from Borrower
to the Concentration Account Bank instructing such bank to remit the proceeds
received into the Concentration Account to an identified deposit account
maintained by Foothill, (b) an irrevocable letter from Network to the Network
Concentration Account Bank instructing such bank to remit the proceeds received
into the Network Concentration Account to an identified deposit account
maintained by Foothill, and (c) irrevocable letters from each of the FPTV
Debtors to their respective FPTV Account Banks instructing such banks to remit
the proceeds received into the FPTV Accounts to an identified deposit account
maintained by Foothill.
"TANGIBLE NET WORTH" means, as of the date any determination
thereof is to be made, the difference of: (a) Borrower's total stockholder's
equity; minus (b) the sum of: (i) all
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intangible assets of Borrower; and (ii) all amounts due to Borrower from
Affiliates (net of amounts due to Affiliates by Borrower), calculated on a
consolidated basis.
"TEL/AUS" has the meaning ascribed thereto in the preamble to
this Agreement.
"TEL/COLORADO" means Telemundo of Colorado Springs, Inc., a
Delaware corporation.
"TEL/FL" has the meaning ascribed thereto in the preamble to
this Agreement.
"TEL/HOU" has the meaning ascribed thereto in the preamble to
this Agreement.
"TEL/MEX" has the meaning ascribed thereto in the preamble to
this Agreement.
"TEL/NORCAL" has the meaning ascribed thereto in the preamble
to this Agreement.
"TEL/SANAN" has the meaning ascribed thereto in the preamble
to this Agreement.
"TEL/SANFE" has the meaning ascribed thereto in the preamble
to this Agreement.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
/sections/ 77aaa-77bbbb), as amended.
"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 of Affiliates 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.
"TOWER LEASES" means those certain leases between a FPTV
Debtor and a third Person relative to the lease by the FPTV Debtor of a
transmitting tower, antenna, or the real property on which either or both is
situated.
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"TRI-PARTY AGREEMENTS" means (a) an agreement, in form and
substance reasonably satisfactory to Foothill and Group, providing for the
establishment of the New Concentration Account, such New Concentration Account
to be in Foothill's name, that unless an Event of Default has occurred and is
continuing or Foothill reasonably deems itself insecure (in accordance with
Section 1208 of the Code), Group shall be entitled to use the funds deposited
into the New Concentration Account in the ordinary course of its business and
consistent with the terms of this Agreement, and that from and after the
occurrence and during the continuation of an Event of Default or at such time as
Foothill deems itself insecure (in accordance with Section 1208 of the Code),
but not before, Foothill shall be entitled to instruct the New Concentration
Account Bank to remit the proceeds of all of the cash receipts, checks, and
other items of payment received in such New Concentration Account directly to an
identified deposit account maintained by Foothill, and (b) an agreement, in form
and substance reasonably satisfactory to Foothill and Network, providing for the
establishment of the Network Concentration Account, that such Network
Concentration Account to be in Foothill's name, that unless an Event of Default
has occurred and is continuing or Foothill reasonably deems itself insecure (in
accordance with Section 1208 of the Code), Network shall be entitled to use the
funds deposited into the Network Concentration Account in the ordinary course of
its business and consistent with the terms of this Agreement, and that from and
after the occurrence and during the continuation of an Event of Default or at
such time as Foothill deems itself insecure (in accordance with Section 1208 of
the Code), but not before, Foothill shall be entitled to instruct the Network
Concentration Account Bank to remit the proceeds of all of the cash receipts,
checks, and other items of payment received in such Network Concentration
Account directly to an identified deposit account maintained by Foothill.
"TU MUNDO" has the meaning ascribed thereto in the preamble to
this Agreement.
"1290 LANDLORD" means 1290 Associates, as
successor-in-interest to O & Y Equity Corp., Olympia & York Holdings
Corporation, and Fame Associates.
"1290 LEASE" means that certain lease agreement, dated as of
April 1, 1983, as amended, by and between Group and the 1290 Landlord,
concerning certain premises located at 1290 Avenue of the Americas, New York,
New York.
"1290 SUBLEASES" means, collectively, the sublease agreements
by and between Group, as sublessor, and the parties, as sublessees, listed on
Exhibit A to the O & Y letter Agreement, concerning certain premises located at
1290 Avenue of the Americas, New York, New York.
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"UNFUNDED BENEFIT LIABILITY" means the excess of a Benefit
Plan's benefit liabilities (as defined in Section 4001(a)(16) of ERISA) over the
current value of such Benefit Plan's assets, determined in accordance with the
assumptions used by the Benefit Plan's actuaries for funding the Benefit Plan
pursuant to Section 412 of the IRC for the applicable plan year.
"UNITED STATES" means the United States of America, or any
department, agency, or instrumentality of the United States of America, its
territories and possessions and the Commonwealth of Puerto Rico.
"VOIDABLE TRANSFER" has the meaning set forth in SECTION 15.9.
"WNJU" has the meaning ascribed thereto in the preamble to
this Agreement.
"WNJU/LICENSE" has the meaning ascribed thereto in the
preamble to this Agreement.
1.2 ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP. When used herein, the
term "financial statements" shall include the notes and schedules thereto.
Whenever the term "Borrower" is used in respect of a financial covenant or a
related definition, it shall be understood to mean Borrower on a consolidated
basis unless the context clearly requires otherwise.
1.3 CODE. Any terms used in this Agreement that are defined in
the Code shall be construed and defined as set forth in the Code unless
otherwise defined herein.
1.4 CONSTRUCTION. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, references to
the singular include the plural, the term "including" is not limiting, and the
term "or" has, except where otherwise indicated, the inclusive meaning
represented by the phrase "and/or." The words "hereof," "herein," "hereby,"
"hereunder," and similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. Section,
subsection, clause, schedule, and exhibit references are to this Agreement
unless otherwise specified. Any reference in this Agreement or in the Loan
Documents to this Agreement or any of the Loan Documents shall include all
alterations, amendments, changes, extensions, modifications, joinders, renewals,
replacements, substitutions, and supplements, thereto and thereof, as
applicable. Any reference in this Agreement to "per annum" (other than in
SECTION 2.7(E)) shall, for any period less than a full year, be pro rated for
the actual number of days elapsed in the partial year.
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1.5 SCHEDULES AND EXHIBITS. All of the schedules and exhibits
attached to this Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 REVOLVING ADVANCES. (a) Subject to the terms and
conditions of this Agreement, Foothill agrees to make revolving advances to
Borrower in an amount at any one time outstanding not to exceed the Borrowing
Base less the undrawn or unreimbursed amount of L/Cs and L/C Guarantees
outstanding hereunder. For purposes of this Agreement, "Borrowing Base", as of
any date of determination, shall mean the sum of: (i) eighty percent (80%) of
the amount of Eligible Accounts, PLUS (ii) Five Million Dollars ($5,000,000).
The Borrowing Base shall be calculated and determined once per month as of the
first day of each month; PROVIDED, HOWEVER, that, upon the occurrence and
continuation of an Event of Default, the Borrowing Base shall be calculated and
determined on a daily basis.
(a) Anything to the contrary in SECTION 2.1(a)
above notwithstanding, from and after the occurrence and during the continuance
of an Event of Default, Foothill may reduce its advance rates based upon
Eligible Accounts without declaring an Event of Default.
(b) Foothill shall have no obligation to make
advances hereunder to the extent they would cause the outstanding Obligations to
exceed Twenty Million Dollars ($20,000,000) (the "Maximum Amount").
(c) Foothill is authorized to make advances under
this Agreement based upon telephonic or other instructions received from anyone
purporting to be an Authorized Officer of Borrower, or without instructions if
pursuant to SECTION 2.4(D). Borrower agrees to establish and maintain a single
designated deposit account for the purpose of receiving the proceeds of the
advances requested by Borrower and made by Foothill hereunder. Unless otherwise
agreed in writing by Foothill and Borrower, any advance requested by Borrower
and made by Foothill hereunder shall be made to such designated deposit account.
Amounts borrowed pursuant to this SECTION 2.1 may be repaid and, subject to the
terms and conditions of this Agreement, reborrowed at any time during the term
of this Agreement.
2.2 LETTERS OF CREDIT AND LETTER OF CREDIT GUARANTEES.
(a) Subject to the terms and conditions of this
Agreement, Foothill agrees to issue commercial or standby letters of credit for
the account of Borrower (each, an "L/C") or to issue standby letters of credit
or guarantees of payment (each such letter of credit
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or guaranty, an "L/C Guaranty") with respect to commercial or standby letters of
credit issued by another Person for the account of Borrower in an aggregate face
amount not to exceed the lesser of: (i) the Borrowing Base less the amount of
advances outstanding pursuant to SECTION 2.1, and (ii) Two Million Five Hundred
Thousand Dollars ($2,500,000). Borrower expressly understands and agrees that
Foothill shall have no obligation to arrange for the issuance by other financial
institutions of letters of credit that are to be the subject of L/C Guarantees.
Borrower and Foothill acknowledge and agree that certain of the letters of
credit that are to be the subject of L/C Guarantees may be outstanding on the
Closing Date. Each L/C and each letter of credit that is the subject of an L/C
Guaranty shall have an expiry date no later than sixty (60) days prior to the
date on which this Agreement is scheduled to terminate under SECTION 3.4
(without regard to any potential renewal term) and all such L/Cs and letters of
credit (and the applicable L/C Guarantees) shall be in form and substance
acceptable to Foothill in its sole discretion. Foothill shall not have any
obligation to issue L/Cs or L/C Guarantees to the extent that the face amount of
all outstanding L/Cs and L/C Guarantees, plus the amount of advances outstanding
pursuant to SECTION 2.1, would exceed the lesser of: (y) the Maximum Amount, or
(z) the Maximum Foothill Amount plus the Syndicated Amount. The L/Cs and the L/C
Guarantees issued under this SECTION 2.2 shall be used by Borrower, consistent
with this Agreement, for its general working capital purposes or to support its
obligations with respect to workers' compensation premiums or other similar
obligations. If Foothill is obligated to advance funds under an L/C or L/C
Guaranty, the amount so advanced immediately shall be deemed to be an advance
made by Foothill to Borrower pursuant to SECTION 2.1 and, thereafter, shall bear
interest at the rates then applicable under SECTION 2.4.
(b) Borrower hereby agrees to indemnify, save,
defend, and hold Foothill harmless from any loss, cost, expense, or liability,
including payments made by Foothill, expenses, and reasonable attorneys fees
incurred by Foothill arising out of or in connection with any L/Cs or L/C
Guarantees. Borrower agrees to be bound by the issuing bank's regulations and
interpretations of any letters of credit guarantied by Foothill and opened to or
for Borrower's account or by Foothill's interpretations of any L/C issued by
Foothill to or for Borrower's account, even though this interpretation may be
different from Borrower's own, absent manifest error or a violation of law, and
Borrower understands and agrees that Foothill shall not be liable for any error,
negligence, or mistakes, whether of omission or commission, in following
Borrower's instructions or those contained in the L/Cs or any modifications,
amendments, or supplements thereto, other than gross negligence or willful
misconduct. Borrower understands that the L/C Guarantees may require Foothill to
indemnify the issuing bank for certain costs or liabilities arising out of
claims by Borrower against such issuing bank. Borrower hereby agrees to
indemnify, save, defend, and hold Foothill harmless with respect to any loss,
cost, expense (including attorneys fees), or liability incurred by Foothill
under any L/C Guaranty as a result of Foothill's indemnification of any such
issuing bank. The foregoing
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indemnification shall not constitute a waiver of the right of Borrower to assert
any claim that it may have against such issuing bank.
(c) Borrower hereby authorizes and directs any
bank that issues a letter of credit guaranteed by Foothill to deliver to
Foothill all instruments, documents, and other writings and property received by
the issuing bank pursuant to such letter of credit, and to accept and rely upon
Foothill's instructions and agreements with respect to all matters arising in
connection with such letter of credit and the related application. Borrower may
or may not be the "applicant" or "account party" with respect to such letter of
credit.
(d) Any and all service charges, commissions,
fees, and costs incurred by Foothill relating to the letters of credit
guaranteed by Foothill shall be considered Foothill Expenses for purposes of
this Agreement and immediately shall be reimbursable by Borrower to Foothill. On
the first day of each month, Borrower will pay Foothill a fee equal to two and
one-half percent (2.5%) per annum times the average Daily Balance of the L/Cs
and L/C Guarantees that were outstanding during the immediately preceding month.
Service charges, commissions, fees, and costs may be charged to Borrower's loan
account at the time the service is rendered or the cost is incurred.
(e) Immediately upon the termination of this
Agreement, Borrower agrees to either: (i) provide cash collateral to be held by
Foothill in an amount equal to the maximum amount of Foothill's obligations
under L/Cs plus the maximum amount of Foothill's obligations to any Person under
outstanding L/C Guarantees, or (ii) cause to be delivered to Foothill releases
of all of Foothill's obligations under its outstanding L/Cs and L/C Guarantees.
At Foothill's discretion, any proceeds of Collateral received by Foothill after
the occurrence and during the continuation of an Event of Default may be held as
the cash collateral required by this SECTION 2.2(E).
2.3 OVERADVANCES. If, at any time or for any reason, the
amount of Obligations owed by Borrower to Foothill pursuant to SECTIONS 2.1 AND
2.2 is greater than either the dollar or percentage limitations set forth in
SECTIONS 2.1 OR 2.2 (an "Overadvance"), Borrower immediately shall pay to
Foothill, in cash, the amount of such excess to be used by Foothill first, to
repay non-contingent Obligations and, thereafter, to be held by Foothill as cash
collateral to secure Borrower's obligation to repay Foothill for all amounts
paid pursuant to L/Cs or L/C Guarantees.
2.4 INTEREST: RATES, PAYMENTS, AND CALCULATIONS.
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(a) Interest Rate. All Obligations, except for
undrawn L/Cs and L/C Guarantees, shall bear interest, on the average Daily
Balance, at a per annum rate equal to one and three-quarters (1.75) percentage
points above the Reference Rate.
(b) Default Rate. (i) All Obligations, except
for undrawn L/Cs and L/C Guarantees, shall bear interest, from and after the
occurrence and during the continuance of an Event of Default, at a per annum
rate equal to four and three-quarters (4.75) percentage points above the
Reference Rate. (ii) From and after the occurrence and during the continuance of
an Event of Default, the fee provided in SECTION 2.2(D) shall be increased to a
fee equal to five and one-half percent (5.5%) per annum times the average Daily
Balance of the undrawn L/Cs and L/C Guarantees that were outstanding during the
immediately preceding month.
(c) Minimum Interest. In no event shall the rate
of interest chargeable hereunder be less than eight percent (8.0%) per annum,
nor shall the amount of interest accrued and payable to Foothill during the
first two (2) years following the Closing Date be less than Three Hundred Sixty
Thousand Dollars ($360,000) (the "Minimum Interest Amount") per annum. To the
extent that interest accrued hereunder at the rate set forth herein (including
the minimum interest rate) would yield less than the foregoing minimum amount,
the interest rate chargeable hereunder for the year in question automatically
shall be deemed increased during the last month for that year to that rate that
would result in the minimum amount of interest being accrued and payable
hereunder. The foregoing to the contrary notwithstanding, if Borrower prepays
the obligations and terminates this Agreement prior to the Maturity Date and on
a date other than the last day of a calendar year, Borrower shall be liable to
Foothill for, and shall include in such payoff amount, an amount equal to the
amount by which (a)(i) the Minimum Interest Amount, times (ii) a fraction, the
numerator of which is the number of days elapsed in such year to the date of the
payoff, and the denominator of which is 360, exceeds (b) the amount of interest
that was accrued and payable hereunder during such year.
(d) Payments. Interest hereunder shall be due
and payable, in arrears, on the first day of each month during the term hereof.
Borrower hereby authorizes Foothill, and Foothill hereby agrees that it will,
without prior notice to Borrower, charge such interest, all Foothill Expenses
(as and when incurred), and all installments or other payments due under any
note or other Loan Document to Borrower's loan account, which amounts thereafter
shall accrue interest at the rate then applicable hereunder. Any interest not
paid when due shall be compounded by becoming a part of the Obligations, and
such interest shall thereafter accrue interest at the rate then applicable
hereunder.
(e) Computation. The Reference Rate as of the
date of this Agreement is eight and one-half percent (8.5%) per annum. In the
event the Reference Rate is
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changed from time to time hereafter, the applicable rate of interest hereunder
automatically and immediately shall be increased or decreased by an amount equal
to such change in the Reference Rate. All interest and fees chargeable under the
Loan Documents shall be computed on the basis of a three hundred sixty (360) day
year for the actual number of days elapsed.
(f) Intent to Limit Charges to Maximum Lawful
Rate. In no event shall the interest rate or rates payable under this Agreement,
plus any other amounts paid in connection herewith, exceed the highest rate
permissible under any law that a court of competent jurisdiction shall, in a
final determination, deem applicable. Borrower and Foothill, in executing this
Agreement, intend legally to agree upon the rate or rates of interest and manner
of payment stated within it; PROVIDED, HOWEVER, that, anything contained herein
to the contrary notwithstanding, if said rate or rates of interest or manner of
payment exceeds the maximum allowable under applicable law, then, IPSO FACTO as
of the date of this Agreement, Borrower is and shall be liable only for the
payment of such maximum as allowed by law, and payment received from Borrower in
excess of such legal maximum, whenever received, shall be applied to reduce the
principal balance of the Obligations to the extent of such excess.
2.5 CREDITING PAYMENTS; APPLICATION OF COLLECTIONS. The
receipt of any wire transfer of funds, check, or other item of payment by
Foothill (whether from transfers to Foothill by the Concentration Account Bank,
the Network Concentration Account Bank, the FPTV Account Banks, or otherwise)
immediately shall be applied to provisionally reduce the Obligations, but shall
not be considered a payment on account unless such wire transfer is of
immediately available federal funds and is made to the appropriate deposit
account of Foothill or unless and until such check or other item of payment is
honored when presented for payment. Anything to the contrary contained herein
notwithstanding, any wire transfer, check, or other item of payment received by
Foothill on account of the Obligations shall be deemed received by Foothill only
if it is received by Foothill on or before 11:00 a.m. Los Angeles time. If any
wire transfer, check, or other item of payment received by Foothill on account
of the Obligations is received by Foothill after 11:00 a.m. Los Angeles time it
shall be deemed to have been received by Foothill as of the opening of business
on the immediately following Business Day.
2.6 STATEMENTS OF OBLIGATIONS. Foothill shall render monthly
statements to Borrower of the Obligations, including principal, interest, fees,
and including an itemization of all charges and expenses constituting Foothill
Expenses owing in reasonable detail so as to enable Borrower to determine the
nature and amount of the relevant charges and payments, and such statements
shall be conclusively presumed to be correct and accurate and constitute an
account stated between Borrower and Foothill unless, within thirty (30) days
after receipt thereof by Borrower, Borrower shall deliver to Foothill by
registered or certified mail at its address specified in SECTION 12, written
objection thereto describing the error or errors
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contained in any such statements. Borrower and Foothill agree to negotiate in
good faith relative to any claimed error or errors and, if an adjustment is
made, Foothill also agrees to reverse the allocable interest charged hereunder
with respect to the adjusted amount.
2.7 FEES. Borrower shall pay to Foothill the following fees:
(a) Amendment and Restatement Fee. A one time
fee of Twenty Five Thousand Dollars ($25,000) which is earned, in full, on the
Effective Date and is due and payable by Borrower to Foothill in connection with
this Agreement on the Effective Date;
(b) Unused Line Fee. On the first day of each
month following the Effective Date and during the term of this Agreement, a fee,
in arrears, in an amount equal to one-half of one percent (0.5%) per annum times
the Average Unused Portion of the Maximum Amount;
(c) Monthly Fee. On the first day of each month
following the Effective Date and during the term of this Agreement, a fee, in
arrears, equal to Twelve Thousand Five Hundred Dollars ($12,500);
(d) Annual Facility Fee. On each anniversary of
the Effective Date, a fee in an amount equal to one-quarter of one percent
(0.25%) of the Maximum Amount, such fee to be fully earned on each such
anniversary;
(e) Financial Examination Fees. Foothill's
customary fee of Six Hundred Fifty Dollars ($650) per day per examiner, plus
reasonable out-of-pocket expenses for each financial analysis and examination of
Borrower performed by Foothill or its agents; it being understood and agreed
that, in the absence of an Event of Default, Foothill will not perform an audit
examination of Borrower and its businesses more frequently than once per quarter
and, in the absence of an Event of Default, Borrower shall not be obligated to
pay more than $25,000 per annum for financial examination fees (exclusive of
reasonable out-of-pocket expenses); and
(f) Servicing Fee. On the first day of each
month occurring after the Effective Date and during the term of this Agreement,
and thereafter so long as any Obligations are outstanding, a servicing fee, in
arrears, in an amount equal to Three Thousand Five Hundred Dollars ($3,500) per
month.
3. CONDITIONS; TERM OF AGREEMENT.
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3.1 CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THIS
AGREEMENT. The effectiveness of this Agreement and the continuing obligation of
Foothill to make advances or to provide the L/C or L/C Guarantys is subject to
the fulfillment, to the reasonable satisfaction of Foothill and its counsel, of
each of the following conditions:
(a) Foothill shall have received the
Reaffirmation Agreement, duly executed, and such document shall be in full force
and effect.
(b) Foothill shall have received a certificate
from the Secretary of each Debtor attesting to the resolutions of such Debtor's
Board of Directors authorizing its execution and delivery of this Agreement and
the other Loan Documents to which such Debtor is a party and authorizing
officers of such Debtor to execute same;
(c) Foothill shall have received an opinion of
Borrower's corporate counsel in form and substance reasonably satisfactory to
Foothill;
(d) all other documents and legal matters in
connection with the transactions contemplated by this Agreement to occur on or
before the Closing Date shall have been delivered or executed or recorded and
shall be in form and substance satisfactory to Foothill and its counsel.
3.2 CONDITIONS PRECEDENT TO ALL ADVANCES, L/CS, OR L/C
GUARANTEES. The following shall be conditions precedent to all advances, L/Cs,
or L/C Guarantees hereunder:
(a) the representations and warranties contained
in this Agreement and the other Loan Documents shall be true and correct in all
material respects on and as of the date of such advance, L/C, or L/C Guaranty,
as though made on and as of such date (except to the extent that such
representations and warranties relate solely to an earlier date);
(b) no Event of Default or event which with the
giving of notice or passage of time would constitute an Event of Default shall
have occurred and be continuing on the date of such advance, L/C, or L/C
Guaranty, nor shall either result from the making thereof; and
(c) no injunction, writ, restraining order, or
other order of any nature prohibiting, directly or indirectly, the making of
such advance or the issuance of such L/C or L/C Guaranty shall have been issued
and remain in force by any governmental authority against Borrower, Foothill, or
any of their Affiliates.
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3.3 [Intentionally omitted.]
3.4 TERM. This Agreement shall become effective upon the
Effective Date and shall continue in full force and effect for a term ending on
the Maturity Date. The foregoing notwithstanding, Foothill shall have the right
to terminate its obligations under this Agreement immediately and without notice
upon the occurrence and during the continuation of an Event of Default.
3.5 EFFECT OF TERMINATION. On the date of termination, all
Obligations (including contingent reimbursement obligations under any
outstanding L/Cs or L/C Guarantees) immediately shall become due and payable
without notice or demand. No termination of this Agreement, however, shall
relieve or discharge Borrower of Borrower's duties, Obligations, or covenants
hereunder, and Foothill's continuing security interests in the Collateral and
the Real Property shall remain in effect until all Obligations have been fully
and finally discharged and Foothill's obligation to provide advances hereunder
is terminated.
3.6 EARLY TERMINATION BY BORROWER. The provisions of SECTION
3.4 notwithstanding, Borrower has the option, at any time upon ninety (90) days
prior written notice to Foothill, to terminate this Agreement by paying to
Foothill, in cash, the Obligations (including an amount equal to the full amount
of the L/Cs or L/C Guarantees), together with a premium (the "Early Termination
Premium") equal to: (a) during the period of time from and after the date of the
execution and delivery of this Agreement up to, but not including, the first
anniversary of the Closing Date, three percent (3.0%) times the Maximum Amount;
(b) during the period of time from and after the first anniversary of the
Closing Date up to, but not including, the second anniversary of the Closing
Date, one and one-half percent (1.5%) times the Maximum Amount; and (c)
thereafter, three-quarters of one percent (0.75%) times the Maximum Amount. The
foregoing notwithstanding, in the event that Borrower terminates this Agreement
and pays to Foothill, in cash, the Obligations on any date that is within sixty
(60) days after the third anniversary of the Closing Date or within sixty (60)
days after the fourth anniversary of the Closing Date, Borrower shall be
relieved of its obligation to pay the Early Termination Premium. Upon written
request therefor from Borrower received by Foothill, Foothill agrees that it
promptly will provide a written statement of the then current outstanding amount
of the Obligations so as to enable Borrower to terminate this Agreement within
the sixty day periods set forth in the preceding sentence.
3.7 TERMINATION UPON EVENT OF DEFAULT. If Foothill terminates
this Agreement upon the occurrence of an Event of Default (unless Borrower is
entitled to terminate this Agreement pursuant to the penultimate sentence of
SECTION 3.6 and properly does so after being notified of the existence of an
Event of Default), in view of the impracticability and extreme difficulty of
ascertaining actual damages and by mutual agreement of the parties as to a
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reasonable calculation of Foothill's lost profits as a result thereof, Borrower
shall pay to Foothill upon the effective date of such termination, a premium in
an amount equal to the Early Termination Premium. The Early Termination Premium
shall be presumed to be the amount of damages sustained by Foothill as the
result of the early termination and Borrower agrees that it is reasonable under
the circumstances currently existing. The Early Termination Premium provided for
in this SECTION 3.7 shall be deemed included in the Obligations.
4. CREATION OF SECURITY INTEREST.
4.1 GRANT OF SECURITY INTEREST. Borrower hereby grants to
Foothill a continuing security interest in all currently existing and hereafter
acquired or arising Collateral in order to secure prompt repayment of any and
all Obligations and in order to secure prompt performance by Borrower of each of
its covenants and duties under the Loan Documents. Foothill's security interests
in the Collateral shall attach to all Collateral without further act on the part
of Foothill or Borrower. Anything contained in this Agreement or any other Loan
Document to the contrary notwithstanding, except for Permitted Asset
Dispositions to the extent permitted hereby, Borrower has no authority, express
or implied, to dispose of any item or portion of the Collateral or the Real
Property. Anything to the contrary in this Agreement or the other Loan Documents
notwithstanding, to the extent this Agreement or any Loan Document purports to
grant to Foothill, a security interest in the FCC Licenses, Foothill shall only
have a security interest in such FCC Licenses at such times and to the extent
that a security interest in such FCC Licenses is permitted under applicable law
and Foothill agrees that, to the extent prior FCC approval is required pursuant
to the Communications Act of 1934, as amended, or the rules and regulations of
the FCC for (a) the operation and effectiveness of any right, or remedy
hereunder or under any Loan Document, or (b) taking any action that may be taken
by Foothill hereunder or under any Loan Document, such right, remedy, or action
will be subject to such prior FCC approval having been obtained by or in favor
of Foothill (and Borrower will use its reasonable best efforts to obtain any
such approval as promptly as possible after Foothill first becomes entitled to
exercise such right, remedy, or action).
4.2 NEGOTIABLE COLLATERAL. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral,
Borrower shall, immediately upon the request of Foothill, endorse and assign
such Negotiable Collateral to Foothill and deliver physical possession of such
Negotiable Collateral (exclusive of Borrower's Books unless an Event of Default
has occurred and is continuing) to Foothill.
4.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, NEGOTIABLE
COLLATERAL. Borrower agrees that it will continue to consolidate their net
receipts into the Concentration Account in accordance with their past practices
as they exist on the Effective Date and that such consolidation will occur not
less frequently than weekly (or, following the occurrence and
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during the continuation of an Event of Default, daily) and will not fail to
consolidate their receipts into the Concentration Account during any week (or,
following the occurrence and during the continuation of an Event of Default, any
day) without the prior written consent of Foothill. In this regard, the net
proceeds (as determined in accordance with Borrower's past practices as they
exist on the Effective Date) of all of Borrower's cash receipts, checks, and
other items of payment (including, insurance proceeds, proceeds of cash sales,
rental proceeds, and tax refunds) automatically will be transferred, directly or
indirectly, on a weekly (or, following the occurrence and during the
continuation of an Event of Default, daily) basis from the original deposit
account to which they are deposited into the Concentration Account. Unless an
Event of Default has occurred and is continuing or Foothill reasonably deems
itself insecure (in accordance with Section 1208 of the Code), Borrower shall be
entitled to use the proceeds of the funds deposited into the Concentration
Account in the ordinary course of their business and consistent with the terms
of this Agreement. From and after the occurrence and during the continuation of
an Event of Default or at such time as Foothill deems itself insecure (in
accordance with Section 1208 of the Code), but not before, Foothill shall be
entitled to send the Sweep Letters to the Concentration Account Bank, the
Network Concentration Account Bank, or the FPTV Account Banks, or exercise its
rights under the Tri-Party Agreements, as applicable, instructing the
Concentration Account Bank, the Network Concentration Account Bank, or the FPTV
Account Bank to remit the proceeds of all of Group's, Network's, or the FPTV
Debtor's cash receipts, checks, and other items of payment directly to an
identified deposit account maintained by Foothill and, upon receipt therein,
Foothill shall apply same to reduce the amount of the Obligations. At any time
that an Event of Default has occurred and is continuing, Foothill or Foothill's
designee may: (a) notify customers or Account Debtors of Borrower that the
Accounts, General Intangibles, or Negotiable Collateral have been assigned to
Foothill or that Foothill has a security interest therein; and (b) collect the
Accounts, General Intangibles, and Negotiable Collateral directly and charge the
reasonable collection costs and expenses to Borrower's loan account. Borrower
agrees that it will hold in trust for Foothill, as Foothill's trustee, any cash
receipts, checks, and other items of payment (including, insurance proceeds,
proceeds of cash sales, rental proceeds, and tax refunds) that it receives and
weekly, or daily, as applicable hereinabove, will deliver said cash receipts,
checks, and other items of payment to the Concentration Account Bank in their
original form as received by Borrower.
4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. At any time
upon the reasonable request of Foothill, Borrower shall execute and deliver to
Foothill all financing statements, continuation financing statements, fixture
filings, security agreements, chattel mortgages, pledges, assignments,
endorsements of certificates of title, applications for title, affidavits,
reports, notices, schedules of accounts, letters of authority, and all other
documents that Foothill may reasonably request, in form reasonably satisfactory
to Foothill, to perfect and continue perfected Foothill's security interests in
the Collateral and the Real Property, and in
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order to fully consummate all of the transactions contemplated hereby and under
the other the Loan Documents.
4.5 POWER OF ATTORNEY. Borrower hereby irrevocably makes,
constitutes, and appoints Foothill (and any of Foothill's officers, employees,
or agents designated by Foothill) as Borrower's true and lawful attorney, with
power to: (a) if, upon a reasonable request therefor, Borrower refuses to, or
fails timely to execute and deliver any of the documents described in SECTION
4.4, sign the name of Borrower on any of the documents described in SECTION 4.4;
(b) at any time that an Event of Default has occurred and is continuing, sign
Borrower's name on any invoice or bill of lading relating to any Account, drafts
against Account Debtors, schedules and assignments of Accounts, verifications of
Accounts, and notices to Account Debtors; (c) send requests for verification of
Accounts; it being agreed that unless an Event of Default has occurred and is
continuing, such verifications shall not indicate that they are being conducted
on behalf of a financier to Borrower; (d) at any time that an Event of Default
has occurred and is continuing, endorse Borrower's name on any checks, notices,
acceptances, money orders, drafts, or other item of payment or security that may
come into Foothill's possession; (e) at any time that an Event of Default has
occurred and is continuing, notify the post office authorities to change the
address for delivery of Borrower's mail to an address designated by Foothill, to
receive and open all mail addressed to Borrower, and to retain all mail relating
to the Collateral and promptly forward all other mail to Borrower; (f) at any
time that an Event of Default has occurred and is continuing, make, settle, and
adjust all claims under Borrower's policies of insurance and make all
determinations and decisions with respect to such policies of insurance; and (g)
at any time that an Event of Default has occurred and is continuing, settle and
adjust disputes and claims respecting the Accounts directly with Account
Debtors, for amounts and upon terms which Foothill determines to be reasonable,
and Foothill may cause to be executed and delivered any documents and releases
which Foothill reasonably determines to be necessary. The appointment of
Foothill as Borrower's attorney, and each and every one of Foothill's rights and
powers, being coupled with an interest, is irrevocable (although conditional
upon certain events occurring and continuing in existence) until all of the
Obligations have been fully and finally repaid and performed and Foothill's
obligation to extend credit hereunder is terminated.
4.6 RIGHT TO INSPECT. Prior to the time that an Event of
Default has occurred and is continuing or Foothill deems itself insecure (in
accordance with Section 1208 of the Code), Foothill (through any of its
officers, employees, or agents) shall have the right, from time to time
hereafter upon prior reasonable notification to Borrower and during normal
business hours, to inspect Borrower's Books and to check, test, and appraise the
Collateral in order to verify Borrower's financial condition or the amount,
quality, value, condition of, or any other matter relating to, the Collateral.
After the time that an Event of Default has occurred and is continuing or
Foothill deems itself insecure (in accordance with Section 1208 of the Code),
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Foothill (through any of its officers, employees, or agents) shall have the
right, from time to time hereafter without prior notification to Borrower and at
any time or times determined by Foothill, to inspect Borrower's Books and to
check, test, and appraise the Collateral in order to verify Borrower's financial
condition or the amount, quality, value, condition of, or any other matter
relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce Foothill to enter into this Agreement,
Borrower makes the following representations and warranties, which shall be
true, correct, and complete in all material respects as of the Effective Date,
and at and as of the date of each advance under the Loan, as though made on and
as of the date of such advance under the Loan (except to the extent that such
representations and warranties expressly relate solely to an earlier date), such
representations and warranties to survive the execution and delivery of this
Agreement:
5.1 NO PRIOR ENCUMBRANCES. Borrower has good and indefeasible
title to the Collateral (other than with respect to the FCC Licenses, which are
subject to periodic renewal) and the Real Property, free and clear of liens,
claims, security interests, or encumbrances, except for Permitted Liens.
5.2 ELIGIBLE ACCOUNTS. The Eligible Accounts are, at the time
of the creation thereof and as of each date on which Borrower includes them in a
Borrowing Base calculation or certification, bona fide existing obligations
created by the sale and delivery of broadcasting time or the production and
syndication of television programming to Account Debtors in the ordinary course
of the Obligee's business, unconditionally owed to an Obligee without defenses,
disputes, offsets, counterclaims, or rights of return or cancellation. The
services giving rise to such Eligible Accounts have been fully performed, except
for the obligation to make additional advertising time available in certain
circumstances. At the time of the creation of an Eligible Account and as of each
date on which Borrower includes an Eligible Account in a Borrowing Base
calculation or certification, Borrower has not received notice of actual or
imminent bankruptcy, insolvency, or material impairment of the financial
condition of any applicable Account Debtor regarding such Eligible Account and,
in the case of an Advertising Agency Account Debtor, of the underlying client of
such Advertising Agency Account Debtor.
5.3 LOCATION OF INVENTORY AND EQUIPMENT. The Inventory and
Equipment are not stored with a bailee, warehouseman, or similar party (without
Foothill's prior written consent) and (except for Inventory and Equipment that,
in the aggregate, has a value of not more than $1,000,000) are located only at
the locations identified on SCHEDULE 6.16 or otherwise permitted by SECTION
6.16.
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5.4 LOCATION OF CHIEF EXECUTIVE OFFICE; FEINS. The chief
executive office of each Debtor is located at its respective address indicated
in the preamble to this Agreement and the FEIN of each Debtor is as set forth on
SCHEDULE 5.4 hereto.
5.5 DUE ORGANIZATION AND QUALIFICATION. Each Debtor is a
corporation existing and in good standing under the laws of the state of its
incorporation and qualified and licensed to do business in, and in good standing
in, any state where the failure to be so licensed or qualified could reasonably
be expected to have a material adverse effect on the business, operations,
condition (financial or otherwise), finances, or prospects of Borrower, taken as
a whole, or on the value of any Material Property. Other than the ownership of
FCC Licenses by each of the License Subs, the License Subs conduct no material
business activities and have no liabilities (other than with respect to their
organization and continued existence) whatsoever.
5.6 DUE AUTHORIZATION; NO CONFLICT. The execution, delivery,
and performance of the Loan Documents are within Borrower's corporate powers,
have been duly authorized, and are not in conflict with nor constitute a breach
of any provision contained in Borrower's Articles or Certificate of
Incorporation, or By-laws, nor will they constitute an event of default under
any material agreement to which Borrower is a party or by which its properties
or assets may be bound.
5.7 LICENSES AND PERMITS. All material licenses, permits, and
consents and similar rights (including FCC Licenses) required from any Federal,
state, or local governmental body for the ownership, construction, use, and
operation of the Communications Systems and other properties now owned and
operated by Borrower, have been validly issued and are in full force and effect
and Borrower is in compliance, in all material respects, with all of the
provisions thereof and none of such licenses, permits, or consents is the
subject of any pending or, to the best of Borrower's knowledge and belief,
threatened proceeding for the revocation, cancellation, suspension, or
non-renewal thereof. Borrower owns or possesses all material patents,
trademarks, trade names, copyrights, and other similar rights necessary for the
conduct of its business as now carried on, without any known conflict of the
rights of others.
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5.8 GOVERNMENTAL CONSENT. No approval, consent, or withholding
of objection on the part of any regulatory body, Federal, state, or local, is
necessary in connection with the execution and delivery by Borrower of this
Agreement or the Loan Documents or, except as contemplated by SECTION 4.1
hereof, compliance by Borrower with any of the provisions of this Agreement or
the Loan Documents.
5.9 NO DEFAULT IN COMMUNICATION FRANCHISE AGREEMENTS. No
material default by Borrower exists under any Communication Franchise Agreement
to which it is a party and no event has occurred or exists which, with notice or
lapse of time or both, would constitute a default by Borrower thereunder and
each such Communication Franchise Agreement has been duly authorized, executed,
and delivered by Borrower and is in full force and effect.
5.10 GOVERNMENTAL AUTHORITY. No consent, authorization,
approval, or other action by, and no notice to or filing with, any governmental
authority or regulatory body or any other Person is required (i) for the grant
by Borrower of the security interest in the Collateral granted hereby or for the
execution, delivery, or performance of this Agreement by Borrower, (ii) except
for filings, recordings, or the taking of possession, in each case, that are
required by law to perfect Foothill security interests or liens in the
Collateral and Real Property and except as contemplated by SECTION 4.1 hereof,
for the perfection of such security interest or the exercise by Foothill of the
rights and remedies provided for in this Agreement, or (iii) except for the
consents, authorizations, approvals, actions, notices, and filings with the FCC
and other governmental authorities, all of which have been duly obtained, taken,
given, or made and are in full force and effect and are not subject to any
conditions (other than those conditions generally applicable to entities holding
licenses, permits, consents, or authorizations granted or issued by the FCC and
other governmental authorities with respect to Broadcast Systems and
Communications Systems), except for the FCC consent required in connection with
the completion of the condition subsequent set forth in SECTION 3.3(F) hereof,
and except for immaterial consents, authorizations, approvals, actions, notices,
and filings with the FCC and other governmental authorities, for the performance
of Borrower's obligations hereunder or the conduct of its business.
5.11 LITIGATION. There are no actions or proceedings pending
or against Borrower before any court or administrative agency and Borrower does
not have knowledge of any pending or threatened litigation, governmental
investigations, or claims, complaints, actions, or prosecutions involving
Borrower, except for: (a) ongoing collection matters in which
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Borrower is the plaintiff; (b) matters disclosed on SCHEDULE 5.11; and (c)
matters that, if decided adversely to Borrower, would not materially impair the
enforceability, validity, or priority of the liens or security interests of
Foothill with respect to Material Property.
5.12 NO MATERIAL ADVERSE CHANGE IN FINANCIAL CONDITION. All
financial statements relating to Borrower that have been delivered by Borrower
to Foothill have been prepared in accordance with GAAP (except, in the case of
interim financial statements, to normal year-end audit adjustments and the lack
of footnotes) and fairly present Borrower's financial condition as of the date
thereof and Borrower's results of operations for the period then ended. There
has not been a material adverse change in the financial condition of Borrower
since the date of the latest financial statements submitted to Foothill on or
before the Effective Date.
5.13 SOLVENCY. Borrower, taken as a whole, is Solvent. No
transfer of property is being made by any Debtor and no obligation is being
incurred by any Debtor in connection with the transactions contemplated by this
Agreement or the other Loan Documents with the intent to hinder, delay, or
defraud either present or future creditors of any Debtor.
5.14 EMPLOYEE BENEFITS. Except for any Benefit Plan being
submitted for Internal Revenue Service review and that is described on SCHEDULE
5.14 hereto, each Benefit Plan is in compliance in all material respects with
the applicable provisions of ERISA and the IRC. Each Qualified Plan and
Multiemployer Plan has been determined by the Internal Revenue Service to
qualify under Section 401 of the IRC, and the trusts created thereunder have
been determined to be exempt from tax under Section 501 of the IRC, and, to the
best knowledge of Borrower, nothing has occurred that would cause the loss of
such qualification or tax-exempt status. There are no outstanding liabilities
under Title IV of ERISA with respect to any Benefit Plan maintained or sponsored
by Borrower or any ERISA Affiliate, nor with respect to any Benefit Plan to
which Borrower or any ERISA Affiliate contributes or is obligated to contribute
which could reasonably be expected to have a material adverse effect on the
financial condition of Borrower. No Benefit Plan subject to Title IV of ERISA
has any Unfunded Benefit Liability which could reasonably be expected to have a
material adverse effect on the financial condition of Borrower. Neither Borrower
nor any ERISA Affiliate has transferred any Unfunded Benefit Liability to a
person other than Borrower or an ERISA Affiliate or has otherwise engaged in a
transaction that could be subject to Sections 4069 or 4212(c) of ERISA which
could reasonably be expected to have a material adverse effect on the financial
condition of Borrower. Neither Borrower nor any ERISA Affiliate has incurred nor
reasonably expects to incur (x) any liability (and no event has occurred which,
with the giving of notice under Section 4219 of ERISA, would result in such
liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer
Plan, or (y) any liability under Title IV of ERISA (other than premiums due but
not delinquent under Section 4007 of ERISA) with respect to a Benefit Plan,
which could, in either event, reasonably be expected to have a material adverse
effect on the financial condition of Borrower. No application for a funding
waiver or an extension of any amortization period pursuant to Section 412 of the
IRC has been made with respect to
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any Benefit Plan. No ERISA Event has occurred or is reasonably expected to occur
with respect to any Benefit Plan which could reasonably be expected to have a
material adverse effect on the financial condition of Borrower, other than the
pending litigation styled JOHN BLAIR COMMUNICATIONS, INC. PROFIT SHARING PLAN,
ET AL V. TELEMUNDO GROUP, INC. PROFIT SHARING PLAN, ET AL that is more
particularly described on SCHEDULE 5.11 hereto. Borrower and each ERISA
Affiliate have complied in all material respects with the notice and
continuation coverage requirements of Section 4980B of the IRC.
5.15 ENVIRONMENTAL CONDITION. None of Borrower's properties or
assets has ever been used by Borrower in the disposal of, or to produce, store,
handle, treat, release, or transport, any Hazardous Materials in violation of
any applicable law or regulation. To the best of Borrower's knowledge, none of
Borrower's properties or assets has ever been designated or identified in any
manner pursuant to any environmental protection statute as a Hazardous Materials
disposal site, or a candidate for closure pursuant to any environmental
protection statute. To the best of Borrower's knowledge, no lien arising under
any environmental protection statute has attached to any revenues or to any real
or personal property owned or operated by Borrower. Borrower has not received a
summons, citation, notice, or directive from the Environmental Protection Agency
or any other federal or state governmental agency concerning any action or
omission by Borrower resulting in the releasing or disposing of Hazardous
Materials into the environment.
5.16 CAPITAL STOCK OF GROUP'S SUBSIDIARIES.
(a) Set forth on SCHEDULE 5.16 is a complete and
accurate list of Group's Subsidiaries, showing: (i) the jurisdiction of their
incorporation; and (ii) the number outstanding and the percentage of the
outstanding shares of each such class owned (directly or indirectly) by Group or
one or more of its Subsidiaries. All of the outstanding capital stock of each of
Group's Subsidiaries has been validly issued and is fully paid and
non-assessable.
(b) Except as set forth on SCHEDULE 5.16, no
capital stock (or any securities, instruments, warrants, option, or purchase
rights, conversion or exchange rights, calls, commitments, or claims of any
character convertible into or exercisable for capital stock) of Group's
Subsidiaries is subject to issuance under any security, instrument, warrant,
option or purchase rights, conversion or exchange rights, call, commitment, or
claim of any right, title, or interest therein or thereto.
5.17 RELIANCE BY FOOTHILL; CUMULATIVE. Each warranty and
representation contained in this Agreement automatically shall be deemed
repeated (except for those that expressly relate solely to an earlier date) with
each advance or issuance of an L/C or L/C Guaranty and shall be conclusively
presumed to have been relied on by Foothill regardless of any investigation made
or information possessed by Foothill. The warranties and representations set
forth herein shall be cumulative and in addition to any and all other warranties
and representations that Borrower now or hereafter shall give, or cause to be
given, to Foothill.
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6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, and unless Foothill shall otherwise consent in writing, each Debtor
shall do all of the following:
6.1 ACCOUNTING SYSTEM. Borrower shall maintain a system of
accounting in accordance with GAAP with ledger and account cards or computer
tapes, discs, printouts, and records pertaining to the Collateral which contain
information as from time to time reasonably may be requested by Foothill.
Borrower also shall keep proper books of account showing all sales, claims, and
allowances on its Inventory.
6.2 COLLATERAL REPORTS. Borrower shall deliver to Foothill,
(a) no later than the twentieth (20th) day of each month during the term of this
Agreement, a detailed aging, by total, of the Accounts, a reconciliation
statement, and a summary aging, by vendor, of all accounts payable and any book
overdraft, and (b) on a weekly basis, a report of all deposits made to the
Concentration Account and the Network Concentration Account. Original sales
invoices evidencing sales shall be mailed by Borrower to each Account Debtor on
a monthly basis with, at Foothill's request, a copy to Foothill. With such
regularity as Foothill shall require, but not more frequently than once per
month, Borrower shall deliver to Foothill collection reports, sales journals,
invoices, original delivery receipts, customer's purchase orders, shipping
instructions, bills of lading, and other documentation respecting shipment
arrangements; PROVIDED, HOWEVER, that, upon the occurrence and continuation of
an Event of Default, such information shall be provided on a daily basis. Absent
such a request by Foothill, copies of all such documentation shall be held by
Borrower as custodian for Foothill. In addition, from time to time, Borrower
shall deliver to Foothill such other and additional information or documentation
as Foothill reasonably may request.
6.3 GOVERNMENT AUTHORIZATION. Borrower shall deliver to
Foothill, as soon as practicable, and in any event within twenty (20) days after
the receipt by Borrower from the FCC or any other governmental agency having
jurisdiction over the operations of Borrower or filing or receipt thereof by
Borrower, (i) copies of any order or notice of the FCC or such other agency or
court of competent jurisdiction which designates any material FCC License or
other material franchise, permit, or other governmental operating authorization
of Borrower, or any application therefor, for a hearing or which refuses renewal
or extension of, or revokes or suspends the authority of Borrower to construct
or operate a Communications System (or portion thereof), (ii) a copy of any
competing application filed with respect to any such FCC License or other
authorization, or application therefor, of Borrower, or any citation, notice of
violation, or order to show cause issued by the FCC or other agency or any
complaint filed by the FCC or other agency which is available to Borrower, and
(iii) a copy of any notice or application by Borrower requesting authority to or
notifying the FCC of its intent to cease broadcasting on any broadcast station
for any period in excess of twenty (20) days.
6.4 OFF-THE-AIR REPORTS. Borrower shall deliver promptly to
Foothill notice
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of each occurrence of a period of twenty-four (24) consecutive hours or more
during which any Communications System owned or operated by Borrower was not
broadcasting.
6.5 SCHEDULES OF ACCOUNTS. With such regularity as Foothill
shall require, but not more frequently than once per month, Borrower shall
provide Foothill with schedules describing all Accounts; provided, HOWEVER,
that, upon the occurrence and continuation of an Event of Default, such
information shall be provided on a daily basis. Foothill's failure to request
such schedules or Borrower's failure to execute and deliver such schedules shall
not affect or limit Foothill's security interests or other rights in and to the
Accounts.
6.6 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Borrower
agrees to deliver to Foothill: (a) as soon as available, but in any event within
fifty (50) days after the end of each March, June, and September, a company
prepared consolidated balance sheet, income statement, and cash flow statement
covering Borrower's operations during such period; and (b) as soon as available,
but in any event within one hundred five (105) days after the end of each of
Borrower's fiscal years, consolidated financial statements of Borrower for each
such fiscal year, audited by independent certified public accountants reasonably
acceptable to Foothill (it being agreed that any of the "Big Six" accounting
firms are acceptable to Foothill) and certified, without any material
qualifications, by such accountants to have been prepared in accordance with
GAAP, together with a written report of such accountants addressed to Foothill
stating that in making the examination necessary for certification of such
audited financial statements nothing has come to their attention that would lead
them to believe that there then exists, or existed during the period covered by
such audited financial statements, any Event of Default. Such audited financial
statements shall include a balance sheet, profit and loss statement, and cash
flow statement, and, if prepared, such accountants' letter to management. In
addition to the financial statements referred to above, with the delivery of
each quarterly and year-end financial statement Borrower agrees to deliver
supplemental financial schedules consisting of a balance sheet and income
statement prepared on a consolidating basis so as to present each Debtor
separately.
Together with the above, Borrower also shall deliver to
Foothill Borrower's Form 10-Q Quarterly Reports, Form 10-K Annual Reports, and
Form 8-K Current Reports, and any other filings made by Borrower with the
Securities and Exchange Commission, if any, within five (5) days of filing, or
any other information that is provided by Borrower to its shareholders, and any
other report reasonably requested by Foothill relating to the Collateral, the
Real Property, or the financial condition of Borrower.
Each quarter, together with the financial statements provided
pursuant to SECTION 6.6(A), Borrower shall deliver to Foothill a certificate
signed by its chief financial officer to the effect that: (i) all financial
statements delivered or caused to be delivered to Foothill hereunder have been
prepared in accordance with GAAP (except, in the case of interim financial
statements, to normal year-end audit adjustments and the lack of footnotes) and
fairly present the financial condition of Borrower; (ii) Borrower is in timely
compliance with all of its covenants and agreements hereunder; (iii) the
representations and warranties of Borrower contained in this
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Agreement and the other Loan Documents are true and correct in all material
respects on and as of the date of such certificate, as though made on and as of
such date (except to the extent that such representations and warranties relate
solely to an earlier date); and (iv) on the date of delivery of such certificate
to Foothill there does not exist any condition or event that constitutes an
Event of Default (or, in each case, to the extent of any non-compliance,
describing such non-compliance as to which he or she may have knowledge and what
action Borrower has taken, is taking, or proposes to take with respect thereto).
Borrower hereby irrevocably authorizes and directs all
auditors, accountants, or other third parties to deliver to Foothill, upon the
occurrence and during the continuation of an Event of Default and at Borrower's
expense, copies of Borrower's financial statements, papers related thereto, and
other accounting records of any nature in their possession, and to disclose to
Foothill any information they may have regarding Borrower's business affairs and
financial conditions.
6.7 TAX RETURNS. Borrower agrees to deliver to Foothill copies
of each of Borrower's future federal income tax returns, and any amendments
thereto, within thirty (30) days of the filing thereof with the Internal Revenue
Service.
6.8 [Intentionally omitted.]
6.9 RETURNS. Returns and allowances, if any, as between
Borrower and its Account Debtors shall be on the same basis and in accordance
with the usual customary practices of Borrower, as they exist at the time of the
execution and delivery of this Agreement and as they may be modified from time
to time in accordance with industry practice and the requirements of Borrower's
business. On a monthly basis, Borrower shall notify Foothill of all material
returns and recoveries and of all material disputes and claims; PROVIDED,
HOWEVER, that, upon the occurrence and continuation of an Event of Default, such
information shall be provided on a daily basis.
6.10 TITLE TO EQUIPMENT. Upon Foothill's reasonable request,
Borrower immediately shall deliver to Foothill, properly endorsed, any and all
evidences of ownership of, certificates of title, or applications for title to
any items of Equipment.
6.11 MAINTENANCE OF EQUIPMENT. Borrower shall keep and
maintain the Equipment in reasonably good operating condition and repair
(ordinary wear and tear excepted), and make all reasonably necessary
replacements thereto so that the value and operating efficiency thereof shall at
all times be reasonably maintained and preserved. Borrower shall not permit any
item of Equipment to become a fixture to real estate or an accession to other
property, and the Equipment is now and shall at all times remain personal
property.
6.12 TAXES. All assessments and taxes, whether real, personal,
or otherwise, due or payable by, or imposed, levied, or assessed against
Borrower or any of its property have been paid, and shall hereafter be paid in
full, before delinquency or before the expiration of any
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extension period. Borrower shall make due and timely payment or deposit of all
federal, state, and local taxes, assessments, or contributions required of it by
law, and will execute and deliver to Foothill, on demand, appropriate
certificates attesting to the payment thereof or deposit with respect thereto.
Borrower will make timely payment or deposit of all tax payments and withholding
taxes required of it by applicable laws, including those laws concerning
F.I.C.A., F.U.T.A., state disability, and local, state, and federal income
taxes, and will, upon reasonable request, furnish Foothill with proof
satisfactory to Foothill indicating that Borrower has made such payments or
deposits. The foregoing to the contrary notwithstanding, Borrower shall not be
required to pay or discharge any such assessment, tax (other than payroll
taxes), or contribution so long as the validity thereof shall be the subject of
a Permitted Protest.
6.13 INSURANCE.
(a) Borrower, at its expense, shall keep the
Collateral and the Real Property insured against loss or damage by fire, theft,
explosion, sprinklers, and all other hazards and risks, and in such amounts, as
are ordinarily insured against by other owners in similar businesses. Borrower
also shall maintain business interruption, public liability, broadcaster's
liability, and property damage insurance relating to Borrower's ownership and
use of the Collateral and the Real Property, as well as insurance against
larceny, embezzlement, and criminal misappropriation.
(b) All such policies of insurance (except those
of public liability and property damage) shall contain a 438BFU lender's loss
payable endorsement, or an equivalent endorsement in a form satisfactory to
Foothill, showing Foothill as sole loss payee thereof, and shall contain a
waiver of warranties, and shall specify that the insurer must give at least ten
(10) days prior written notice to Foothill before canceling its policy for any
reason. Borrower shall deliver to Foothill certified copies of such policies of
insurance and reasonable evidence of the payment of all premiums therefor. All
proceeds payable under any such policy shall be payable to Foothill to be
applied on account of the Obligations.
6.14 FINANCIAL COVENANTS. Borrower shall maintain the
financial covenants set forth on SCHEDULE 6.14 attached hereto.
6.15 NO SETOFFS OR COUNTERCLAIMS. All payments hereunder and
under the other Loan Documents made by or on behalf of Borrower shall be made
without setoff or counterclaim and free and clear of, and without deduction or
withholding for or on account of, any federal, state, or local taxes.
6.16 LOCATION OF INVENTORY AND EQUIPMENT. Borrower shall keep
the Inventory and Equipment only at one or more of the locations identified on
SCHEDULE 6.16; PROVIDED, HOWEVER, that Borrower may amend SCHEDULE 6.16 so long
as such amendment occurs by written notice to Foothill not less than thirty (30)
days prior to the date on which the Inventory or Equipment is moved to such new
location, so long as such new location is within the United States, and so long
as, at the time of such written notification, Borrower provides any
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financing statements or fixture filings necessary to perfect and continue
perfected Foothill's security interests in such assets and also provides to
Foothill a landlord's waiver in form and substance reasonably satisfactory to
Foothill.
6.17 LOCATION OF CONCENTRATION ACCOUNT; LOCATION OF NETWORK
CONCENTRATION ACCOUNT; LOCATION OF OTHER DEPOSIT ACCOUNTS. Group shall maintain
the Concentration Account with the Concentration Account Bank; PROVIDED,
HOWEVER, that Group may change the depositary with which the Concentration
Account is maintained so long as such change occurs by written notice to
Foothill not less than thirty (30) days prior to the date on which the change is
to occur, so long as the new depositary is located within the continental United
States of America, and so long as, at the time of such written notification from
Borrower to Foothill, Borrower provides any Notification Letters or financing
statements necessary to perfect and continue perfected Foothill's security
interests in such deposit account. Network shall maintain the Network
Concentration Account with the Network Concentration Account Bank; PROVIDED,
HOWEVER, that Network may change the depositary with which the Network
Concentration Account is maintained so long as such change occurs by written
notice to Foothill not less than thirty (30) days prior to the date on which the
change is to occur, so long as the new depositary is located within the
continental United States of America, and so long as, at the time of such
written notification from Borrower to Foothill, Borrower provides any
Notification Letters or financing statements necessary to perfect and continue
perfected Foothill's security interests in such deposit account. Each Debtor
shall maintain only those deposit accounts reflected on SCHEDULE 6.17 attached
hereto; PROVIDED, HOWEVER, that any Debtor may change the depositary with which
any such deposit account is maintained so long as such change occurs by written
notice to Foothill not less than thirty (30) days prior to the date on which the
change is to occur, so long as the new depositary is located within the
continental United States of America, and so long as, at the time of such
written notification from Borrower to Foothill, such Debtor provides any
Notification Letters or financing statements necessary to perfect and continue
perfected Foothill's security interests in such deposit account.
6.18 COMPLIANCE WITH LAWS. Borrower shall comply with the
requirements of all applicable laws, rules, regulations, and orders of any
governmental authority, including the Fair Labor Standards Act and the Americans
With Disabilities Act, the non-compliance with which, individually or in the
aggregate, would have or could reasonably be expected to have a material adverse
effect on the business, operations, condition (financial or otherwise),
finances, or prospects of Borrower, taken as a whole, or on the value of
Material Property.
6.19 EMPLOYEE BENEFITS.
(a) Borrower promptly shall deliver to Foothill a written
statement by the chief financial officer of Borrower specifying the nature of
any of the following events and the actions which Borrower proposes to take with
respect thereto after the Closing Date, and in any event within ten (10) days of
becoming aware of any of them, and when known, any action taken or threatened by
the Internal Revenue Service, PBGC, Department of Labor, or other party with
respect thereto: (i) an ERISA Event with respect to any Benefit Plan; (ii) the
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incurrence of an obligation to pay additional premium to the PBGC under Section
4006(a)(3)(E) of ERISA with respect to any Benefit Plan; and (iii) any lien on
the assets of Borrower arising in connection with any Benefit Plan.
(b) Borrower shall also promptly furnish to Foothill
copies prepared or received by Borrower or an ERISA Affiliate of: (i) at the
request of Foothill, each annual report (Internal Revenue Service Form 5500
series) and all accompanying schedules, actuarial reports, financial information
concerning the financial status of each Benefit Plan, and schedules showing the
amounts contributed to each Benefit Plan by or on behalf of Borrower or its
ERISA Affiliates for the most recent three (3) plan years; (ii) all notices of
intent to terminate or to have a trustee appointed to administer any Benefit
Plan that is subject to Title IV of ERISA or Section 412 of the IRC; (iii) all
written demands by the PBGC under Subtitle D of Title IV of ERISA; (iv) all
notices required to be sent to employees or to the PBGC under Section 302 of
ERISA or Section 412 of the IRC; (v) all written notices received with respect
to a Multiemployer Benefit Plan concerning (x) the imposition or amount of
withdrawal liability pursuant to Section 4202 of ERISA, (y) a termination
described in Section 4041A of ERISA, or (z) a reorganization or insolvency
described in Subtitle E of Title IV of ERISA; (vi) the adoption of any new
Benefit Plan that is subject to Title IV of ERISA or Section 412 of the IRC by
Borrower or any ERISA Affiliate; (vii) the adoption of any amendment to any
Benefit Plan that is subject to Title IV of ERISA or Section 412 of the IRC, if
such amendment results in a material increase in benefits or Unfunded Benefit
Liability; or (viii) the commencement of contributions by Borrower or any ERISA
Affiliate to any Benefit Plan that is subject to Title IV of ERISA or Section
412 of the IRC; PROVIDED, HOWEVER, that no action is required of Borrower unless
the foregoing would have a material adverse effect on Borrower taken as a whole.
6.20 LEASES. Borrower shall pay when due all rents and other
material amounts payable under any leases to which Borrower is a party or by
which Borrower's properties and assets are bound, unless such payments are the
subject of a Permitted Protest. To the extent that Borrower fails timely to make
payment of such rents and other amounts payable when due under its leases,
Foothill shall be entitled, in its discretion, and without the necessity of
declaring an Event of Default, to reserve an amount equal to such unpaid amounts
from the loan availability created under SECTION 2.1 hereof.
6.21 NOTICES. Borrower promptly shall deliver to Foothill all
material written notices received by it with respect to the Collateral,
including, the Communication Franchise Agreements.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, each Debtor will not do any of the following without Foothill's
prior written consent:
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7.1 INDEBTEDNESS. Create, incur, assume, permit, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement;
(b) Indebtedness set forth on SCHEDULE 7.1
attached hereto;
(c) Indebtedness of Group evidenced by the
Senior Notes;
(d) Indebtedness of any Debtor owing to any
other Debtor;
(e) Indebtedness permitted under SECTION 7.7
hereof;
(f) Indebtedness in the form of surety bonds or
appeal bonds required in the ordinary course of business in connection with the
enforcement of rights or claims of Borrower in connection with judgments that do
not result in an Event of Default under this Agreement;
(g) Indebtedness secured by Permitted Liens; and
(h) refinancings, renewals, or extensions of
Indebtedness permitted under clauses (b), (c), (d), (e), (f), and (g) of this
SECTION 7.1 (and continuance or renewal of any Permitted Liens associated
therewith) so long as: (i) the terms and conditions of such refinancings,
renewals, or extensions do not materially impair the prospects of repayment of
the Obligations by Borrower, (ii) the net cash proceeds of such refinancings,
renewals, or extensions do not result in an increase in the aggregate principal
amount of the Indebtedness so refinanced, renewed, or extended, (iii) such
refinancings, renewals, refundings, or extensions do not result in a shortening
of the average weighted maturity of the Indebtedness so refinanced, renewed, or
extended, and (iv) to the extent that Indebtedness that is refinanced was
subordinated in right of payment to the Obligations, then the subordination
terms and conditions of the refinancing Indebtedness must be at least as
favorable to Foothill as those applicable to the refinanced Indebtedness.
7.2 LIENS. Create, incur, assume, or permit to exist, directly
or indirectly, any lien on or with respect to any of its property or assets, of
any kind, whether now owned or hereafter acquired, or any income or profits
therefrom, except for Permitted Liens (including liens that are replacements of
Permitted Liens to the extent that the original Indebtedness is refinanced under
SECTION 7.1(H) and so long as the replacement liens secure only those assets or
property that secured the original Indebtedness).
7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES. Enter into any
acquisition, merger, consolidation, reorganization, or recapitalization, or
reclassify its capital stock, or liquidate, wind up, or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, assign, lease,
transfer, or otherwise dispose of, in one transaction or a series of
transactions, all
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or any substantial part of its business, property, or assets, where such
business, property, or assets are material to Borrower taken as a whole, and
except for transfers of any property or assets to Group from any other Debtor,
whether now owned or hereafter acquired, or acquire by purchase or otherwise all
or substantially all of the properties, assets, stock, or other evidence of
beneficial ownership of any Person; PROVIDED, HOWEVER, that so long as no Event
of Default has occurred and is continuing, the foregoing shall not preclude
Borrower from making one or more Permitted Investments.
7.4 EXTRAORDINARY TRANSACTIONS AND DISPOSAL OF ASSETS. Enter
into any material transaction not in the ordinary and usual course of Borrower's
business (as now conducted or as presently contemplated), including the sale,
lease, or other disposition of, moving, relocation, or transfer, whether by sale
or otherwise, of any of Borrower's properties or assets; PROVIDED, HOWEVER, that
so long as no Event of Default has occurred and is continuing, the foregoing
shall not preclude Borrower from making Permitted Asset Dispositions. The
foregoing to the contrary notwithstanding, Foothill agrees that its consent to
the sale of property or assets may not be unreasonably withheld if the proceeds
of such sale are sufficient to prepay in full the Obligations and, upon the
receipt thereof, Borrower prepays the Obligations (including any applicable
Early Termination Premium) and terminates this Agreement.
7.5 COMMUNICATION FRANCHISE AGREEMENTS. Borrower shall not,
except solely as, and solely to the extent, expressly permitted pursuant to this
Agreement (i) cancel or terminate any of the Communication Franchise Agreements
or consent to or accept any cancellation or termination thereof, (ii) sell,
assign, or otherwise dispose of (by operation of law or otherwise) any part of
its respective interest or rights under any Communication Franchise Agreements,
(iii) amend, supplement, or otherwise modify any of the Communication Franchise
Agreements in any way that could reasonably be expected to be materially adverse
to Borrower, taken as a whole, (iv) waive any material default under or breach
of any of the Communication Franchise Agreements or waive, fail to enforce,
forgive, or release any material right, interest, or entitlement of any kind,
howsoever arising under or in respect of any of the Communication Franchise
Agreements or vary or agree to the variation in any respect of any of the
material provisions of any of the Communication Franchise Agreements in a manner
that would be materially adverse to Borrower, taken as a whole, or (v) petition,
request, or take any other legal or administrative action which seeks, or may
reasonably be expected, to rescind, terminate, or suspend any of the
Communication Franchise Agreements or amend or modify any of the Communication
Franchise Agreements in any respect of any of the material provisions of any of
the Communication Franchise Agreements in a manner that would be materially
adverse to Borrower, taken as a whole. Borrower, at its expense, will perform
and comply, in all material respects, with all terms and provisions of each of
the Communication Franchise Agreements required to be performed or complied with
by it, will maintain each of the Communication Franchise Agreements in full
force and effect, will enforce each of the Communication Franchise Agreements in
accordance with their respective terms.
7.6 CHANGE NAME. Change any Debtor's name, FEIN, business
structure,
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or identity, or add any new fictitious name; PROVIDED, HOWEVER, that any Debtor
may change its name or add new fictitious names so long as such change or
addition occurs by written notice to Foothill not less than thirty (30) days
prior to the effectiveness thereof, so long as at the time of such written
notification, such Debtor provides any financing statements or fixture filings
necessary to perfect and continue perfected Foothill's security interests.
7.7 GUARANTEE. Guarantee or otherwise become in any way liable
with respect to the obligations of any third Person except by endorsement of
instruments or items of payment for deposit to the account of Borrower or which
are transmitted or turned over to Foothill; PROVIDED, HOWEVER, that Group may
guaranty the obligations of any other Debtor so long as such obligation of such
other Debtor was not prohibited under the other terms of this Agreement.
7.8 RESTRUCTURE. Make any material change in Borrower's
financial structure, the principal nature of Borrower's business operations, or
the date of its fiscal year.
7.9 PREPAYMENTS. Except in connection with a refinancing
permitted by SECTION 7.1(H), prepay, purchase, acquire, redeem, or retire any
Indebtedness of any Debtor owing to any third Person, except that Group shall be
entitled to make the sinking fund payments provided for in the Senior Notes
Indenture.
7.10 CHANGE OF CONTROL. Other than as a result of
distributions made pursuant to the terms of the Plan, cause, permit, or suffer,
directly or indirectly, any Change of Control.
7.11 CAPITAL EXPENDITURES. Make any capital expenditure, or
any commitment therefor, in excess of One Million Five Hundred Thousand Dollars
($1,500,000) for any individual transaction (excluding the replacement of
transmitter and antenna at any individual station, for which any commitment
shall not exceed Four Million Dollars ($4,000,000) for any individual
transaction) or where the aggregate amount of such capital expenditures, made or
committed for in any fiscal year, is in excess of the amount corresponding to
that fiscal year (the "Annual Amount") set forth in the table below:
MAXIMUM AGGREGATE CAPITAL
FISCAL YEAR EXPENDITURES
1996 $9,764,000
1997 $9,377,000
1998 $9,125,000
1999 $9,125,000
Anything in the foregoing to the contrary notwithstanding, in
the event that any amount permitted to be expended for capital expenditures
during any such fiscal year under this
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SECTION 7.11 is not expended during such fiscal year (the "Unexpended Amount"),
Borrower may make additional capital expenditures in the succeeding year in
excess of the Annual Amount permitted in such succeeding fiscal year plus the
Unexpended Amount for such prior fiscal year, it being understood and agreed
that in each year any such prior year's Unexpended Amount shall be deemed
expended prior to the expenditure of any of the current year's Annual Amount.
Such Unexpended Amount for 1995 is $1,156,000.
7.12 CONDITIONAL SALES. Sell any goods or services on
conditional terms of sale; it being understood that, in the ordinary course of
business, Borrower sells commercial advertising time based upon certain ratings
levels and the failure to achieve such ratings levels may require that Borrower
provide additional commercial advertising time to such customer at no additional
cost to such customer.
7.13 DISTRIBUTIONS. Make any distribution or declare or pay
any dividends (in cash or in stock) on, or purchase, acquire, redeem, or retire
any of Borrower's capital stock, of any class, whether now or hereafter
outstanding, except that Group may purchase, acquire, redeem, or retire any of
the capital stock of any of the other Debtors and any Subsidiary of Group may
declare and pay dividends or other distributions to Group.
7.14 ACCOUNTING METHODS. Modify or change, in any material
respect, its method of accounting. After the occurrence and during the
continuation of an Event of Default, Borrower waives the right to assert a
confidential relationship, if any, it may have with any accounting firm or
service bureau in connection with any information requested by Foothill pursuant
to or in accordance with this Agreement and agrees that Foothill may contact
directly any such accounting firm or service bureau in order to obtain such
information.
7.15 INVESTMENTS. Directly or indirectly make or acquire any
beneficial interest in (including stock, partnership interest, or other
securities of), or make any loan, advance, or capital contribution to, any
Person; PROVIDED, HOWEVER, that so long as no Event of Default has occurred and
is continuing, the foregoing shall not preclude Borrower from making Permitted
Investments.
7.16 TRANSACTIONS WITH AFFILIATES. Directly or indirectly
enter into or permit to exist any material transaction with any Affiliate of
Borrower (other than a Debtor) except for transactions that are no less
favorable to Borrower than would be obtained in arm's length transaction with a
non-Affiliate.
7.17 SUSPENSION. Suspend or go out of a substantial portion of
its business where such business is material to Borrower taken as a whole.
7.18 USE OF PROCEEDS. Use the proceeds of the advances made
hereunder for any purpose other than: (a) on or about the Closing Date, together
with other funds of Group and funds received pursuant to the terms of the Plan,
to make the distributions provided for in the Plan; (b) to pay transactional
costs and expenses incurred in connection with this Agreement;
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and (c) thereafter, consistent with the terms and conditions hereof, for its
lawful and permitted corporate purposes.
7.19 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE; INVENTORY
AND EQUIPMENT WITH BAILEES. Borrower covenants and agrees that it will not,
without thirty (30) days prior written notification to Foothill, relocate its
chief executive office to a new location and so long as, at the time of such
written notification, Borrower provides any financing statements or fixture
filings necessary to perfect and continue perfected Foothill's security
interests and also provides to Foothill a landlord's waiver in form and
substance satisfactory to Foothill. The Inventory and Equipment shall not at any
time now or hereafter be stored with a bailee, warehouseman, or similar party
without Foothill's prior written consent.
7.20 AMENDMENT OF CERTAIN DOCUMENTS.
(a) Agree to any amendment to, or waive any of
its rights with respect to, the terms and provisions regarding interest rates,
principal or interest payment amounts, total principal amounts or similar
material terms and provisions of the Senior Notes or the Senior Notes Indenture,
without in each case obtaining the prior written consent of Foothill to such
amendment or waiver which consent shall not be unreasonably withheld; PROVIDED,
HOWEVER, that the foregoing shall not restrict any amendment of the Senior Notes
Indenture in order to conform such documents with the provisions of the TIA.
(b) Agree to any material amendment to or waiver
of the events of default, redemption provisions, or affirmative and negative
covenants of the Senior Notes or the Senior Notes Indenture (including the
defined terms related to any of the foregoing), which would make such terms or
conditions materially more onerous or restrictive to Borrower, without obtaining
the prior written consent of Foothill to such amendment or waiver.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an
event of default (each, an "Event of Default") under this Agreement:
8.1 If Borrower fails to pay when due and payable or when
declared due and payable, any portion of the Obligations (whether of principal,
interest (including any interest which, but for the provisions of the Bankruptcy
Code, would have accrued on such amounts), fees and charges due Foothill,
reimbursement of Foothill Expenses, or other amounts constituting Obligations);
PROVIDED, HOWEVER, that in the case of Overadvances that are caused by the
charging of interest, fees, or Foothill Expenses to Borrower's loan account with
Foothill such event shall not constitute an Event of Default if, within three
(3) Business Days prior telephonic notice of such Overadvance, Borrower prepays,
or otherwise eliminates, such Overadvance;
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8.2 (a) If Borrower fails or neglects to perform, keep, or
observe, in any material respect, any term, provision, condition, covenant, or
agreement contained in SECTIONS 6.2 (Collateral Reports), 6.5 (Schedules of
Accounts), and 6.6 (Financial Statements) of this Agreement and such failure
continues for a period of five (5) days from the date Foothill sends Borrower
telephonic or written notice of such failure or neglect; (b) If Borrower fails
or neglects to perform, keep, or observe, in any material respect, any term,
provision, condition, covenant, or agreement contained in SECTIONS 6.7 (Tax
Returns), 6.10 (Title to Equipment), 6.16 (Location of Inventory and Equipment),
6.18 (Compliance with Laws), 6.19 (Employee Benefits), or 6.20 (Leases) of this
Agreement and such failure continues for a period of fifteen (15) days from the
date of such failure or neglect; (c) If Borrower fails or neglects to perform,
keep, or observe, in any material respect, any term, provision, condition,
covenant, or agreement contained in SECTIONS 6.1 (Accounting System), 6.11
(Maintenance of Equipment) and 6.9 (Returns) of this Agreement and such failure
continues for a period of fifteen (15) days from the date Foothill sends
Borrower telephonic or written notice of such failure or neglect; or (d) If
Borrower fails or neglects to perform, keep, or observe, in any material
respect, any other term, provision, condition, covenant, or agreement contained
in this Agreement, in any of the Loan Documents, or in any other present or
future agreement between Borrower and Foothill (other than any such term,
provision, condition, covenant, or agreement that is the subject of another
provision of this SECTION 8);
8.3 If there is a material impairment of the prospect of
repayment of any portion of the Obligations owing to Foothill or a material
impairment of the value or priority of Foothill's security interests in Material
Property;
8.4 If any Material Property is attached, seized, subjected to
a writ or distress warrant, or is levied upon, or comes into the possession of
any third Person and such attachment, seizure, writ, warrant, or levy is not
released, discharged, or bonded against before the earlier of thirty (30) days
of the date it first arises or five (5) days of the date when such property or
asset is subject to being forfeited by Borrower;
8.5 If an Insolvency Proceeding is commenced by a Debtor;
8.6 If an Insolvency Proceeding is commenced against any
Debtor and any of the following events occur: (a) such Debtor consents to the
institution of the Insolvency Proceeding against it; (b) the petition commencing
the Insolvency Proceeding is not timely controverted; (c) the petition
commencing the Insolvency Proceeding is not dismissed within sixty (60) calendar
days of the date of the filing thereof; provided, HOWEVER, that, during the
pendency of such period, Foothill shall be relieved of its obligation to make
additional advances; (d) an interim trustee is appointed to take possession of
all or a substantial portion of the properties or assets of, or to operate all
or any substantial portion of the business of, any Debtor; or (e) an order for
relief shall have been issued or entered therein;
8.7 If any FPTV Debtor is enjoined, restrained, or in any way
prevented by court order from continuing to conduct all or any material part of
its business affairs and such
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injunction, restraining order, or other court order is not stayed within thirty
(30) days of the date on which it first arises;
8.8 (a) If a notice of lien, levy, or assessment is filed of
record with respect to any of a Debtor's properties or assets by the United
States, or if any taxes or debts owing at any time hereafter to the United
States becomes a lien, whether choate or otherwise, upon any of a Debtor's
properties or assets and, in any such case, the aggregate amount of such taxes
or debts is less than Two Hundred Fifty Thousand Dollars ($250,000) and within
five (5) days of the filing or attachment of same, Borrower does not instruct
Foothill to reserve the entire amount thereof (together with interest and
penalties projected to be added thereto) from the Borrowing Base; or (b) If a
notice of lien, levy, or assessment is filed of record with respect to any of a
Debtor's properties or assets by any state, county, municipal, or other
non-federal governmental agency, or if any taxes or debts owing at any time
hereafter to any one or more of such entities becomes a lien, whether choate or
otherwise, upon any of a Debtor's properties or assets and, in any such case,
such taxes or debts are not the subject of a Permitted Protest, and the lien,
levy, or assessment is not released, discharged, or bonded against before the
earlier of thirty (30) days of the date it first arises or five (5) days of the
date when such property or asset is subject to being forfeited by Borrower;
8.9 If a judgment or other claim becomes a lien or encumbrance
upon any Material Property and the same is not released, discharged, or bonded
against before the earlier of thirty (30) days of the date it first arises or
five (5) days of the date when such property or asset is subject to being
forfeited by Borrower; PROVIDED, HOWEVER, that during such period Foothill shall
be entitled to create a reserve against the Borrowing Base in an amount
sufficient to discharge such lien or encumbrance and any and all penalties or
interest payable in connection therewith;
8.10 (a) If there is a payment default in any agreement to
which a Debtor is a party with one or more third Persons involving One Million
Dollars ($1,000,000), or more, that results in a right by such third Persons,
irrespective of whether exercised, to accelerate the maturity of such Debtor's
obligations thereunder or if there is a nonpayment default in any agreement to
which a Debtor is a party with one or more third Persons involving One Million
Dollars ($1,000,000), or more, that results in the acceleration of the maturity
of such Debtor's obligations thereunder, and, in either such case, such Debtor
is not diligently and in good faith contesting its default thereunder; or (b) If
there is a payment default in any agreement to which a Debtor is a party with
one or more third Persons involving Ten Million Dollars ($10,000,000), or more,
that results in a right by such third Persons, irrespective of whether
exercised, to accelerate the maturity of such Debtor's obligations thereunder or
if there is a nonpayment default in any agreement to which a Debtor is a party
with one or more third Persons involving Ten Million Dollars ($10,000,000), or
more, that results in the acceleration of the maturity of such Debtor's
obligations thereunder;
8.11 If a Debtor makes any payment on account of Indebtedness
that has been contractually subordinated in right of payment to the payment of
the Obligations, except to the
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extent such payment is permitted by the terms of the subordination provisions
applicable to such Indebtedness;
8.12 If any material misstatement or misrepresentation exists
now or hereafter in any warranty, representation, statement, or report at the
time when made to Foothill by a Debtor or any officer, employee, agent, or
director of Debtor, or if any such warranty or representation is withdrawn;
8.13 If the obligation of any guarantor or other third Person
under any Loan Document is limited or terminated by operation of law or by the
guarantor or other third Person thereunder, or any such guarantor or other third
Person becomes the subject of an Insolvency Proceeding; or
8.14 If (a) with respect to any Benefit Plan, there shall
occur any of the following which could reasonably be expected to have a material
adverse effect on the financial condition of Borrower, taken as a whole: (i) the
violation of any of the provisions of ERISA; (ii) the loss by a Benefit Plan
intended to be a Qualified Plan of its qualification under Section 401(a) of the
IRC; (iii) the incurrence of liability under Title IV of ERISA; (iv) a failure
to make full payment when due of all amounts which, under the provisions of any
Benefit Plan or applicable law, Borrower or any ERISA Affiliate is required to
make; (v) the filing of a notice of intent to terminate a Benefit Plan under
Sections 4041 or 4041A of ERISA; (vi) a complete or partial withdrawal of
Borrower or an ERISA Affiliate from any Benefit Plan that is subject to Title IV
of ERISA or Section 412 of the IRC; (vii) the receipt of a notice by the plan
administrator of a Benefit Plan that the PBGC has instituted proceedings to
terminate such Benefit Plan or appoint a trustee to administer such Benefit
Plan; (viii) a commencement or increase of contributions to, or the adoption of
or the amendment of, a Benefit Plan; and (ix) the assessment against Borrower or
any ERISA Affiliate of a tax under Section 4980B of the IRC, and, in any such
case, such act or event shall continue uncured or unremedied for a period of
thirty (30) days after the first occurrence thereof; or (b) the Unfunded Benefit
Liability of all of the Benefit Plans of Borrower and its ERISA Affiliates
shall, in the aggregate, exceed One Million Dollars ($1,000,000).
8.15 If Borrower fails to keep in full force and effect,
suffers the termination or revocation of, terminates, forfeits, or suffers a
materially adverse amendment to, any Communications Franchise or Communications
Franchise Agreement at any time held by Borrower that is necessary to the
operation of any Communications System owned by Borrower.
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9. FOOTHILL'S RIGHTS AND REMEDIES.
9.1 RIGHTS AND REMEDIES. Upon the occurrence, and during the
continuation, of an Event of Default Foothill may, at its election, without
notice of its election and without demand, do any one or more of the following,
all of which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced
by this Agreement, by any of the other Loan Documents, or otherwise, immediately
due and payable;
(b) Cease advancing money or extending credit to
or for the benefit of Borrower under this Agreement, under any of the Loan
Documents, or under any other agreement between any Debtor and Foothill;
(c) Terminate this Agreement and any of the
other Loan Documents as to any future liability or obligation of Foothill, but
without affecting Foothill's rights and security interests in the Collateral or
the Real Property and without affecting the Obligations;
(d) Settle or adjust disputes and claims
directly with Account Debtors for amounts and upon terms which Foothill
considers advisable, and in such cases, Foothill will credit Borrower's loan
account with only the net amounts received by Foothill in payment of such
disputed Accounts after deducting all Foothill Expenses incurred or expended in
connection therewith;
(e) Borrower agrees that, upon the occurrence of
and during the continuance of an Event of Default and at Foothill's request,
each Borrower will immediately file such applications for approval and shall
take all other and further actions required by Foothill to obtain such approvals
or consents of regulatory authorities as are necessary to transfer ownership and
control to Foothill, of the FCC Licenses held by it, or its interest in any
Person holding any such FCC License. To enforce the provisions of this SECTION
9.1(E), Foothill is empowered to request the appointment of a receiver from any
court of competent jurisdiction. Such receiver shall be instructed to seek from
the FCC an involuntary transfer of control of any FCC License for the purpose of
seeking a bona fide purchaser to whom control will ultimately be transferred.
Borrower hereby agrees to authorize such an involuntary transfer of control upon
the request of the receiver so appointed and, if Borrower shall refuse to
authorize the transfer, its approval may be required by the court. Upon the
occurrence and continuance of an Event of Default, Borrower shall further use
its reasonable best efforts to assist in obtaining approval of the FCC, if
required, for any action or transactions contemplated by this Agreement or the
Loan Documents, including, preparation, execution, and filing with the FCC of
the assignor's or transferor's portion of any application or applications for
consent to the assignment of any FCC License or transfer of control necessary or
appropriate under the FCC's rules and regulations for approval of the transfer
or assignment of any portion of the Collateral, together with any FCC License or
other authorization. Borrower acknowledges that the assignment or transfer of
FCC Licenses is integral to Foothill's realization of the value of the
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Collateral, that there is no adequate remedy at law for failure by Borrower to
comply with the provisions of this SECTION 9.1(E) and that such failure would
not be adequately compensable in damages, and therefore agrees that the
agreements contained in this SECTION 9.1(E) may be specifically enforced.
(f) Cause Borrower to hold all returned
Inventory in trust for Foothill, segregate all returned Inventory from all other
property of Borrower or in Borrower's possession and conspicuously label said
returned Inventory as the property of Foothill;
(g) Without notice to or demand upon any Debtor
or any guarantor, make such payments and do such acts as Foothill considers
necessary or reasonable to protect its security interests in the Collateral.
Borrower agrees to assemble the Collateral if Foothill so requires, and to make
the Collateral available to Foothill as Foothill may designate. Borrower
authorizes Foothill to enter the premises where the Collateral is located, to
take and maintain possession of the Collateral, or any part of it, and to pay,
purchase, contest, or compromise any encumbrance, charge, or lien that in
Foothill's determination appears to conflict with its security interests and to
pay all expenses incurred in connection therewith. With respect to any of
Borrower's owned premises, Borrower hereby grants Foothill a license to enter
into possession of such premises and to occupy the same, without charge, for up
to one hundred twenty (120) days in order to exercise any of Foothill's rights
or remedies provided herein, at law, in equity, or otherwise;
(h) Without notice to any Debtor (such notice
being expressly waived), and without constituting a retention of any collateral
in satisfaction of an obligation (within the meaning of Section 9505 of the
Code), set off and apply to the Obligations any and all (i) balances and
deposits of any Debtor held by Foothill (including any amounts received from the
Concentration Account, the Network Concentration Account, or the FPTV Accounts),
or (ii) indebtedness at any time owing to or for the credit or the account of
any Debtor held by Foothill;
(i) Hold, as cash collateral, any and all
balances and deposits of any Debtor held by Foothill, and any amounts received
from the Concentration Account, the Network Concentration Account, or the FPTV
Accounts, to secure the full and final repayment of all of the Obligations;
(j) Ship, reclaim, recover, store, finish,
maintain, repair, prepare for sale, advertise for sale, and sell (in the manner
provided for herein) the Collateral. Foothill is hereby granted a license or
other right to use, without charge, Borrower's labels, patents, copyrights,
rights of use of any name, trade secrets, trade names, trademarks, service
marks, and advertising matter, or any property of a similar nature, as it
pertains to the Collateral, in completing production of, advertising for sale,
and selling any Collateral and Borrower's rights under all licenses and all
franchise agreements shall inure to Foothill's benefit;
(k) Sell the Collateral at either a public or
private sale, or both, by
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way of one or more contracts or transactions, for cash
or on terms, in such manner and at such places (including Borrower's premises)
as is commercially reasonable. It is not necessary that the Collateral be
present at any such sale;
(l) Foothill shall give notice of the
disposition of the Collateral as follows:
(1) Foothill shall give the Debtor with
rights in the Collateral that is being disposed of and each holder of a security
interest in the Collateral who has filed with Foothill a written request for
notice, a notice in writing of the time and place of public sale, or, if the
sale is a private sale or some other disposition other than a public sale is to
be made of the Collateral, then the time on or after which the private sale or
other disposition is to be made;
(2) The notice shall be personally delivered
or mailed, postage prepaid, to the applicable Debtor as provided in SECTION 12,
at least five (5) days before the date fixed for the sale, or at least five (5)
days before the date on or after which the private sale or other disposition is
to be made; no notice needs to be given prior to the disposition of any portion
of the Collateral that is perishable or threatens to decline speedily in value
or that is of a type customarily sold on a recognized market. Notice to Persons
other than a Debtor claiming an interest in the Collateral shall be sent to such
addresses as they have furnished to Foothill;
(3) If the sale is to be a public sale,
Foothill also shall give notice of the time and place by publishing a notice one
time at least five (5) days before the date of the sale in a newspaper of
general circulation in the county in which the sale is to be held;
(m) Foothill may credit bid and purchase at any
public sale; and
(n) Any deficiency that exists after disposition
of the Collateral as provided above will be paid immediately by Borrower. Any
excess will be returned, without interest and subject to the rights of third
Persons, by Foothill to Borrower.
Anything to the contrary contained in this SECTION 9.1 notwithstanding, the
parties hereto acknowledge that the Code requires that the time, place, terms,
and manner of a secured party's sale of collateral must be in good faith and in
a commercially reasonable manner and that the Code prohibits the waiver or
variance of the debtor's rights and the secured party's duties in respect
thereof.
9.2 REMEDIES CUMULATIVE. Foothill's rights and remedies under
this Agreement, the Loan Documents, and all other agreements shall be
cumulative. Foothill shall have all other rights and remedies not inconsistent
herewith as provided under the Code, by law, or in equity. No exercise by
Foothill of one right or remedy shall be deemed an election, and no waiver by
Foothill of any Event of Default shall be deemed a continuing waiver. No delay
by Foothill shall constitute a waiver, election, or acquiescence by it.
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10. TAXES AND EXPENSES.
If any Debtor fails to pay any material monies (whether taxes, rents,
assessments, insurance premiums, or otherwise) due to third Persons, or fails to
make any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, to the extent that Foothill
reasonably determines that such failure by such Debtor could have a material
adverse effect on Foothill's interests in the Collateral or the Real Property,
and to the extent that such amounts are not then the subject of a Permitted
Protest, in its discretion and with at least one (1) day prior telephonic notice
to Borrower, Foothill may do any or all of the following: (a) make payment of
the same or any part thereof; (b) set up such reserves in Borrower's loan
account as Foothill reasonably deems necessary to protect Foothill from the
exposure created by such failure; or (c) obtain and maintain insurance policies
of the type described in SECTION 6.12, and take any action with respect to such
policies as Foothill deems prudent. Any such amounts paid by Foothill shall
constitute Foothill Expenses. Any such payments made by Foothill shall not
constitute an agreement by Foothill to make similar payments in the future or a
waiver by Foothill of any Event of Default under this Agreement. Foothill need
not inquire as to, or contest the validity of, any such expense, tax, security
interest, encumbrance, or lien and the receipt of the usual official notice for
the payment thereof shall be conclusive evidence that the same was validly due
and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 DEMAND; PROTEST; ETC. Each Debtor waives demand, protest,
notice of protest, notice of default or dishonor, notice of payment and
nonpayment, notice of any default, nonpayment at maturity, release, compromise,
settlement, extension, or renewal of accounts, documents, instruments, chattel
paper, and guarantees at any time held by Foothill on which any Debtor may in
any way be liable.
11.2 FOOTHILL'S LIABILITY FOR COLLATERAL. So long as Foothill
complies with its obligations, if any, under Section 9207 of the Code, Foothill
shall not in any way or manner be liable or responsible for: (a) the safekeeping
of the Collateral; (b) any loss or damage thereto occurring or arising in any
manner or fashion from any cause; (c) any diminution in the value thereof; or
(d) any act or default of any carrier, warehouseman, bailee, forwarding agency,
or other Person. All risk of loss, damage, or destruction of the Collateral
shall be borne by Borrower.
11.3 INDEMNIFICATION. Borrower agrees to defend, indemnify,
save, and hold Foothill and its officers, employees, and agents harmless
against: (a) all obligations, demands, claims, and liabilities claimed or
asserted by any other Person arising out of or relating to the transactions
contemplated by this Agreement or any other Loan Document, and (b) all losses
(including reasonable attorneys fees and disbursements) in any way suffered,
incurred, or paid by Foothill as a result of or in any way arising out of,
following, or consequential to the transactions contemplated by this Agreement
or any other Loan Document, but excluding any obligations, demands, claims,
liabilities, and losses caused by Foothill's gross negligence or
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willful misconduct. This provision shall survive the termination of this
Agreement. In addition, Borrower agrees to pay, indemnify, and hold Foothill
harmless from any and all recording and filing fees, any and all documentary
stamp taxes and intangibles taxes and any and all other stamp, excise, or other
taxes (other than any taxes that are determined based solely upon the income or
revenues of Foothill), if any, that may be payable or determined to be payable
in connection with the execution and delivery of, or consummation of any of the
transactions contemplated by, this Agreement, including any advances or loans
made pursuant hereto or the other Loan Documents, and any and all liabilities
with respect to, or resulting from, any delay in paying any of such fees or
taxes.
11.4 SURETYSHIP WAIVERS AND CONSENTS. Each Debtor acknowledges
that the obligations of such Debtor undertaken herein might be construed to
consist, at least in part, of the guaranty of obligations of Persons or entities
other than such Debtor (including the other Debtors party hereto) and, in full
recognition of that fact, each Debtor consents and agrees that Foothill may (if
it has so agreed with another Debtor), at any time and from time to time,
without notice or demand, whether before or after any actual or purported
termination, repudiation or revocation of this Agreement by any one or more
Debtors, and without affecting the enforceability or continuing effectiveness
hereof as to each Debtor: (a) supplement, restate, modify, amend, increase,
decrease, extend, renew, accelerate or otherwise change the time for payment or
the terms of the Obligations or any part thereof, including any increase or
decrease of the rate(s) of interest thereon; (b) supplement, restate, modify,
amend, increase, decrease or waive, or enter into or give any agreement,
approval or consent with respect to, the Obligations or any part thereof, or any
of the Loan Documents or any additional security or guarantees, or any
condition, covenant, default, remedy, right, representation or term thereof or
thereunder; (c) accept new or additional instruments, documents or agreements in
exchange for or relative to any of the Loan Documents or the Obligations or any
part thereof; (d) accept partial payments on the Obligations; (e) receive and
hold additional security or guarantees for the Obligations or any part thereof;
(f) release, reconvey, terminate, waive, abandon, fail to perfect, subordinate,
exchange, substitute, transfer or enforce any security or guarantees, and apply
any security and direct the order or manner of sale thereof as Foothill in its
sole and absolute discretion may determine; (g) release any Person from any
personal liability with respect to the Obligations or any part thereof; (h)
settle, release on terms satisfactory to Foothill or by operation of applicable
laws or otherwise liquidate or enforce any Obligations and any security therefor
or guaranty thereof in any manner, consent to the transfer of any security and
bid and purchase at any sale; or (i) consent to the merger, change or any other
restructuring or termination of the corporate or partnership existence of any
Debtor or any other Person, and correspondingly restructure the Obligations, and
any such merger, change, restructuring or termination shall not affect the
liability of any Debtor or the continuing effectiveness hereof, or the
enforceability hereof with respect to all or any part of the Obligations.
Upon the occurrence and during the continuance of any Event of
Default, Foothill may enforce this Agreement independently as to each Debtor and
independently of any other remedy or security Foothill at any time may have or
hold in connection with the Obligations, and it shall not be necessary for
Foothill to marshal assets in favor of any Debtor or any other Person or to
proceed upon or against or exhaust any security or remedy before proceeding to
enforce this Agreement. Each Debtor expressly waives any right to require
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Foothill to marshal assets in favor of any Debtor or any other Person or to
proceed against any other Debtor or any collateral provided by any Person, and
agrees that Foothill may proceed against Debtors or any collateral in such order
as it shall determine in its sole and absolute discretion.
Foothill may file a separate action or actions against any
Debtor, whether action is brought or prosecuted with respect to any security or
against any other Person, or whether any other Person is joined in any such
action or actions. Each Debtor agrees that Foothill and any Debtor and any
Affiliate of any Debtor may deal with each other in connection with the
Obligations or otherwise, or alter any contracts or agreements now or hereafter
existing between any of them, in any manner whatsoever, all without in any way
altering or affecting the continuing efficacy of this Agreement.
Foothill's rights hereunder shall be reinstated and revived,
and the enforceability of this Agreement shall continue, with respect to any
amount at any time paid on account of the Obligations which thereafter shall be
required to be restored or returned by Foothill, all as though such amount had
not been paid. The rights of Foothill created or granted herein and the
enforceability of this Agreement at all times shall remain effective to cover
the full amount of all the Obligations even though the Obligations, including
any part thereof or any other security or guaranty therefor, may be or hereafter
may become invalid or otherwise unenforceable as against any Debtor and whether
or not any other Debtor shall have any personal liability with respect thereto.
To the maximum extent permitted by applicable law, each Debtor
expressly waives any and all defenses now or hereafter arising or asserted by
reason of (a) any disability or other defense of any other Debtor with respect
to the Obligations, (b) the unenforceability or invalidity of any security or
guaranty for the Obligations or the lack of perfection or continuing perfection
or failure of priority of any security for the Obligations, (c) the cessation
for any cause whatsoever of the liability of any other Debtor (other than by
reason of the full payment and performance of all Obligations), (d) any failure
of Foothill to marshal assets in favor of any Debtor or any other Person, (e)
any failure of Foothill to give notice of sale or other disposition of
collateral to any Debtor or any other Person or any defect in any notice that
may be given in connection with any sale or disposition of collateral; PROVIDED,
HOWEVER, that the foregoing shall not be deemed to include a waiver by the
Debtor that owns the subject collateral of notice of sale or other disposition
thereof, (f) any failure of Foothill to comply with applicable law in connection
with the sale or other disposition of any collateral or other security for any
Obligation, including any failure of Foothill to conduct a commercially
reasonable sale or other disposition of any collateral or other security for any
Obligation; PROVIDED, HOWEVER, that the foregoing shall not be deemed to include
a waiver, by the Debtor that owns the subject collateral, of the requirement of
commercial reasonableness in connection with any such sale or other disposition,
(g) any act or omission of Foothill or others that directly or indirectly
results in or aids the discharge or release of any of any Debtor or the
Obligations or any security or guaranty therefor by operation of law or
otherwise, (h) any law which provides that the obligation of a surety or
guarantor must neither be larger in amount nor in other respects more
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burdensome than that of the principal or which reduces a surety's or guarantor's
obligation in proportion to the principal obligation, (i) any failure of
Foothill to file or enforce a claim in any bankruptcy or other proceeding with
respect to any Person, (j) the election by Foothill of the application or
non-application of Section 1111(b)(2) of the Bankruptcy Code, (k) any extension
of credit or the grant of any lien under Section 364 of the Bankruptcy Code, (l)
any use of cash collateral under Section 363 of the Bankruptcy Code, (m) any
agreement or stipulation with respect to the provision of adequate protection in
any bankruptcy proceeding of any Person, (n) the avoidance of any lien in favor
of Foothill for any reason, or (o) any action taken by Foothill that is
authorized by this section or any other provision of any Loan Document. Until
such time as all of the Obligations have been fully, finally, and indefeasibly
paid in full in cash: (i) each Debtor hereby waives and postpones any right of
subrogation it has or may have as against any other Debtor with respect to the
Obligations; and (ii) in addition, each Debtor also hereby waives and postpones
any right to proceed or to seek recourse against or with respect to any property
or asset of any other Debtor. Each Debtor expressly waives all setoffs and
counterclaims and all presentments, demands for payment or performance, notices
of nonpayment or nonperformance, protests, notices of protest, notices of
dishonor, and all notices of acceptance of this Agreement or of the existence,
creation or incurring of new or additional Obligations.
In the event that all or any part of the Obligations at any time are
secured by any one or more deeds of trust or mortgages or other instruments
creating or granting liens on any interests in real property, each Debtor
authorizes Foothill (or the Collateral Agent (or its agents) on Foothill's
behalf), upon the occurrence of and during the continuance of any Event of
Default, at its sole option, without notice or demand and without affecting the
obligations of any Debtor, the enforceability of this Agreement, or the validity
or enforceability of any liens of, or for the benefit of, Foothill on any
collateral, to foreclose any or all of such deeds of trust or mortgages or other
instruments by judicial or nonjudicial sale.
To the fullest extent permitted by applicable law, each Debtor
expressly waives any defenses to the enforcement of this Agreement or any rights
of Foothill created or granted hereby or to the recovery by Foothill against any
Debtor or any other Person liable therefor of any deficiency after a judicial or
nonjudicial foreclosure or sale, even though such a foreclosure or sale may
impair the subrogation rights of Debtors and may preclude Debtors from obtaining
reimbursement or contribution from other Debtors. Each Debtor expressly waives
any defenses or benefits that may be derived from California Code of Civil
Procedure ss.ss. 580a, 580b, 580d or 726, or comparable provisions of the laws
of any other jurisdiction, and all other suretyship defenses it otherwise might
or would have under California law or other applicable law. Each Debtor
expressly waives any right to receive notice of any judicial or nonjudicial
foreclosure or sale of any real property or interest therein of another Debtor
that is subject to any such deeds of trust or mortgages or other instruments and
any Debtor's failure to receive any such notice shall not impair or affect such
Debtor's obligations or the enforceability of this Agreement or any rights of
Foothill created or granted hereby; PROVIDED, HOWEVER, that the foregoing shall
not be deemed to include a waiver, by the Debtor that owns the subject
collateral, of any right to notice. WITHOUT LIMITING THE GENERALITY OF ANY OTHER
WAIVER OR
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OTHER PROVISION SET FORTH IN THIS SECTION, EACH DEBTOR WAIVES ALL RIGHTS AND
DEFENSES ARISING OUT OF AN ELECTION OF REMEDIES BY FOOTHILL, EVEN THOUGH THAT
ELECTION OF REMEDIES, SUCH AS A NONJUDICIAL FORECLOSURE WITH RESPECT TO SECURITY
FOR THE OBLIGATIONS, HAS DESTROYED SUCH DEBTOR'S RIGHTS OF SUBROGATION AND
REIMBURSEMENT AGAINST THE PRINCIPAL DEBTOR BY THE OPERATION OF SECTION 580D OF
THE CODE OF CIVIL PROCEDURE OR OTHERWISE.
Debtors and each of them warrant and agree that each of the
waivers and consents set forth herein are made after consultation with legal
counsel and with full knowledge of their significance and consequences, with the
understanding that events giving rise to any defense or right waived may
diminish, destroy or otherwise adversely affect rights which Debtors otherwise
may have against other Debtors, Foothill or others, or against Collateral. If
any of the waivers or consents herein are determined to be contrary to any
applicable law or public policy, such waivers and consents shall be effective to
the maximum extent permitted by law.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other Loan Document shall
be in writing and (except for financial statements and other informational
documents which may be sent by first-class mail, postage prepaid and except for
notices under SECTION 2.6 which must be sent by registered or certified mail,
return receipt requested) shall be personally delivered or sent by registered or
certified mail, postage prepaid, return receipt requested, or by telefacsimile
to the applicable Debtor or to Foothill, as the case may be, at its address set
forth below:
IF TO GROUP: TELEMUNDO GROUP, INC.
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Mr. Peter J. Housman II
Telefacsimile No.: (305) 889-7997
WITH COPIES TO: TELEMUNDO GROUP, INC.
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Osvaldo F. Torres
Telefacsimile No.: (305) 889-7987
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IF TO ESTRELLA: ESTRELLA COMMUNICATIONS, INC.
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Mr. Peter J. Housman II
Telefacsimile No.: (305) 889-7997
WITH COPIES TO: TELEMUNDO GROUP, INC.
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Osvaldo F. Torres
Telefacsimile No.: (305) 889-7987
IF TO
ESTRELLA/LICENSE: ESTRELLA LICENSE CORPORATION
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Mr. Peter J. Housman II
Telefacsimile No.: (305) 889-7997
WITH COPIES TO: TELEMUNDO GROUP, INC.
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Osvaldo F. Torres
Telefacsimile No.: (305) 889-7987
IF TO NEW JERSEY: NEW JERSEY TELEVISION BROADCASTING
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Mr. Peter J. Housman II
Telefacsimile No.: (305) 889-7997
WITH COPIES TO: TELEMUNDO GROUP, INC.
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Osvaldo F. Torres
Telefacsimile No.: (305) 889-7987
IF TO NETWORK: TELEMUNDO NETWORK, INC.
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Mr. Peter J. Housman II
Telefacsimile No.: (305) 889-7997
WITH COPIES TO: TELEMUNDO GROUP, INC.
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2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Osvaldo F. Torres
Telefacsimile No.: (305) 889-7987
IF TO TEL/AUS: TELEMUNDO OF AUSTIN, INC.
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Mr. Peter J. Housman II
Telefacsimile No.: (305) 889-7997
WITH COPIES TO: TELEMUNDO GROUP, INC.
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Osvaldo F. Torres
Telefacsimile No.: (305) 889-7987
IF TO TEL/FL: TELEMUNDO OF FLORIDA, INC.
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Mr. Peter J. Housman II
Telefacsimile No.: (305) 889-7997
WITH COPIES TO: TELEMUNDO GROUP, INC.
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Osvaldo F. Torres
Telefacsimile No.: (305) 889-7987
IF TO FL/LICENSE: TELEMUNDO OF FLORIDA LICENSE
CORPORATION
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Mr. Peter J. Housman II
Telefacsimile No.: (305) 889-7997
WITH COPIES TO: TELEMUNDO GROUP, INC.
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Osvaldo F. Torres
Telefacsimile No.: (305) 889-7987
IF TO TEL/HOU: TELEMUNDO OF GALVESTON-HOUSTON, INC.
2290 West 8th Avenue
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Hialeah, Florida 33010
Attn: Mr. Peter J. Housman II
Telefacsimile No.: (305) 889-7997
WITH COPIES TO: TELEMUNDO GROUP, INC.
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Osvaldo F. Torres
Telefacsimile No.: (305) 889-7987
IF TO HOU/LICENSE: TELEMUNDO OF GALVESTON-HOUSTON
LICENSE CORPORATION
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Mr. Peter J. Housman II
Telefacsimile No.: (305) 889-7997
WITH COPIES TO: TELEMUNDO GROUP, INC.
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Osvaldo F. Torres
Telefacsimile No.: (305) 889-7987
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IF TO TEL/MEX: TELEMUNDO OF MEXICO, INC.
900 Market Street, Suite 200
Wilmington, Delaware 19801
Attn: Mr. Peter J. Housman II
Telefacsimile No.: (305) 889-7997
WITH COPIES TO: TELEMUNDO GROUP, INC.
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Osvaldo F. Torres
Telefacsimile No.: (305) 889-7987
IF TO TEL/NORCAL: TELEMUNDO OF NORTHERN CALIFORNIA,
INC.
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Mr. Peter J. Housman II
Telefacsimile No.: (305) 889-7997
WITH COPIES TO: TELEMUNDO GROUP, INC.
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Osvaldo F. Torres
Telefacsimile No.: (305) 889-7987
IF TO NORCAL/LICENSE: TELEMUNDO OF NORTHERN CALIFORNIA
LICENSE CORPORATION
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Mr. Peter J. Housman II
Telefacsimile No.: (305) 889-7997
WITH COPIES TO: TELEMUNDO GROUP, INC.
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Osvaldo F. Torres
Telefacsimile No.: (305) 889-7987
IF TO TEL/SANAN: TELEMUNDO OF SAN ANTONIO, INC.
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Mr. Peter J. Housman II
Telefacsimile No.: (305) 889-7997
WITH COPIES TO: TELEMUNDO GROUP, INC.
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2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Osvaldo F. Torres
Telefacsimile No.: (305) 889-7987
IF TO SANAN/LICENSE: TELEMUNDO OF SAN ANTONIO LICENSE CORPORATION
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Mr. Peter J. Housman II
Telefacsimile No.: (305) 889-7997
WITH COPIES TO: TELEMUNDO GROUP, INC.
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Osvaldo F. Torres
Telefacsimile No.: (305) 889-7987
IF TO TEL/SANFE: TELEMUNDO OF SANTA FE, INC.
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Mr. Peter J. Housman II
Telefacsimile No.: (305) 889-7997
WITH COPIES TO: TELEMUNDO GROUP, INC.
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Osvaldo F. Torres
Telefacsimile No.: (305) 889-7987
IF TO TU MUNDO: TU MUNDO MUSIC, INC.
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Mr. Peter J. Housman II
Telefacsimile No.: (305) 889-7997
WITH COPIES TO: TELEMUNDO GROUP, INC.
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Osvaldo F. Torres
Telefacsimile No.: (305) 889-7987
IF TO SACC/ACQ: SACC ACQUISITION CORPORATION
2290 West 8th Avenue
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Hialeah, Florida 33010
Attn: Mr. Peter J. Housman II
Telefacsimile No.: (305) 889-7997
WITH COPIES TO: TELEMUNDO GROUP, INC.
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Osvaldo F. Torres
Telefacsimile No.: (305) 889-7987
IF TO SAT: SAT CORPORATION
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Mr. Peter J. Housman II
Telefacsimile No.: (305) 889-7997
WITH COPIES TO: TELEMUNDO GROUP, INC.
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Osvaldo F. Torres
Telefacsimile No.: (305) 889-7987
IF TO SACC: SPANISH AMERICAN COMMUNICATIONS
CORPORATION
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Mr. Peter J. Housman II
Telefacsimile No.: (305) 889-7997
WITH COPIES TO: TELEMUNDO GROUP, INC.
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Osvaldo F. Torres
Telefacsimile No.: (305) 889-7987
IF TO WNJU: WNJU-TV BROADCASTING CORPORATION
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Mr. Peter J. Housman II
Telefacsimile No.: (305) 889-7997
WITH COPIES TO: TELEMUNDO GROUP, INC.
2290 West 8th Avenue
Hialeah, Florida 33010
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Attn: Osvaldo F. Torres
Telefacsimile No.: (305) 889-7987
IF TO WNJU/LICENSE: WNJU LICENSE CORPORATION
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Mr. Peter J. Housman II
Telefacsimile No.: (305) 889-7997
WITH COPIES TO: TELEMUNDO GROUP, INC.
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Osvaldo F. Torres
Telefacsimile No.: (305) 889-7987
IF TO FOOTHILL: FOOTHILL CAPITAL CORPORATION
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attn: Business Finance Division
Manager
Telefacsimile No.: (310) 575-3435
WITH COPIES TO: BROBECK, PHLEGER & HARRISON
550 South Hope Street
Los Angeles, California 90071
Attn: John Francis Hilson, Esq.
Telefacsimile No.: (213) 239-1324
The parties hereto may change the address at which they are to
receive notices hereunder, by notice in writing in the foregoing manner given to
the other. All notices or demands sent in accordance with this SECTION 12, other
than notices by Foothill in connection with Sections 9504 or 9505 of the Code,
shall be deemed received on the earlier of the date of actual receipt or three
(3) days after the deposit thereof in the mail. Borrower acknowledges and agrees
that notices sent by Foothill in connection with Sections 9504 or 9505 of the
Code shall be deemed sent when deposited in the mail or transmitted by
telefacsimile.
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13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO WITH
RESPECT TO ALL MATTERS ARISING HEREUNDER OR RELATED HERETO SHALL BE DETERMINED
UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA. THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE
AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA;
PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR
OTHER PROPERTY MAY BE BROUGHT, AT FOOTHILL'S OPTION, IN THE COURTS OF ANY
JURISDICTION WHERE FOOTHILL ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL
OR OTHER PROPERTY MAY BE FOUND. EACH DEBTOR AND FOOTHILL WAIVES, TO THE EXTENT
PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE
OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS
BROUGHT IN ACCORDANCE WITH THIS SECTION 13. EACH DEBTOR AND FOOTHILL HEREBY
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH DEBTOR
AND FOOTHILL REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWER'S DOCUMENTS.
All documents, schedules, invoices, agings, or other papers
delivered to Foothill may be destroyed or otherwise disposed of by Foothill four
(4) months after they are delivered to or received by Foothill, unless Borrower
requests, in writing, the return of said documents, schedules, or other papers
and makes arrangements, at Borrower's expense, for their return.
15. GENERAL PROVISIONS.
15.1 EFFECTIVENESS. This Agreement shall be binding and deemed
effective when executed by Borrower and Foothill.
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15.2 SUCCESSORS AND ASSIGNS. This Agreement shall bind and
inure to the benefit of the respective successors and assigns of each of the
parties; PROVIDED, HOWEVER, that Borrower may not assign this Agreement or any
rights or duties hereunder without Foothill's prior written consent and any
prohibited assignment shall be absolutely void. No consent to an assignment by
Foothill shall release Borrower from its Obligations. Foothill may assign this
Agreement and its rights and duties hereunder and no consent or approval by
Borrower is required in connection with any such assignment. Foothill reserves
the right to sell, assign, transfer, negotiate, or grant participations in all
or any part of, or any interest in Foothill's rights and benefits hereunder. In
connection with any such assignment or participation, Foothill may disclose all
documents and information which Foothill now or hereafter may have relating to
Borrower or Borrower's business; PROVIDED, HOWEVER, that, with respect to any
potential participants or assignees that are first contacted by Foothill on or
after the Closing Date, Foothill agrees to obtain a confidentiality agreement
from such potential participants or assignees containing substantially similar
terms and conditions to those contained in SECTION 15.3 hereof. To the extent
that Foothill assigns its rights and obligations hereunder to a third Person,
Foothill thereafter shall be released from such assigned obligations to Borrower
and such assignment shall effect a novation between Borrower and such third
Person. Anything to the contrary contained herein notwithstanding, Foothill
agrees that so long as no Event of Default has occurred and is continuing,
Foothill will not assign any of its rights and obligations hereunder without the
prior written consent of Borrower which consent shall not be unreasonably
withheld; PROVIDED, HOWEVER, that Borrower's consent shall not be required in
connection with the assignment of Foothill's rights hereunder made in connection
with the sale of all or a substantial portion of Foothill's commercial loan
portfolio. No such consent of Borrower shall be required in connection with the
grant by Foothill of any participation interest in its rights and benefits
hereunder. Anything to the contrary contained herein notwithstanding, Foothill
agrees that it will not participate any of its rights and obligations hereunder
to a third Person known to be engaged in a business that is directly competitive
with the business of Borrower, nor to any Affiliate of any such Person.
15.3 CONFIDENTIALITY. Foothill agrees to hold all material
information obtained by it pursuant to the requirements of this Agreement in
accordance with its reasonable customary procedures for handling confidential
information; it being understood and agreed by Borrower that in any event
Foothill may make disclosures (a) reasonably required by any BONA FIDE potential
or actual assignee, transferee, or participant in connection with any
contemplated or actual assignment or transfer by Foothill of an interest herein
or any participation interest in Foothill's rights hereunder, (b) of information
that has become public by disclosures made by Persons other than Foothill, its
Affiliates, assignees, transferees, or participants, or (c) as required or
requested by any court, governmental or administrative agency, pursuant to any
subpoena or other legal process, or by any law, statute, regulation, or court
order; PROVIDED, HOWEVER, that, unless prohibited by applicable law, statute,
regulation, or court order, Foothill shall notify Borrower of any request by any
court, governmental or administrative agency, or pursuant to any subpoena or
other legal process for disclosure of any such non-public material information
concurrent with, or where practicable, prior to the disclosure thereof.
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<PAGE>
15.4 SECTION HEADINGS. Headings and numbers have been set
forth herein for convenience only. Unless the contrary is compelled by the
context, everything contained in each section applies equally to this entire
Agreement.
15.5 INTERPRETATION. Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved against Foothill
or Borrower, whether under any rule of construction or otherwise. On the
contrary, this Agreement has been reviewed by all parties and shall be construed
and interpreted according to the ordinary meaning of the words used so as to
fairly accomplish the purposes and intentions of all parties hereto.
15.6 SEVERABILITY OF PROVISIONS. Each provision of this
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any specific provision.
15.7 AMENDMENTS IN WRITING. This Agreement can only be amended
by a writing signed by both Foothill and Borrower.
15.8 COUNTERPARTS; TELEFACSIMILE EXECUTION. This Agreement 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 Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of a manually executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver a manually executed
counterpart of this Agreement but the failure to deliver a manually executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement.
15.9 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the
incurrence or payment of the Obligations by Borrower or any guarantor of the
Obligations or the transfer by either or both of such parties to Foothill of any
property of either or both of such parties should for any reason subsequently be
declared to be void or voidable under any state or federal law relating to
creditors' rights, including provisions of the Bankruptcy Code relating to
fraudulent conveyances, preferences, and other voidable or recoverable payments
of money or transfers of property (collectively, a "Voidable Transfer"), and if
Foothill is required to repay or restore, in whole or in part, any such Voidable
Transfer, or elects to do so upon the reasonable advice of its counsel, then, as
to any such Voidable Transfer, or the amount thereof that Foothill is required
or elects to repay or restore, and as to all reasonable costs, expenses, and
attorneys fees of Foothill related thereto, the liability of Borrower or such
guarantor automatically shall be revived, reinstated, and restored and shall
exist as though such Voidable Transfer had never been made.
15.10 INTEGRATION. This Agreement, together with the other
Loan Documents, reflects the entire understanding of the parties with respect to
the transactions contemplated hereby and shall not be contradicted or qualified
by any other agreement, oral or written, before
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<PAGE>
the date hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in Los Angeles, California.
FOOTHILL CAPITAL CORPORATION,
a California corporation
By /s/ CHRISTOPHER J. COUTU
------------------------
Title: Assistant Vice President
TELEMUNDO GROUP, INC.,
a Delaware corporation
By /s/ OSVALDO F. TORRES
---------------------
Title: V.P. General Counsel & Secretary
ESTRELLA COMMUNICATIONS, INC.,
a Delaware corporation
By /s/ OSVALDO F. TORRES
---------------------
Title: V.P. General Counsel & Secretary
ESTRELLA LICENSE CORPORATION,
a Delaware corporation
By /s/ OSVALDO F. TORRES
---------------------
Title: V.P. General Counsel & Secretary
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<PAGE>
NEW JERSEY TELEVISION
BROADCASTING CORPORATION,
a New York corporation
By /s/ OSVALDO F. TORRES
---------------------
Title: V.P. General Counsel & Secretary
TELEMUNDO NETWORK, INC.,
a Delaware corporation
By /s/ OSVALDO F. TORRES
---------------------
Title: V.P. General Counsel & Secretary
TELEMUNDO OF AUSTIN, INC.,
a Delaware corporation
By /s/ OSVALDO F. TORRES
---------------------
Title: V.P. General Counsel & Secretary
TELEMUNDO OF FLORIDA, INC.,
a Delaware corporation
By /s/ OSVALDO F. TORRES
---------------------
Title: V.P. General Counsel & Secretary
TELEMUNDO OF FLORIDA LICENSE CORPORATION,
a Delaware corporation
By /s/ OSVALDO F. TORRES
---------------------
Title: V.P. General Counsel & Secretary
TELEMUNDO OF GALVESTON-HOUSTON, INC.,
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<PAGE>
a Delaware corporation
By /s/ OSVALDO F. TORRES
---------------------
Title: V.P. General Counsel & Secretary
TELEMUNDO OF GALVESTON-HOUSTON
LICENSE CORPORATION,
a Delaware corporation
By /s/ OSVALDO F. TORRES
---------------------
Title: V.P. General Counsel & Secretary
TELEMUNDO OF MEXICO, INC.,
a Delaware corporation
By /s/ OSVALDO F. TORRES
---------------------
Title: V.P. General Counsel & Secretary
TELEMUNDO OF NORTHERN
CALIFORNIA, INC.,
a California corporation
By /s/ OSVALDO F. TORRES
---------------------
Title: V.P. General Counsel & Secretary
TELEMUNDO OF NORTHERN
CALIFORNIA LICENSE CORPORATION,
a Delaware corporation
By /s/ OSVALDO F. TORRES
---------------------
Title: V.P. General Counsel & Secretary
TELEMUNDO OF SAN ANTONIO, INC.,
a Texas corporation
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<PAGE>
By /s/ OSVALDO F. TORRES
---------------------
Title: V.P. General Counsel & Secretary
TELEMUNDO OF SAN ANTONIO LICENSE
CORPORATION,
a Delaware corporation
By /s/ OSVALDO F. TORRES
---------------------
Title: V.P. General Counsel & Secretary
TELEMUNDO OF SANTA FE, INC.,
a Delaware corporation
By /s/ OSVALDO F. TORRES
---------------------
Title: V.P. General Counsel & Secretary
TU MUNDO MUSIC, INC.,
a Delaware corporation
By /s/ OSVALDO F. TORRES
---------------------
Title: V.P. General Counsel & Secretary
SACC ACQUISITION CORPORATION,
a Delaware corporation
By /s/ OSVALDO F. TORRES
---------------------
Title: V.P. General Counsel & Secretary
SAT CORPORATION,
a Delaware corporation
By /s/ OSVALDO F. TORRES
---------------------
Title: V.P. General Counsel & Secretary
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<PAGE>
SPANISH AMERICAN COMMUNICATIONS
CORPORATION,
a Delaware corporation
By /s/ OSVALDO F. TORRES
---------------------
Title: V.P. General Counsel & Secretary
WNJU-TV BROADCASTING
CORPORATION,
a New Jersey corporation
By /s/ OSVALDO F. TORRES
---------------------
Title: V.P. General Counsel & Secretary
WNJU LICENSE CORPORATION,
a Delaware corporation
By /s/ OSVALDO F. TORRES
---------------------
Title: V.P. General Counsel & Secretary
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<PAGE>
================================================================================
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
BY AND BETWEEN
TELEMUNDO GROUP, INC.,
CERTAIN OF ITS SUBSIDIARIES,
AND
FOOTHILL CAPITAL CORPORATION
DATED AS OF DECEMBER 31, 1996
================================================================================
<PAGE>
<TABLE>
TABLE OF CONTENTS
<CAPTION>
<S> <C>
1. DEFINITIONS AND CONSTRUCTION.................................................. 2
1.1 Definitions........................................................... 2
1.2 Accounting Terms...................................................... 24
1.3 Code.................................................................. 24
1.4 Construction.......................................................... 24
1.5 Schedules and Exhibits................................................ 25
2. LOAN AND TERMS OF PAYMENT..................................................... 25
2.1 Revolving Advances.................................................... 25
2.2 Letters of Credit and Letter of Credit Guarantees..................... 26
2.3 Overadvances.......................................................... 28
2.4 Interest: Rates, Payments, and Calculations.......................... 28
2.5 Crediting Payments; Application of Collections........................ 29
2.6 Statements of Obligations............................................. 30
2.7 Fees.................................................................. 30
3. CONDITIONS; TERM OF AGREEMENT................................................. 31
3.1 Conditions Precedent to the Effectiveness of this Agreement........... 31
3.2 Conditions Precedent to All Advances, L/Cs, or L/C Guarantees......... 31
3.3 [Intentionally omitted.].............................................. 32
3.4 Term.................................................................. 32
3.5 Effect of Termination................................................. 32
3.6 Early Termination by Borrower......................................... 32
3.7 Termination Upon Event of Default..................................... 33
4. CREATION OF SECURITY INTEREST................................................. 33
4.1 Grant of Security Interest............................................ 33
4.2 Negotiable Collateral................................................. 34
4.3 Collection of Accounts, General Intangibles, Negotiable Collateral.... 34
4.4 Delivery of Additional Documentation Required......................... 35
4.5 Power of Attorney..................................................... 35
4.6 Right to Inspect...................................................... 36
5. REPRESENTATIONS AND WARRANTIES................................................ 36
5.1 No Prior Encumbrances................................................. 36
5.2 Eligible Accounts..................................................... 36
5.3 Location of Inventory and Equipment................................... 37
5.4 Location of Chief Executive Office; FEIN.............................. 37
5.5 Due Organization and Qualification.................................... 37
5.6 Due Authorization; No Conflict........................................ 37
5.7 Licenses and Permits.................................................. 37
5.8 Governmental Consent.................................................. 38
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<PAGE>
5.9 No Default In Communication Franchise Agreements...................... 38
5.10 Governmental Authority................................................ 38
5.11 Litigation............................................................ 39
5.12 No Material Adverse Change in Financial Condition..................... 39
5.13 Solvency.............................................................. 39
5.14 Employee Benefits..................................................... 39
5.15 Environmental Condition............................................... 40
5.16 Capital Stock of Group's Subsidiaries................................. 40
5.17 Reliance by Foothill; Cumulative...................................... 41
6. AFFIRMATIVE COVENANTS......................................................... 41
6.1 Accounting System..................................................... 41
6.2 Collateral Reports............................................................ 41
6.3 Government Authorization.............................................. 42
6.4 Off-the-Air Reports................................................... 42
6.5 Schedules of Accounts................................................. 42
6.6 Financial Statements, Reports, Certificates........................... 42
6.7 Tax Returns........................................................... 44
6.8 [Intentionally omitted.].............................................. 44
6.9 Returns............................................................... 44
6.10 Title to Equipment.................................................... 44
6.11 Maintenance of Equipment.............................................. 44
6.12 Taxes................................................................. 44
6.13 Insurance............................................................. 45
6.14 Financial Covenants................................................... 45
6.15 No Setoffs or Counterclaims........................................... 45
6.16 Location of Inventory and Equipment................................... 45
6.17 Location of Concentration Account; Location of Network
Concentration Account; Location of Other Deposit Accounts................... 46
6.18 Compliance with Laws.................................................... 46
6.19 Employee Benefits..................................................... 46
6.20 Leases................................................................ 47
6.21 Notices............................................................... 48
7. NEGATIVE COVENANTS............................................................ 48
7.1 Indebtedness.......................................................... 48
7.2 Liens................................................................. 49
7.3 Restrictions on Fundamental Changes................................... 49
7.4 Extraordinary Transactions and Disposal of Assets..................... 49
7.5 Communication Franchise Agreements.................................... 49
7.6 Change Name........................................................... 50
7.7 Guarantee............................................................. 50
7.8 Restructure........................................................... 50
7.9 Prepayments........................................................... 50
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<PAGE>
7.10 Change of Control..................................................... 51
7.11 Capital Expenditures.................................................. 51
7.12 Conditional Sales..................................................... 51
7.13 Distributions......................................................... 51
7.14 Accounting Methods.................................................... 52
7.15 Investments........................................................... 52
7.16 Transactions with Affiliates.......................................... 52
7.17 Suspension............................................................ 52
7.18 Use of Proceeds....................................................... 52
7.19 Change in Location of Chief Executive Office; Inventory and Equipment
with Bailees.......................................................... 52
7.20 Amendment of Certain Documents........................................ 53
8. EVENTS OF DEFAULT............................................................. 53
9. FOOTHILL'S RIGHTS AND REMEDIES................................................ 57
9.1 Rights and Remedies................................................... 57
9.2 Remedies Cumulative................................................... 60
10. TAXES AND EXPENSES............................................................ 60
11. WAIVERS; INDEMNIFICATION...................................................... 60
11.1 Demand; Protest; etc.................................................. 61
11.2 Foothill's Liability for Collateral................................... 61
11.3 Indemnification....................................................... 61
11.4 Suretyship Waivers and Consents....................................... 61
12. NOTICES....................................................................... 65
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.................................... 73
14. DESTRUCTION OF BORROWER'S DOCUMENTS........................................... 74
15. GENERAL PROVISIONS............................................................ 74
15.1 Effectiveness......................................................... 74
15.2 Successors and Assigns................................................ 74
15.3 Confidentiality....................................................... 75
15.4 Section Headings...................................................... 75
15.5 Interpretation........................................................ 75
15.6 Severability of Provisions............................................ 75
15.7 Amendments in Writing................................................. 76
15.8 Counterparts; Telefacsimile Execution................................. 76
15.9 Revival and Reinstatement of Obligations.............................. 76
15.10 Integration........................................................... 76
</TABLE>
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<PAGE>
SCHEDULES
Schedule E-1 Excluded Equipment
Schedule P-1 Permitted Liens
Schedule R-1 Real Property
Schedule 5.4 Location of Chief Executive Office and FEIN
Schedule 5.11 Litigation
Schedule 5.14 ERISA Benefit Plans
Schedule 5.16 Capital Stock of Group's Subsidiaries
Schedule 6.14 Financial Covenants
Schedule 6.16 Location of Inventory and Equipment
Schedule 6.17 Deposit Accounts
Schedule 7.1 Permitted Indebtedness
<PAGE>
Schedule E-1
Excluded Equipment
1. The Equipment provided by Borrower to the New News Service and
that is used in connection with the Hialeah satellite uplink
located at 2470 West 8th Avenue, Hialeah, Florida.
2. The Domestic Satellite Transponder (Galaxy 4, Transponder 8,
99 degrees west longitude).
3. The Equipment provided by Borrower to the New News Service and
that is used in connection with the studio facilities of
approximately 3,600 square feet located within the Telemundo
Network Operations Center located at 2470 West 8th Avenue,
Hialeah, Florida.
4. The Equipment used by Studios located at Calle de Atletas, #2
Colonia Country Club, C.P. 04220, Mexico, D.F.
5. The Equipment used and/or owned by Telemundo of Puerto Rico,
Inc. located at Avenida Roosevelt 383, Hato Rey, Puerto Rico
and elsewhere in Puerto Rico.
6. The Equipment used and/or owned by Video 44, an Illinois
General Partnership, located at 430 West Grant Place, Chicago,
Illinois.
<PAGE>
Schedule P-1
[Permitted Liens]
1. Other than such liens, security interests and other
encumbrances as Foothill may reasonably required to be
released, terminated or discharged (which would not include
purchase money security interests securing the purchase of
property with a value of less than $100,000), all liens,
security interests and other encumbrances disclosed in the UCC
search reports of CT Corporation attached hereto and
incorporated herein by reference that are not discharged on
the Consummation Date pursuant to the Plan, and all liens and
claims that arose in the normal course of business, since such
reports, which are not material to the Borrower taken as a
whole.
<PAGE>
Schedule R-1
Borrower Real Property
Telemundo of San Antonio, Inc.
1. The 1519' KVDA transmission tower and buildings on 85 acres at
12325 Jolly Road, Elmendorf, Texas 78112 (Latitude 29/degree/
17' 39" N and Longitude 98/degree/ 15' 30" W).
2. The corner lot located at 6226 San Pedro, San Antonio, Texas.
3. The office/studio building an lot located at 6234 San Pedro,
San Antonio, Texas.
Telemundo of Galveston-Houston, Inc.
1. Transmitter site located at 3111 West Parkwood Drive,
Friendswood, Texas.
<PAGE>
Schedule 5.4
Debtor Name Debtor FEIN
Group 13-3348686
Estrella 13-3272365
Estrella/License 13-3464780
New Jersey 13-2535420
Network 22-2892128
Tel/Aus 22-3172288
Tel/FL 59-2444938
FL/License 65-0560885
Tel/Hou 13-3464774
Hou/License 65-0572885
Tel/Mex 65-0544502
Tel/NorCal 94-2599863
NorCal/License 65-0572887
Tel/SanAn 74-2523998
SanAn/License 65-0561808
Tel/SanFe 22-3172281
Tu Mundo 65-0543604
SACC/Acq 13-3398460
SAT 13-3469719
SACC 22-2322318
WNJU 22-1696557
WNJU/License 13-3465158
<PAGE>
Schedule 5.11
[Litigation]
See Attached
<PAGE>
Schedule 5.14
[ERISA Benefit Plans]
1. Telemundo Group, Inc. Retirement and Savings Plan.
2. WNJU-TV Broadcasting Corporation Savings Plan for Union
Employees of Telemundo.
<PAGE>
Schedule 6.14
(a) Current Ratio. A ratio of Consolidated Current Assets divided by
Consolidated Current Liabilities of at least one and one tenth to one (1.1:
1.0), measured on a fiscal quarter-end basis; and
(b) Tangible Net Worth. Tangible Net Worth of no less than negative One
Hundred Twenty Million, Seven Hundred Sixty-Three Thousand Dollars
($120,763,000), measured on a fiscal quarter-end basis.
<PAGE>
Schedule 6.16
[Location of Inventory and Equipment]
See Attached
<PAGE>
Schedule 6.17
[Deposit Accounts]
See Attached
<PAGE>
Schedule 7.1
[Permitted Indebtedness]
1. Capital Lease Obligations 6,670
2. The approximately $192 million
in aggregate principal amount of
10.5% Senior Notes
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
AGREEMENT, between Telemundo Group, Inc., a Delaware
corporation (the "Company"), and Roland A. Hernandez ("Executive"), dated as of
September 10, 1997.
WHEREAS, the Company and Executive entered into that certain
Employment Agreement dated as of March 9, 1995 (the "Original Agreement").
WHEREAS, the Company and Executive desire to amend and restate
the Original Agreement in its entirety by entering into this Amended and
Restated Employment Agreement (the "Agreement").
IT IS, THEREFORE, AGREED THAT THE ORIGINAL AGREEMENT IS HEREBY
AMENDED AND RESTATED, AND THE PARTIES HEREBY AGREE, AS FOLLOWS:
1. EMPLOYMENT AND TERM. The Company hereby agrees to continue
Executive in its employ, and Executive hereby agrees to continue such employment
as President and Chief Executive Officer of the Company (or such other position
determined in accordance with Section 9(d)(ii) of this Agreement) for the period
commencing on the date first above written and ending on February 28, 2001;
PROVIDED, HOWEVER, that effective on March 1, 2001 and on each March 1
thereafter, the term of this Agreement shall be extended for an additional
period of one year from the then current expiration date unless the Company or
Executive shall have given written notice to the other of its or his election
not to so extend the term of this Agreement on or before the immediately prior
December 1, subject, however, to earlier termination as provided in Section 9
herein (the "Employment Period"). The Executive also agrees, during the
Employment Period, to serve (without additional compensation) on the Board of
Directors (and appropriate committees thereof) of the Company, if requested by
the Board of Directors.
2. TERMS OF EMPLOYMENT. (a) During the Employment Period,
Executive agrees, subject to the provisions of Section 9(d)(ii) of this
Agreement, to devote all but a DE MINIMUS amount of his business time and
attention to the business and affairs of the "Telemundo Group" (as defined
below) and to use his best efforts to perform faithfully and efficiently such
responsibilities. It is acknowledged and agreed that, in addition to such DE
MINIMUS business time as Executive is permitted to spend other than on the
business and affairs of Telemundo Group described above, Executive may also
serve as a member of the board of directors of (i) (A) Interspan Communications
Ltd., the general partner of Interspan Communications, a California limited
partnership that is an affiliate of the Company, and (B) any corporate or other
successor to such partnership,(ii) Inter-Con Securities Systems, Inc., (iii)
Beneficial Corporation, and (iv) and any other corporation that Executive deems
appropriate or desirable provided that Executive gives to the Board of Directors
advance written notice of his desire to take any such director position and the
Board of Directors approves Executive's taking of such director position, which
approval shall not be unreasonably withheld or delayed, and which activities
referred to in (i)-(iv) above Executive agrees shall not, individually or in the
aggregate, interfere or conflict with the performance of his duties hereunder.
For purposes of this Agreement, the term " Telemundo Group" shall mean any and
all of the Company and any of its current or future divisions or subsidiaries.
(b) The principal place of employment of Executive
shall be the greater Los Angeles, California area. Executive understands and
agrees that in connection with his employment hereunder, he will be required to
travel extensively on behalf of the Telemundo Group.
3. BASE SALARY. During the Employment Period Executive shall
receive a base salary (the "Base Salary") as follows. For the period of the
Employment Period ending on February 28, 1998, the Base Salary shall be payable
to Executive at an annual rate of $700,000. For the period of the Employment
Period beginning on March 1, 1998 and ending on the last day of the Employment
Period, the Base Salary shall be payable to Executive at an annual rate of
$800,000. The Base Salary shall be payable consistent with the executive payroll
practices of the Company.
4. BONUS. For fiscal year 1997 (or portion thereof) during the
Employment Period, Executive will be paid a bonus (the "Formula Bonus") as set
forth below if the Company attains the "High Point," "Target" or "Threshold"
performance targets set by the Compensation and Stock Option Committee (the
"Compensation Committee") of the Board of Directors as set forth on Exhibit A as
"Adjusted Net Contribution" ("ANC"). For each of the 1998, 1999, 2000 and 2001
fiscal years and any subsequent fiscal years (or portion thereof) during the
Employment Period, Executive will be paid a bonus (the "Budget Bonus") as set
forth below in subsection (c) (the "Formula Bonus" and the "Budget Bonus" are
hereinafter collectively referred to as the "Bonus"). Executive shall receive
Bonus only if Executive is employed by the Company on the last day of the fiscal
year to which the Bonus relates, subject to the provisions of Sections 9(a),
9(c) and 9(d). Notwithstanding anything to the contrary contained herein, in no
event shall Executive's Bonus for 1997 exceed $1,050,000.
(a) For the fiscal year ended December 31, 1997, if
the Company attains the Threshold ANC, but less than the Target ANC, Executive
shall receive a Formula Bonus equal to (A) (i) 50% plus (ii) the
Threshold/Target Interpolation Percentage multiplied by (B) the Base Salary for
such year. If the Company attains the Target ANC but less than the High Point
ANC, Executive shall receive a bonus equal to (A)(i) 100% plus (ii) the
Target/High Point Interpolation Percentage multiplied by (B) the Base Salary for
such year. If the Company attains at least the High Point ANC, Executive shall
receive a Formula Bonus equal to 150% of Base Salary for such year. If the
Company shall fail to achieve at least the Threshold ANC for such year, no
Formula Bonus shall be due or payable for such year.
(b) The "Threshold/Target Interpolation Percentage"
shall equal (A) 50%, in the case of the fiscal year ending on December 31, 1997,
multiplied by (B) the number resulting from dividing (x) the amount by which the
actual ANC exceeds the Threshold ANC by (y) the amount by which the Target ANC
exceeds the Threshold ANC.
The "Target/High Point Interpolation Percentage" shall equal
(A) 50% multiplied by (B) the number resulting from dividing (x) the amount by
which the actual ANC exceeds the Target ANC by (y) the amount by which the High
Point ANC exceeds the Target ANC.
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(c) For each of the 1998, 1999, 2000, 2001 fiscal
years and any subsequent fiscal years (or portion thereof) during the Employment
Period, Executive will be paid a Budget Bonus based upon the Company's
achievement of targets with respect to its earnings, before interest, taxes,
depreciation and amortization ("EBITDA") during such fiscal year (which fiscal
year target shall not be greater than the Company's budget for EBITDA for such
fiscal year), as follows. During the first quarter of each such fiscal year, the
Compensation Committee shall establish a budgeted EBITDA target (the "EBITDA
Target") for such fiscal year and notify Executive in writing of the EBITDA
Target. Pursuant to subsection (d), the Committee shall determine the Company's
EBITDA for such fiscal year and shall notify Executive of its determination of
the amount of the Company's EBITDA for such fiscal year and of the amount of
Executive's Budget Bonus for such year, which Budget Bonus shall be equal to (i)
100% of Executive's Base Salary for such fiscal year if the Company's EBITDA is
100% or more of the EBITDA Target, (ii) 50% of Executive's Base Salary for such
fiscal year if the Company's EBITDA is 90% of the EBITDA Target and (iii) pro
rated between 50% and 100% of Executive's Base Salary for such fiscal year if
the Company's EBITDA is more than 90% of the EBITDA Target but less than 100% of
the EBITDA Target. Executive shall be paid no Budget Bonus for any such fiscal
year in which the Company's EBITDA is less than 90% of the EBITDA Target for
such fiscal year.
(d) Each Bonus shall be paid upon certification by
the Compensation Committee (which the Compensation Committee will make within 30
days after the certification by the Company's independent auditors of the
financial statements for such fiscal year) that the performance targets
entitling Executive to a Bonus with respect to such fiscal year have been met.
If the Compensation Committee so certifies, the Bonus will be paid promptly but
in no event later than ten days after such certification.
(e) For purposes of this Agreement, the
"Compensation Committee" shall mean a committee consisting of at least two (2)
directors of the Company, each of whom is a "non-employee director" within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended, and
an "outside director" within the meaning of Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code").
(f) The Company's obligation to pay Budget Bonuses
is conditioned upon the holders of a majority of the outstanding shares of the
Company approving a senior officer incentive plan covering Executive and the
other top three senior officers of the Company, under which plan incentive
compensation will be payable based upon the achievement of performance goals to
be established from time to time by the Compensation Committee.
5. EMPLOYEE BENEFIT PLANS; ETC. (a) Executive shall be
entitled during the Employment Period to participate in all retirement,
disability, pension, savings, medical, insurance and other plans of the Company
generally available to all senior executives (other than any performance based
bonus or option (or similar) plans). Executive shall be entitled to paid
vacations during each year of his employment consistent with the Company's
vacation policy for executive level employees (which shall provide for a least
20 vacation days per year).
(b) The Company shall engage a security service firm
to provide security protection for Executive and members of his family while
Executive and any such
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members who are traveling with Executive are traveling in Latin America in
connection with business of the Company. To this end, Executive shall have the
right to cause the Company to engage the services of an affiliate of Inter-Con
Security Systems, Inc., a company in which Executive has a financial interest,
to provide such protection. Executive agrees that the charges for such
protection services by such affiliate will be at rates that are competitive with
those offered for comparable services by similarly situated service providers
and that the total charges by such affiliate will not exceed $10,000 during any
12-month period without the approval of the Board of Directors of the Company.
(c) The Company shall reimburse Executive, up to an
aggregate of $20,000, for all actual legal expenses and costs actually incurred
by Executive in connection with the negotiation, preparation and execution of
this Agreement and the related compliance with all applicable reporting
requirements under the federal securities laws that are attendant to Executive
and his beneficial ownership of securities issued by the Company.
(d) The Company agrees that it will provide
Executive, in his capacity as an officer and as a director, with indemnification
rights which are not materially less favorable to the Executive, in his capacity
as an officer and as a director, than those provided as of the date of this
Agreement in the By-laws of the Company.
6. LIFE INSURANCE. During the Employment Period, the Company
shall, at its own cost and expense (but only to the extent Executive passes a
physical examination and is insurable at standard rates), maintain a term life
insurance policy or similar coverage on the life of Executive in the amount of
$2,000,000 payable to such beneficiary or beneficiaries as Executive may
designate. The Company may maintain such other insurance on the life of
Executive as it deems appropriate, and Executive agrees to submit to all
requested medical examinations and procedures required in connection therewith.
In lieu of the term life insurance described above,
Executive shall have the option to obtain whole life or other life insurance in
an amount equal to or greater than $2,000,000, in which case the Company shall
reimburse Executive each year during the Employment Period an amount equal to
the premium which it would have paid for $2,000,000 of term life insurance
described above.
7. STOCK OPTION AGREEMENT. Contemporaneously with and in
connection with the execution of the Original Agreement, the parties hereto
entered into a Nonqualified Stock Option Agreement For Corporate Officers
("Stock Option Agreement") with respect to an aggregate 512,500 shares of the
Company's Series A Common Stock, par value $.01 per share (the "Common Stock"),
which Stock Option Agreement is being amended concurrently with the execution of
this Agreement (the "Amended Option Agreement"). Contemporaneously with and in
connection with the execution of this Agreement, the parties hereto are entering
into a Nonqualified Stock Option Agreement For Corporate Officers with respect
to an aggregate 30,000 shares of Common Stock (the "1997 Option Agreement").
8. EXPENSES. The Company shall reimburse Executive for all
reasonable expenses properly incurred by him in accordance with the policies of
the Telemundo Group in effect from time to time, on behalf of the Telemundo
Group in the performance of his duties hereunder, provided that proper vouchers
are submitted to the Company by Executive evidencing such expenses and the
purposes for which the same were incurred.
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9. TERMINATION. The Company shall have the right to terminate
Executive's employment only as expressly provided in this Agreement.
(a) DEATH OR DISABILITY. Except as otherwise provided
herein, this Agreement shall terminate automatically upon Executive's death.
The Company may terminate this Agreement after having
established Executive's "Disability" (as defined below), by giving Executive
written notice of its intention to terminate Executive's employment. For
purposes of this Agreement, "Disability" means Executive's inability to perform
substantially all his duties and responsibilities to the Telemundo Group by
reason of a physical or mental disability or infirmity (i) for a continuous
period of twelve consecutive months or (ii) at such earlier time as Executive
submits medical evidence satisfactory to the Company or the Board of Directors
determines in good faith and upon competent medical advice that Executive has a
physical or mental disability or infirmity that will likely prevent Executive
from substantially performing his duties and responsibilities for twelve
consecutive months or longer. The date of Disability shall be the day on which
Executive receives notice from the Company pursuant to this Section 9.
Upon termination of Executive's employment because of
death or Disability, the Company shall pay Executive or his estate or other
personal representative (i) within 60 days, the amount of Executive's Base
Salary earned up to the date of death or Disability, as the case may be, through
the date of termination, (ii) all benefits and other items referred to in
Sections 5 and 8 which are due up to the date of death or Disability and (iii)
when otherwise due in accordance with the provisions of Section 4, the Bonus, if
any, earned for the year in which such termination occurred, without regard to
whether Executive is an employee of the Company on the last day of such year.
(b) CAUSE; RESIGNATION WITHOUT GOOD REASON OR AS A
SPECIFIED RESIGNATION. The Company shall have the right to terminate Executive's
employment for "Cause" as defined below. Except as provided in Section 15
herein, (i) upon termination of Executive's employment for Cause or (ii) upon
Executive resigning as an employee pursuant to a resignation that is without
Good Reason and is not a Specified Resignation (as defined in Section 9(d)(i)),
this Agreement shall terminate and the Executive shall not be entitled to
receive any compensation or other benefits other than (x) Base Salary earned up
to the date of such termination or resignation and (y) all benefits and other
items referred to in Sections 5 and 8 which are due up to the date of such
termination or resignation (and the Company shall be entitled to terminate any
life insurance payments provided pursuant to Section 6).
For purposes of this Agreement, "Cause" shall mean
(i) the willful and continued failure by Executive to perform substantially all
his duties to the Company or the failure by the Executive to comply with the
reasonable written policies, procedures and directives of the Board of Directors
(other than any such failure resulting from his death or Disability), in each
case after being given written notice by the Board of Directors of a failure to
perform or comply (which notice specifically identifies the manner in which
Executive has failed to perform or comply) and a reasonable opportunity to cure
such noncompliance or nonperformance; (ii) the willful misconduct by Executive
in the performance of his duties to the Company, provided that (for purposes of
this clause (ii) only and not for any other purpose or interpretation of this
Agreement) an act shall be considered
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"willful" only if done in bad faith and not in the best interests of the
Company; (iii) the grossly negligent performance by Executive of his duties to
the Company; (iv) the conviction of Executive by a court of competent
jurisdiction of the commission of (x) a felony or (y) a crime involving moral
turpitude; or (v) a material breach by Executive of Sections 10 or 11 hereof.
Notwithstanding the foregoing, the Company shall not
be entitled to terminate Executive for any of the reasons specified in clause
(i), (ii), (iii) or (v) of the immediately preceding paragraph unless such
termination is authorized by a resolution adopted by the Board of Directors of
the Company at a meeting called and held for this purpose (after five business
days' prior written notice to Executive, which prior written notice shall state
the general facts, circumstances or
deficiencies supporting a claim for Cause termination, and after affording
Executive and his counsel an opportunity to be heard before the Board of
Directors).
(c) TERMINATION WITHOUT CAUSE; NON-RENEWAL.
Notwithstanding anything to the contrary contained herein, the Company shall
have the right to terminate the employment of Executive at any time without
Cause and the Company shall be entitled to determine, in its sole and absolute
discretion, not to extend the Employment Period as provided in Section 1. Upon a
termination without Cause, except as provided in Section 15, this Agreement
shall terminate and the Executive shall not be entitled to receive any
compensation or other benefits, except that the Company shall (i) through the
later of February 28, 2001 or the first anniversary of the date of termination
of Executive's employment (the "Entitlement Date") continue to pay to Executive
the Base Salary in effect immediately prior to the date of termination, such
payments to be made in installments at the times such amounts would have been
paid if the Agreement had not been so terminated, and (ii) pay to the Executive,
when otherwise due in accordance with Section 4, the Bonus, if any, earned for
the fiscal year in which such termination occurs, without regard to whether
Executive is employed on the last day of such fiscal year and (iii) through the
Entitlement Date continue Executive's benefits and other items referred to in
Section 5 or, to the extent the Company is legally unable to provide any such
benefits or other items as a result of Executive no longer being an employee,
reimburse Executive for his cost (not to exceed the actual cost to the Company
if he were still an employee) of obtaining the equivalent coverage and benefits.
During the period in which Executive receives the payments required by the
immediately preceding sentence, Executive shall be subject to the provisions set
forth in Sections 10 and 11 below. In the event that Company elects not to
extend the Employment Period, then, absent any termination pursuant to Section
9, the Company shall continue paying to Executive his Base Salary during the
period, if any, beginning on the date Executive's employment terminates and
ending on the first anniversary of the date on which the Company gives its
notice of non-renewal to Executive. During the period in which Executive
receives the payments required by the immediately preceding sentence, Executive
shall be subject to the provisions set forth in Sections 10 and 11 below.
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(d) TERMINATION FOR GOOD REASON; SPECIFIED
RESIGNATION RIGHT.
(i) Executive shall have the right to
terminate his employment under this Agreement upon the occurrence of any event
that constitutes Good Reason by giving written notice to the Company. "Good
Reason" means any of the following: (A) a Diminution in Duty (as defined below),
(B) a Designated Relocation (as defined below), or (C) any Other Good Reason
Event (as defined below); PROVIDED, HOWEVER, that Good Reason shall not be
deemed to have occurred prior to the giving of written notice by the Executive
to the Company generally describing the alleged Good Reason, and the actions the
Executive believes are necessary to cure such alleged Good Reason, and the
Company's failure to so cure within 15 days of receipt of such notice. The
giving of such notice and the action or failure to take action by the Company
shall be irrelevant in determining whether a Good Reason has in fact occurred.
If a Change of Control Transaction (as defined in the Amended Option Agreement)
occurs, then, during the period beginning on the date that is 14 months after
the consummation of the Change of Control Transaction and ending on the date
that is 15 months after the consummation of the Change of Control Transaction,
Executive shall have the right to terminate his employment under this Agreement
for any reason whatsoever by giving written notice of such termination to the
Company (such termination being a "Specified Resignation" and, for purposes of
this Agreement, a Specified Resignation shall be treated exactly like a
termination for Good Reason). Upon a termination for Good Reason or a Specified
Resignation, except as provided in Section 15, this Agreement shall terminate
and the Executive shall not be entitled to receive any compensation or other
benefits other than the Company shall (i) through the Entitlement Date continue
to pay to Executive the Base Salary in effect immediately prior to the date of
termination, such payments to be made in installments at the times such amounts
would have been paid if the Agreement had not been so terminated, (ii) pay to
the Executive, when otherwise due in accordance with Section 4, the Bonus, if
any, earned for the fiscal year in which such termination occurs, without regard
to whether Executive is employed on the last day of such fiscal year and (iii)
through the Entitlement Date continue Executive's benefits and other items
referred to in Section 5 or, to the extent the Company is legally unable to
provide any such benefits or other items as a result of Executive no longer
being an employee, reimburse Executive for his cost (not to exceed the actual
cost to the Company if he were still an employee) of obtaining the equivalent
coverage and benefits. During such period, Executive shall be subject to the
provisions set forth in Sections 10 and 11 below.
(ii) "Diminution in Duty" means, without
Executive's express prior written consent: (A) the assignment to Executive of
any duties inconsistent in any respect with Executive's position on the date of
this Agreement, or (B) any adverse change in Executive's status, offices,
titles, reporting requirements, authority, duties or responsibilities as in
effect on the date of this Agreement; PROVIDED, HOWEVER, that after a Change of
Control Transaction (as defined in the Amended Option Agreement), a "Diminution
in Duty" means a change in Executive's position with the Company so that he is
neither (1) the President and Chief Executive Officer of the Company, nor (2)
the President and Chief Executive Officer of a successor to any part of the
Company's business or assets. Notwithstanding anything whatsoever to the
contrary contained in this Agreement (or in the Amended Option Agreement or in
the 1997 Option Agreement), if after a Change of Control Transaction any of the
events described in clause (A) or (B) of the immediately preceding sentence
occurs (without regard to the application of the proviso in such sentence),
Executive shall have the absolute right to change his position with the Company
to a position that has
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such work location, time commitment, duties, responsibilities and terms as shall
be specified by Executive in his sole and absolute discretion after consultation
with the Company, and the requirement of Section 2(a) that Executive devote his
full time and attention to the Telemundo Group shall cease to apply.
(iii) "Designated Relocation" means the
Company requiring Executive's work location to be other than the Company's
headquarters in the greater Los Angeles area or other than within thirty (30)
miles of the Company's current headquarters in Glendale, California.
(iv) "Other Good Reason Event" means any of
the following: (A) a material breach of this Agreement by the Company (which
shall include, without limitation, any reduction in the amount of any
compensation or benefits provided to Executive under this Agreement) or (B) any
termination or attempted termination by the Company of Executive's employment
other than as expressly permitted in this Agreement.
(e) OFFICER AND BOARD POSITIONS. Upon the
termination of employment with the Company for any reason, Executive shall be
deemed to have resigned his position as an officer and a member of the Board of
Directors of the Company and any of its subsidiaries and as a member of any
committees of such Boards, effective on the date of termination; PROVIDED,
HOWEVER, that Executive shall not be so obligated to resign from the board of
directors of the Company so long as Hernandez Partners is entitled to designate
a nominee for election as a director of the Company under that certain
Shareholders Agreement dated as of December 20, 1994 among Hernandez Partners,
TLMD Partners II, L.L.C., Bastion Capital Fund, L.P., Leon Black, GRS Partners
II, L.P. and The Value Realization Fund, L.P.
(f) CERTAIN CONDITION. Notwithstanding anything to
the contrary contained in this Section 9, the obligations of the Company under
this Section 9 shall continue only so long as the Executive does not breach his
obligations under Section 10 and 11.
(g) CERTAIN EFFECT. As used in this Agreement,
termination of this Agreement shall also result in and mean termination of the
Employment Period hereunder.
(h) MITIGATION OF DAMAGES. Executive shall have no
duty to mitigate any of his damages in the event of any breach of or default or
failure in performance under this Agreement by the Company.
(i) STOCK OPTIONS. The references in Section 9(a),
9(b), 9(c) or 9(d) to Executive, other than as therein stated, not being
entitled to receive compensation or benefits upon termination of his employment
under any of such Sections shall not affect Executive's rights under the Amended
Option Agreement or the 1997 Stock Option Agreement.
10. CONFIDENTIALITY, ETC. Executive will not divulge, furnish
or make accessible to anyone (otherwise than in the regular course of business
of the Telemundo Group) any confidential information, plans or materials or
trade secrets of the Telemundo Group or with respect to any other confidential
or secret aspects of the business of the Telemundo Group; PROVIDED, HOWEVER,
that during his employment, Executive shall have the
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latitude customarily given to a chief executive officer to disclose information
in good faith for the benefit of the Company and its stockholders (taken as a
whole). All memoranda, notes, lists, records and other documents or papers (and
all copies thereof), including such items stored in computer memories, on
microfiche or by any other means, made or compiled by or on behalf of Executive,
or made available to him relating to the Telemundo Group are and shall be the
Company's property and shall be delivered to the Company promptly upon the
termination of his employment with the Company; PROVIDED, HOWEVER, that (i) this
obligation shall not apply to information that (A) is not confidential (other
than as a result of Executive's breach of this Section) and (B) does not contain
certain trade secrets of the Company, (ii) Executive shall have the right to
retain such of the foregoing as shall be reasonably necessary to enforce his
rights under this Agreement and to comply with and enforce his rights, including
the right to defend himself against claims, provided copies of such retained
information are provided to the Company and the retained information remain
subject to the provision of this Section, and (iii) Executive shall have no
obligation to return information that is no longer in his possession, custody or
control. This Section 10 shall survive the expiration or termination or
termination of this Agreement, the Employment Period and the term of employment;
PROVIDED, HOWEVER, that if Executive's employment is terminated pursuant to
Section 9(c) or Section 9(d), then this Section 10 will terminate on the
Entitlement Date.
11. NO INTERFERENCE; AFFILIATE TRANSACTIONS.
(a) During the Employment Period and for one year
thereafter, Executive will not, directly or indirectly, for himself, or as agent
of or on behalf of, or in conjunction with, any person, firm, corporation, or
other entity, engage or participate in the Company Business (as hereinafter
defined), whether as employee, consultant, partner, principal, shareholder or
representative, or render advisory or other services to or for any person, firm,
corporation or other entity, which is engaged, directly or indirectly, in the
Company Business; PROVIDED, HOWEVER, that (i) Executive may continue to own,
manage and engage in the television business activities of Interspan
Communications, a California limited partnership or any successor to such
partnership (the "Interspan Successor"), so long as its business consists
primarily of operating television station KFWD in Dallas/Fort Worth Texas, and
(ii) Executive may own less than 5% of the common stock of a publicly traded
company that is engaged in the Company Business and (iii) Executive may own
Common Stock and securities convertible into Common Stock (or securities into
which Common Stock is converted in any business combination transaction). For
purposes of this Section 11(a), "Company Business" shall mean and be limited to
any of (x) the provision of Spanish language television programming in the
United States (which includes Puerto Rico), (y) the ownership of television
broadcast stations, networks or any over-the-air television signal, and cable in
the United States (which includes Puerto Rico) that broadcast primarily Spanish
language programming, and (z) the sale of television advertising time and
programs inside and outside the United States (which includes Puerto Rico) for
Spanish language television stations, cable and networks.
(b) During the Employment Period and for one year
after such period, Executive agrees and covenants that he will not interfere
directly or indirectly in any way with the Company. "Interfere" means to
influence or attempt to influence, directly or indirectly, present or active
prospective customers, employees, suppliers, performers, directors,
representatives, agents or independent contractors of the Company, or any of its
network affiliates to restrict, reduce, sever or otherwise alter their
relationship with the
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Telemundo Group or any of its network affiliates; provided, that this provision
shall not restrict the Executive (i) during the Employment Period, from
conducting in the ordinary course the business that Interspan Communications now
presently conducts, whether through Interspan Communications or the Interspan
Successor, as it relates to the Dallas-Ft. Worth television station KFWD to the
extent such business is conducted in good faith and without an adverse effect
(it being understood that the solicitation for employment or employment of
Company employees would have an adverse effect) on the Company (other than any
such effects which have no greater adverse effect on the Company than the effect
that such presently conducted business of Interspan Communications presently has
on the Company), or (ii) after the Employment Period, from operating Dallas-Fort
Worth television station KFWD.
(c) Executive agrees that during the Employment
Period, except as provided in Section 5(b) with respect to security services
that may be provided by an affiliate of Inter-Con Security Systems, Inc., he
will not at any time enter into, on behalf of the Telemundo Group, or cause the
Telemundo Group to enter into, directly or indirectly, any transactions (each, a
"Transaction") with any business organization in which he or, to his knowledge
after due inquiry, any member of his family may be interested as a partner,
trustee, director, officer, employee, shareholder, lender of money or guarantor,
except to the extent disclosed to the Company and agreed to by the board of
directors of the Company in writing; PROVIDED, HOWEVER, that no such disclosure
and agreement shall be required for the Company or Telemundo Group to enter into
any transaction with a publicly traded company in which Executive or any member
of his family is a director so long as such transaction is in the ordinary
course of business of such publicly traded company and the Company or Telemundo
Group and is on no less favorable terms to the Company or Telemundo Group than
would be available to it if no such relationship existed. Executive will use his
best efforts to ensure that any Transaction is disclosed to the Board of
Directors of the Company and approved thereby prior to entering into a contract
relating thereto and/or consummation thereof, as contemplated by the preceding
sentence.
(d) From and after the termination Executive's
employment, the Executive shall not disparage the Company, its officers,
directors, employees or business, nor shall the Company or any of its officers,
directors, employees or agents disparage the Executive or members of his family,
and neither party shall disclose any facts relating to such termination;
provided, that nothing contained in this Section 11(d) shall restrict the
parties from making any statements or disclosure believed necessary to enforce
in any judicial or similar proceeding the provisions of this Agreement or as a
party believes may be required by applicable law.
(e) In the event any court having jurisdiction
determines that any part of this Section 11 is unenforceable, such court shall
have the power to reduce the duration or scope of such provision and such
provision, in its reduced form, shall be enforceable. This Section 11 shall
survive the expiration or termination of this Agreement and the Employment
Period; PROVIDED, HOWEVER, that if Executive's employment is terminated pursuant
to Section 9(c) or Section 9(d), then this Section 11 will terminate on the
Entitlement Date.
12. INJUNCTIVE RELIEF. Executive acknowledges that the
provisions of Sections 10 and 11 herein are reasonable and necessary for the
protection of the Telemundo Group and the Telemundo Group will be irrevocably
damaged if such provisions are not
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specifically enforced. Accordingly, Executive agrees that, in addition to any
other relief to which the Company may be entitled in the form of damages, the
Company shall be entitled to seek and obtain injunctive relief from a court of
competent jurisdiction (without the posting of a bond therefor) for the purposes
of restraining Executive from any actual or threatened breach of such
provisions.
13. REMEDIES; SERVICE OF PROCESS.
(a) Except when a party is seeking an injunction or
specific performance hereunder, the parties agree to submit any dispute
concerning this Agreement to binding arbitration. The parties may agree to
submit the matter to a single arbitrator or to several arbitrators, may require
that arbitrators possess special qualifications or expertise or may agree to
submit a matter to a mutually acceptable firm of experts for decision. In the
event the parties shall fail to thus agree upon terms of arbitration within
twenty (20) days from the first written demand for arbitration, then such
disputed matter shall be settled by arbitration under the Rules of Employment
Arbitration of the American Arbitration Association, by three arbitrators
appointed in accordance with such Rules. Such arbitration shall be held in Los
Angeles, California. Once a matter has been submitted to arbitration pursuant to
this section, the decision of the arbitrators shall be final and binding upon
all parties. The cost of arbitration shall be shared equally by the parties and
each party shall pay the expenses of his/its attorneys, except that the
arbitrators shall be entitled to award the costs of arbitration, attorneys and
accountants' fees, as well as costs, to the party that they determine to be the
prevailing party in any such arbitration.
(b) The Company and Executive hereby irrevocably
consent to the jurisdiction of the Courts of the State of California and of any
Federal Court located in such State in connection with any action or proceedings
arising out of or relating to the provisions of Sections 10 and 11 of this
Agreement. Executive further agrees that he will not commence or move to
transfer any action or proceeding arising out or relating to the provisions of
Sections 10 and 11 of this Agreement to any Court other than one located in the
State of California. In any such litigation, Executive waives personal service
of any summons, complaint or other process and agrees that the service thereof
may be made by certified mail directed to Executive at his address for purposes
of notice under Section 17(b) hereof.
14. SUCCESSORS. This Agreement and the rights and obligations
hereunder are personal to Executive and without the prior written consent of the
Company and Executive shall not be assignable.
15. SURVIVAL OF PROVISIONS. Notwithstanding anything to the
contrary contained herein, the provisions of Sections 5(d), 9, 10, 11, 12, 13,
14, 15, 16 and 17 hereof shall survive the termination or expiration of this
Agreement, irrespective of the reasons therefor.
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16. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Notwithstanding anything to the contrary
contained herein, if it shall be determined that any payment, distribution or
benefit received or to be received by Executive from the Company ("Payments"),
whether under this Agreement or otherwise (including, without limitation, the
Amended Option Agreement and the 1997 Option Agreement), would be subject to the
excise tax imposed by Section 4999 of the Code, or any successor or counterpart
section thereto (the "Excise Tax"), then Executive shall be entitled to receive
an additional payment (the "Excise Tax Gross-Up Payment") in an amount such that
the net amount retained by Executive, after the calculation and deduction of any
Excise Tax on the Payments and any federal, state and local income taxes,
employment taxes and excise tax on the Excise Tax Gross-Up Payment provided for
in this Section 16, shall be equal to the Payments. For the avoidance of doubt,
in determining the amount of the Excise Tax Gross-Up Payment attributable to
federal income taxes the Company shall take into account the maximum reduction
in federal income taxes that could be obtained by the deduction of the portion
of the Excise Tax Gross-Up Payment attributable to state and local income taxes.
Finally, the Excise Tax Gross-Up Payment shall be net of any income or excise
tax withholding payments made by the Company or any affiliate to any federal,
state or local taxing authority with respect to the Excise Tax Gross-Up Payment
that was not deducted from compensation payable to Executive.
(b) All determinations required to be made under this
Section 16, including whether and when an Excise Tax Gross-Up Payment is
required and the amount of such Excise Tax Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, except as specified in Section
16(a) above, shall be made by Deloitte & Touche LLP (the "Accounting Firm"),
which shall provide detailed supporting calculations both to the Company and
Executive within 15 business days after the Company becomes obligated to make
any Payments to Executive. The determination of tax liability made by the
Accounting Firm shall be subject to review by Executive's tax advisor and, if
Executive's tax advisor does not agree with the determination reached by the
Accounting Firm, then the Accounting Firm and Executive's tax advisor shall
jointly designate a nationally recognized public accounting firm, which shall
make the determination. All fees and expenses of the accountants and tax
advisors retained by either Executive or the Company shall be borne by the
Company. Any Excise Tax Gross-Up Payment, as determined pursuant to this Section
16 shall be paid by the Company to Executive within five days after the receipt
of the determination. Any determination by a jointly designated public
accounting firm shall be binding upon the Company and Executive.
(c) As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the initial determination hereunder,
it is possible that Excise Tax Gross-Up Payments will not have been made by the
Company that should have been made consistent with the purpose of this Section
16 ("Underpayment"). In the event that Executive is required to make a payment
of any Excise Tax, any such Underpayment calculated in accordance with and in
the same manner as the Excise Tax Gross-Up Payment in Section 16 above shall be
promptly paid by the Company to or for the benefit of Executive. In the event
that the Excise Tax Gross-Up Payment exceeds the amount subsequently determined
to be due, such excess shall constitute a loan from the Company to Executive
payable on the fifth day after demand by the Company (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code).
12
<PAGE>
17. MISCELLANEOUS. (a) This Agreement shall be governed by
and construed in accordance with the laws of the State of California, without
reference to principles of conflict of laws.
(b) All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered,
telecopied or mailed, certified or registered mail, return receipt requested:
If to Executive:
Roland Hernandez
300 North San Rafael Avenue
Pasadena, CA 91105
Telecopy: (626) 395-9749
with a copy to:
Alan J. Barton, Esq.
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street
Los Angeles, California 90071
Telecopy: (213) 627-0705
If to the Company:
Telemundo Group, Inc.
2290 West 8th Avenue
Hialeah, Florida 33010
Attention: Chairman
Phone: (305) 884-8200
Telecopy No.: (305) 889-7997
with a copy to:
Telemundo Group, Inc.
2290 West 8th Avenue
Hialeah, Florida 33010
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee or upon refusal if properly delivered.
(c) The Company may withhold from any amounts payable
under this Agreement such Federal, state or local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
(d) Executive represents and warrants that he is not
a party to any agreement, contract or under-standing, whether employment or
otherwise, which would in
13
<PAGE>
any way restrict or prohibit him from undertaking or performing employment in
accordance with the terms and conditions of this Agreement.
(e) This Agreement, the Amended Option Agreement and
the 1997 Option Agreement set forth the entire understanding of the parties with
respect to the subject matter hereof, and no statement, representation, warranty
or covenant has been made by either party except as expressly set forth herein.
This Agreement shall not be changed or terminated orally. This Agreement amends
the Original Agreement and supersedes and cancels all other prior agreements
between the parties, whether written or oral, relating to the employment of
Executive. The headings and captions contained in this Agreement are for
convenience only and shall not be deemed to affect the meaning or construction
of any provision hereof.
(f) If, at any time subsequent to the date hereof,
any provision of this Agreement shall be held by any court of competent
jurisdiction to be illegal, void or unenforceable, such provision shall be of no
force and effect, but the illegality or unenforceability of such provision shall
have no effect upon and shall not impair the enforceability of any provision of
this Agreement.
(g) The Company's failure to insist upon strict
compliance with any provision hereof shall not be deemed to be a waiver of such
provision or any other provision hereof. Executive's failure to insist upon
strict compliance with any provision hereof shall not be deemed to be a waiver
of such provision or any other provision hereof.
(h) This Agreement shall inure to the benefit of and
be binding upon any successor to the Company and shall inure to the benefit of
Executive's successors, heirs and personal representatives.
(SIGNATURE PAGE FOLLOWS)
14
<PAGE>
IN WITNESS WHEREOF, Executive has hereunto set his hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name and on its behalf, all as of
the day and year first above written.
/s/ ROLAND A. HERNANDEZ
----------------------------
Roland A. Hernandez
TELEMUNDO GROUP, INC.
By: /s/ BRUCE SPECTOR
-----------------------
Name: Bruce Spector
Title: Chairman of the
Compensation Committee
15
<PAGE>
Telemundo Group, Inc.
Bonus Schedule
(dollars in thousands)
ADJUSTED NET CONTRIBUTION 1
---------------------------
AS OF DECEMBER 31,
------------------
TARGETS 1997
------- ----
High Point 45,540
Target 39,600
Threshold 33,660
- --------
1 "Adjusted Net Contribution" means operating income plus depreciation and
amortization determined in accordance with generally accepted accounting
principles without giving effect to any income, gain or loss associated with
Telenoticias del Mundo, LP., but determined consistent with the accounting
method for determining "Net Contribution before Telenoticias" on the Company's
internal financial statements in prior periods and adjusted to eliminate the
impact of changes in accounting principles after the date of this Agreement, and
of acquisitions or divestitures of operating units after the date of this
Agreement if taking such operating units into account would either increase or
decrease the actual Net Contribution by at least 5% of the Adjusted Net
Contribution target in the year of acquisition or divestiture on an annualized
basis, and also adjusted to eliminate (i) all monetary compensation paid to
presently serving executive officers who are terminated during calendar year
1995 (but only such compensation paid after such termination), (ii) any legal
fees and costs paid by the Company with respect to item (i), (iii) $95,000 of
expenses in 1995, (iv) the expense associated with the exercise of options to
acquire common stock held on March 7, 1995 by the executive officers of the
Company, to the extent not in the Company's budget, (v) the expense associated
with the exercise of options issued to those person who are executive officers
of the Company on March 7, 1995 in connection with their termination prior to
July, 1995, to the extent not in the Company's budget, (vi) direct costs
incurred in the Company's bankruptcy reorganization, to the extent not included
in the Company's budget, (vii) direct costs incurred in settling the Blair
litigation, to the extent not included in the Company's budget and (viii)
certain contingent expenses relating to Puerto Rico as discussed between the
parties, to the extent not included in the Company's budget. The adjustment set
forth in clauses (i)-(viii) (other than clause (iii) shall occur only when and
to the extent actually expensed by the Company and to the extent considered in
the calculation of Adjusted Net Contribution.
16
AMENDED AND RESTATED
NONQUALIFIED STOCK OPTION AGREEMENT
FOR CORPORATE OFFICERS
AGREEMENT made as of the 10th day of September, 1997 between Telemundo
Group, Inc., a Delaware corporation (the "Company"), and Roland A. Hernandez
(the "Optionee").
WHEREAS, the Company has adopted the 1994 Stock Plan, as the same may
be amended from time to time (the "Plan") in order to provide additional
incentive to certain officers and employees of the Company and its Subsidiaries;
and
WHEREAS, the Optionee has entered into an employment agreement, dated
as of March 9, 1995, with the Company (the "Employment Agreement");
WHEREAS, the Committee responsible for administration of the Plan
granted an option to the Optionee, effective as of March 9, 1995 (the "Grant
Date"), pursuant to that certain Nonqualified Stock Option Agreement for
Corporate Officers (the "Original Agreement") dated as of the Grant Date;
WHEREAS, the Committee and the Optionee desire to amend and restate the
Original Agreement in its entirety, effective as of September 10, 1997, pursuant
to this Amended and Restated Nonqualified Stock Option Agreement for Officers
(the "Agreement") concurrently with the Company's amendment and restatement of
the Employment Agreement pursuant to that certain Amended and Restated
Employment Agreement (the "Amended Employment Agreement") between the Company
and Optionee dated concurrently herewith.
NOW, THEREFORE, the parties hereto agree that the Original Agreement
shall be amended and restated as follows:
1. OPTION.
1.1 This Agreement shall be construed in accordance and consistent
with, and subject to, the provisions of the Plan (the provisions of which are
incorporated herein by reference) and, except as otherwise expressly set forth
herein, the capitalized terms used in this Agreement shall have the same
definitions as set forth in the Plan.
1.2 The parties acknowledge and agree that pursuant to the Original
Agreement the Company has granted the Optionee the right and option (the
"Option") to purchase all or any part of an aggregate of 512,500 whole shares of
Stock and that they now desire for the Option to be subject to, and governed in
accordance with, the terms and conditions set forth in this Agreement.
1.3 The Option is not intended to qualify as an Incentive Stock
Option within the meaning of Section 422 of the Code.
<PAGE>
2. PURCHASE PRICE.
The price at which the Optionee shall be entitled to purchase shares of
Stock upon the exercise of the Option shall be $10.00 per share.
3. DURATION OF OPTION.
Except as otherwise provided in this Agreement or the Plan, the Option
shall be exercisable to the extent and in the manner provided herein for a
period of ten years from the Grant Date (the "Exercise Term"); provided,
however, that the Option may be earlier terminated as provided in Section 7
hereof.
4. COMPENSATION COMMITTEE. The Company represents and warrants to the
Optionee that this Agreement has been approved by the Committee.
5. VESTING AND EXERCISABILITY OF OPTION.
5.1 Unless otherwise provided in this Agreement or the Plan,
the Option shall entitle the Optionee, in whole at any time or in part from time
to time, to exercise the Option for shares of Stock to the extent the Option has
become "vested". The parties acknowledge that the Option has fully vested and
become immediately exercisable as to 256,250 Shares in accordance with the
Original Agreement. The remaining provisions of Section 5 shall govern the
vesting and exercisability of the remaining 256,250 Shares that are subject to
the Option (the "Remaining Option Shares").
5.2 The Option shall "vest" and become exercisable as to all
of the Remaining Option Shares on February 28, 2004 if, but only if, Optionee is
employed with the Company on such vesting date.
5.3 The Option shall "vest" and become exercisable as to
32,032 of the Remaining Option Shares on the effective date of this Agreement.
5.4 In addition, to the extent that the Option shall not have
previously "vested" and become exercisable pursuant to Sections 5.3 or 7.3, the
Option shall "vest" and become exercisable with respect to 128, 125 of the
Remaining Option Shares on the day immediately after the date during the period
beginning on September 10, 1997 and ending on December 31, 1997 on which the
closing price of the Stock, on Nasdaq or the principal exchange on which shares
of Stock are then trading, has equaled or exceeded $32.00 per share for a period
of thirty (30) consecutive trading days, if, but only if, the Optionee is
employed with the Company on such vesting date.
5.5 In addition, to the extent that the Option shall not have
previously "vested" and become exercisable pursuant to Sections 5.3, 5.4 or 7.3,
the Option shall "vest" and become exercisable as to 32,032 of the Remaining
Option Shares on December 31, 1998, if, but only if, Optionee is employed with
the Company on such vesting date.
5.6 In addition, to the extent that the Option shall not have
previously "vested" and become exercisable pursuant to Sections 5.3, 5.4, 5.5 or
7.3, the Option shall "vest" and become exercisable as to 32,032 of the
Remaining Option Shares on December 31, 1999, if, but only if, Optionee is
employed with the Company on such vesting date.
2
<PAGE>
5.7 In addition, to the extent that the Option shall not have
previously "vested" and become exercisable pursuant to Sections 5.3, 5.4, 5.5,
5.6 or 7.3, the Option shall "vest" and become exercisable as to 32,029 of the
Remaining Option Shares on December 31, 2000, if, but only if, Optionee is
employed with the Company on such vesting date.
5.8 In addition, to the extent the Option shall not have
previously "vested" and become exercisable pursuant to Sections 5.3, 5.4, 5.5,
5.6, 5.7 or 7.3, all of the Remaining Option Shares which have not previously
"vested" pursuant to such provisions, shall become "vested" and exercisable
immediately prior to the time at which a "Change of Control Transaction" occurs
if, but only if, Optionee is employed with the Company immediately prior to the
occurrence of such Change of Control Transaction. A "Change of Control
Transaction" means any one or more of the following events: (A) an event or
series of events after the date of the Original Agreement as a result of which
any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of
the Exchange Act) who did not own at least 500,000 shares of the Company's
Series B Common Stock on September 1, 1997 becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of more
than 50% of the aggregate voting power of all of the capital stock of the
Company normally entitled to vote in the election of directors or (B) a sale,
transfer, conveyance or other disposition, directly or indirectly, in any single
transaction or series of related transactions, no matter how accomplished, which
results in more than 50%, in value, of (1) the capital stock (or other equity
interest in) or operating assets of Telemundo Network, Inc., a wholly-owned
subsidiary of the Company or (2) the aggregate capital stock (or other equity
interest in) or operating assets of all of the Company's subsidiaries (other
than Telemundo Network, Inc.), which currently comprise the Company's owned and
operated station group (including any special purpose license subsidiaries),
being owned (which term shall include "beneficial ownership" within the meaning
of Rule 13d-3 under the Exchange Act), directly or indirectly, by any "person"
or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange
Act) who did not own at least 500,000 shares of the Company's Series B Common
Stock on September 1, 1997 or (C) a transaction or series of related
transactions leading to at least an 80% reduction in the number of outstanding
shares of Stock held by "unaffiliated persons" (meaning any person other than
Hernandez Partners, Apollo Partners, L.P. or Bastion Capital Fund, L.P. or any
of their respective affiliates (as this term is defined in Rule 12b-2 under the
Exchange Act) on the date of this Agreement.
5.9 In the event of a subdivision or combination of the
outstanding shares of Stock (whether by stock split, stock dividend, reverse
stock split or otherwise), the per share prices specified in Sections 5.4, and
5.8 shall be proportionately adjusted.
6. MANNER OF EXERCISE AND PAYMENt.
6.1 Subject to the terms and conditions of this Agreement and
the Plan, the Option may be exercised by delivery of written notice to the
Company at its principal
3
<PAGE>
executive office. Such notice shall state that the Optionee is electing to
exercise the Option and the number of shares of Stock in respect of which the
Option is being exercised and shall be signed by the person or persons
exercising the Option. If requested by the Committee, such person or persons
shall (i) deliver this Agreement to the Secretary of the Company who shall
endorse thereon a notation of such exercise and (ii) provide satisfactory proof
as to the right of such person or persons to exercise the Option.
6.2 The notice, of exercise described in Section 6.1 shall be
accompanied by the full purchase price for the shares of Stock in respect of
which the Option is being exercised and by the Withholding Taxes, in cash, by
check or, in the discretion of the Committee, by transferring shares of Stock to
the Company held by the Optionee for more than six months and having a Fair
Market Value on the day preceding the day of exercise equal to the cash amount
for which such shares of Stock are substituted. Notwithstanding the preceding
sentence, the parties agree that, to the extent permitted by law, and to the
extent it would not, in the Company's judgment, result in any adverse legal,
financial or tax implications for the Company, it is their intention that
Optionee be able to effect a simultaneous exercise of this Option and sale of
shares of Stock issuable upon such exercise in the over-the-counter market or
any securities exchange on which the Stock is then listed, without Optionee
bearing any commission or brokerage expense (a "concurrent transaction"). To
this end, the Company and Optionee shall jointly agree upon a securities broker
to be used in such transactions and further to adopt such additional procedures
as may be necessary or advisable to accomplish concurrent transactions. In any
concurrent transaction, the Company shall not be required to deliver a share
certificate upon exercise of this Option unless it receives concurrent payment
of the exercise price and Withholding Taxes. The Company shall bear all
commission and brokerage expense associated with concurrent transactions, which
shall be treated as an adjustment in the purchase price of shares subject to
this Option.
6.3 Upon receipt of notice of exercise and full payment for
the shares of Stock in respect of which the Option is being exercised and of the
Withholding Taxes, the Company shall, subject to Section 14 of the Plan,
promptly take such action as may be necessary to effect the transfer to the
Optionee of the number of shares of Stock as to which such exercise was
effective, including issuing and delivering such shares of Stock and entering
the Optionee's name as a stockholder of record on the books of the Company
provided, that full payment of the exercise price and Withholding Taxes may be
made concurrently with such transfer and delivery in the case of a concurrent
transaction provided for in Section 6.2.
6.4 The Optionee shall not be deemed to be the holder of, or
to have any of the rights of a holder with respect, to any shares of Stock
subject to the option until (i) the Option shall have been exercised pursuant to
the terms of this Agreement and the Optionee shall have paid the full purchase
price for the number of shares of Stock in respect of which the Option was
exercised, (ii) the Company shall have issued and delivered the shares of Stock
to the Optionee, and (iii) the Optionee's name shall have been entered as a
stockholder
4
<PAGE>
of record on the books of the Company, whereupon the Optionee shall have full
voting and other ownership rights with respect to such shares.
6.5 If and when requested by Optionee, the Company shall file
a registration statement (on Form S-8 or any successor form) under the
Securities Act of 1933 (the "Act") covering the shares of Stock subject to this
Option and shall use its best efforts to cause the same to become effective and
in addition shall register or qualify such shares under all applicable State
securities laws (including in connection with a concurrent transaction). In
addition, the Company will use its reasonable efforts to permit such shares to
be registered in a "piggy back" registration in connection with a registration
of shares of stock to be issued by the Company pursuant to Form S-1, S-2, S-3 or
S-8 under the Act, on such customary terms and conditions as the Company shall
reasonably specify. Upon the Optionee's written request, if he desires to sell
shares of Stock that cannot be resold by him for any reason without registration
under the Act, the Company will (i) promptly cause a registration statement to
be filed under the Act covering the resale of such shares and use its best
efforts to cause the same to become effective as promptly as practicable (the
Company being under no obligation to effect more than one such registration) or
(ii) repurchase such shares and, to the extent requested by the Optionee, the
number of such vested shares subject to this Option from Optionee at their
market value. The Optionee shall, in a manner customary for such a registration,
cooperate with the Company, as reasonably requested by it, in connection with
such registration and resale. The Company shall, by written notice to the
Optionee within 10 days after receipt of such request, elect whether the Company
will effect such registration or repurchase Optionee's shares of Stock. For this
purpose, "market value" of (i) outstanding shares shall mean the product of the
number of shares to be repurchased multiplied by the arithmetic average of the
closing prices of the Stock, as reported by Nasdaq or the principal exchange on
which the Stock is listed, during the five trading days immediately prior to the
Optionee giving a written request to the Company to register the shares, and
(ii) vested shares subject to this Option shall mean the value of the number of
such vested shares, determined in accordance with the preceding clause (i) as if
they were outstanding, reduced by the aggregate exercise price of the number of
vested shares to be repurchased. To the extent the Company provides registration
rights to effective officers pursuant to benefit or stock plans of the Company,
Optionee will be provided with similar rights as are provided to other executive
officers.
7. TERMINATION OF EMPLOYMENT.
7.1 TERMINATION UNDER SECTION 9(A) OF AMENDED EMPLOYMENT
AGREEMENT. If the employment of the Optionee is terminated pursuant to Section
9(a) of the Amended Employment Agreement, the Optionee (or his personal
representative) may at any time within one year after such termination (but in
no event after the expiration of the Exercise Term) exercise the Option to the
extent, but only to the extent, that the Option or portion thereof was vested on
the date of such termination and the remainder of the Option, if any, shall
terminate.
5
<PAGE>
7.2 TERMINATION UNDER SECTION 9(B) OF AMENDED EMPLOYMENT
AGREEMENT. If the employment of the Optionee is terminated for Cause or if the
Optionee resigns from his employment pursuant to a resignation that is without
Good Reason and is not a Specified Resignation, in either case as provided in
Section 9(b) of the Amended Employment Agreement, as finally determined pursuant
to the provisions of said Section 9(b), the Optionee (or his personal
representative) may at any time within one year after such termination or
resignation (but in no event after the expiration of the Exercise Term) exercise
the Option to the extent, but only to the extent, that the Option or portion
thereof was vested on the date of such termination or resignation and, subject
to Section 7.3, the remainder of the Option, if any, shall terminate.
7.3 TERMINATION UNDER SECTIONS 9(C) OR 9(D) OF THE AMENDED
EMPLOYMENT AGREEMENT. If the Optionee's employment is terminated pursuant to
Section 9(c) or 9(d) of the Amended Employment Agreement, the Option, to the
extent it has not vested with respect to any Remaining Option Shares, shall
immediately vest and become exercisable. The Optionee may at any time within one
year after the date of such termination of employment (but in no event after the
expiration of the Exercise Term) exercise any or all of the Option to the extent
not previously exercised.
8. NON-TRANSFERABILITY.
The Option shall not be transferable other than by will or by the laws
of descent and distribution. During the lifetime of the Optionee, the Option
shall be exercisable only by the Optionee.
9. NO RIGHT TO CONTINUED EMPLOYMENT.
Nothing in this Agreement or the Plan shall be interpreted or construed
to confer upon the Optionee any right with respect to continuance of employment
by the Company, nor shall this Agreement or the Plan interfere in any way with
the right of the Company to terminate the Optionee's employment at any time,
subject to all terms and conditions of the Amended Employment Agreement.
10. ADJUSTMENTS.
In the event of a Change in Capitalization, the Committee shall
conclusively determine the appropriate adjustments to the number and class of
shares of Stock subject to the Option and the purchase price for such shares of
Stock. The Committee's adjustment shall be made in accordance with the
provisions of Section 4.5 of the Plan and shall be effective and final, binding
and conclusive for all purposes of the Plan and this Agreement. Notwithstanding
either of the preceding two sentences, the vesting and exercisability provisions
in Sections 5 and 7.3 and the rights of the Optionee under Sections 6.5 and 11
shall not be adversely affected by any Change in Capitalization.
6
<PAGE>
11. CERTAIN EVENTS.
Except as otherwise expressly provided herein, upon the effective date
of (i) the liquidation or dissolution of the Company or (ii) a merger or
consolidation of the Company (a "Transaction"), the Option shall continue in
effect in accordance with its terms and the Optionee shall be entitled to
receive in respect of all shares of Stock subject to the Option, upon exercise
of the Option, the same number and kind of stock, securities, cash, property or
other consideration that each holder of shares of Stock was entitled to receive
in the Transaction. In addition, if circumstances are such that unvested
Remaining Option Shares would vest under more than one provision of this
Agreement, the Optionee shall have the right to select the provision under which
the vesting occurs.
12. WITHHOLDING OF TAXES.
At such times as an Optionee recognizes taxable income in connection
with the receipt of shares of Stock, securities, cash or property hereunder (a
"Taxable Event"), the Optionee shall pay to the Company an amount equal to the
federal, state and local income taxes and other amounts as may be required by
law to be withheld by the Company in connection with the Taxable Event (the
"Withholding Taxes") prior to the issuance, or release from escrow, of such
shares of Stock or securities or the payment of such cash or such property. The
Company shall have the right to deduct from any payment of cash to an Optionee
or Grantee an amount equal to the Withholding Taxes in satisfaction of the
obligation to pay Withholding Taxes. In satisfaction of the obligation to pay
Withholding Taxes to the Company, the Optionee may make a written election (the
"Tax Election"), which may be accepted or rejected in the discretion of the
Committee, to have withheld a portion of the shares then issuable to him having
an aggregate Fair Market Value, on the date preceding the date of such issuance,
equal to the Withholding Taxes.
13. OPTIONEE BOUND BY THE PLAN.
The Optionee hereby acknowledges receipt of a copy of the Plan as in
effect on the date hereof and agrees to be bound by all the terms and provisions
of the Plan.
14. MODIFICATION OF AGREEMENT.
This Agreement may be modified, amended, suspended or terminated, and
any terms or conditions may be waived, but only by a written instrument executed
by the parties hereto.
15. SEVERABILITY.
Should any provision of this Agreement be held by a court of competent
jurisdiction to be unenforceable or invalid for any reason, the remaining
provisions of this Agreement shall not be affected by such holding and shall
continue in full force in accordance with their terms.
7
<PAGE>
16. GOVERNING LAW.
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of New York without giving
effect to the conflicts of laws principles thereof.
17. SUCCESSORS IN INTEREST.
This Agreement shall inure to the benefit of and be binding upon any
successor to the Company. This Agreement shall inure to the benefit of the
Optionee's legal representatives. All obligations imposed upon the Optionee and
all rights granted to the Company under this Agreement shall be final, binding
and conclusive upon the Optionee's heirs, executors, administrators and
successors.
18. RESOLUTION OF DISPUTES.
Any dispute or disagreement which may arise under, or as a result of,
or in any way relate to, the interpretation, construction or application of this
Agreement shall be determined by binding arbitration. The parties may agree to
submit the matter to a single arbitrator or to several arbitrators, may require
that arbitrators possess special qualifications or expertise or may agree to
submit a matter to a mutually acceptable firm of experts for decision. In the
event the parties shall fail to thus agree upon terms of arbitration within
twenty (20) days from the first written demand for arbitration, then such
disputed matter shall be settled by arbitration under the Rules of Employment
Arbitration of the American Arbitration Association, by three arbitrators
appointed in accordance with such Rules. Such arbitration shall be held in Los
Angeles, California. Once a matter has been submitted to arbitration pursuant to
this section, the decision of the arbitrators reached and promulgated as a
result thereof shall be final and binding upon all parties. The cost of
arbitration shall be shared equally by the parties and each party shall pay the
expenses of his/its attorneys, except that the arbitrators shall be entitled to
award the costs of arbitration, attorneys and accountants' fees, as well as
costs, to the party that they determine to be the prevailing party in any such
arbitration.
19. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
TELEMUNDO GROUP, INC.
By: /s/ BRUCE SPECTOR
--------------------------------
Name: Bruce Spector
Title: Chairman of the
Compensation Committee
/s/ ROLAND A. HERNANDEZ
------------------------------------
Roland A. Hernandez
NONQUALIFIED STOCK OPTION AGREEMENT
FOR CORPORATE OFFICERS
AGREEMENT made as of the 10th day of September, 1997 between Telemundo
Group, Inc., a Delaware corporation (the "Company"), and Roland A. Hernandez
(the "Optionee").
WHEREAS, the Company has adopted the 1994 Stock Plan, as the same may
be amended from time to time (the "Plan") in order to provide additional
incentive to certain officers and employees of the Company and its Subsidiaries;
and
WHEREAS, the Optionee has entered into an employment agreement, dated
as of March 9, 1995, with the Company (the "Employment Agreement");
WHEREAS, the Committee responsible for administration of the Plan has
determined to grant an option to the Optionee as provided herein, which grant
shall be made concurrently with the Company's amendment and restatement of the
Employment Agreement pursuant to that certain Amended and Restated Employment
Agreement (the "Amended Employment Agreement") between the Company and Optionee
dated concurrently herewith (the "Grant Date").
NOW, THEREFORE, the parties hereto agree as follows:
1. GRANT OF OPTION.
1.1 This Agreement shall be construed in accordance and consistent
with, and subject to, the provisions of the Plan (the provisions of which are
incorporated herein by reference) and, except as otherwise expressly set forth
herein, the capitalized terms used in this Agreement shall have the same
definitions as set forth in the Plan.
1.2 The Company hereby grants to the Optionee the right and option
(the "Option") to purchase all or any part of an aggregate of 30,000 whole
shares of Stock (the "Option Shares") subject to, and in accordance with, the
terms and conditions set forth in this Agreement.
1.3 The Option is not intended to qualify as an Incentive Stock
Option within the meaning of Section 422 of the Code.
2. PURCHASE PRICE.
The price at which the Optionee shall be entitled to purchase shares of
Stock upon the exercise of the Option shall be $33.75 per share.
3. DURATION OF OPTION.
Except as otherwise provided in this Agreement or the Plan, the Option
shall be exercisable to the extent and in the manner provided herein for a
period of ten years from the Grant Date (the "Exercise Term"); PROVIDED,
HOWEVER, that the Option may be earlier terminated as provided in Section 7
hereof.
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4. COMPENSATION COMMITTEE. The Company represents and warrants to the
Optionee that this Agreement has been approved by the Committee.
5. VESTING AND EXERCISABILITY OF OPTION.
5.1 Unless otherwise provided in this Agreement or the Plan,
the Option shall entitle the Optionee, in whole at any time or in part from time
to time, to exercise the Option for shares of Stock to the extent the Option has
become "vested."
5.2 The Option shall "vest" and become exercisable as to
10,000 of the Option Shares on each of February 28, 1999, February 28, 2000 and
February 28, 2001 if, but only if, Optionee is employed with the Company on each
applicable vesting date.
5.3 In addition, to the extent the Option shall not have
previously "vested" and become exercisable pursuant to Sections 5.2 or 7.3, all
of the Option Shares which have not previously "vested" pursuant to such
provisions, shall become "vested" and exercisable immediately prior to the time
at which a "Change of Control Transaction" occurs if, but only if, the Optionee
is employed with the Company immediately prior to the occurrence of such Change
of Control Transaction. A "Change of Control Transaction" means any one or more
of the following events: (A) an event or series of events after the date of this
Agreement as a result of which any "person" or "group" (as such terms are used
in Sections 13(d) and 14(d) of the Exchange Act) who did not own at least
500,000 shares of the Company's Series B Common Stock on September 1, 1997
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of more than 50% of the aggregate voting power of
all of the capital stock of the Company normally entitled to vote in the
election of directors or (B) a sale, transfer, conveyance or other disposition,
directly or indirectly, in any single transaction or series of related
transactions, no matter how accomplished, which results in more than 50%, in
value, of (1) the capital stock (or other equity interest in) or operating
assets of Telemundo Network, Inc., a wholly-owned subsidiary of the Company or
(2) the aggregate capital stock (or other equity interest in) or operating
assets of all of the Company's subsidiaries (other than Telemundo Network,
Inc.), which currently comprise the Company's owned and operated station group
(including any special purpose license subsidiaries), being owned (which term
shall include "beneficial ownership" within the meaning of Rule 13d-3 under the
Exchange Act), directly or indirectly, by any "person" or "group" (as such terms
are used in Sections 13(d) and 14(d) of the Exchange Act) who did not own at
least 500,000 shares of the Company's Series B Common Stock on September 1, 1997
or (C) a transaction or series of related transactions leading to at least an
80% reduction in the number of outstanding shares of Stock held by "unaffiliated
persons" (meaning any person other than Hernandez Partners, Apollo Partners,
L.P. or Bastion Capital Fund, L.P. or any of their respective affiliates (as
this term is defined in Rule 12b-2 under the Exchange Act) on the date of this
Agreement.
5.4 In the event of a subdivision or combination of the
outstanding shares of Stock (whether by stock split, stock dividend, reverse
stock split or otherwise), the per share prices specified in Section 5.3 shall
be proportionately adjusted.
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6. MANNER OF EXERCISE AND PAYMENt.
6.1 Subject to the terms and conditions of this Agreement and
the Plan, the Option may be exercised by delivery of written notice to the
Company at its principal executive office. Such notice shall state that the
Optionee is electing to exercise the Option and the number of shares of Stock in
respect of which the Option is being exercised and shall be signed by the person
or persons exercising the Option. If requested by the Committee, such person or
persons shall (i) deliver this Agreement to the Secretary of the Company who
shall endorse thereon a notation of such exercise and (ii) provide satisfactory
proof as to the right of such person or persons to exercise the Option.
6.2 The notice, of exercise described in Section 6.1 shall be
accompanied by the full purchase price for the shares of Stock in respect of
which the Option is being exercised and by the Withholding Taxes, in cash, by
check or, in the discretion of the Committee, by transferring shares of Stock to
the Company held by the Optionee for more than six months and having a Fair
Market Value on the day preceding the day of exercise equal to the cash amount
for which such shares of Stock are substituted. Notwithstanding the preceding
sentence, the parties agree that, to the extent permitted by law, and to the
extent it would not, in the Company's judgment, result in any adverse legal,
financial or tax implications for the Company, it is their intention that
Optionee be able to effect a simultaneous exercise of this Option and sale of
shares of Stock issuable upon such exercise in the over-the-counter market or
any securities exchange on which the Stock is then listed, without Optionee
bearing any commission or brokerage expense (a "concurrent transaction"). To
this end, the Company and Optionee shall jointly agree upon a securities broker
to be used in such transactions and further to adopt such additional procedures
as may be necessary or advisable to accomplish concurrent transactions. In any
concurrent transaction, the Company shall not be required to deliver a share
certificate upon exercise of this Option unless it receives concurrent payment
of the exercise price and Withholding Taxes. The Company shall bear all
commission and brokerage expense associated with concurrent transactions, which
shall be treated as an adjustment in the purchase price of shares subject to
this Option.
6.3 Upon receipt of notice of exercise and full payment for
the shares of Stock in respect of which the Option is being exercised and of the
Withholding Taxes, the Company shall, subject to Section 14 of the Plan,
promptly take such action as may be necessary to effect the transfer to the
Optionee of the number of shares of Stock as to which such exercise was
effective, including issuing and delivering such shares of Stock and entering
the Optionee's name as a stockholder of record on the books of the Company
provided, that full payment of the exercise price and Withholding Taxes may be
made concurrently with such transfer and delivery in the case of a concurrent
transaction provided for in Section 6.2.
6.4 The Optionee shall not be deemed to be the holder of, or
to have any of the rights of a holder with respect, to any shares of Stock
subject to the option until (i) the
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Option shall have been exercised pursuant to the terms of this Agreement and the
Optionee shall have paid the full purchase price for the number of shares of
Stock in respect of which the Option was exercised, (ii) the Company shall have
issued and delivered the shares of Stock to the Optionee, and (iii) the
Optionee's name shall have been entered as a stockholder of record on the books
of the Company, whereupon the Optionee shall have full voting and other
ownership rights with respect to such shares.
6.5 The Company will use its reasonable efforts to permit
shares of Stock issued pursuant to this Option to be registered in a "piggy
back" registration in connection with a registration of shares of stock to be
issued by the Company pursuant to Form S-1, S-2, S-3 or S-8 under the Act, on
such customary terms and conditions as the Company shall reasonably specify. The
Optionee shall, in a manner customary for such a registration, cooperate with
the Company, as reasonably requested by it, in connection with such registration
and resale. To the extent the Company provides registration rights generally to
executive officers pursuant to benefit or stock plans of the Company, Optionee
will be provided with similar rights as are provided to other executive
officers.
7. TERMINATION OF EMPLOYMENT.
7.1 TERMINATION UNDER SECTION 9(A) OF AMENDED EMPLOYMENT
AGREEMENT. If the employment of the Optionee is terminated pursuant to Section
9(a) of the Amended Employment Agreement, the Optionee (or his personal
representative) may at any time within one year after such termination (but in
no event after the expiration of the Exercise Term) exercise the Option to the
extent, but only to the extent, that the Option or portion thereof was vested on
the date of such termination and the remainder of the Option, if any, shall
terminate.
7.2 TERMINATION UNDER SECTION 9(B) OF AMENDED EMPLOYMENT
AGREEMENT. If the employment of the Optionee is terminated for Cause or if the
Optionee resigns from his employment pursuant to a resignation that is without
Good Reason and is not a Specified Resignation, in either case as provided in
Section 9(b) of the Amended Employment Agreement, as finally determined pursuant
to the provisions of said Section 9(b), the Optionee (or his personal
representative) may at any time within one year after such termination or
resignation (but in no event after the expiration of the Exercise Term) exercise
the Option to the extent, but only to the extent, that the Option or portion
thereof was vested on the date of such termination or resignation and, subject
to Section 7.3, the remainder of the Option, if any, shall terminate.
7.3 TERMINATION UNDER SECTIONS 9(C) OR 9(D) OF THE AMENDED
EMPLOYMENT AGREEMENT. If the Optionee's employment is terminated pursuant to
Section 9(c) or 9(d) of the Amended Employment Agreement, the Option, to the
extent it has not vested with respect to any Option Shares, shall immediately
vest and become exercisable. The Optionee may at any time within one year after
the date of such termination of employment (but in no event after the expiration
of the Exercise Term) exercise any or all of the Option to the extent not
previously exercised.
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8. NON-TRANSFERABILITY.
The Option shall not be transferable other than by will or by the laws
of descent and distribution. During the lifetime of the Optionee, the Option
shall be exercisable only by the Optionee.
9. NO RIGHT TO CONTINUED EMPLOYMENT.
Nothing in this Agreement or the Plan shall be interpreted or construed
to confer upon the Optionee any right with respect to continuance of employment
by the Company, nor shall this Agreement or the Plan interfere in any way with
the right of the Company to terminate the Optionee's employment at any time,
subject to all terms and conditions of the Amended Employment Agreement.
10. ADJUSTMENTS.
In the event of a Change in Capitalization, the Committee shall
conclusively determine the appropriate adjustments to the number and class of
shares of Stock subject to the Option and the purchase price for such shares of
Stock. The Committee's adjustment shall be made in accordance with the
provisions of Section 4.5 of the Plan and shall be effective and final, binding
and conclusive for all purposes of the Plan and this Agreement. Notwithstanding
either of the preceding two sentences, the vesting and exercisability provisions
in Sections 5 and 7.3 and the rights of the Optionee under Sections 6.5 and 11
shall not be adversely affected by any Change in Capitalization.
11. CERTAIN EVENTS.
Except as otherwise expressly provided herein, upon the effective date
of (i) the liquidation or dissolution of the Company or (ii) a merger or
consolidation of the Company (a "Transaction"), the Option shall continue in
effect in accordance with its terms and the Optionee shall be entitled to
receive in respect of all shares of Stock subject to the Option, upon exercise
of the Option, the same number and kind of stock, securities, cash, property or
other consideration that each holder of shares of Stock was entitled to receive
in the Transaction. In addition, if circumstances are such that unvested
remaining Option Shares would vest under more than one provision of this
Agreement, the Optionee shall have the right to select the provision under which
the vesting occurs.
12. WITHHOLDING OF TAXES.
At such times as an Optionee recognizes taxable income in connection
with the receipt of shares of Stock, securities, cash or property hereunder (a
"Taxable Event"), the Optionee shall pay to the Company an amount equal to the
federal, state and local income taxes and other amounts as may be required by
law to be withheld by the Company in connection with the Taxable Event (the
"Withholding Taxes") prior to the issuance, or
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release from escrow, of such shares of Stock or securities or the payment of
such cash or such property. The Company shall have the right to deduct from any
payment of cash to an Optionee or Grantee an amount equal to the Withholding
Taxes in satisfaction of the obligation to pay Withholding Taxes. In
satisfaction of the obligation to pay Withholding Taxes to the Company, the
Optionee may make a written election (the "Tax Election"), which may be accepted
or rejected in the discretion of the Committee, to have withheld a portion of
the shares then issuable to him having an aggregate Fair Market Value, on the
date preceding the date of such issuance, equal to the Withholding Taxes.
13. OPTIONEE BOUND BY THE PLAN.
The Optionee hereby acknowledges receipt of a copy of the Plan as in
effect on the date hereof and agrees to be bound by all the terms and provisions
of the Plan.
14. MODIFICATION OF AGREEMENT.
This Agreement may be modified, amended, suspended or terminated, and
any terms or conditions may be waived, but only by a written instrument executed
by the parties hereto.
15. SEVERABILITY.
Should any provision of this Agreement be held by a court of competent
jurisdiction to be unenforceable or invalid for any reason, the remaining
provisions of this Agreement shall not be affected by such holding and shall
continue in full force in accordance with their terms.
16. GOVERNING LAW.
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of New York without giving
effect to the conflicts of laws principles thereof.
17. SUCCESSORS IN INTEREST.
This Agreement shall inure to the benefit of and be binding upon any
successor to the Company. This Agreement shall inure to the benefit of the
Optionee's legal representatives. All obligations imposed upon the Optionee and
all rights granted to the Company under this Agreement shall be final, binding
and conclusive upon the Optionee's heirs, executors, administrators and
successors.
18. RESOLUTION OF DISPUTES.
Any dispute or disagreement which may arise under, or as a result of,
or in any way relate to, the interpretation, construction or application of this
Agreement shall be determined by binding arbitration. The parties may agree to
submit the matter to a single
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arbitrator or to several arbitrators, may require that arbitrators possess
special qualifications or expertise or may agree to submit a matter to a
mutually acceptable firm of experts for decision. In the event the parties shall
fail to thus agree upon terms of arbitration within twenty (20) days from the
first written demand for arbitration, then such disputed matter shall be settled
by arbitration under the Rules of Employment Arbitration of the American
Arbitration Association, by three arbitrators appointed in accordance with such
Rules. Such arbitration shall be held in Los Angeles, California. Once a matter
has been submitted to arbitration pursuant to this section, the decision of the
arbitrators reached and promulgated as a result thereof shall be final and
binding upon all parties. The cost of arbitration shall be shared equally by the
parties and each party shall pay the expenses of his/its attorneys, except that
the arbitrators shall be entitled to award the costs of arbitration, attorneys
and accountants' fees, as well as costs, to the party that they determine to be
the prevailing party in any such arbitration.
19. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
TELEMUNDO GROUP, INC.
By: /s/ BRUCE SPECTOR
--------------------------------
Name: Bruce Spector
Title: Chairman of the
Compensation Committee
/s/ ROLAND A. HERNANDEZ
------------------------------------
Roland A. Hernandez
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
AGREEMENT, between Telemundo Group, Inc., a Delaware
corporation (the "Company"), and Donald J. Tringali ("Executive"), dated as of
September 10, 1997.
WHEREAS, the Company and Executive entered into that certain
Employment Agreement dated as of June 11, 1996 (the "Original Agreement").
WHEREAS, the Company and Executive desire to amend and restate
the Original Agreement in its entirety by entering into this Amended and
Restated Employment Agreement (the "Agreement").
IT IS, THEREFORE, AGREED THAT THE ORIGINAL AGREEMENT IS HEREBY
AMENDED AND RESTATED, AND THE PARTIES HEREBY AGREE, AS FOLLOWS:
1. EMPLOYMENT AND TERM. The Company hereby agrees to continue
Executive in its employ, and Executive hereby agrees to continue such employment
as Executive Vice President of the Company (or such other position determined in
accordance with Section 9(d)(ii) of this Agreement) reporting to the President
and Chief Executive Officer for the period commencing on the date first above
written and ending on February 28, 2001; PROVIDED, HOWEVER, that effective on
March 1, 2001 and on each March 1 thereafter, the term of this Agreement shall
be extended for an additional period of one year from the then current
expiration date unless the Company or Executive shall have given written notice
to the other of its or his election not to so extend the term of this Agreement
on or before the immediately prior December 1, subject, however, to earlier
termination as provided in Section 9 herein (the "Employment Period"). The
Executive also agrees, during the Employment Period, to serve (without
additional compensation) on the Board of Directors (and appropriate committees
thereof) of the Company, if requested by the Board of Directors.
2. TERMS OF EMPLOYMENT. (a) During the Employment Period,
Executive agrees, subject to the provisions of Section 9(d)(ii) of this
Agreement, to devote all but a DE MINIMUS amount of his business time and
attention to the business and affairs of the "Telemundo Group" (as defined
below) and to use his best efforts to perform faithfully and efficiently such
responsibilities. For purposes of this Agreement, the term "Telemundo Group"
shall mean any and all of the Company and any of its current or future divisions
or subsidiaries.
(b) The principal place of employment of Executive
shall be greater Los Angeles, California area. Executive understands and agrees
that in connection with his employment hereunder, he will be required to travel
extensively on behalf of the Telemundo Group.
3. BASE SALARY. During the Employment Period Executive shall
receive a base salary (the "Base Salary") as follows. For the period of the
Employment Period beginning on the effective date of this Agreement and ending
on February 28, 1998, the Base Salary shall be payable to Executive at an annual
rate of $350,000. For the period of the Employment Period beginning on March 1,
1998 and ending on the last day of the
<PAGE>
Employment Period, the Base Salary shall be payable to Executive at an annual
rate of $400,000. The Base Salary shall be payable consistent with the executive
payroll practices of the Company. Executive acknowledges and agrees that he has
been paid in full his Base Salary for periods prior to the effective date of
this Agreement.
4. BONUS. For 1997 (or portion thereof) during the Employment
Period, Executive will be paid bonuses as set forth in Section 4(a) below if
certain performance targets set by the Compensation and Stock Option Committee
(the "Compensation Committee") of the Board of Directors are met. For each of
the 1998, 1999, 2000 and 2001 fiscal years and any subsequent fiscal years (or
portion thereof) during the Employment Period, Executive will be paid a bonus
(the "Budget Bonus") as set forth below in subsection (b) (the bonuses described
in the first sentence of this Section 4 and the "Budget Bonus" are hereinafter
collectively referred to as the "Bonus"). Executive shall receive the Bonus only
if Executive is employed by the Company on the last day of the fiscal year to
which the Bonus relates, subject to the provisions of Sections 9(a), 9(c) and
9(d).
(a) For the fiscal year ended December 31, 1997,
Executive will be eligible for a bonus in an amount computed in accordance with
Exhibit A hereto. Such bonus shall be paid at the times bonuses are customarily
paid to the Company's executives.
(b) For each of the 1998, 1999, 2000, 2001 fiscal
years and any subsequent fiscal years (or portion thereof) during the Employment
Period, Executive will be paid a Budget Bonus based upon the Company's
achievement of targets with respect to its earnings, before interest, taxes,
depreciation and amortization ("EBITDA") during such fiscal year (which fiscal
year target shall not be greater than the Company's budget for EBITDA for such
fiscal year), as follows. During the first quarter of each such fiscal year, the
Compensation Committee shall establish a budgeted EBITDA target (the "EBITDA
Target") for such fiscal year and notify Executive in writing of the EBITDA
Target. Pursuant to subsection (c), the Committee shall determine the Company's
EBITDA for such fiscal year and shall notify Executive of its determination of
the amount of the Company's EBITDA for such fiscal year and of the amount of
Executive's Budget Bonus for such year, which Budget Bonus shall be equal to (i)
100% of Executive's Base Salary for such fiscal year if the Company's EBITDA is
100% or more of the EBITDA Target, (ii) 50% of Executive's Base Salary for such
fiscal year if the Company's EBITDA is 90% of the EBITDA Target and (iii) pro
rated between 50% and 100% of Executive's Base Salary for such fiscal year if
the Company's EBITDA is more than 90% of the EBITDA Target but less than 100% of
the EBITDA Target. Executive shall be paid no Budget Bonus for any such fiscal
year in which the Company's EBITDA is less than 90% of the EBITDA Target for
such fiscal year.
(c) Each Bonus shall be paid upon certification by
the Compensation Committee (which the Compensation Committee will make within 30
days after the certification by the Company's independent auditors of the
financial statements for such fiscal year) that the performance targets
entitling Executive to a Bonus with respect to such fiscal year have been met.
If the Compensation Committee so certifies, the Bonus will be paid promptly but
in no event later than ten days after such certification.
(d) For purposes of this Agreement, the "Compensation
Committee" shall mean a committee consisting of at least two (2) directors of
the Company,
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each of whom is a "non-employee director" within the meaning of Rule 16b-3 under
the Securities Exchange Act of 1934, as amended, and an "outside director"
within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code").
(e) The Company's obligation to pay Budget Bonuses is
conditioned upon the holders of a majority of the outstanding shares of the
Company approving a senior officer incentive plan covering Executive and the
other top three senior officers of the Company, under which plan incentive
compensation will be payable based upon the achievement of performance goals to
be established from time to time by the Compensation Committee.
5. EMPLOYEE BENEFIT PLANS; ETC. (a) Executive shall be
entitled during the Employment Period to participate in all retirement,
disability, pension, savings, medical, insurance and other plans of the Company
generally available to all senior executives (other than any performance based
bonus or option (or similar) plans). Executive shall be entitled to paid
vacations during each year of his employment consistent with the Company's
vacation policy for executive level employees (which shall provide for a least
20 vacation days per year).
(b) The Company agrees that it will provide
Executive, in his capacity as an officer and, if applicable, as a director, with
indemnification rights which are not materially less favorable to the Executive,
in his capacity as an officer and as a director, than those provided as of the
date of this Agreement in the By-laws of the Company.
6. Intentionally omitted.
7. STOCK OPTION AGREEMENTS. Contemporaneously with and in
connection with the execution of the Original Agreement, the parties hereto
entered into a Nonqualified Stock Option Agreement For Corporate Officers (the
"Stock Option Agreement") with respect to an aggregate of 75,000 shares of the
Company's Series A Common Stock, par value $.01 per share (the "Common Stock"),
which Stock Option Agreement is being amended concurrently with the execution of
this Agreement (the "Amended Option Agreement"). Contemporaneously with and in
connection with the execution of this Agreement, the parties hereto are entering
into a Nonqualified Stock Option Agreement For Corporate Officers with respect
to an aggregate 30,000 shares of Common Stock (the "1997 Option Agreement").
8. EXPENSES. The Company shall reimburse Executive for all
reasonable expenses properly incurred by him in accordance with the policies of
the Telemundo Group in effect from time to time, on behalf of the Telemundo
Group in the performance of his duties hereunder, provided that proper vouchers
are submitted to the Company by Executive evidencing such expenses and the
purposes for which the same were incurred.
9. TERMINATION. The Company shall have the right to terminate
Executive's employment only as expressly provided in this Agreement.
(a) DEATH OR DISABILITY. Except as otherwise provided
herein, this Agreement shall terminate automatically upon Executive's death.
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The Company may terminate this Agreement after having
established Executive's "Disability" (as defined below), by giving Executive
written notice of its intention to terminate Executive's employment. For
purposes of this Agreement, "Disability" means Executive's inability to perform
substantially all his duties and responsibilities to the Telemundo Group by
reason of a physical or mental disability or infirmity (i) for a continuous
period of twelve consecutive months or (ii) at such earlier time as Executive
submits medical evidence satisfactory to the Company or the Board of Directors
determines in good faith and upon competent medical advice that Executive has a
physical or mental disability or infirmity that will likely prevent Executive
from substantially performing his duties and responsibilities for twelve
consecutive months or longer. The date of Disability shall be the day on which
Executive receives notice from the Company pursuant to this Section 9.
Upon termination of Executive's employment because of
death or Disability, the Company shall pay Executive or his estate or other
personal representative (i) within 60 days, the amount of Executive's Base
Salary earned up to the date of death or Disability, as the case may be, through
the date of termination, (ii) all benefits and other items referred to in
Sections 5 and 8 which are due up to the date of death or Disability and (iii)
when otherwise due in accordance with the provisions of Section 4, the Bonus, if
any, earned for the year in which such termination occurred, without regard to
whether Executive is an employee of the Company on the last day of such year.
(b) CAUSE; RESIGNATION WITHOUT GOOD REASON OR AS A
SPECIFIED RESIGNATION. The Company shall have the right to terminate Executive's
employment for "Cause" as defined below. Except as provided in Section 15
herein, (i) upon termination of Executive's employment for Cause or (ii) upon
Executive resigning as an employee pursuant to a resignation that is without
Good Reason and is not a Specified Resignation (as defined in Section 9(d)(i)),
this Agreement shall terminate and the Executive shall not be entitled to
receive any compensation or other benefits other than (x) Base Salary earned up
to the date of such termination or resignation and (y) all benefits and other
items referred to in Sections 5 and 8 which are due up to the date of such
termination or resignation.
For purposes of this Agreement, "Cause" shall mean
(i) the willful and continued failure by Executive to perform substantially all
his duties to the Company or the failure by the Executive to comply with the
reasonable written policies, procedures and directives of the Board of Directors
(other than any such failure resulting from his death or Disability), in each
case after being given written notice by the Board of Directors of a failure to
perform or comply (which notice specifically identifies the manner in which
Executive has failed to perform or comply) and a reasonable opportunity to cure
such noncompliance or nonperformance; (ii) the willful misconduct by Executive
in the performance of his duties to the Company, provided that (for purposes of
this clause (ii) only and not for any other purpose or interpretation of this
Agreement) an act shall be considered "willful" only if done in bad faith and
not in the best interests of the Company; (iii) the grossly negligent
performance by Executive of his duties to the Company; (iv) the conviction of
Executive by a court of competent jurisdiction of the commission of (x) a felony
or (y) a crime involving moral turpitude; or (v) a material breach by Executive
of Sections 10 or 11 hereof.
Notwithstanding the foregoing, the Company shall not
be entitled to terminate Executive for any of the reasons specified in clause
(i), (ii), (iii) or (v) of the
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immediately preceding paragraph unless such termination is authorized by a
resolution adopted by the Board of Directors of the Company at a meeting called
and held for this purpose (after five business days' prior written notice to
Executive, which prior written notice shall state the general facts,
circumstances or deficiencies supporting a claim for Cause termination, and
after affording Executive and his counsel an opportunity to be heard before the
Board of Directors).
(c) TERMINATION WITHOUT CAUSE; NON-RENEWAL.
Notwithstanding anything to the contrary contained herein, the Company shall
have the right to terminate the employment of Executive at any time without
Cause and the Company shall be entitled to determine, in its sole and absolute
discretion, not to extend the Employment Period as provided in Section 1. Upon a
termination without Cause, except as provided in Section 15, this Agreement
shall terminate and the Executive shall not be entitled to receive any
compensation or other benefits, except that the Company shall (i) through the
later of February 28, 2001 or the first anniversary of the date of termination
of Executive's employment (the "Entitlement Date") continue to pay to Executive
the Base Salary in effect immediately prior to the date of termination, such
payments to be made in installments at the times such amounts would have been
paid if the Agreement had not been so terminated, and (ii) pay to the Executive,
when otherwise due in accordance with Section 4, the Bonus, if any, earned for
the fiscal year in which such termination occurs, without regard to whether
Executive is employed on the last day of such fiscal year and (iii) through the
Entitlement Date continue Executive's benefits and other items referred to in
Section 5 or, to the extent the Company is legally unable to provide any such
benefits or other items as a result of Executive no longer being an employee,
reimburse Executive for his cost (not to exceed the actual cost to the Company
if he were still an employee) of obtaining the equivalent coverage and benefits.
During the period in which Executive receives the payments required by the
immediately preceding sentence, Executive shall be subject to the provisions set
forth in Sections 10 and 11 below. In the event that Company elects not to
extend the Employment Period, then, absent any termination pursuant to Section
9, the Company shall continue paying to Executive his Base Salary during the
period, if any, beginning on the date Executive's employment terminates and
ending on the first anniversary of the date on which the Company gives its
notice of non-renewal to Executive. During the period in which Executive
receives the payments required by the immediately preceding sentence, Executive
shall be subject to the provisions set forth in Sections 10 and 11 below.
(d) TERMINATION FOR GOOD REASON; SPECIFIED
RESIGNATION RIGHT.
(i) Executive shall have the right to
terminate his employment under this Agreement upon the occurrence of any event
that constitutes Good Reason by giving written notice to the Company. "Good
Reason" means any of the following: (A) a Diminution in Duty (as defined below),
(B) a Designated Relocation (as defined below), or (C) any Other Good Reason
Event (as defined below); PROVIDED, HOWEVER, that Good Reason shall not be
deemed to have occurred prior to the giving of written notice by the Executive
to the Company generally describing the alleged Good Reason, and the actions the
Executive believes are necessary to cure such alleged Good Reason, and the
Company's failure to so cure within 15 days of receipt of such notice. The
giving of such notice and the action or failure to take action by the Company
shall be irrelevant in determining whether a Good Reason has in fact occurred.
If a Change of Control Transaction (as defined in the Amended Option Agreement)
occurs, then, during the period
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beginning on the date that is 14 months after the consummation of the Change of
Control Transaction and ending on the date that is 15 months after the
consummation of the Change of Control Transaction, Executive shall have the
right to terminate his employment under this Agreement for any reason whatsoever
by giving written notice of such termination to the Company (such termination
being a "Specified Resignation" and, for purposes of this Agreement, a Specified
Resignation shall be treated exactly like a termination for Good Reason). Upon a
termination for Good Reason or a Specified Resignation, except as provided in
Section 15, this Agreement shall terminate and the Executive shall not be
entitled to receive any compensation or other benefits other than the Company
shall (i) through the Entitlement Date continue to pay to Executive the Base
Salary in effect immediately prior to the date of termination, such payments to
be made in installments at the times such amounts would have been paid if the
Agreement had not been so terminated, (ii) pay to the Executive, when otherwise
due in accordance with Section 4, the Bonus, if any, earned for the fiscal year
in which such termination occurs, without regard to whether Executive is
employed on the last day of such fiscal year and (iii) through the Entitlement
Date continue Executive's benefits and other items referred to in Section 5 or,
to the extent the Company is legally unable to provide any such benefits or
other items as a result of Executive no longer being an employee, reimburse
Executive for his cost (not to exceed the actual cost to the Company if he were
still an employee) of obtaining the equivalent coverage and benefits. During
such period, Executive shall be subject to the provisions set forth in Sections
10 and 11 below.
(ii) "Diminution in Duty" means, without
Executive's express prior written consent: (A) the assignment to Executive of
any duties inconsistent in any respect with Executive's position on the date of
this Agreement, or (B) any adverse change in Executive's status, offices,
titles, reporting requirements, authority, duties or responsibilities as in
effect on the date of this Agreement; PROVIDED, HOWEVER, that after a Change of
Control Transaction (as defined in the Amended Option Agreement), a "Diminution
in Duty" means a change in Executive's position with the Company so that he is
neither (1) an Executive Vice President of the Company, nor (2) an Executive
Vice President of a successor to any part of the Company's business or assets.
Notwithstanding anything whatsoever to the contrary contained in this Agreement
(or in the Amended Option Agreement or in the 1997 Option Agreement), if after a
Change of Control Transaction any of the events described in clause (A) or (B)
of the immediately preceding sentence occurs (without regard to the application
of the proviso in such sentence), Executive shall have the absolute right to
change his position with the Company to a position that has such work location,
time commitment, duties, responsibilities and terms as shall be specified by
Executive in his sole and absolute discretion after consultation with the
Company, and the requirement of Section 2(a) that Executive devote his full time
and attention to the Telemundo Group shall cease to apply.
(iii) "Designated Relocation" means the
Company requiring Executive's work location to be other than the Company's
headquarters in the greater Los Angeles area or other than within thirty (30)
miles of the Company's current headquarters in Glendale, California.
(iv) "Other Good Reason Event" means any of
the following: (A) a material breach of this Agreement by the Company (which
shall include, without limitation, any reduction in the amount of any
compensation or benefits provided to
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Executive under this Agreement) or (B) any termination or attempted termination
by the Company of Executive's employment other than as expressly permitted in
this Agreement.
(e) OFFICER AND BOARD POSITIONS. Upon the termination
of employment with the Company for any reason, Executive shall be deemed to have
resigned any and all of his positions as an officer and a member of the Board of
Directors of the Company and any of its subsidiaries and as a member of any
committees of such Boards, effective on the date of termination.
(f) CERTAIN CONDITION. Notwithstanding anything to
the contrary contained in this Section 9, the obligations of the Company under
this Section 9 shall continue only so long as the Executive does not breach his
obligations under Section 10 and 11.
(g) CERTAIN EFFECT. As used in this Agreement,
termination of this Agreement shall also result in and mean termination of the
Employment Period hereunder.
(h) MITIGATION OF DAMAGES. Executive shall have no
duty to mitigate any of his damages in the event of any breach of or default or
failure in performance under this Agreement by the Company.
(i) STOCK OPTIONS. The references in Section 9(a),
9(b), 9(c) or 9(d) to Executive, other than as therein stated, not being
entitled to receive compensation or benefits upon termination of his employment
under any of such Sections shall not affect Executive's rights under the Amended
Option Agreement or the 1997 Option Agreement.
10. CONFIDENTIALITY, ETC. Executive will not divulge, furnish
or make accessible to anyone (otherwise than in the regular course of business
of the Telemundo Group) any confidential information, plans or materials or
trade secrets of the Telemundo Group or with respect to any other confidential
or secret aspects of the business of the Telemundo Group; PROVIDED, HOWEVER,
that during his employment, Executive shall have the latitude customarily given
an executive vice president to disclose information in good faith for the
benefit of the Company and its stockholders (taken as a whole). All memoranda,
notes, lists, records and other documents or papers (and all copies thereof),
including such items stored in computer memories, on microfiche or by any other
means, made or compiled by or on behalf of Executive, or made available to him
relating to the Telemundo Group are and shall be the Company's property and
shall be delivered to the Company promptly upon the termination of his
employment with the Company; PROVIDED, HOWEVER, that (i) this obligation shall
not apply to information that (A) is not confidential (other than as a result of
Executive's breach of this Section) and (B) does not contain certain trade
secrets of the Company, (ii) Executive shall have the right to retain such of
the foregoing as shall be reasonably necessary to enforce his rights under this
Agreement and to comply with and enforce his rights, including the right to
defend himself against claims, provided copies of such retained information are
provided to the Company and the retained information remain subject to the
provision of this Section, and (iii) Executive shall have no obligation to
return information that is no longer in his possession, custody or control. This
Section 10 shall survive the expiration or termination or termination of this
Agreement, the Employment Period and the term of employment; PROVIDED, HOWEVER,
that if Executive's employment is terminated pursuant to Section 9(c) or Section
9(d), then this Section 10 will terminate on the Entitlement Date.
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11. NO INTERFERENCE; AFFILIATE TRANSACTIONS.
(a) During the Employment Period and for one year
thereafter, Executive will not, directly or indirectly, for himself, or as agent
of or on behalf of, or in conjunction with, any person, firm, corporation, or
other entity, engage or participate in the Company Business (as hereinafter
defined), whether as employee, consultant, partner, principal, shareholder or
representative, or render advisory or other services to or for any person, firm,
corporation or other entity, which is engaged, directly or indirectly, in the
Company Business; PROVIDED, HOWEVER, that (i) Executive may own less than 5% of
the common stock of a publicly traded company that is engaged in the Company
Business and (ii) Executive may own Common Stock and securities convertible into
Common Stock (or securities into which Common Stock is converted in any business
combination transaction). For purposes of this Section 11(a), "Company Business"
shall mean and be limited to any of (x) the provision of Spanish language
television programming in the United States (which includes Puerto Rico), (y)
the ownership of television broadcast stations, networks or any over-the-air
television signal, and cable in the United States (which includes Puerto Rico)
that broadcast primarily Spanish language programming, and (z) the sale of
television advertising time and programs inside and outside the United States
(which includes Puerto Rico) for Spanish language television stations, cable and
networks.
(b) During the Employment Period and for one year
after such period, Executive agrees and covenants that he will not interfere
directly or indirectly in any way with the Company. "Interfere" means to
influence or attempt to influence, directly or indirectly, present or active
prospective customers, employees, suppliers, performers, directors,
representatives, agents or independent contractors of the Company, or any of its
network affiliates to restrict, reduce, sever or otherwise alter their
relationship with the Telemundo Group or any of its network affiliates.
(c) Executive agrees that during the Employment
Period, he will not at any time enter into, on behalf of the Telemundo Group, or
cause the Telemundo Group to enter into, directly or indirectly, any
transactions (each, a "Transaction") with any business organization in which he
or, to his knowledge after due inquiry, any member of his family may be
interested as a partner, trustee, director, officer, employee, shareholder,
lender of money or guarantor, except to the extent disclosed to the Company and
agreed to by the board of directors of the Company in writing. Executive will
use his best efforts to ensure that any Transaction is disclosed to the Board of
Directors of the Company and approved thereby prior to entering into a contract
relating thereto and/or consummation thereof, as contemplated by the preceding
sentence.
(d) From and after the termination of Executive's
employment, the Executive shall not disparage the Company, its officers,
directors, employees or business, nor shall the Company or any of its officers,
directors, employees or agents disparage the Executive or members of his family,
and neither party shall disclose any facts relating to such termination;
provided, that nothing contained in this Section 11(d) shall restrict the
parties from making any statements or disclosure believed necessary to enforce
in any judicial or similar proceeding the provisions of this Agreement or as a
party believes may be required by applicable law.
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(e) In the event any court having jurisdiction
determines that any part of this Section 11 is unenforceable, such court shall
have the power to reduce the duration or scope of such provision and such
provision, in its reduced form, shall be enforceable. This Section 11 shall
survive the expiration or termination of this Agreement and the Employment
Period; PROVIDED, HOWEVER, that if Executive's employment is terminated pursuant
to Section 9(c) or Section 9(d), then this Section 11 will terminate on the
Entitlement Date.
12. INJUNCTIVE RELIEF. Executive acknowledges that the
provisions of Sections 10 and 11 herein are reasonable and necessary for the
protection of the Telemundo Group and the Telemundo Group will be irrevocably
damaged if such provisions are not specifically enforced. Accordingly, Executive
agrees that, in addition to any other relief to which the Company may be
entitled in the form of damages, the Company shall be entitled to seek and
obtain injunctive relief from a court of competent jurisdiction (without the
posting of a bond therefor) for the purposes of restraining Executive from any
actual or threatened breach of such provisions.
13. REMEDIES; SERVICE OF PROCESS.
(a) Except when a party is seeking an injunction or
specific performance hereunder, the parties agree to submit any dispute
concerning this Agreement to binding arbitration. The parties may agree to
submit the matter to a single arbitrator or to several arbitrators, may require
that arbitrators possess special qualifications or expertise or may agree to
submit a matter to a mutually acceptable firm of experts for decision. In the
event the parties shall fail to thus agree upon terms of arbitration within
twenty (20) days from the first written demand for arbitration, then such
disputed matter shall be settled by arbitration under the Rules of Employment
Arbitration of the American Arbitration Association, by three arbitrators
appointed in accordance with such Rules. Such arbitration shall be held in Los
Angeles, California. Once a matter has been submitted to arbitration pursuant to
this section, the decision of the arbitrators shall be final and binding upon
all parties. The cost of arbitration shall be shared equally by the parties and
each party shall pay the expenses of his/its attorneys, except that the
arbitrators shall be entitled to award the costs of arbitration, attorneys and
accountants' fees, as well as costs, to the party that they determine to be the
prevailing party in any such arbitration.
(b) The Company and Executive hereby irrevocably
consent to the jurisdiction of the Courts of the State of California and of any
Federal Court located in such State in connection with any action or proceedings
arising out of or relating to the provisions of Sections 10 and 11 of this
Agreement. Executive further agrees that he will not commence or move to
transfer any action or proceeding arising out or relating to the provisions of
Sections 10 and 11 of this Agreement to any Court other than one located in the
State of California. In any such litigation, Executive waives personal service
of any summons, complaint or other process and agrees that the service thereof
may be made by certified mail directed to Executive at his address for purposes
of notice under Section 17(b) hereof.
14. SUCCESSORS. This Agreement and the rights and obligations
hereunder are personal to Executive and without the prior written consent of the
Company and Executive shall not be assignable.
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15. SURVIVAL OF PROVISIONS. Notwithstanding anything to the
contrary contained herein, the provisions of Sections 5(b), 9, 10, 11, 12, 13,
14, 15, 16 and 17 hereof shall survive the termination or expiration of this
Agreement, irrespective of the reasons therefor.
16. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Notwithstanding anything to the contrary
contained herein, if it shall be determined that any payment, distribution or
benefit received or to be received by Executive from the Company ("Payments"),
whether under this Agreement or otherwise (including without limitation, the
Amended Option Agreement and the 1997 Option Agreement), would be subject to the
excise tax imposed by Section 4999 of the Code, or any successor or counterpart
section thereto (the "Excise Tax"), then Executive shall be entitled to receive
an additional payment (the "Excise Tax Gross-Up Payment") in an amount such that
the net amount retained by Executive, after the calculation and deduction of any
Excise Tax on the Payments and any federal, state and local income taxes,
employment taxes and excise tax on the Excise Tax Gross-Up Payment provided for
in this Section 16, shall be equal to the Payments. For the avoidance of doubt,
in determining the amount of the Excise Tax Gross-Up Payment attributable to
federal income taxes the Company shall take into account the maximum reduction
in federal income taxes that could be obtained by the deduction of the portion
of the Excise Tax Gross-Up Payment attributable to state and local income taxes.
Finally, the Excise Tax Gross-Up Payment shall be net of any income or excise
tax withholding payments made by the Company or any affiliate to any federal,
state or local taxing authority with respect to the Excise Tax Gross-Up Payment
that was not deducted from compensation payable to Executive.
(b) All determinations required to be made under this
Section 16, including whether and when an Excise Tax Gross-Up Payment is
required and the amount of such Excise Tax Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, except as specified in Section
16(a) above, shall be made by Deloitte & Touche LLP (the "Accounting Firm"),
which shall provide detailed supporting calculations both to the Company and
Executive within 15 business days after the Company becomes obligated to make
any Payments to Executive. The determination of tax liability made by the
Accounting Firm shall be subject to review by Executive's tax advisor and, if
Executive's tax advisor does not agree with the determination reached by the
Accounting Firm, then the Accounting Firm and Executive's tax advisor shall
jointly designate a nationally recognized public accounting firm, which shall
make the determination. All fees and expenses of the accountants and tax
advisors retained by either Executive or the Company shall be borne by the
Company. Any Excise Tax Gross-Up Payment, as determined pursuant to this Section
16 shall be paid by the Company to Executive within five days after the receipt
of the determination. Any determination by a jointly designated public
accounting firm shall be binding upon the Company and Executive.
(c) As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the initial determination hereunder,
it is possible that Excise Tax Gross-Up Payments will not have been made by the
Company that should have been made consistent with the purpose of this Section
16 ("Underpayment"). In the event that Executive is required to make a payment
of any Excise Tax, any such Underpayment calculated in accordance with and in
the same manner as the Excise Tax Gross-Up Payment in Section 16 above shall be
promptly paid by the Company to or for the benefit of
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Executive. In the event that the Excise Tax Gross-Up Payment exceeds the amount
subsequently determined to be due, such excess shall constitute a loan from the
Company to Executive payable on the fifth day after demand by the Company
(together with interest at the rate provided in Section 1274(b)(2)(B) of the
Code).
17. MISCELLANEOUS. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of California, without
reference to principles of conflict of laws.
(b) All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered,
telecopied or mailed, certified or registered mail, return receipt requested:
If to Executive:
Donald J. Tringali
1551 East Paseo Pavon
Tucson, Arizona 85718
If to the Company:
Telemundo Group, Inc.
2290 West 8th Avenue
Hialeah, Florida 33010
Attention: Chairman
Phone: (305) 884-8200
Telecopy No.: (305) 889-7997
with a copy to:
Telemundo Group, Inc.
2290 West 8th Avenue
Hialeah, Florida 33010
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee or upon refusal if properly delivered.
(c) The Company may withhold from any amounts payable
under this Agreement such Federal, state of local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
(d) Executive represents and warrants that he is not
a party to any agreement, contract or under-standing, whether employment or
otherwise, which would in any way restrict or prohibit him from undertaking or
performing employment in accordance with the terms and conditions of this
Agreement.
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(e) This Agreement, the Amended Option Agreement and
the 1997 Option Agreement set forth the entire understanding of the parties with
respect to the subject matter hereof, and no statement, representation, warranty
or covenant has been made by either party except as expressly set forth herein.
This Agreement shall not be changed or terminated orally. This Agreement amends
the Original Agreement and supersedes and cancels all other prior agreements
between the parties, whether written or oral, relating to the employment of
Executive. The headings and captions contained in this Agreement are for
convenience only and shall not be deemed to affect the meaning or construction
of any provision hereof.
(f) If, at any time subsequent to the date hereof,
any provision of this Agreement shall be held by any court of competent
jurisdiction to be illegal, void or unenforceable, such provision shall be of no
force and effect, but the illegality or unenforceability of such provision shall
have no effect upon and shall not impair the enforceability of any provision of
this Agreement.
(g) The Company's failure to insist upon strict
compliance with any provision hereof shall not be deemed to be a waiver of such
provision or any other provision hereof. Executive's failure to insist upon
strict compliance with any provision hereof shall not be deemed to be a waiver
of such provision or any other provision hereof.
(h) This Agreement shall inure to the benefit of and
be binding upon any successor to the Company and shall inure to the benefit of
Executive's successors, heirs and personal representatives.
(SIGNATURE PAGE FOLLOWS)
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IN WITNESS WHEREOF, Executive has hereunto set his hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name and on its behalf, all as of
the day and year first above written.
/s/ DONALD J. TRINGALI
---------------------------
Donald J. Tringali
TELEMUNDO GROUP, INC.
By: /s/ BRUCE SPECTOR
-----------------------
Name: Bruce Spector
Title: Chairman of the
Compensation Committee
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EXHIBIT A
TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT
BETWEEN TELEMUNDO GROUP, INC. AND
DONALD J. TRINGALI
(dollars in thousands)
ADJUSTED NET CONTRIBUTION1
% OF SALARY IF
TARGET ACHIEVED 2 1997 TARGETS
- ----------------- ------------
100% $47,789
75% $41,556
50% $35,322
- --------
1 "Adjusted Net Contribution" means operating income plus depreciation
and amortization determined in accordance with generally accepted
accounting principles, without giving effect to any income, gain or
loss associated with TeleNoticias del Mundo, L.P. or WSNS, but
determined consistent with the accounting method for determining "Net
Contribution before TeleNoticias and WSNS" on the Company's internal
financial statements in prior periods and adjusted to eliminate the
impact of changes in accounting principles after the date of this
Agreement and of acquisitions or divestitures of operating units after
the date of this Agreement if taking such operating units into account
would either increase or decrease the actual Net Contribution by at
least 5% of the Adjusted Net Contribution target in the year of
acquisition or divestiture on an annualized basis and also adjusted to
eliminate: (i) all monetary compensation paid to executive officers who
are terminated during calendar year 1995 (but only such compensation
paid after such termination); (ii) any legal fees and costs paid by the
Company with respect to item (i); (iii) $95,000 of expenses in 1995;
(iv) the expense associated with the exercise of options to acquire
common stock held on March 7, 1995 by the executive officers of the
Company, to the extent not in the Company's budget; (v) the expense
associated with the exercise of options issued to those persons who are
executive officers of the Company on March 7, 1995 in connection with
their termination prior to July 1995, to the extent not in the
Company's budget; (vi) direct cost incurred in the Company's bankruptcy
reorganization, to the extent not included in the Company's budget;
(vii) direct costs incurred in settling the Blair litigation, to the
extent not included in the Company's budget; and (viii) certain
contingent expenses relating to Puerto Rico as discussed between the
parties, to the extent not included in the Company's budget. The
adjustments set forth in clauses (i) - (viii) (other than clause (iii))
shall occur only when and to the extent actually expensed by the
Company and to the extent considered in the calculation of Adjusted Net
Contribution.
2 Bonus payments shall be subject to required withholdings. The bonus
shall be based on the actual annualized salary for the applicable calendar year.
Calculations hereunder shall be based upon data provided by the Company's Chief
Financial Officer to the Chief Executive Officer, whose decision shall be final.
AMENDED AND RESTATED
NONQUALIFIED STOCK OPTION AGREEMENT
FOR CORPORATE OFFICERS
AGREEMENT made as of the 10th day of September, 1997 between Telemundo
Group, Inc., a Delaware corporation (the "Company"), and Donald J. Tringali (the
"Optionee").
WHEREAS, the Company has adopted the 1994 Stock Plan, as the same may
be amended from time to time (the "Plan") in order to provide additional
incentive to certain officers and employees of the Company and its Subsidiaries;
and
WHEREAS, the Optionee has entered into an employment agreement with the
Company, dated as of June 11, 1996 (the "Employment Agreement");
WHEREAS, the Committee responsible for administration of the Plan
granted an option to the Optionee, effective as of June 11, 1996 (the "Grant
Date"), pursuant to that certain Nonqualified Stock Option Agreement for
Corporate Officers (the "Original Agreement") dated as of the Grant Date;
WHEREAS, the Committee and the Optionee desire to amend and restate the
Original Agreement in its entirety, effective as of September 10, 1997, pursuant
to this Amended and Restated Nonqualified Stock Option Agreement for Officers
(the "Agreement") concurrently with the Company's amendment and restatement of
the Employment Agreement pursuant to that certain Amended and Restated
Employment Agreement (the "Amended Employment Agreement") between the Company
and Optionee dated concurrently herewith.
NOW, THEREFORE, the parties hereto agree that the Original Agreement
shall be amended and restated as follows:
1. OPTION.
1.1 This Agreement shall be construed in accordance and
consistent with, and subject to, the provisions of the Plan (the provisions of
which are incorporated herein by reference) and, except as otherwise expressly
set forth herein, the capitalized terms used in this Agreement shall have the
same definitions as set forth in the Plan.
1.2 The parties acknowledge and agree that pursuant to the
Original Agreement the Company has granted the Optionee the right and option
(the "Option") to purchase all or any part of an aggregate of 75,000 whole
shares of Stock and that they now desire for the Option to be subject to, and
governed in accordance with, the terms and conditions set forth in this
Agreement.
1.3 The Option is not intended to qualify as an Incentive
Stock Option within the meaning of Section 422 of the Code.
<PAGE>
2. PURCHASE PRICE.
The price at which the Optionee shall be entitled to purchase shares of
Stock upon the exercise of the Option shall be $23.375 per share.
3. DURATION OF OPTION.
Except as otherwise provided in this Agreement or the Plan, the Option
shall be exercisable to the extent and in the manner provided herein for a
period of ten years from the Grant Date (the "Exercise Term"); PROVIDED,
HOWEVER, that the Option may be earlier terminated as provided in Section 7
hereof.
4. COMPENSATION COMMITTEE. The Company represents and warrants to the
Optionee that this Agreement has been approved by the Committee.
5. VESTING AND EXERCISABILITY OF OPTION.
5.1 Unless otherwise provided in this Agreement or the Plan,
the Option shall entitle the Optionee, in whole at any time or in part from time
to time, to exercise the Option for shares of Stock to the extent the Option has
become "vested." The parties acknowledge that the Option has fully vested and
become immediately exercisable as to 25,000 Shares in accordance with the
Original Agreement. The remaining provisions of Section 5 shall govern the
vesting and exercisability of the remaining 50,000 Shares that are subject to
the Option (the "Remaining Option Shares").
5.2 The Option shall "vest" and become exercisable as to all
of the Remaining Option Shares on February 28, 2004 if, but only if, Optionee is
employed with the Company on such vesting date.
5.3 The Option shall "vest" and become exercisable as to 6,250
of the Remaining Option Shares on the effective date of this Agreement.
5.4 In addition, to the extent that the Option shall not have
previously "vested" and become exercisable pursuant to Sections 5.3 or 7.3, the
Option shall "vest" and become exercisable with respect to 25,000 of the
Remaining Option Shares on the day immediately after the date during the period
beginning on September 10, 1997 and ending on December 31, 1997 on which the
closing price of the Stock, on Nasdaq or the principal exchange on which shares
of Stock are then trading, has equaled or exceeded $32.00 per share for a period
of thirty (30) consecutive trading days, if, but only if, the Optionee is
employed with the Company on such vesting date.
5.5 In addition, to the extent that the Option shall not have
previously "vested" and become exercisable pursuant to Sections 5.3, 5.4 or 7.3,
the Option shall "vest" and become exercisable as to 6,250 of the Remaining
Option Shares on December 31, 1998, if, but only if, Optionee is employed with
the Company on such vesting date.
5.6 In addition, to the extent that the Option shall not have
previously "vested" and become exercisable pursuant to Sections 5.3, 5.4, 5.5 or
7.3, the Option shall "vest" and become exercisable as to 6,250 of the Remaining
Option Shares on December 31, 1999, if, but only if, Optionee is employed with
the Company on such vesting date.
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5.7 In addition, to the extent that the Option shall not have
previously "vested" and become exercisable pursuant to Sections 5.3, 5.4, 5.5,
5.6 or 7.3, the Option shall "vest" and become exercisable as to 6,250 of the
Remaining Option Shares on December 31, 2000, if, but only if, Optionee is
employed with the Company on such vesting date.
5.8 In addition, to the extent the Option shall not have
previously "vested" and become exercisable pursuant to Sections 5.3, 5.4, 5.5,
5.6, 5.7 or 7.3, all of the Remaining Option Shares which have not previously
"vested" pursuant to such provisions, shall become "vested" and exercisable
immediately prior to the time at which a "Change of Control Transaction" occurs
if, but only if, Optionee is employed with the Company immediately prior to the
occurrence of such Change of Control Transaction. A "Change of Control
Transaction" means any one or more of the following events: (A) an event or
series of events after the date of the Original Agreement as a result of which
any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of
the Exchange Act) who did not own at least 500,000 shares of the Company's
Series B Common Stock on September 1, 1997 becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of more
than 50% of the aggregate voting power of all of the capital stock of the
Company normally entitled to vote in the election of directors or (B) a sale,
transfer, conveyance or other disposition, directly or indirectly, in any single
transaction or series of related transactions, no matter how accomplished, which
results in more than 50%, in value, of (1) the capital stock (or other equity
interest in) or operating assets of Telemundo Network, Inc., a wholly-owned
subsidiary of the Company or (2) the aggregate capital stock (or other equity
interest in) or operating assets of all of the Company's subsidiaries (other
than Telemundo Network, Inc.), which currently comprise the Company's owned and
operated station group (including any special purpose license subsidiaries),
being owned (which term shall include "beneficial ownership" within the meaning
of Rule 13d-3 under the Exchange Act), directly or indirectly, by any "person"
or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange
Act) who did not own at least 500,000 shares of the Company's Series B Common
Stock on September 1, 1997 or (C) a transaction or series of related
transactions leading to at least an 80% reduction in the number of outstanding
shares of Stock held by "unaffiliated persons" (meaning any person other than
Hernandez Partners, Apollo Partners, L.P. or Bastion Capital Fund, L.P. or any
of their respective affiliates (as this term is defined in Rule 12b-2 under the
Exchange Act) on the date of this Agreement.
5.9 In the event of a subdivision or combination of the
outstanding shares of Stock (whether by stock split, stock dividend, reverse
stock split or otherwise), the per share prices specified in Sections 5.4, and
5.8 shall be proportionately adjusted.
6. MANNER OF EXERCISE AND PAYMENt.
6.1 Subject to the terms and conditions of this Agreement and
the Plan, the Option may be exercised by delivery of written notice to the
Company at its principal
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executive office. Such notice shall state that the Optionee is electing to
exercise the Option and the number of shares of Stock in respect of which the
Option is being exercised and shall be signed by the person or persons
exercising the Option. If requested by the Committee, such person or persons
shall (i) deliver this Agreement to the Secretary of the Company who shall
endorse thereon a notation of such exercise and (ii) provide satisfactory proof
as to the right of such person or persons to exercise the Option.
6.2 The notice, of exercise described in Section 6.1 shall be
accompanied by the full purchase price for the shares of Stock in respect of
which the Option is being exercised and by the Withholding Taxes, in cash, by
check or, in the discretion of the Committee, by transferring shares of Stock to
the Company held by the Optionee for more than six months and having a Fair
Market Value on the day preceding the day of exercise equal to the cash amount
for which such shares of Stock are substituted. Notwithstanding the preceding
sentence, the parties agree that, to the extent permitted by law, and to the
extent it would not, in the Company's judgment, result in any adverse legal,
financial or tax implications for the Company, it is their intention that
Optionee be able to effect a simultaneous exercise of this Option and sale of
shares of Stock issuable upon such exercise in the over-the-counter market or
any securities exchange on which the Stock is then listed, without Optionee
bearing any commission or brokerage expense (a "concurrent transaction"). To
this end, the Company and Optionee shall jointly agree upon a securities broker
to be used in such transactions and further to adopt such additional procedures
as may be necessary or advisable to accomplish concurrent transactions. In any
concurrent transaction, the Company shall not be required to deliver a share
certificate upon exercise of this Option unless it receives concurrent payment
of the exercise price and Withholding Taxes. The Company shall bear all
commission and brokerage expense associated with concurrent transactions, which
shall be treated as an adjustment in the purchase price of shares subject to
this Option.
6.3 Upon receipt of notice of exercise and full payment for
the shares of Stock in respect of which the Option is being exercised and of the
Withholding Taxes, the Company shall, subject to Section 14 of the Plan,
promptly take such action as may be necessary to effect the transfer to the
Optionee of the number of shares of Stock as to which such exercise was
effective, including issuing and delivering such shares of Stock and entering
the Optionee's name as a stockholder of record on the books of the Company
provided, that full payment of the exercise price and Withholding Taxes may be
made concurrently with such transfer and delivery in the case of a concurrent
transaction provided for in Section 6.2.
6.4 The Optionee shall not be deemed to be the holder of, or
to have any of the rights of a holder with respect, to any shares of Stock
subject to the option until (i) the Option shall have been exercised pursuant to
the terms of this Agreement and the Optionee shall have paid the full purchase
price for the number of shares of Stock in respect of which the Option was
exercised, (ii) the Company shall have issued and delivered the shares of Stock
to the Optionee, and (iii) the Optionee's name shall have been entered as a
stockholder
4
<PAGE>
of record on the books of the Company, whereupon the Optionee shall have full
voting and other ownership rights with respect to such shares.
6.5 The Company will use its reasonable efforts to permit
shares of Stock issued pursuant to this Option to be registered in a "piggy
back" registration in connection with a registration of shares of stock to be
issued by the Company pursuant to Form S-1, S-2, S-3 or S-8 under the Act, on
such customary terms and conditions as the Company shall reasonably specify. The
Optionee shall, in a manner customary for such a registration, cooperate with
the Company, as reasonably requested by it, in connection with such registration
and resale. To the extent the Company provides registration rights generally to
executive officers pursuant to benefit or stock plans of the Company, Optionee
will be provided with similar rights as are provided to other executive
officers.
7. TERMINATION OF EMPLOYMENT.
7.1 TERMINATION UNDER SECTION 9(A) OF AMENDED EMPLOYMENT
AGREEMENT. If the employment of the Optionee is terminated pursuant to Section
9(a) of the Amended Employment Agreement, the Optionee (or his personal
representative) may at any time within one year after such termination (but in
no event after the expiration of the Exercise Term) exercise the Option to the
extent, but only to the extent, that the Option or portion thereof was vested on
the date of such termination and the remainder of the Option, if any, shall
terminate.
7.2 TERMINATION UNDER SECTION 9(B) OF AMENDED EMPLOYMENT
AGREEMENT. If the employment of the Optionee is terminated for Cause or if the
Optionee resigns from his employment pursuant to a resignation that is without
Good Reason and is not a Specified Resignation, in either case as provided in
Section 9(b) of the Amended Employment Agreement, as finally determined pursuant
to the provisions of said Section 9(b), the Optionee (or his personal
representative) may at any time within one year after such termination or
resignation (but in no event after the expiration of the Exercise Term) exercise
the Option to the extent, but only to the extent, that the Option or portion
thereof was vested on the date of such termination or resignation and, subject
to Section 7.3, the remainder of the Option, if any, shall terminate.
7.3 TERMINATION UNDER SECTIONS 9(C) OR 9(D) OF THE AMENDED
EMPLOYMENT AGREEMENT. If the Optionee's employment is terminated pursuant to
Section 9(c) or 9(d) of the Amended Employment Agreement, the Option, to the
extent it has not vested with respect to any Remaining Option Shares, shall
immediately vest and become exercisable. The Optionee may at any time within one
year after the date of such termination of employment (but in no event after the
expiration of the Exercise Term) exercise any or all of the Option to the extent
not previously exercised.
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8. NON-TRANSFERABILITY.
The Option shall not be transferable other than by will or by the laws
of descent and distribution. During the lifetime of the Optionee, the Option
shall be exercisable only by the Optionee.
9. NO RIGHT TO CONTINUED EMPLOYMENT.
Nothing in this Agreement or the Plan shall be interpreted or construed
to confer upon the Optionee any right with respect to continuance of employment
by the Company, nor shall this Agreement or the Plan interfere in any way with
the right of the Company to terminate the Optionee's employment at any time,
subject to all terms and conditions of the Amended Employment Agreement.
10. ADJUSTMENTS.
In the event of a Change in Capitalization, the Committee shall
conclusively determine the appropriate adjustments to the number and class of
shares of Stock subject to the Option and the purchase price for such shares of
Stock. The Committee's adjustment shall be made in accordance with the
provisions of Section 4.5 of the Plan and shall be effective and final, binding
and conclusive for all purposes of the Plan and this Agreement. Notwithstanding
either of the preceding two sentences, the vesting and exercisability provisions
in Sections 5 and 7.3 and the rights of the Optionee under Sections 6.5 and 11
shall not be adversely affected by any Change in Capitalization.
11. CERTAIN EVENTS.
Except as otherwise expressly provided herein, upon the effective date
of (i) the liquidation or dissolution of the Company or (ii) a merger or
consolidation of the Company (a "Transaction"), the Option shall continue in
effect in accordance with its terms and the Optionee shall be entitled to
receive in respect of all shares of Stock subject to the Option, upon exercise
of the Option, the same number and kind of stock, securities, cash, property or
other consideration that each holder of shares of Stock was entitled to receive
in the Transaction. In addition, if circumstances are such that unvested
Remaining Option Shares would vest under more than one provision of this
Agreement, the Optionee shall have the right to select the provision under which
the vesting occurs.
12. WITHHOLDING OF TAXES.
At such times as an Optionee recognizes taxable income in connection
with the receipt of shares of Stock, securities, cash or property hereunder (a
"Taxable Event"), the Optionee shall pay to the Company an amount equal to the
federal, state and local income taxes and other amounts as may be required by
law to be withheld by the Company in connection with the Taxable Event (the
"Withholding Taxes") prior to the issuance, or release from escrow, of such
shares of Stock or securities or the payment of such cash or
6
<PAGE>
such property. The Company shall have the right to deduct from any payment of
cash to an Optionee or Grantee an amount equal to the Withholding Taxes in
satisfaction of the obligation to pay Withholding Taxes. In satisfaction of the
obligation to pay Withholding Taxes to the Company, the Optionee may make a
written election (the "Tax Election"), which may be accepted or rejected in the
discretion of the Committee, to have withheld a portion of the shares then
issuable to him having an aggregate Fair Market Value, on the date preceding the
date of such issuance, equal to the Withholding Taxes.
13. OPTIONEE BOUND BY THE PLAN.
The Optionee hereby acknowledges receipt of a copy of the Plan as in
effect on the date hereof and agrees to be bound by all the terms and provisions
of the Plan.
14. MODIFICATION OF AGREEMENT.
This Agreement may be modified, amended, suspended or terminated, and
any terms or conditions may be waived, but only by a written instrument executed
by the parties hereto.
15. SEVERABILITY.
Should any provision of this Agreement be held by a court of competent
jurisdiction to be unenforceable or invalid for any reason, the remaining
provisions of this Agreement shall not be affected by such holding and shall
continue in full force in accordance with their terms.
16. GOVERNING LAW.
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of New York without giving
effect to the conflicts of laws principles thereof.
17. SUCCESSORS IN INTEREST.
This Agreement shall inure to the benefit of and be binding upon any
successor to the Company. This Agreement shall inure to the benefit of the
Optionee's legal representatives. All obligations imposed upon the Optionee and
all rights granted to the Company under this Agreement shall be final, binding
and conclusive upon the Optionee's heirs, executors, administrators and
successors.
18. RESOLUTION OF DISPUTES.
Any dispute or disagreement which may arise under, or as a result of,
or in any way relate to, the interpretation, construction or application of this
Agreement shall be determined by binding arbitration. The parties may agree to
submit the matter to a single arbitrator or to several arbitrators, may require
that arbitrators possess special qualifications
7
<PAGE>
or expertise or may agree to submit a matter to a mutually acceptable firm of
experts for decision. In the event the parties shall fail to thus agree upon
terms of arbitration within twenty (20) days from the first written demand for
arbitration, then such disputed matter shall be settled by arbitration under the
Rules of Employment Arbitration of the American Arbitration Association, by
three arbitrators appointed in accordance with such Rules. Such arbitration
shall be held in Los Angeles, California. Once a matter has been submitted to
arbitration pursuant to this section, the decision of the arbitrators reached
and promulgated as a result thereof shall be final and binding upon all parties.
The cost of arbitration shall be shared equally by the parties and each party
shall pay the expenses of his/its attorneys, except that the arbitrators shall
be entitled to award the costs of arbitration, attorneys and accountants' fees,
as well as costs, to the party that they determine to be the prevailing party in
any such arbitration.
19. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
TELEMUNDO GROUP, INC.
By: /s/ BRUCE SPECTOR
--------------------------------
Name: Bruce Spector
Title: Chairman of the
Compensation Committee
/s/ DONALD J. TRINGALI
------------------------------------
Donald J. Tringali
8
NONQUALIFIED STOCK OPTION AGREEMENT
FOR CORPORATE OFFICERS
AGREEMENT made as of the 10th day of September, 1997 between Telemundo
Group, Inc., a Delaware corporation (the "Company"), and Donald J. Tringali (the
"Optionee").
WHEREAS, the Company has adopted the 1994 Stock Plan, as the same may
be amended from time to time (the "Plan") in order to provide additional
incentive to certain officers and employees of the Company and its Subsidiaries;
and
WHEREAS, the Optionee has entered into an employment agreement, dated
as of June 11, 1996, with the Company (the "Employment Agreement");
WHEREAS, the Committee responsible for administration of the Plan has
determined to grant an option to the Optionee as provided herein, which grant
shall be made concurrently with the Company's amendment and restatement of the
Employment Agreement pursuant to that certain Amended and Restated Employment
Agreement (the "Amended Employment Agreement") between the Company and Optionee
dated concurrently herewith (the "Grant Date").
NOW, THEREFORE, the parties hereto agree as follows:
1. GRANT OF OPTION.
1.1 This Agreement shall be construed in accordance and
consistent with, and subject to, the provisions of the Plan (the provisions of
which are incorporated herein by reference) and, except as otherwise expressly
set forth herein, the capitalized terms used in this Agreement shall have the
same definitions as set forth in the Plan.
1.2 The Company hereby grants to the Optionee the right and
option (the "Option") to purchase all or any part of an aggregate of 30,000
whole shares of Stock (the "Option Shares") subject to, and in accordance with,
the terms and conditions set forth in this Agreement.
1.3 The Option is not intended to qualify as an Incentive
Stock Option within the meaning of Section 422 of the Code.
2. PURCHASE PRICE.
The price at which the Optionee shall be entitled to purchase shares of
Stock upon the exercise of the Option shall be $33.75 per share.
3. DURATION OF OPTION.
Except as otherwise provided in this Agreement or the Plan, the Option
shall be exercisable to the extent and in the manner provided herein for a
period of ten years from the Grant Date (the "Exercise Term"); PROVIDED,
HOWEVER, that the Option may be earlier terminated as provided in Section 7
hereof.
<PAGE>
4. COMPENSATION COMMITTEE. The Company represents and warrants to the
Optionee that this Agreement has been approved by the Committee.
5. VESTING AND EXERCISABILITY OF OPTION.
5.1 Unless otherwise provided in this Agreement or the Plan,
the Option shall entitle the Optionee, in whole at any time or in part from time
to time, to exercise the Option for shares of Stock to the extent the Option has
become "vested."
5.2 The Option shall "vest" and become exercisable as to
10,000 of the Option Shares on each of February 28, 1999, February 28, 2000 and
February 28, 2001 if, but only if, Optionee is employed with the Company on each
applicable vesting date.
5.3 In addition, to the extent the Option shall not have
previously "vested" and become exercisable pursuant to Sections 5.2 or 7.3, all
of the Option Shares which have not previously "vested" pursuant to such
provisions, shall become "vested" and exercisable immediately prior to the time
at which a "Change of Control Transaction" occurs if, but only if, the Optionee
is employed with the Company immediately prior to the occurrence of such Change
of Control Transaction. A "Change of Control Transaction" means any one or more
of the following events: (A) an event or series of events after the date of this
Agreement as a result of which any "person" or "group" (as such terms are used
in Sections 13(d) and 14(d) of the Exchange Act) who did not own at least
500,000 shares of the Company's Series B Common Stock on September 1, 1997
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of more than 50% of the aggregate voting power of
all of the capital stock of the Company normally entitled to vote in the
election of directors or (B) a sale, transfer, conveyance or other disposition,
directly or indirectly, in any single transaction or series of related
transactions, no matter how accomplished, which results in more than 50%, in
value, of (1) the capital stock (or other equity interest in) or operating
assets of Telemundo Network, Inc., a wholly-owned subsidiary of the Company or
(2) the aggregate capital stock (or other equity interest in) or operating
assets of all of the Company's subsidiaries (other than Telemundo Network,
Inc.), which currently comprise the Company's owned and operated station group
(including any special purpose license subsidiaries), being owned (which term
shall include "beneficial ownership" within the meaning of Rule 13d-3 under the
Exchange Act), directly or indirectly, by any "person" or "group" (as such terms
are used in Sections 13(d) and 14(d) of the Exchange Act) who did not own at
least 500,000 shares of the Company's Series B Common Stock on September 1, 1997
or (C) a transaction or series of related transactions leading to at least an
80% reduction in the number of outstanding shares of Stock held by "unaffiliated
persons" (meaning any person other than Hernandez Partners, Apollo Partners,
L.P. or Bastion Capital Fund, L.P. or any of their respective affiliates (as
this term is defined in Rule 12b-2 under the Exchange Act) on the date of this
Agreement.
5.4 In the event of a subdivision or combination of the
outstanding shares of Stock (whether by stock split, stock dividend, reverse
stock split or otherwise), the per share prices specified in Section 5.3 shall
be proportionately adjusted.
2
<PAGE>
6. MANNER OF EXERCISE AND PAYMENt.
6.1 Subject to the terms and conditions of this Agreement and
the Plan, the Option may be exercised by delivery of written notice to the
Company at its principal executive office. Such notice shall state that the
Optionee is electing to exercise the Option and the number of shares of Stock in
respect of which the Option is being exercised and shall be signed by the person
or persons exercising the Option. If requested by the Committee, such person or
persons shall (i) deliver this Agreement to the Secretary of the Company who
shall endorse thereon a notation of such exercise and (ii) provide satisfactory
proof as to the right of such person or persons to exercise the Option.
6.2 The notice, of exercise described in Section 6.1 shall be
accompanied by the full purchase price for the shares of Stock in respect of
which the Option is being exercised and by the Withholding Taxes, in cash, by
check or, in the discretion of the Committee, by transferring shares of Stock to
the Company held by the Optionee for more than six months and having a Fair
Market Value on the day preceding the day of exercise equal to the cash amount
for which such shares of Stock are substituted. Notwithstanding the preceding
sentence, the parties agree that, to the extent permitted by law, and to the
extent it would not, in the Company's judgment, result in any adverse legal,
financial or tax implications for the Company, it is their intention that
Optionee be able to effect a simultaneous exercise of this Option and sale of
shares of Stock issuable upon such exercise in the over-the-counter market or
any securities exchange on which the Stock is then listed, without Optionee
bearing any commission or brokerage expense (a "concurrent transaction"). To
this end, the Company and Optionee shall jointly agree upon a securities broker
to be used in such transactions and further to adopt such additional procedures
as may be necessary or advisable to accomplish concurrent transactions. In any
concurrent transaction, the Company shall not be required to deliver a share
certificate upon exercise of this Option unless it receives concurrent payment
of the exercise price and Withholding Taxes. The Company shall bear all
commission and brokerage expense associated with concurrent transactions, which
shall be treated as an adjustment in the purchase price of shares subject to
this Option.
6.3 Upon receipt of notice of exercise and full payment for
the shares of Stock in respect of which the Option is being exercised and of the
Withholding Taxes, the Company shall, subject to Section 14 of the Plan,
promptly take such action as may be necessary to effect the transfer to the
Optionee of the number of shares of Stock as to which such exercise was
effective, including issuing and delivering such shares of Stock and entering
the Optionee's name as a stockholder of record on the books of the Company
provided, that full payment of the exercise price and Withholding Taxes may be
made concurrently with such transfer and delivery in the case of a concurrent
transaction provided for in Section 6.2.
6.4 The Optionee shall not be deemed to be the holder of, or
to have any of the rights of a holder with respect, to any shares of Stock
subject to the option until (i) the
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<PAGE>
Option shall have been exercised pursuant to the terms of this Agreement and the
Optionee shall have paid the full purchase price for the number of shares of
Stock in respect of which the Option was exercised, (ii) the Company shall have
issued and delivered the shares of Stock to the Optionee, and (iii) the
Optionee's name shall have been entered as a stockholder of record on the books
of the Company, whereupon the Optionee shall have full voting and other
ownership rights with respect to such shares.
6.5 The Company will use its reasonable efforts to permit
shares of Stock issued pursuant to this Option to be registered in a "piggy
back" registration in connection with a registration of shares of stock to be
issued by the Company pursuant to Form S-1, S-2, S-3 or S-8 under the Act, on
such customary terms and conditions as the Company shall reasonably specify. The
Optionee shall, in a manner customary for such a registration, cooperate with
the Company, as reasonably requested by it, in connection with such registration
and resale. To the extent the Company provides registration rights generally to
executive officers pursuant to benefit or stock plans of the Company, Optionee
will be provided with similar rights as are provided to other executive
officers.
7. TERMINATION OF EMPLOYMENT.
7.1 TERMINATION UNDER SECTION 9(A) OF AMENDED EMPLOYMENT
AGREEMENT. If the employment of the Optionee is terminated pursuant to Section
9(a) of the Amended Employment Agreement, the Optionee (or his personal
representative) may at any time within one year after such termination (but in
no event after the expiration of the Exercise Term) exercise the Option to the
extent, but only to the extent, that the Option or portion thereof was vested on
the date of such termination and the remainder of the Option, if any, shall
terminate.
7.2 TERMINATION UNDER SECTION 9(B) OF AMENDED EMPLOYMENT
AGREEMENT. If the employment of the Optionee is terminated for Cause or if the
Optionee resigns from his employment pursuant to a resignation that is without
Good Reason and is not a Specified Resignation, in either case as provided in
Section 9(b) of the Amended Employment Agreement, as finally determined pursuant
to the provisions of said Section 9(b), the Optionee (or his personal
representative) may at any time within one year after such termination or
resignation (but in no event after the expiration of the Exercise Term) exercise
the Option to the extent, but only to the extent, that the Option or portion
thereof was vested on the date of such termination or resignation and, subject
to Section 7.3, the remainder of the Option, if any, shall terminate.
7.3 TERMINATION UNDER SECTIONS 9(C) OR 9(D) OF THE AMENDED
EMPLOYMENT AGREEMENT. If the Optionee's employment is terminated pursuant to
Section 9(c) or 9(d) of the Amended Employment Agreement, the Option, to the
extent it has not vested with respect to any Option Shares, shall immediately
vest and become exercisable. The Optionee may at any time within one year after
the date of such termination of employment (but in no event after the expiration
of the Exercise Term) exercise any or all of the Option to the extent not
previously exercised.
4
<PAGE>
8. NON-TRANSFERABILITY.
The Option shall not be transferable other than by will or by the laws
of descent and distribution. During the lifetime of the Optionee, the Option
shall be exercisable only by the Optionee.
9. NO RIGHT TO CONTINUED EMPLOYMENT.
Nothing in this Agreement or the Plan shall be interpreted or construed
to confer upon the Optionee any right with respect to continuance of employment
by the Company, nor shall this Agreement or the Plan interfere in any way with
the right of the Company to terminate the Optionee's employment at any time,
subject to all terms and conditions of the Amended Employment Agreement.
10. ADJUSTMENTS.
In the event of a Change in Capitalization, the Committee shall
conclusively determine the appropriate adjustments to the number and class of
shares of Stock subject to the Option and the purchase price for such shares of
Stock. The Committee's adjustment shall be made in accordance with the
provisions of Section 4.5 of the Plan and shall be effective and final, binding
and conclusive for all purposes of the Plan and this Agreement. Notwithstanding
either of the preceding two sentences, the vesting and exercisability provisions
in Sections 5 and 7.3 and the rights of the Optionee under Sections 6.5 and 11
shall not be adversely affected by any Change in Capitalization.
11. CERTAIN EVENTS.
Except as otherwise expressly provided herein, upon the effective date
of (i) the liquidation or dissolution of the Company or (ii) a merger or
consolidation of the Company (a "Transaction"), the Option shall continue in
effect in accordance with its terms and the Optionee shall be entitled to
receive in respect of all shares of Stock subject to the Option, upon exercise
of the Option, the same number and kind of stock, securities, cash, property or
other consideration that each holder of shares of Stock was entitled to receive
in the Transaction. In addition, if circumstances are such that unvested
remaining Option Shares would vest under more than one provision of this
Agreement, the Optionee shall have the right to select the provision under which
the vesting occurs.
12. WITHHOLDING OF TAXES.
At such times as an Optionee recognizes taxable income in connection
with the receipt of shares of Stock, securities, cash or property hereunder (a
"Taxable Event"), the Optionee shall pay to the Company an amount equal to the
federal, state and local income taxes and other amounts as may be required by
law to be withheld by the Company in connection with the Taxable Event (the
"Withholding Taxes") prior to the issuance, or
5
<PAGE>
release from escrow, of such shares of Stock or securities or the payment of
such cash or such property. The Company shall have the right to deduct from any
payment of cash to an Optionee or Grantee an amount equal to the Withholding
Taxes in satisfaction of the obligation to pay Withholding Taxes. In
satisfaction of the obligation to pay Withholding Taxes to the Company, the
Optionee may make a written election (the "Tax Election"), which may be accepted
or rejected in the discretion of the Committee, to have withheld a portion of
the shares then issuable to him having an aggregate Fair Market Value, on the
date preceding the date of such issuance, equal to the Withholding Taxes.
13. OPTIONEE BOUND BY THE PLAN.
The Optionee hereby acknowledges receipt of a copy of the Plan as in
effect on the date hereof and agrees to be bound by all the terms and provisions
of the Plan.
14. MODIFICATION OF AGREEMENT.
This Agreement may be modified, amended, suspended or terminated, and
any terms or conditions may be waived, but only by a written instrument executed
by the parties hereto.
15. SEVERABILITY.
Should any provision of this Agreement be held by a court of competent
jurisdiction to be unenforceable or invalid for any reason, the remaining
provisions of this Agreement shall not be affected by such holding and shall
continue in full force in accordance with their terms.
16. GOVERNING LAW.
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of New York without giving
effect to the conflicts of laws principles thereof.
17. SUCCESSORS IN INTEREST.
This Agreement shall inure to the benefit of and be binding upon any
successor to the Company. This Agreement shall inure to the benefit of the
Optionee's legal representatives. All obligations imposed upon the Optionee and
all rights granted to the Company under this Agreement shall be final, binding
and conclusive upon the Optionee's heirs, executors, administrators and
successors.
18. RESOLUTION OF DISPUTES.
Any dispute or disagreement which may arise under, or as a result of,
or in any way relate to, the interpretation, construction or application of this
Agreement shall be determined by binding arbitration. The parties may agree to
submit the matter to a single arbitrator or to several arbitrators, may require
that arbitrators possess special qualifications or expertise or may agree to
submit a matter to a mutually acceptable firm of experts for decision. In the
event the parties shall fail to thus agree upon terms of arbitration within
twenty (20) days from the first written demand for arbitration, then such
disputed matter shall be settled by arbitration under the Rules of Employment
Arbitration of the American Arbitration Association, by three arbitrators
appointed in accordance with such Rules. Such arbitration shall be held in Los
Angeles, California. Once a matter has been submitted to arbitration pursuant to
this section, the decision of the arbitrators reached and promulgated as a
result thereof shall be final and binding upon all parties. The cost of
arbitration shall be shared equally by the parties and each party shall pay the
expenses of his/its attorneys, except that the arbitrators shall be entitled to
award the costs of arbitration, attorneys and accountants' fees, as well as
costs, to the party that they determine to be the prevailing party in any such
arbitration.
19. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
TELEMUNDO GROUP, INC.
By: /s/ BRUCE SPECTOR
--------------------------------
Name: Bruce Spector
Title: Chairman of the
Compensation Committee
/s/ DONALD J. TRINGALI
------------------------------------
Donald J. Tringali
7
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
AGREEMENT, between Telemundo Group, Inc., a Delaware
corporation (the "Company"), and Peter J. Housman II ("Executive"), dated as of
September 10, 1997.
WHEREAS, the Company and Executive entered into that certain
Employment Agreement dated as of March 7, 1997 (the "Original Agreement").
WHEREAS, the Company and Executive desire to amend and restate
the Original Agreement in its entirety by entering into this Amended and
Restated Employment Agreement (the "Agreement").
IT IS, THEREFORE, AGREED THAT THE ORIGINAL AGREEMENT IS HEREBY
AMENDED AND RESTATED, AND THE PARTIES HEREBY AGREE, AS FOLLOWS:
1. EMPLOYMENT AND TERM. The Company hereby agrees to continue
Executive in its employ, and Executive hereby agrees to continue such employment
as Chief Financial Officer and Treasurer of the Company (or such other position
determined in accordance with Section 9(d)(ii) of this Agreement) reporting to
the President and Chief Executive Officer for the period commencing on the date
first above written and ending on February 28, 2001; PROVIDED, HOWEVER, that
effective on March 1, 2001 and on each March 1 thereafter, the term of this
Agreement shall be extended for an additional period of one year from the then
current expiration date unless the Company or Executive shall have given written
notice to the other of its or his election not to so extend the term of this
Agreement on or before the immediately prior December 1, subject, however, to
earlier termination as provided in Section 9 herein (the "Employment Period").
The Executive also agrees, during the Employment Period, to serve (without
additional compensation) on the Board of Directors (and appropriate committees
thereof) of the Company, if requested by the Board of Directors. The Employment
Agreement, dated as of May 15, 1994, between the Company and Executive is hereby
superseded by the Agreement and terminated with no further force or effect
effective as of the close of business on December 31, 1996.
2. TERMS OF EMPLOYMENT. (a) During the Employment Period,
Executive agrees, subject to the provisions of Section 9(d)(ii) of this
Agreement, to devote all but a DE MINIMUS amount of his business time and
attention to the business and affairs of the "Telemundo Group" (as defined
below) and to use his best efforts to perform faithfully and efficiently such
responsibilities. For purposes of this Agreement, the term "Telemundo Group"
shall mean any and all of the Company and any of its current or future divisions
or subsidiaries.
(b) The principal place of employment of Executive
shall be Hialeah, Florida. Executive understands and agrees that in connection
with his employment hereunder, he will be required to travel extensively on
behalf of the Telemundo Group.
3. BASE SALARY. During the Employment Period Executive shall
receive a base salary (the "Base Salary") as follows. For the period of the
Employment Period beginning on the effective date of this Agreement and ending
on February 28, 1998, the Base
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Salary shall be payable to Executive at an annual rate of $325,000. For the
period of the Employment Period beginning on March 1, 1998 and ending on the
last day of the Employment Period, the Base Salary shall be payable to Executive
at an annual rate of $400,000. The Base Salary shall be payable consistent with
the executive payroll practices of the Company. Executive acknowledges and
agrees that he has been paid in full his Base Salary for periods prior to the
effective date of this Agreement.
4. BONUS. For 1997 (or portion thereof) during the Employment
Period, Executive will be paid bonuses as set forth in Section 4(a) below if
certain performance targets set by the Compensation and Stock Option Committee
(the "Compensation Committee") of the Board of Directors are met. For each of
the 1998, 1999, 2000 and 2001 fiscal years and any subsequent fiscal years (or
portion thereof) during the Employment Period, Executive will be paid a bonus
(the "Budget Bonus") as set forth below in subsection (b) (the bonuses described
in the first sentence of this Section 4 and the "Budget Bonus" are hereinafter
collectively referred to as the "Bonus"). Executive shall receive the Bonus only
if Executive is employed by the Company on the last day of the fiscal year to
which the Bonus relates, subject to the provisions of Sections 9(a), 9(c) and
9(d).
(a) For the fiscal year ended December 31, 1997,
Executive will be eligible for a bonus in an amount computed in accordance with
Exhibit A hereto. Such Bonus shall be paid at the times bonuses are customarily
paid to the Company's executives.
(b) For each of the 1998, 1999, 2000, 2001 fiscal
years and any subsequent fiscal years (or portion thereof) during the Employment
Period, Executive will be paid a Budget Bonus based upon the Company's
achievement of targets with respect to its earnings, before interest, taxes,
depreciation and amortization ("EBITDA") during such fiscal year (which fiscal
year target shall not be greater than the Company's budget for EBITDA for such
fiscal year), as follows. During the first quarter of each such fiscal year, the
Compensation Committee shall establish a budgeted EBITDA target (the "EBITDA
Target") for such fiscal year and notify Executive in writing of the EBITDA
Target. Pursuant to subsection (c), the Committee shall determine the Company's
EBITDA for such fiscal year and shall notify Executive of its determination of
the amount of the Company's EBITDA for such fiscal year and of the amount of
Executive's Budget Bonus for such year, which Budget Bonus shall be equal to (i)
100% of Executive's Base Salary for such fiscal year if the Company's EBITDA is
100% or more of the EBITDA Target, (ii) 50% of Executive's Base Salary for such
fiscal year if the Company's EBITDA is 90% of the EBITDA Target and (iii) pro
rated between 50% and 100% of Executive's Base Salary for such fiscal year if
the Company's EBITDA is more than 90% of the EBITDA Target but less than 100% of
the EBITDA Target. Executive shall be paid no Budget Bonus for any such fiscal
year in which the Company's EBITDA is less than 90% of the EBITDA Target for
such fiscal year.
(c) Each Bonus shall be paid upon certification by
the Compensation Committee (which the Compensation Committee will make within 30
days after the certification by the Company's independent auditors of the
financial statements for such fiscal year) that the performance targets
entitling Executive to a Bonus with respect to such fiscal year have been met.
If the Compensation Committee so certifies, the Bonus will be paid promptly but
in no event later than ten days after such certification.
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(d) For purposes of this Agreement, the "Compensation
Committee" shall mean a committee consisting of at least two (2) directors of
the Company, each of whom is a "non-employee director" within the meaning of
Rule 16b-3 under the Securities Exchange Act of 1934, as amended, and an
"outside director" within the meaning of Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code").
(e) The Company's obligation to pay Budget Bonuses is
conditioned upon the holders of a majority of the outstanding shares of the
Company approving a senior officer incentive plan covering Executive and the
other top three senior officers of the Company, under which plan incentive
compensation will be payable based upon the achievement of performance goals to
be established from time to time by the Compensation Committee.
5. EMPLOYEE BENEFIT PLANS; ETC. (a) Executive shall be
entitled during the Employment Period to participate in all retirement,
disability, pension, savings, medical, insurance and other plans of the Company
generally available to all senior executives (other than any performance based
bonus or option (or similar) plans). Executive shall be entitled to paid
vacations during each year of his employment consistent with the Company's
vacation policy for executive level employees (which shall provide for a least
20 vacation days per year).
(b) The Company agrees that it will provide
Executive, in his capacity as an officer and, if applicable, as a director, with
indemnification rights which are not materially less favorable to the Executive,
in his capacity as an officer and as a director, than those provided as of the
date of this Agreement in the By-laws of the Company.
6. Intentionally omitted.
7. STOCK OPTION AGREEMENTS. The parties hereto acknowledge and
agree that that certain Nonqualified Stock Option Agreement For Corporate
Officers, dated as of December 31, 1994, with respect to an aggregate of 50,000
shares of Common Stock (as defined below) is, as set forth in that certain
letter agreement dated January 27, 1997 between the Company and Executive, no
longer outstanding. The parties hereto further acknowledge and agree that the
Nonqualified Stock Option Agreement For Corporate Officers (the "Stock Option
Agreement"), dated as of June 30, 1995, with respect to an aggregate of 50,000
shares of the Company's Series A Common Stock, par value $.01 per share (the
"Common Stock"), shall be amended and restated concurrently with the execution
of this Agreement (such amendment and restatement being the "Amended Option
Agreement). Contemporaneously with and in connection with the execution of this
Agreement, the parties hereto are entering into a Nonqualified Stock Option
Agreement For Corporate Officers with respect to an aggregate 30,000 shares of
Common Stock (the "1997 Option Agreement").
8. EXPENSES. The Company shall reimburse Executive for all
reasonable expenses properly incurred by him in accordance with the policies of
the Telemundo Group in effect from time to time, on behalf of the Telemundo
Group in the performance of his duties hereunder, provided that proper vouchers
are submitted to the Company by Executive evidencing such expenses and the
purposes for which the same were incurred.
9. TERMINATION. The Company shall have the right to terminate
Executive's employment only as expressly provided in this Agreement.
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(a) DEATH OR DISABILITY. Except as otherwise provided
herein, this Agreement shall terminate automatically upon Executive's death.
The Company may terminate this Agreement after having
established Executive's "Disability" (as defined below), by giving Executive
written notice of its intention to terminate Executive's employment. For
purposes of this Agreement, "Disability" means Executive's inability to perform
substantially all his duties and responsibilities to the Telemundo Group by
reason of a physical or mental disability or infirmity (i) for a continuous
period of twelve consecutive months or (ii) at such earlier time as Executive
submits medical evidence satisfactory to the Company or the Board of Directors
determines in good faith and upon competent medical advice that Executive has a
physical or mental disability or infirmity that will likely prevent Executive
from substantially performing his duties and responsibilities for twelve
consecutive months or longer. The date of Disability shall be the day on which
Executive receives notice from the Company pursuant to this Section 9.
Upon termination of Executive's employment because of
death or Disability, the Company shall pay Executive or his estate or other
personal representative (i) within 60 days, the amount of Executive's Base
Salary earned up to the date of death or Disability, as the case may be, through
the date of termination, (ii) all benefits and other items referred to in
Sections 5 and 8 which are due up to the date of death or Disability and (iii)
when otherwise due in accordance with the provisions of Section 4, the Bonus, if
any, earned for the year in which such termination occurred, without regard to
whether Executive is an employee of the Company on the last day of such year.
(b) CAUSE; RESIGNATION WITHOUT GOOD REASON OR AS A
SPECIFIED RESIGNATION. The Company shall have the right to terminate Executive's
employment for "Cause" as defined below. Except as provided in Section 15
herein, (i) upon termination of Executive's employment for Cause or (ii) upon
Executive resigning as an employee pursuant to a resignation that is without
Good Reason and is not a Specified Resignation (as defined in Section 9(d)(i)),
this Agreement shall terminate and the Executive shall not be entitled to
receive any compensation or other benefits other than (x) Base Salary earned up
to the date of such termination or resignation and (y) all benefits and other
items referred to in Sections 5 and 8 which are due up to the date of such
termination or resignation.
For purposes of this Agreement, "Cause" shall mean
(i) the willful and continued failure by Executive to perform substantially all
his duties to the Company or the failure by the Executive to comply with the
reasonable written policies, procedures and directives of the Board of Directors
(other than any such failure resulting from his death or Disability), in each
case after being given written notice by the Board of Directors of a failure to
perform or comply (which notice specifically identifies the manner in which
Executive has failed to perform or comply) and a reasonable opportunity to cure
such noncompliance or nonperformance; (ii) the willful misconduct by Executive
in the performance of his duties to the Company, provided that (for purposes of
this clause (ii) only and not for any other purpose or interpretation of this
Agreement) an act shall be considered "willful" only if done in bad faith and
not in the best interests of the Company; (iii) the grossly negligent
performance by Executive of his duties to the Company; (iv) the conviction of
Executive by a court of competent jurisdiction of the commission of (x) a felony
or (y) a
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crime involving moral turpitude; or (v) a material breach by Executive of
Sections 10 or 11 hereof.
Notwithstanding the foregoing, the Company shall not
be entitled to terminate Executive for any of the reasons specified in clause
(i), (ii), (iii) or (v) of the immediately preceding paragraph unless such
termination is authorized by a resolution adopted by the Board of Directors of
the Company at a meeting called and held for this purpose (after five business
days' prior written notice to Executive, which prior written notice shall state
the general facts, circumstances or deficiencies supporting a claim for Cause
termination, and after affording Executive and his counsel an opportunity to be
heard before the Board of Directors).
(c) TERMINATION WITHOUT CAUSE; NON-RENEWAL.
Notwithstanding anything to the contrary contained herein, the Company shall
have the right to terminate the employment of Executive at any time without
Cause and the Company shall be entitled to determine, in its sole and absolute
discretion, not to extend the Employment Period as provided in Section 1. Upon a
termination without Cause, except as provided in Section 15, this Agreement
shall terminate and the Executive shall not be entitled to receive any
compensation or other benefits, except that the Company shall (i) through the
later of February 28, 2001 or the first anniversary of the date of termination
of Executive's employment (the "Entitlement Date") continue to pay to Executive
the Base Salary in effect immediately prior to the date of termination, such
payments to be made in installments at the times such amounts would have been
paid if the Agreement had not been so terminated, and (ii) pay to the Executive,
when otherwise due in accordance with Section 4, the Bonus, if any, earned for
the fiscal year in which such termination occurs, without regard to whether
Executive is employed on the last day of such fiscal year and (iii) through the
Entitlement Date continue Executive's benefits and other items referred to in
Section 5 or, to the extent the Company is legally unable to provide any such
benefits or other items as a result of Executive no longer being an employee,
reimburse Executive for his cost (not to exceed the actual cost to the Company
if he were still an employee) of obtaining the equivalent coverage and benefits.
During the period in which Executive receives the payments required by the
immediately preceding sentence, Executive shall be subject to the provisions set
forth in Sections 10 and 11 below. In the event that Company elects not to
extend the Employment Period, then, absent any termination pursuant to Section
9, the Company shall continue paying to Executive his Base Salary during the
period, if any, beginning on the date Executive's employment terminates and
ending on the first anniversary of the date on which the Company gives its
notice of non-renewal to Executive. During the period in which Executive
receives the payments required by the immediately preceding sentence, Executive
shall be subject to the provisions set forth in Sections 10 and 11 below.
(d) TERMINATION FOR GOOD REASON; SPECIFIED
RESIGNATION RIGHT.
(i) Executive shall have the right to
terminate his employment under this Agreement upon the occurrence of any event
that constitutes Good Reason by giving written notice to the Company. "Good
Reason" means any of the following: (A) a Diminution in Duty (as defined below),
(B) a Designated Relocation (as defined below), or (C) any Other Good Reason
Event (as defined below); PROVIDED, HOWEVER, that Good Reason shall not be
deemed to have occurred prior to the giving of written notice by the Executive
to the Company generally describing the alleged Good Reason, and the
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actions the Executive believes are necessary to cure such alleged Good Reason,
and the Company's failure to so cure within 15 days of receipt of such notice.
The giving of such notice and the action or failure to take action by the
Company shall be irrelevant in determining whether a Good Reason has in fact
occurred. If a Change of Control Transaction (as defined in the Amended Option
Agreement) occurs, then, during the period beginning on the date that is 14
months after the consummation of the Change of Control Transaction and ending on
the date that is 15 months after the consummation of the Change of Control
Transaction, Executive shall have the right to terminate his employment under
this Agreement for any reason whatsoever by giving written notice of such
termination to the Company (such termination being a "Specified Resignation"
and, for purposes of this Agreement, a Specified Resignation shall be treated
exactly like a termination for Good Reason). Upon a termination for Good Reason
or a Specified Resignation, except as provided in Section 15, this Agreement
shall terminate and the Executive shall not be entitled to receive any
compensation or other benefits other than the Company shall (i) through the
Entitlement Date continue to pay to Executive the Base Salary in effect
immediately prior to the date of termination, such payments to be made in
installments at the times such amounts would have been paid if the Agreement had
not been so terminated, (ii) pay to the Executive, when otherwise due in
accordance with Section 4, the Bonus, if any, earned for the fiscal year in
which such termination occurs, without regard to whether Executive is employed
on the last day of such fiscal year and (iii) through the Entitlement Date
continue Executive's benefits and other items referred to in Section 5 or, to
the extent the Company is legally unable to provide any such benefits or other
items as a result of Executive no longer being an employee, reimburse Executive
for his cost (not to exceed the actual cost to the Company if he were still an
employee) of obtaining the equivalent coverage and benefits. During such period,
Executive shall be subject to the provisions set forth in Sections 10 and 11
below.
(ii) "Diminution in Duty" means, without
Executive's express prior written consent: (A) the assignment to Executive of
any duties inconsistent in any respect with Executive's position on the date of
this Agreement, or (B) any adverse change in Executive's status, offices,
titles, reporting requirements, authority, duties or responsibilities as in
effect on the date of this Agreement; PROVIDED, HOWEVER, that after a Change of
Control Transaction (as defined in the Amended Option Agreement), a "Diminution
in Duty" means a change in Executive's position with the Company so that he is
neither (1) the Chief Financial Officer and Treasurer of the Company, nor (2)
the Chief Financial Officer and Treasurer of a successor to any part of the
Company's business or assets. Notwithstanding anything whatsoever to the
contrary contained in this Agreement (or in the Amended Option Agreement or in
the 1997 Option Agreement), if after a Change of Control Transaction any of the
events described in clause (A) or (B) of the immediately preceding sentence
occurs (without regard to the application of the proviso in such sentence),
Executive shall have the absolute right to change his position with the Company
to a position that has such work location, time commitment, duties,
responsibilities and terms as shall be specified by Executive in his sole and
absolute discretion after consultation with the Company, and the requirement of
Section 2(a) that Executive devote his full time and attention to the Telemundo
Group shall cease to apply.
(iii) "Designated Relocation" means the
Company requiring Executive's work location to be other than within thirty (30)
miles of the Company's current corporate offices in Hialeah, Florida.
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(iv) "Other Good Reason Event" means any of
the following: (A) a material breach of this Agreement by the Company (which
shall include, without limitation, any reduction in the amount of any
compensation or benefits provided to Executive under this Agreement) or (B) any
termination or attempted termination by the Company of Executive's employment
other than as expressly permitted in this Agreement.
(e) OFFICER AND BOARD POSITIONS. Upon the termination
of employment with the Company for any reason, Executive shall be deemed to have
resigned any and all of his positions as an officer and a member of the Board of
Directors of the Company and any of its subsidiaries and as a member of any
committees of such Boards, effective on the date of termination.
(f) CERTAIN CONDITION. Notwithstanding anything to
the contrary contained in this Section 9, the obligations of the Company under
this Section 9 shall continue only so long as the Executive does not breach his
obligations under Section 10 and 11.
(g) CERTAIN EFFECT. As used in this Agreement,
termination of this Agreement shall also result in and mean termination of the
Employment Period hereunder.
(h) MITIGATION OF DAMAGES. Executive shall have no
duty to mitigate any of his damages in the event of any breach of or default or
failure in performance under this Agreement by the Company.
(i) STOCK OPTIONS. The references in Section 9(a),
9(b), 9(c) or 9(d) to Executive, other than as therein stated, not being
entitled to receive compensation or benefits upon termination of his employment
under any of such Sections shall not affect Executive's rights under the Amended
Option Agreement or the 1997 Option Agreement.
10. CONFIDENTIALITY, ETC. Executive will not divulge, furnish
or make accessible to anyone (otherwise than in the regular course of business
of the Telemundo Group) any confidential information, plans or materials or
trade secrets of the Telemundo Group or with respect to any other confidential
or secret aspects of the business of the Telemundo Group; PROVIDED, HOWEVER,
that during his employment, Executive shall have the latitude customarily given
a chief financial officer to disclose information in good faith for the benefit
of the Company and its stockholders (taken as a whole). All memoranda, notes,
lists, records and other documents or papers (and all copies thereof), including
such items stored in computer memories, on microfiche or by any other means,
made or compiled by or on behalf of Executive, or made available to him relating
to the Telemundo Group are and shall be the Company's property and shall be
delivered to the Company promptly upon the termination of his employment with
the Company; PROVIDED, HOWEVER, that (i) this obligation shall not apply to
information that (A) is not confidential (other than as a result of Executive's
breach of this Section) and (B) does not contain certain trade secrets of the
Company, (ii) Executive shall have the right to retain such of the foregoing as
shall be reasonably necessary to enforce his rights under this Agreement and to
comply with and enforce his rights, including the right to defend himself
against claims, provided copies of such retained information are provided to the
Company and the retained information remain subject to the provision of this
Section, and (iii) Executive shall have no obligation to return information that
is no longer in his possession, custody or control. This Section 10 shall
survive the expiration or termination or termination of this Agreement, the
Employment
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Period and the term of employment; PROVIDED, HOWEVER, that if Executive's
employment is terminated pursuant to Section 9(c) or Section 9(d), then this
Section 10 will terminate on the Entitlement Date.
11. NO INTERFERENCE; AFFILIATE TRANSACTIONS.
(a) During the Employment Period and for one year
thereafter, Executive will not, directly or indirectly, for himself, or as agent
of or on behalf of, or in conjunction with, any person, firm, corporation, or
other entity, engage or participate in the Company Business (as hereinafter
defined), whether as employee, consultant, partner, principal, shareholder or
representative, or render advisory or other services to or for any person, firm,
corporation or other entity, which is engaged, directly or indirectly, in the
Company Business; PROVIDED, HOWEVER, that (i) Executive may own less than 5% of
the common stock of a publicly traded company that is engaged in the Company
Business and (ii) Executive may own Common Stock and securities convertible into
Common Stock (or securities into which Common Stock is converted in any business
combination transaction). For purposes of this Section 11(a), "Company Business"
shall mean and be limited to any of (x) the provision of Spanish language
television programming in the United States (which includes Puerto Rico), (y)
the ownership of television broadcast stations, networks or any over-the-air
television signal, and cable in the United States (which includes Puerto Rico)
that broadcast primarily Spanish language programming, and (z) the sale of
television advertising time and programs inside and outside the United States
(which includes Puerto Rico) for Spanish language television stations, cable and
networks.
(b) During the Employment Period and for one year
after such period, Executive agrees and covenants that he will not interfere
directly or indirectly in any way with the Company. "Interfere" means to
influence or attempt to influence, directly or indirectly, present or active
prospective customers, employees, suppliers, performers, directors,
representatives, agents or independent contractors of the Company, or any of its
network affiliates to restrict, reduce, sever or otherwise alter their
relationship with the Telemundo Group or any of its network affiliates.
(c) Executive agrees that during the Employment
Period, he will not at any time enter into, on behalf of the Telemundo Group, or
cause the Telemundo Group to enter into, directly or indirectly, any
transactions (each, a "Transaction") with any business organization in which he
or, to his knowledge after due inquiry, any member of his family may be
interested as a partner, trustee, director, officer, employee, shareholder,
lender of money or guarantor, except to the extent disclosed to the Company and
agreed to by the board of directors of the Company in writing; PROVIDED,
HOWEVER, that no such disclosure and agreement shall be required for the Company
or Telemundo Group to enter into any transaction with Marlene May or May
International Productions or their affiliates or successors (if such transaction
would otherwise be subject to this Section 11(c)) so long as such transaction
(i) is in the ordinary course of business of Marlene May or May International
Productions on one hand and the Company or Telemundo Group on the other hand,
(ii) is on no less favorable terms to the Company or Telemundo Group than would
be available if no such relationship existed and (iii) does not involve an
amount of more than $10,000 during any 12-month period. Executive will use his
best efforts to ensure that any Transaction is disclosed to the Board of
Directors of the Company and approved thereby prior to entering into a contract
relating thereto and/or consummation thereof, as contemplated by the preceding
sentence.
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(d) From and after the termination of Executive's
employment, Executive shall not disparage the Company, its officers, directors,
employees or business, nor shall the Company or any of its officers, directors,
employees or agents disparage the Executive or members of his family, and
neither party shall disclose any facts relating to such termination; provided,
that nothing contained in this Section 11(d) shall restrict the parties from
making any statements or disclosure believed necessary to enforce in any
judicial or similar proceeding the provisions of this Agreement or as a party
believes may be required by applicable law.
(e) In the event any court having jurisdiction
determines that any part of this Section 11 is unenforceable, such court shall
have the power to reduce the duration or scope of such provision and such
provision, in its reduced form, shall be enforceable. This Section 11 shall
survive the expiration or termination of this Agreement and the Employment
Period; PROVIDED, HOWEVER, that if Executive's employment is terminated pursuant
to Section 9(c) or Section 9(d), then this Section 11 will terminate on the
Entitlement Date.
12. INJUNCTIVE RELIEF. Executive acknowledges that the
provisions of Sections 10 and 11 herein are reasonable and necessary for the
protection of the Telemundo Group and the Telemundo Group will be irrevocably
damaged if such provisions are not specifically enforced. Accordingly, Executive
agrees that, in addition to any other relief to which the Company may be
entitled in the form of damages, the Company shall be entitled to seek and
obtain injunctive relief from a court of competent jurisdiction (without the
posting of a bond therefor) for the purposes of restraining Executive from any
actual or threatened breach of such provisions.
13. REMEDIES; SERVICE OF PROCESS.
(a) Except when a party is seeking an injunction or
specific performance hereunder, the parties agree to submit any dispute
concerning this Agreement to binding arbitration. The parties may agree to
submit the matter to a single arbitrator or to several arbitrators, may require
that arbitrators possess special qualifications or expertise or may agree to
submit a matter to a mutually acceptable firm of experts for decision. In the
event the parties shall fail to thus agree upon terms of arbitration within
twenty (20) days from the first written demand for arbitration, then such
disputed matter shall be settled by arbitration under the Rules of Employment
Arbitration of the American Arbitration Association, by three arbitrators
appointed in accordance with such Rules. Such arbitration shall be held in
Miami, Florida. Once a matter has been submitted to arbitration pursuant to this
section, the decision of the arbitrators shall be final and binding upon all
parties. The cost of arbitration shall be shared equally by the parties and each
party shall pay the expenses of his/its attorneys, except that the arbitrators
shall be entitled to award the costs of arbitration, attorneys and accountants'
fees, as well as costs, to the party that they determine to be the prevailing
party in any such arbitration.
(b) The Company and Executive hereby irrevocably
consent to the jurisdiction of the Courts of the State of Florida and of any
Federal Court located in such State in connection with any action or proceedings
arising out of or relating to the provisions of Sections 10 and 11 of this
Agreement. Executive further agrees that he will not commence or move to
transfer any action or proceeding arising out or relating to the
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provisions of Sections 10 and 11 of this Agreement to any Court other than one
located in the State of Florida. In any such litigation, Executive waives
personal service of any summons, complaint or other process and agrees that the
service thereof may be made by certified mail directed to Executive at his
address for purposes of notice under Section 17(b) hereof.
14. SUCCESSORS. This Agreement and the rights and obligations
hereunder are personal to Executive and without the prior written consent of the
Company and Executive shall not be assignable.
15. SURVIVAL OF PROVISIONS. Notwithstanding anything to the
contrary contained herein, the provisions of Sections 5(b), 9, 10, 11, 12, 13,
14, 15, 16 and 17 hereof shall survive the termination or expiration of this
Agreement, irrespective of the reasons therefor.
16. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Notwithstanding anything to the contrary
contained herein, if it shall be determined that any payment, distribution or
benefit received or to be received by Executive from the Company ("Payments"),
whether under this Agreement or otherwise (including without limitation, the
Amended Stock Option Agreement and the 1997 Option Agreement), would be subject
to the excise tax imposed by Section 4999 of the Code, or any successor or
counterpart section thereto (the "Excise Tax ), then Executive shall be entitled
to receive an additional payment (the "Excise Tax Gross-Up Payment") in an
amount such that the net amount retained by Executive, after the calculation and
deduction of any Excise Tax on the Payments and any federal, state and local
income taxes, employment taxes and excise tax on the Excise Tax Gross-Up Payment
provided for in this Section 16, shall be equal to the Payments. For the
avoidance of doubt, in determining the amount of the Excise Tax Gross-Up Payment
attributable to federal income taxes the Company shall take into account the
maximum reduction in federal income taxes that could be obtained by the
deduction of the portion of the Excise Tax Gross-Up Payment attributable to
state and local income taxes. Finally, the Excise Tax Gross-Up Payment shall be
net of any income or excise tax withholding payments made by the Company or any
affiliate to any federal, state or local taxing authority with respect to the
Excise Tax Gross-Up Payment that was not deducted from compensation payable to
Executive.
(b) All determinations required to be made under this
Section 16, including whether and when an Excise Tax Gross-Up Payment is
required and the amount of such Excise Tax Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, except as specified in Section
16(a) above, shall be made by Deloitte & Touche LLP (the "Accounting Firm"),
which shall provide detailed supporting calculations both to the Company and
Executive within 15 business days after the Company becomes obligated to make
any Payments to Executive. The determination of tax liability made by the
Accounting Firm shall be subject to review by Executive's tax advisor and, if
Executive's tax advisor does not agree with the determination reached by the
Accounting Firm, then the Accounting Firm and Executive's tax advisor shall
jointly designate a nationally recognized public accounting firm, which shall
make the determination. All fees and expenses of the accountants and tax
advisors retained by either Executive or the Company shall be borne by the
Company. Any Excise Tax Gross-Up Payment, as determined pursuant to this Section
16 shall be paid by the Company to Executive within five days after the receipt
of the
10
<PAGE>
determination. Any determination by a jointly designated public accounting firm
shall be binding upon the Company and Executive.
(c) As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the initial determination hereunder,
it is possible that Excise Tax Gross-Up Payments will not have been made by the
Company that should have been made consistent with the purpose of this Section
16 ("Underpayment"). In the event that Executive is required to make a payment
of any Excise Tax, any such Underpayment calculated in accordance with and in
the same manner as the Excise Tax Gross-Up Payment in Section 16 above shall be
promptly paid by the Company to or for the benefit of Executive. In the event
that the Excise Tax Gross-Up Payment exceeds the amount subsequently determined
to be due, such excess shall constitute a loan from the Company to Executive
payable on the fifth day after demand by the Company (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code).
17. MISCELLANEOUS. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida, without reference
to principles of conflict of laws.
(b) All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered,
telecopied or mailed, certified or registered mail, return receipt requested:
If to Executive:
Peter J. Housman II
2203 Alhambra Circle
Coral Gables, Florida 33134
If to the Company:
Telemundo Group, Inc.
2290 West 8th Avenue
Hialeah, Florida 33010
Attention: Chairman
Phone: (305) 884-8200
Telecopy No.: (305) 889-7997
with a copy to:
Telemundo Group, Inc.
2290 West 8th Avenue
Hialeah, Florida 33010
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee or upon refusal if properly delivered.
11
<PAGE>
(c) The Company may withhold from any amounts payable
under this Agreement such Federal, state of local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
(d) Executive represents and warrants that he is not
a party to any agreement, contract or under-standing, whether employment or
otherwise, which would in any way restrict or prohibit him from undertaking or
performing employment in accordance with the terms and conditions of this
Agreement.
(e) This Agreement, the Amended Option Agreement and
the 1997 Option Agreement set forth the entire understanding of the parties with
respect to the subject matter hereof, and no statement, representation, warranty
or covenant has been made by either party except as expressly set forth herein.
This Agreement shall not be changed or terminated orally. This Agreement amends
the Original Agreement and supersedes and cancels all other prior agreements
between the parties, whether written or oral, relating to the employment of
Executive. The headings and captions contained in this Agreement are for
convenience only and shall not be deemed to affect the meaning or construction
of any provision hereof.
(f) If, at any time subsequent to the date hereof,
any provision of this Agreement shall be held by any court of competent
jurisdiction to be illegal, void or unenforceable, such provision shall be of no
force and effect, but the illegality or unenforceability of such provision shall
have no effect upon and shall not impair the enforceability of any provision of
this Agreement.
(g) The Company's failure to insist upon strict
compliance with any provision hereof shall not be deemed to be a waiver of such
provision or any other provision hereof. Executive's failure to insist upon
strict compliance with any provision hereof shall not be deemed to be a waiver
of such provision or any other provision hereof.
(h) This Agreement shall inure to the benefit of and
be binding upon any successor to the Company and shall inure to the benefit of
Executive's successors, heirs and personal representatives.
(SIGNATURE PAGE FOLLOWS)
12
<PAGE>
IN WITNESS WHEREOF, Executive has hereunto set his hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name and on its behalf, all as of
the day and year first above written.
/s/ PETER J. HOUSMAN II
---------------------------
Peter J. Housman II
TELEMUNDO GROUP, INC.
By: /s/ BRUCE SPECTOR
-----------------------
Name: Bruce Spector
Title: Chairman of the
Compensation Committee
13
<PAGE>
EXHIBIT A
Telemundo Group, Inc.
Bonus Schedule
(dollars in thousands)
Net Contribution 1
% OF SALARY IF
TARGET ACHIEVED 2 1997 TARGETS
- ----------------- ------------
100% $52,200
75% $45,900
50% $39,500
- --------
1 "Net Contribution" means operating income plus depreciation and
amortization determined in accordance with generally accepted
accounting principles, without giving effect to any income, gain or
loss associated with WSNS, but determined consistent with the
accounting method for determining "Net Contribution" on the Company's
internal financial statements in prior periods and adjusted to
eliminate the impact of changes in accounting principles after the date
of this Agreement and of acquisitions or divestitures of operating
units after the date of this Agreement if taking such operating units
into account would either increase or decrease the actual Net
Contribution by at least 5% of the 50% Net Contribution target in the
year of acquisition or divestiture on an annualized basis
2 If Net Contribution is between targets, % of salary will be determined
by linear interpolation.
AMENDED AND RESTATED
NONQUALIFIED STOCK OPTION AGREEMENT
FOR CORPORATE OFFICERS
AGREEMENT made as of the 10th day of September, 1997 between Telemundo
Group, Inc., a Delaware corporation (the "Company"), and Peter J. Housman II
(the "Optionee").
WHEREAS, the Company has adopted the 1994 Stock Plan (the "Plan") in
order to provide additional incentive to certain officers and employees of the
Company and its Subsidiaries;
WHEREAS, the Optionee has entered into an employment agreement, dated
as of March 7, 1997, with the Company (the "Employment Agreement");
WHEREAS, the Committee responsible for administration of the Plan
granted an option to the Optionee, effective as of June 30, 1995 (the "Grant
Date"), pursuant to that certain Nonqualified Stock Option Agreement for
Corporate Officers (the "Original Agreement") dated as of the Grant Date;
WHEREAS, the Committee and the Optionee desire to amend and restate the
Original Agreement in its entirety, effective as of September 10, 1997, pursuant
to this Amended and Restated Nonqualified Stock Option Agreement For Corporate
Officers (the "Agreement") concurrently with the Company's amendment and
restatement of the Employment Agreement pursuant to that certain Amended and
Restated Employment Agreement (the "Amended Employment Agreement") between the
Company and Optionee dated concurrently herewith.
NOW, THEREFORE, the parties hereto agree that the Original Agreement
shall be amended and restated as follows:
1. OPTION.
1.1 This Agreement shall be construed in accordance and
consistent with, and subject to, the provisions of the Plan (the provisions of
which are incorporated herein by reference) and, except as otherwise expressly
set forth herein, the capitalized terms used in this Agreement shall have the
same definitions as set forth in the Plan.
1.2 The parties acknowledge and agree that pursuant to the
Original Agreement, the Company has granted to the Optionee the right and option
(the "Option") to purchase all or any part of an aggregate of 50,000 whole
shares of Stock (the "Option Shares") and that they now desire for the Option to
be subject to, and governed in accordance with, the terms and conditions set
forth in this Agreement.
1.3 The Option is not intended to qualify as an Incentive
Stock Option within the meaning of Section 422 of the Code.
<PAGE>
2. PURCHASE PRICE.
The price at which the Optionee shall be entitled to purchase shares of
Stock upon the exercise of the Option shall be $14.625 per share.
3. DURATION OF OPTION.
Except as otherwise provided in this Agreement or the Plan, the Option
shall be exercisable to the extent and in the manner provided herein for a
period of ten years from the Grant Date (the "Exercise Term"); PROVIDED,
HOWEVER, that the Option may be earlier terminated as provided in Section 7
hereof.
4. COMPENSATION COMMITTEE. The Company represents and warrants to the
Optionee that this Agreement has been approved by the Committee.
5. VESTING AND EXERCISABILITY OF OPTION.
5.1 Unless otherwise provided in this Agreement or the Plan,
the Option shall "vest" so as to entitle the Optionee to purchase, in whole at
any time or in part from time to time, one-third of the total number of shares
covered by the Option on or after each of December 31, 1997, the fourth
anniversary of the Grant Date and the fifth anniversary of the Grant Date if, as
of the relevant date, the Optionee's employment with the Company has not been
terminated, and each such right of purchase shall be cumulative and shall
continue, unless sooner exercised or terminated as herein provided, during the
remaining period of the Exercise Term. Any fractional number of Shares resulting
from the application of the foregoing percentages shall be rounded to the next
higher whole number of Shares.
5.2 In addition, to the extent the Option shall not have
previously "vested" and become exercisable pursuant to Sections 5.1 or 7.3, all
of the Option Shares which have not previously "vested" pursuant to such
provisions, shall become "vested" and exercisable immediately prior to the time
at which a "Change of Control Transaction" occurs if, but only if, the Optionee
is employed with the Company immediately prior to occurrence of such Change of
Control Transaction. A "Change of Control Transaction" means any one or more of
the following events: (A) an event or series of events after the date of the
Original Agreement as a result of which any "person" or "group" (as such terms
are used in Sections 13(d) and 14(d) of the Exchange Act) who did not own at
least 500,000 shares of the Company's Series B Common Stock on September 1, 1997
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of more than 50% of the aggregate voting power of
all of the capital stock of the Company normally entitled to vote in the
election of directors or (B) a sale, transfer, conveyance or other disposition,
directly or indirectly, in any single transaction or series of related
transactions, no matter how accomplished, which results in more than 50%, in
value, of (1) the capital stock (or other equity interest in) or operating
assets of Telemundo Network, Inc., a wholly-owned subsidiary of the Company or
(2) the aggregate capital stock (or other equity interest in) or operating
assets of all of the Company's subsidiaries (other than Telemundo Network,
Inc.), which currently comprise the Company's owned and operated station group
(including any special purpose license subsidiaries), being owned (which term
shall include "beneficial
2
<PAGE>
ownership" within the meaning of Rule 13d-3 under the Exchange Act), directly or
indirectly, by any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act) who did not own at least 500,000 shares of the
Company's Series B Common Stock on September 1, 1997 or (C) a transaction or
series of related transactions leading to at least an 80% reduction in the
number of outstanding shares of Stock held by "unaffiliated persons" (meaning
any person other than Hernandez Partners, Apollo Partners, L.P. or Bastion
Capital Fund, L.P. or any of their respective affiliates (as this term is
defined in Rule 12b-2 under the Exchange Act) on the date of this Agreement.
5.3 In the event of a subdivision or combination of the
outstanding shares of Stock (whether by stock split, stock dividend, reverse
stock split or otherwise), the per share prices specified in Section 5.2 shall
be proportionately adjusted.
6. MANNER OF EXERCISE AND PAYMENt.
6.1 Subject to the terms and conditions of this Agreement and
the Plan, the Option may be exercised by delivery of written notice to the
Company at its principal executive office. Such notice shall state that the
Optionee is electing to exercise the Option and the number of shares of Stock in
respect of which the Option is being exercised and shall be signed by the person
or persons exercising the Option. If requested by the Committee, such person or
persons shall (i) deliver this Agreement to the Secretary of the Company who
shall endorse thereon a notation of such exercise and (ii) provide satisfactory
proof as to the right of such person or persons to exercise the Option.
6.2 The notice, of exercise described in Section 6.1 shall be
accompanied by the full purchase price for the shares of Stock in respect of
which the Option is being exercised and by the Withholding Taxes, in cash, by
check or, in the discretion of the Committee, by transferring shares of Stock to
the Company held by the Optionee for more than six months and having a Fair
Market Value on the day preceding the day of exercise equal to the cash amount
for which such shares of Stock are substituted. Notwithstanding the preceding
sentence, the parties agree that, to the extent permitted by law, and to the
extent it would not, in the Company's judgment, result in any adverse legal,
financial or tax implications for the Company, it is their intention that
Optionee be able to effect a simultaneous exercise of this Option and sale of
shares of Stock issuable upon such exercise in the over-the-counter market or
any securities exchange on which the Stock is then listed, without Optionee
bearing any commission or brokerage expense (a "concurrent transaction"). To
this end, the Company and Optionee shall jointly agree upon a securities broker
to be used in such transactions and further to adopt such additional procedures
as may be necessary or advisable to accomplish concurrent transactions. In any
concurrent transaction, the Company shall not be required to deliver a share
certificate upon exercise of this Option unless it receives concurrent payment
of the exercise price and Withholding Taxes. The Company shall bear all
commission and brokerage expense associated with concurrent transactions, which
shall be treated as an adjustment in the purchase price of shares subject to
this Option.
3
<PAGE>
6.3 Upon receipt of notice of exercise and full payment for
the shares of Stock in respect of which the Option is being exercised and of the
Withholding Taxes, the Company shall, subject to Section 14 of the Plan,
promptly take such action as may be necessary to effect the transfer to the
Optionee of the number of shares of Stock as to which such exercise was
effective, including issuing and delivering such shares of Stock and entering
the Optionee's name as a stockholder of record on the books of the Company
provided, that full payment of the exercise price and Withholding Taxes may be
made concurrently with such transfer and delivery in the case of a concurrent
transaction provided for in Section 6.2.
6.4 The Optionee shall not be deemed to be the holder of, or
to have any of the rights of a holder with respect, to any shares of Stock
subject to the option until (i) the Option shall have been exercised pursuant to
the terms of this Agreement and the Optionee shall have paid the full purchase
price for the number of shares of Stock in respect of which the Option was
exercised, (ii) the Company shall have issued and delivered the shares of Stock
to the Optionee, and (iii) the Optionee's name shall have been entered as a
stockholder of record on the books of the Company, whereupon the Optionee shall
have full voting and other ownership rights with respect to such shares.
6.5 The Company will use its reasonable efforts to permit
shares of Stock issued pursuant to this Option to be registered in a "piggy
back" registration in connection with a registration of shares of stock to be
issued by the Company pursuant to Form S-1, S-2, S-3 or S-8 under the Act, on
such customary terms and conditions as the Company shall reasonably specify. The
Optionee shall, in a manner customary for such a registration, cooperate with
the Company, as reasonably requested by it, in connection with such registration
and resale. To the extent the Company provides registration rights generally to
executive officers pursuant to benefit or stock plans of the Company, Optionee
will be provided with similar rights as are provided to other executive
officers.
7. TERMINATION OF EMPLOYMENT.
7.1 TERMINATION UNDER SECTION 9(A) OF AMENDED EMPLOYMENT
AGREEMENT. If the employment of the Optionee is terminated pursuant to Section
9(a) of the Amended Employment Agreement, the Optionee (or his personal
representative) may at any time within one year after such termination (but in
no event after the expiration of the Exercise Term) exercise the Option to the
extent, but only to the extent, that the Option or portion thereof was vested on
the date of such termination and the remainder of the Option, if any, shall
terminate.
7.2 TERMINATION UNDER SECTION 9(B) OF AMENDED EMPLOYMENT
AGREEMENT. If the employment of the Optionee is terminated for Cause or if the
Optionee resigns from his employment pursuant to a resignation that is without
Good Reason and is not a specified resignation, in either case as provided in
Section 9(b) of the Amended Employment Agreement, as finally determined pursuant
to the provisions of said Section 9(b), the Optionee (or his personal
representative) may at any time within one year after such
4
<PAGE>
termination or resignation (but in no event after the expiration of the Exercise
Term) exercise the Option to the extent, but only to the extent, that the Option
or portion thereof was vested on the date of such termination or resignation
and, subject to Section 7.3, the remainder of the Option, if any, shall
terminate.
7.3 TERMINATION UNDER SECTIONS 9(C) OR 9(D) OF THE AMENDED
EMPLOYMENT AGREEMENT. If the Optionee's employment is terminated pursuant to
Section 9(c) or 9(d) of the Amended Employment Agreement, the Option, to the
extent it has not vested with respect to any Option Shares, shall immediately
vest and become exercisable. The Optionee may at any time within one year after
the date of such termination of employment (but in no event after the expiration
of the Exercise Term) exercise any or all of the Option to the extent not
previously exercised.
8. NON-TRANSFERABILITY.
The Option shall not be transferable other than by will or by the laws
of descent and distribution. During the lifetime of the Optionee, the Option
shall be exercisable only by the Optionee.
9. NO RIGHT TO CONTINUED EMPLOYMENT.
Nothing in this Agreement or the Plan shall be interpreted or construed
to confer upon the Optionee any right with respect to continuance of employment
by the Company, nor shall this Agreement or the Plan interfere in any way with
the right of the Company to terminate the Optionee's employment at any time,
subject to all terms and conditions of the Amended Employment Agreement.
10. ADJUSTMENTS.
In the event of a Change in Capitalization, the Committee shall
conclusively determine the appropriate adjustments to the number and class of
shares of Stock subject to the Option and the purchase price for such shares of
Stock. The Committee's adjustment shall be made in accordance with the
provisions of Section 4.5 of the Plan and shall be effective and final, binding
and conclusive for all purposes of the Plan and this Agreement. Notwithstanding
either of the preceding two sentences, the vesting and exercisability provisions
in Sections 5 and 7.3 and the rights of the Optionee under Sections 6.5 and 11
shall not be adversely affected by any Change in Capitalization.
5
<PAGE>
11. CERTAIN EVENTS.
Except as otherwise expressly provided herein, upon the effective date
of (i) the liquidation or dissolution of the Company or (ii) a merger or
consolidation of the Company (a "Transaction"), the Option shall continue in
effect in accordance with its terms and the Optionee shall be entitled to
receive in respect of all shares of Stock subject to the Option, upon exercise
of the Option, the same number and kind of stock, securities, cash, property or
other consideration that each holder of shares of Stock was entitled to receive
in the Transaction. In addition, if circumstances are such that unvested
remaining Option Shares would vest under more than one provision of this
Agreement, the Optionee shall have the right to select the provision under which
the vesting occurs.
12. WITHHOLDING OF TAXES.
At such times as an Optionee recognizes taxable income in connection
with the receipt of shares of Stock, securities, cash or property hereunder (a
"Taxable Event"), the Optionee shall pay to the Company an amount equal to the
federal, state and local income taxes and other amounts as may be required by
law to be withheld by the Company in connection with the Taxable Event (the
"Withholding Taxes") prior to the issuance, or release from escrow, of such
shares of Stock or securities or the payment of such cash or such property. The
Company shall have the right to deduct from any payment of cash to an Optionee
or Grantee an amount equal to the Withholding Taxes in satisfaction of the
obligation to pay Withholding Taxes. In satisfaction of the obligation to pay
Withholding Taxes to the Company, the Optionee may make a written election (the
"Tax Election"), which may be accepted or rejected in the discretion of the
Committee, to have withheld a portion of the shares then issuable to him having
an aggregate Fair Market Value, on the date preceding the date of such issuance,
equal to the Withholding Taxes.
13. OPTIONEE BOUND BY THE PLAN.
The Optionee hereby acknowledges receipt of a copy of the Plan as in
effect on the date hereof and agrees to be bound by all the terms and provisions
of the Plan.
14. MODIFICATION OF AGREEMENT.
This Agreement may be modified, amended, suspended or terminated, and
any terms or conditions may be waived, but only by a written instrument executed
by the parties hereto.
15. SEVERABILITY.
Should any provision of this Agreement be held by a court of competent
jurisdiction to be unenforceable or invalid for any reason, the remaining
provisions of this Agreement shall not be affected by such holding and shall
continue in full force in accordance with their terms.
6
<PAGE>
16. GOVERNING LAW.
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of New York without giving
effect to the conflicts of laws principles thereof.
17. SUCCESSORS IN INTEREST.
This Agreement shall inure to the benefit of and be binding upon any
successor to the Company. This Agreement shall inure to the benefit of the
Optionee's legal representatives. All obligations imposed upon the Optionee and
all rights granted to the Company under this Agreement shall be final, binding
and conclusive upon the Optionee's heirs, executors, administrators and
successors.
18. RESOLUTION OF DISPUTES.
Any dispute or disagreement which may arise under, or as a result of,
or in any way relate to, the interpretation, construction or application of this
Agreement shall be determined by binding arbitration. The parties may agree to
submit the matter to a single arbitrator or to several arbitrators, may require
that arbitrators possess special qualifications or expertise or may agree to
submit a matter to a mutually acceptable firm of experts for decision. In the
event the parties shall fail to thus agree upon terms of arbitration within
twenty (20) days from the first written demand for arbitration, then such
disputed matter shall be settled by arbitration under the Rules of Employment
Arbitration of the American Arbitration Association, by three arbitrators
appointed in accordance with such Rules. Such arbitration shall be held in New
York, New York. Once a matter has been submitted to arbitration pursuant to this
section, the decision of the arbitrators reached and promulgated as a result
thereof shall be final and binding upon all parties. The cost of arbitration
shall be shared equally by the parties and each party shall pay the expenses of
his/its attorneys, except that the arbitrators shall be entitled to award the
costs of arbitration, attorneys and accountants' fees, as well as costs, to the
party that they determine to be the prevailing party in any such arbitration.
7
<PAGE>
19. ACKNOWLEDGEMENT.
The parties hereto acknowledge and agree that that certain Nonqualified
Stock Option Agreement For Corporate Officers, dated as of December 31, 1994,
with respect to an aggregate of 50,000 shares of the Company's common stock is,
as set forth in that certain letter agreement dated January 27, 1997 between the
Company and Executive, no longer outstanding.
20. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
TELEMUNDO GROUP, INC.
By: /s/ BRUCE SPECTOR
---------------------------------
Name: Bruce Spector
Title: Chairman of the
Compensation Committee
/s/ PETER J. HOUSMAN II
------------------------------------
Peter J. Housman II
8
NONQUALIFIED STOCK OPTION AGREEMENT
FOR CORPORATE OFFICERS
AGREEMENT made as of the 10th day of September, 1997 between Telemundo
Group, Inc., a Delaware corporation (the "Company"), and Peter J. Housman II
(the "Optionee").
WHEREAS, the Company has adopted the 1994 Stock Plan, as the same may
be amended from time to time (the "Plan") in order to provide additional
incentive to certain officers and employees of the Company and its Subsidiaries;
and
WHEREAS, the Optionee has entered into an employment agreement, dated
as of March 7, 1997, with the Company (the "Employment Agreement");
WHEREAS, the Committee responsible for administration of the Plan has
determined to grant an option to the Optionee as provided herein, which grant
shall be made concurrently with the Company's amendment and restatement of the
Employment Agreement pursuant to that certain Amended and Restated Employment
Agreement (the "Amended Employment Agreement") between the Company and Optionee
dated concurrently herewith (the "Grant Date").
NOW, THEREFORE, the parties hereto agree as follows:
1. GRANT OF OPTION.
1.1 This Agreement shall be construed in accordance and
consistent with, and subject to, the provisions of the Plan (the provisions of
which are incorporated herein by reference) and, except as otherwise expressly
set forth herein, the capitalized terms used in this Agreement shall have the
same definitions as set forth in the Plan.
1.2 The Company hereby grants to the Optionee the right and
option (the "Option") to purchase all or any part of an aggregate of 30,000
whole shares of Stock (the "Option Shares") subject to, and in accordance with,
the terms and conditions set forth in this Agreement.
1.3 The Option is not intended to qualify as an Incentive
Stock Option within the meaning of Section 422 of the Code.
2. PURCHASE PRICE.
The price at which the Optionee shall be entitled to purchase shares of
Stock upon the exercise of the Option shall be $33.75 per share.
3. DURATION OF OPTION.
Except as otherwise provided in this Agreement or the Plan, the Option
shall be exercisable to the extent and in the manner provided herein for a
period of ten years from the Grant Date (the "Exercise Term"); PROVIDED,
HOWEVER, that the Option may be earlier terminated as provided in Section 7
hereof.
<PAGE>
4. COMPENSATION COMMITTEE. The Company represents and warrants to the
Optionee that this Agreement has been approved by the Committee.
5. VESTING AND EXERCISABILITY OF OPTION.
5.1 Unless otherwise provided in this Agreement or the Plan,
the Option shall entitle the Optionee, in whole at any time or in part from time
to time, to exercise the Option for shares of Stock to the extent the Option has
become "vested."
5.2 The Option shall "vest" and become exercisable as to
10,000 of the Option Shares on each of February 28, 1999, February 28, 2000 and
February 28, 2001 if, but only if, Optionee is employed with the Company on each
applicable vesting date.
5.3 In addition, to the extent the Option shall not have
previously "vested" and become exercisable pursuant to Sections 5.2 or 7.3, all
of the Option Shares which have not previously "vested" pursuant to such
provisions, shall become "vested" and exercisable immediately prior to the time
at which a "Change of Control Transaction" occurs if, but only if, the Optionee
is employed with the Company immediately prior to the occurrence of such Change
of Control Transaction. A "Change of Control Transaction" means any one or more
of the following events: (A) an event or series of events after the date of this
Agreement as a result of which any "person" or "group" (as such terms are used
in Sections 13(d) and 14(d) of the Exchange Act) who did not own at least
500,000 shares of the Company's Series B Common Stock on September 1, 1997
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of more than 50% of the aggregate voting power of
all of the capital stock of the Company normally entitled to vote in the
election of directors or (B) a sale, transfer, conveyance or other disposition,
directly or indirectly, in any single transaction or series of related
transactions, no matter how accomplished, which results in more than 50%, in
value, of (1) the capital stock (or other equity interest in) or operating
assets of Telemundo Network, Inc., a wholly-owned subsidiary of the Company or
(2) the aggregate capital stock (or other equity interest in) or operating
assets of all of the Company's subsidiaries (other than Telemundo Network,
Inc.), which currently comprise the Company's owned and operated station group
(including any special purpose license subsidiaries), being owned (which term
shall include "beneficial ownership" within the meaning of Rule 13d-3 under the
Exchange Act), directly or indirectly, by any "person" or "group" (as such terms
are used in Sections 13(d) and 14(d) of the Exchange Act) who did not own at
least 500,000 shares of the Company's Series B Common Stock on September 1, 1997
or (C) a transaction or series of related transactions leading to at least an
80% reduction in the number of outstanding shares of Stock held by "unaffiliated
persons" (meaning any person other than Hernandez Partners, Apollo Partners,
L.P. or Bastion Capital Fund, L.P. or any of their respective affiliates (as
this term is defined in Rule 12b-2 under the Exchange Act) on the date of this
Agreement.
5.4 In the event of a subdivision or combination of the
outstanding shares of Stock (whether by stock split, stock dividend, reverse
stock split or otherwise), the per share prices specified in Section 5.3 shall
be proportionately adjusted.
2
<PAGE>
6. MANNER OF EXERCISE AND PAYMENt.
6.1 Subject to the terms and conditions of this Agreement and
the Plan, the Option may be exercised by delivery of written notice to the
Company at its principal executive office. Such notice shall state that the
Optionee is electing to exercise the Option and the number of shares of Stock in
respect of which the Option is being exercised and shall be signed by the person
or persons exercising the Option. If requested by the Committee, such person or
persons shall (i) deliver this Agreement to the Secretary of the Company who
shall endorse thereon a notation of such exercise and (ii) provide satisfactory
proof as to the right of such person or persons to exercise the Option.
6.2 The notice, of exercise described in Section 6.1 shall be
accompanied by the full purchase price for the shares of Stock in respect of
which the Option is being exercised and by the Withholding Taxes, in cash, by
check or, in the discretion of the Committee, by transferring shares of Stock to
the Company held by the Optionee for more than six months and having a Fair
Market Value on the day preceding the day of exercise equal to the cash amount
for which such shares of Stock are substituted. Notwithstanding the preceding
sentence, the parties agree that, to the extent permitted by law, and to the
extent it would not, in the Company's judgment, result in any adverse legal,
financial or tax implications for the Company, it is their intention that
Optionee be able to effect a simultaneous exercise of this Option and sale of
shares of Stock issuable upon such exercise in the over-the-counter market or
any securities exchange on which the Stock is then listed, without Optionee
bearing any commission or brokerage expense (a "concurrent transaction"). To
this end, the Company and Optionee shall jointly agree upon a securities broker
to be used in such transactions and further to adopt such additional procedures
as may be necessary or advisable to accomplish concurrent transactions. In any
concurrent transaction, the Company shall not be required to deliver a share
certificate upon exercise of this Option unless it receives concurrent payment
of the exercise price and Withholding Taxes. The Company shall bear all
commission and brokerage expense associated with concurrent transactions, which
shall be treated as an adjustment in the purchase price of shares subject to
this Option.
6.3 Upon receipt of notice of exercise and full payment for
the shares of Stock in respect of which the Option is being exercised and of the
Withholding Taxes, the Company shall, subject to Section 14 of the Plan,
promptly take such action as may be necessary to effect the transfer to the
Optionee of the number of shares of Stock as to which such exercise was
effective, including issuing and delivering such shares of Stock and entering
the Optionee's name as a stockholder of record on the books of the Company
provided, that full payment of the exercise price and Withholding Taxes may be
made concurrently with such transfer and delivery in the case of a concurrent
transaction provided for in Section 6.2.
6.4 The Optionee shall not be deemed to be the holder of, or
to have any of the rights of a holder with respect, to any shares of Stock
subject to the option until (i) the
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Option shall have been exercised pursuant to the terms of this Agreement and the
Optionee shall have paid the full purchase price for the number of shares of
Stock in respect of which the Option was exercised, (ii) the Company shall have
issued and delivered the shares of Stock to the Optionee, and (iii) the
Optionee's name shall have been entered as a stockholder of record on the books
of the Company, whereupon the Optionee shall have full voting and other
ownership rights with respect to such shares.
6.5 The Company will use its reasonable efforts to permit
shares of Stock issued pursuant to this Option to be registered in a "piggy
back" registration in connection with a registration of shares of stock to be
issued by the Company pursuant to Form S-1, S-2, S-3 or S-8 under the Act, on
such customary terms and conditions as the Company shall reasonably specify. The
Optionee shall, in a manner customary for such a registration, cooperate with
the Company, as reasonably requested by it, in connection with such registration
and resale. To the extent the Company provides registration rights generally to
executive officers pursuant to benefit or stock plans of the Company, Optionee
will be provided with similar rights as are provided to other executive
officers.
7. TERMINATION OF EMPLOYMENT.
7.1 TERMINATION UNDER SECTION 9(A) OF AMENDED EMPLOYMENT
AGREEMENT. If the employment of the Optionee is terminated pursuant to Section
9(a) of the Amended Employment Agreement, the Optionee (or his personal
representative) may at any time within one year after such termination (but in
no event after the expiration of the Exercise Term) exercise the Option to the
extent, but only to the extent, that the Option or portion thereof was vested on
the date of such termination and the remainder of the Option, if any, shall
terminate.
7.2 TERMINATION UNDER SECTION 9(B) OF AMENDED EMPLOYMENT
AGREEMENT. If the employment of the Optionee is terminated for Cause or if the
Optionee resigns from his employment pursuant to a resignation that is without
Good Reason and is not a Specified Resignation, in either case as provided in
Section 9(b) of the Amended Employment Agreement, as finally determined pursuant
to the provisions of said Section 9(b), the Optionee (or his personal
representative) may at any time within one year after such termination or
resignation (but in no event after the expiration of the Exercise Term) exercise
the Option to the extent, but only to the extent, that the Option or portion
thereof was vested on the date of such termination or resignation and, subject
to Section 7.3, the remainder of the Option, if any, shall terminate.
7.3 TERMINATION UNDER SECTIONS 9(C) OR 9(D) OF THE AMENDED
EMPLOYMENT AGREEMENT. If the Optionee's employment is terminated pursuant to
Section 9(c) or 9(d) of the Amended Employment Agreement, the Option, to the
extent it has not vested with respect to any Option Shares, shall immediately
vest and become exercisable. The Optionee may at any time within one year after
the date of such termination of employment (but in no event after the expiration
of the Exercise Term) exercise any or all of the Option to the extent not
previously exercised.
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8. NON-TRANSFERABILITY.
The Option shall not be transferable other than by will or by the laws
of descent and distribution. During the lifetime of the Optionee, the Option
shall be exercisable only by the Optionee.
9. NO RIGHT TO CONTINUED EMPLOYMENT.
Nothing in this Agreement or the Plan shall be interpreted or construed
to confer upon the Optionee any right with respect to continuance of employment
by the Company, nor shall this Agreement or the Plan interfere in any way with
the right of the Company to terminate the Optionee's employment at any time,
subject to all terms and conditions of the Amended Employment Agreement.
10. ADJUSTMENTS.
In the event of a Change in Capitalization, the Committee shall
conclusively determine the appropriate adjustments to the number and class of
shares of Stock subject to the Option and the purchase price for such shares of
Stock. The Committee's adjustment shall be made in accordance with the
provisions of Section 4.5 of the Plan and shall be effective and final, binding
and conclusive for all purposes of the Plan and this Agreement. Notwithstanding
either of the preceding two sentences, the vesting and exercisability provisions
in Sections 5 and 7.3 and the rights of the Optionee under Sections 6.5 and 11
shall not be adversely affected by any Change in Capitalization.
11. CERTAIN EVENTS.
Except as otherwise expressly provided herein, upon the effective date
of (i) the liquidation or dissolution of the Company or (ii) a merger or
consolidation of the Company (a "Transaction"), the Option shall continue in
effect in accordance with its terms and the Optionee shall be entitled to
receive in respect of all shares of Stock subject to the Option, upon exercise
of the Option, the same number and kind of stock, securities, cash, property or
other consideration that each holder of shares of Stock was entitled to receive
in the Transaction. In addition, if circumstances are such that unvested
remaining Option Shares would vest under more than one provision of this
Agreement, the Optionee shall have the right to select the provision under which
the vesting occurs.
12. WITHHOLDING OF TAXES.
At such times as an Optionee recognizes taxable income in connection
with the receipt of shares of Stock, securities, cash or property hereunder (a
"Taxable Event"), the Optionee shall pay to the Company an amount equal to the
federal, state and local income taxes and other amounts as may be required by
law to be withheld by the Company in connection with the Taxable Event (the
"Withholding Taxes") prior to the issuance, or
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release from escrow, of such shares of Stock or securities or the payment of
such cash or such property. The Company shall have the right to deduct from any
payment of cash to an Optionee or Grantee an amount equal to the Withholding
Taxes in satisfaction of the obligation to pay Withholding Taxes. In
satisfaction of the obligation to pay Withholding Taxes to the Company, the
Optionee may make a written election (the "Tax Election"), which may be accepted
or rejected in the discretion of the Committee, to have withheld a portion of
the shares then issuable to him having an aggregate Fair Market Value, on the
date preceding the date of such issuance, equal to the Withholding Taxes.
13. OPTIONEE BOUND BY THE PLAN.
The Optionee hereby acknowledges receipt of a copy of the Plan as in
effect on the date hereof and agrees to be bound by all the terms and provisions
of the Plan.
14. MODIFICATION OF AGREEMENT.
This Agreement may be modified, amended, suspended or terminated, and
any terms or conditions may be waived, but only by a written instrument executed
by the parties hereto.
15. SEVERABILITY.
Should any provision of this Agreement be held by a court of competent
jurisdiction to be unenforceable or invalid for any reason, the remaining
provisions of this Agreement shall not be affected by such holding and shall
continue in full force in accordance with their terms.
16. GOVERNING LAW.
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of New York without giving
effect to the conflicts of laws principles thereof.
17. SUCCESSORS IN INTEREST.
This Agreement shall inure to the benefit of and be binding upon any
successor to the Company. This Agreement shall inure to the benefit of the
Optionee's legal representatives. All obligations imposed upon the Optionee and
all rights granted to the Company under this Agreement shall be final, binding
and conclusive upon the Optionee's heirs, executors, administrators and
successors.
18. RESOLUTION OF DISPUTES.
Any dispute or disagreement which may arise under, or as a result of,
or in any way relate to, the interpretation, construction or application of this
Agreement shall be determined by binding arbitration. The parties may agree to
submit the matter to a single
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arbitrator or to several arbitrators, may require that arbitrators possess
special qualifications or expertise or may agree to submit a matter to a
mutually acceptable firm of experts for decision. In the event the parties shall
fail to thus agree upon terms of arbitration within twenty (20) days from the
first written demand for arbitration, then such disputed matter shall be settled
by arbitration under the Rules of Employment Arbitration of the American
Arbitration Association, by three arbitrators appointed in accordance with such
Rules. Such arbitration shall be held in Los Angeles, California. Once a matter
has been submitted to arbitration pursuant to this section, the decision of the
arbitrators reached and promulgated as a result thereof shall be final and
binding upon all parties. The cost of arbitration shall be shared equally by the
parties and each party shall pay the expenses of his/its attorneys, except that
the arbitrators shall be entitled to award the costs of arbitration, attorneys
and accountants' fees, as well as costs, to the party that they determine to be
the prevailing party in any such arbitration.
19. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
TELEMUNDO GROUP, INC.
By: /s/ BRUCE SPECTOR
---------------------------------
Name: Bruce Spector
Title: Chairman of the
Compensation Committee
/s/ PETER J. HOUSMAN II
------------------------------------
Peter J. Housman II
7
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
AGREEMENT, between Telemundo Group, Inc., a Delaware
corporation (the "Company"), and Stephen J. Levin ("Executive"), dated as of
September 10, 1997.
WHEREAS, the Company and Executive entered into that certain
Employment Agreement dated as of February 27, 1995 and letter agreement entitled
Amendment to Employment Agreement dated May 30, 1995 (collectively, the
"Original Agreement").
WHEREAS, the Company and Executive desire to amend and restate
the Original Agreement in its entirety by entering into this Amended and
Restated Employment Agreement (the "Agreement").
IT IS, THEREFORE, AGREED THAT THE ORIGINAL AGREEMENT IS HEREBY
AMENDED AND RESTATED, AND THE PARTIES HEREBY AGREE, AS FOLLOWS:
1. EMPLOYMENT AND TERM. The Company hereby agrees to continue
Executive in its employ, and Executive hereby agrees to continue such employment
as Executive Vice President of the Company (or such other position determined in
accordance with Section 9(d)(ii) of this Agreement) reporting to the President
and Chief Executive Officer for the period commencing on the date first above
written and ending on February 28, 2001; PROVIDED, HOWEVER, that effective on
March 1, 2001 and on each March 1 thereafter, the term of this Agreement shall
be extended for an additional period of one year from the then current
expiration date unless the Company or Executive shall have given written notice
to the other of its or his election not to so extend the term of this Agreement
on or before the immediately prior December 1, subject, however, to earlier
termination as provided in Section 9 herein (the "Employment Period"). The
Executive also agrees, during the Employment Period, to serve (without
additional compensation) on the Board of Directors (and appropriate committees
thereof) of the Company, if requested by the Board of Directors.
2. TERMS OF EMPLOYMENT. (a) During the Employment Period,
Executive agrees, subject to the provisions of Section 9(d)(ii) of this
Agreement, to devote all but a DE MINIMUS amount of his business time and
attention to the business and affairs of the "Telemundo Group" (as defined
below) and to use his best efforts to perform faithfully and efficiently such
responsibilities. For purposes of this Agreement, the term "Telemundo Group"
shall mean any and all of the Company and any of its current or future divisions
or subsidiaries.
(b) The principal place of employment of Executive
shall be greater Los Angeles, California area. Executive understands and agrees
that in connection with his employment hereunder, he will be required to travel
extensively on behalf of the Telemundo Group.
3. BASE SALARY. During the Employment Period Executive shall
receive a base salary (the "Base Salary") as follows. For the period of the
Employment Period beginning on the effective date of this Agreement and ending
on February 28, 1998, the Base
<PAGE>
Salary shall be payable to Executive at an annual rate of $350,000. For the
period of the Employment Period beginning on March 1, 1998 and ending on the
last day of the Employment Period, the Base Salary shall be payable to Executive
at an annual rate of $400,000. The Base Salary shall be payable consistent with
the executive payroll practices of the Company. Executive acknowledges and
agrees that he has been paid in full his Base Salary for periods prior to the
effective date of this Agreement.
4. BONUS. For 1997 (or portion thereof) during the Employment
Period, Executive will be paid bonuses as set forth in Section 4(a) and 4(b)
below if certain performance targets set by the Compensation and Stock Option
Committee (the "Compensation Committee") of the Board of Directors are met. For
each of the 1998, 1999, 2000 and 2001 fiscal years and any subsequent fiscal
years (or portion thereof) during the Employment Period, Executive will be paid
a bonus (the "Budget Bonus") as set forth below in subsection (c) (the bonuses
described in the first sentence of this Section 4 and the "Budget Bonus" are
hereinafter collectively referred to as the "Bonus"). Executive shall receive
the Bonus only if Executive is employed by the Company on the last day of the
fiscal year to which the Bonus relates, subject to the provisions of Sections
9(a), 9(c) and 9(d).
(a) For the fiscal year ended December 31, 1997,
Executive will be eligible for a bonus in an amount computed in accordance with
Exhibit A hereto. Such bonus shall be paid at the times bonuses are customarily
paid to the Company's executives.
(b) For the calendar year 1997, Executive shall be
eligible for a bonus based on the attainment of certain performance levels by
KVEA as set forth on Exhibit B attached hereto. Such bonus shall be paid at the
times bonuses are customarily paid to the Company's executives.
(c) For each of the 1998, 1999, 2000, 2001 fiscal
years and any subsequent fiscal years (or portion thereof) during the Employment
Period, Executive will be paid a Budget Bonus based upon the Company's
achievement of targets with respect to its earnings, before interest, taxes,
depreciation and amortization ("EBITDA") during such fiscal year (which fiscal
year target shall not be greater than the Company's budget for EBITDA for such
fiscal year), as follows. During the first quarter of each such fiscal year, the
Compensation Committee shall establish a budgeted EBITDA target (the "EBITDA
Target") for such fiscal year and notify Executive in writing of the EBITDA
Target. Pursuant to subsection (d), the Committee shall determine the Company's
EBITDA for such fiscal year and shall notify Executive of its determination of
the amount of the Company's EBITDA for such fiscal year and of the amount of
Executive's Budget Bonus for such year, which Budget Bonus shall be equal to (i)
100% of Executive's Base Salary for such fiscal year if the Company's EBITDA is
100% or more of the EBITDA Target, (ii) 50% of Executive's Base Salary for such
fiscal year if the Company's EBITDA is 90% of the EBITDA Target and (iii) pro
rated between 50% and 100% of Executive's Base Salary for such fiscal year if
the Company's EBITDA is more than 90% of the EBITDA Target but less than 100% of
the EBITDA Target. Executive shall be paid no Budget Bonus for any such fiscal
year in which the Company's EBITDA is less than 90% of the EBITDA Target for
such fiscal year.
(d) Each Bonus shall be paid upon certification by
the Compensation Committee (which the Compensation Committee will make within 30
days
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after the certification by the Company's independent auditors of the financial
statements for such fiscal year) that the performance targets entitling
Executive to a Bonus with respect to such fiscal year have been met. If the
Compensation Committee so certifies, the Bonus will be paid promptly but in no
event later than ten days after such certification.
(e) For purposes of this Agreement, the "Compensation
Committee" shall mean a committee consisting of at least two (2) directors of
the Company, each of whom is a "non-employee director" within the meaning of
Rule 16b-3 under the Securities Exchange Act of 1934, as amended, and an
"outside director" within the meaning of Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code").
(f) The Company's obligation to pay Budget Bonuses is
conditioned upon the holders of a majority of the outstanding shares of the
Company approving a senior officer incentive plan covering Executive and the
other top three senior officers of the Company, under which plan incentive
compensation will be payable based upon the achievement of performance goals to
be established from time to time by the Compensation Committee.
5. EMPLOYEE BENEFIT PLANS; ETC. (a) Executive shall be
entitled during the Employment Period to participate in all retirement,
disability, pension, savings, medical, insurance and other plans of the Company
generally available to all senior executives (other than any performance based
bonus or option (or similar) plans). Executive shall be entitled to paid
vacations during each year of his employment consistent with the Company's
vacation policy for executive level employees (which shall provide for a least
20 vacation days per year).
(b) The Company agrees that it will provide
Executive, in his capacity as an officer and, if applicable, as a director, with
indemnification rights which are not materially less favorable to the Executive,
in his capacity as an officer and as a director, than those provided as of the
date of this Agreement in the By-laws of the Company.
6. Intentionally omitted.
7. STOCK OPTION AGREEMENTS. On March 9, 1995 the Parties
hereto entered into a nonqualified Stock Option Agreement For Corporate Officers
and contemporaneously with and in connection with the execution of letter
agreement entitled Amendment to Employment Agreement dated May 30, 1995, the
parties hereto entered into a Nonqualified Stock Option Agreement For Corporate
Officers (the "Stock Option Agreements") with respect to an aggregate (for such
option agreements collectively) of 50,000 shares of the Company's Series A
Common Stock, par value $.01 per share (the "Common Stock"), which Stock Option
Agreements are being amended concurrently with the execution of this Agreement
(the "Amended Option Agreements). Contemporaneously with and in connection with
the execution of this Agreement, the parties hereto are entering into a
Nonqualified Stock Option Agreement For Corporate Officers with respect to an
aggregate 30,000 shares of Common Stock (the "1997 Option Agreement").
8. EXPENSES. The Company shall reimburse Executive for all
reasonable expenses properly incurred by him in accordance with the policies of
the Telemundo Group in effect from time to time, on behalf of the Telemundo
Group in the performance of his
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duties hereunder, provided that proper vouchers are submitted to the Company by
Executive evidencing such expenses and the purposes for which the same were
incurred.
9. TERMINATION. The Company shall have the right to terminate
Executive's employment only as expressly provided in this Agreement.
(a) DEATH OR DISABILITY. Except as otherwise provided
herein, this Agreement shall terminate automatically upon Executive's death.
The Company may terminate this Agreement after having
established Executive's "Disability" (as defined below), by giving Executive
written notice of its intention to terminate Executive's employment. For
purposes of this Agreement, "Disability" means Executive's inability to perform
substantially all his duties and responsibilities to the Telemundo Group by
reason of a physical or mental disability or infirmity (i) for a continuous
period of twelve consecutive months or (ii) at such earlier time as Executive
submits medical evidence satisfactory to the Company or the Board of Directors
determines in good faith and upon competent medical advice that Executive has a
physical or mental disability or infirmity that will likely prevent Executive
from substantially performing his duties and responsibilities for twelve
consecutive months or longer. The date of Disability shall be the day on which
Executive receives notice from the Company pursuant to this Section 9.
Upon termination of Executive's employment because of
death or Disability, the Company shall pay Executive or his estate or other
personal representative (i) within 60 days, the amount of Executive's Base
Salary earned up to the date of death or Disability, as the case may be, through
the date of termination, (ii) all benefits and other items referred to in
Sections 5 and 8 which are due up to the date of death or Disability and (iii)
when otherwise due in accordance with the provisions of Section 4, the Bonus, if
any, earned for the year in which such termination occurred, without regard to
whether Executive is an employee of the Company on the last day of such year.
(b) CAUSE; RESIGNATION WITHOUT GOOD REASON OR AS A
SPECIFIED RESIGNATION. The Company shall have the right to terminate Executive's
employment for "Cause" as defined below. Except as provided in Section 15
herein, (i) upon termination of Executive's employment for Cause or (ii) upon
Executive resigning as an employee pursuant to a resignation that is without
Good Reason and is not a Specified Resignation (as defined in Section 9(d)(i)),
this Agreement shall terminate and the Executive shall not be entitled to
receive any compensation or other benefits other than (x) Base Salary earned up
to the date of such termination or resignation and (y) all benefits and other
items referred to in Sections 5 and 8 which are due up to the date of such
termination or resignation.
For purposes of this Agreement, "Cause" shall mean
(i) the willful and continued failure by Executive to perform substantially all
his duties to the Company or the failure by the Executive to comply with the
reasonable written policies, procedures and directives of the Board of Directors
(other than any such failure resulting from his death or Disability), in each
case after being given written notice by the Board of Directors of a failure to
perform or comply (which notice specifically identifies the manner in which
Executive has failed to perform or comply) and a reasonable opportunity to cure
such noncompliance or nonperformance; (ii) the willful misconduct by Executive
in the performance of his duties to the Company, provided that (for purposes of
this clause (ii) only
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and not for any other purpose or interpretation of this Agreement) an act shall
be considered "willful" only if done in bad faith and not in the best interests
of the Company; (iii) the grossly negligent performance by Executive of his
duties to the Company; (iv) the conviction of Executive by a court of competent
jurisdiction of the commission of (x) a felony or (y) a crime involving moral
turpitude; or (v) a material breach by Executive of Sections 10 or 11 hereof.
Notwithstanding the foregoing, the Company shall not
be entitled to terminate Executive for any of the reasons specified in clause
(i), (ii), (iii) or (v) of the immediately preceding paragraph unless such
termination is authorized by a resolution adopted by the Board of Directors of
the Company at a meeting called and held for this purpose (after five business
days' prior written notice to Executive, which prior written notice shall state
the general facts, circumstances or deficiencies supporting a claim for Cause
termination, and after affording Executive and his counsel an opportunity to be
heard before the Board of Directors).
(c) TERMINATION WITHOUT CAUSE; NON-RENEWAL.
Notwithstanding anything to the contrary contained herein, the Company shall
have the right to terminate the employment of Executive at any time without
Cause and the Company shall be entitled to determine, in its sole and absolute
discretion, not to extend the Employment Period as provided in Section 1. Upon a
termination without Cause, except as provided in Section 15, this Agreement
shall terminate and the Executive shall not be entitled to receive any
compensation or other benefits, except that the Company shall (i) through the
later of February 28, 2001 or the first anniversary of the date of termination
of Executive's employment (the "Entitlement Date") continue to pay to Executive
the Base Salary in effect immediately prior to the date of termination, such
payments to be made in installments at the times such amounts would have been
paid if the Agreement had not been so terminated, and (ii) pay to the Executive,
when otherwise due in accordance with Section 4, the Bonus, if any, earned for
the fiscal year in which such termination occurs, without regard to whether
Executive is employed on the last day of such fiscal year and (iii) through the
Entitlement Date continue Executive's benefits and other items referred to in
Section 5 or, to the extent the Company is legally unable to provide any such
benefits or other items as a result of Executive no longer being an employee,
reimburse Executive for his cost (not to exceed the actual cost to the Company
if he were still an employee) of obtaining the equivalent coverage and benefits.
During the period in which Executive receives the payments required by the
immediately preceding sentence, Executive shall be subject to the provisions set
forth in Sections 10 and 11 below. In the event that Company elects not to
extend the Employment Period, then, absent any termination pursuant to Section
9, the Company shall continue paying to Executive his Base Salary during the
period, if any, beginning on the date Executive's employment terminates and
ending on the first anniversary of the date on which the Company gives its
notice of non-renewal to Executive. During the period in which Executive
receives the payments required by the immediately preceding sentence, Executive
shall be subject to the provisions set forth in Sections 10 and 11 below.
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(d) TERMINATION FOR GOOD REASON; SPECIFIED
RESIGNATION RIGHT.
(i) Executive shall have the right to
terminate his employment under this Agreement upon the occurrence of any event
that constitutes Good Reason by giving written notice to the Company. "Good
Reason" means any of the following: (A) a Diminution in Duty (as defined below),
(B) a Designated Relocation (as defined below), or (C) any Other Good Reason
Event (as defined below); PROVIDED, HOWEVER, that Good Reason shall not be
deemed to have occurred prior to the giving of written notice by the Executive
to the Company generally describing the alleged Good Reason, and the actions the
Executive believes are necessary to cure such alleged Good Reason, and the
Company's failure to so cure within 15 days of receipt of such notice. The
giving of such notice and the action or failure to take action by the Company
shall be irrelevant in determining whether a Good Reason has in fact occurred.
If a Change of Control Transaction (as defined in the Amended Option Agreement)
occurs, then, during the period beginning on the date that is 14 months after
the consummation of the Change of Control Transaction and ending on the date
that is 15 months after the consummation of the Change of Control Transaction,
Executive shall have the right to terminate his employment under this Agreement
for any reason whatsoever by giving written notice of such termination to the
Company (such termination being a "Specified Resignation" and, for purposes of
this Agreement, a Specified Resignation shall be treated exactly like a
termination for Good Reason). Upon a termination for Good Reason or a Specified
Resignation, except as provided in Section 15, this Agreement shall terminate
and the Executive shall not be entitled to receive any compensation or other
benefits other than the Company shall (i) through the Entitlement Date continue
to pay to Executive the Base Salary in effect immediately prior to the date of
termination, such payments to be made in installments at the times such amounts
would have been paid if the Agreement had not been so terminated, (ii) pay to
the Executive, when otherwise due in accordance with Section 4, the Bonus, if
any, earned for the fiscal year in which such termination occurs, without regard
to whether Executive is employed on the last day of such fiscal year and (iii)
through the Entitlement Date continue Executive's benefits and other items
referred to in Section 5 or, to the extent the Company is legally unable to
provide any such benefits or other items as a result of Executive no longer
being an employee, reimburse Executive for his cost (not to exceed the actual
cost to the Company if he were still an employee) of obtaining the equivalent
coverage and benefits. During such period, Executive shall be subject to the
provisions set forth in Sections 10 and 11 below.
(ii) "Diminution in Duty" means, without
Executive's express prior written consent: (A) the assignment to Executive of
any duties inconsistent in any respect with Executive's position on the date of
this Agreement, or (B) any adverse change in Executive's status, offices,
titles, reporting requirements, authority, duties or responsibilities as in
effect on the date of this Agreement; PROVIDED, HOWEVER, that after a Change of
Control Transaction (as defined in the Amended Option Agreements), a "Diminution
in Duty" means a change in Executive's position with the Company so that he is
neither (1) an Executive Vice President of the Company, nor (2) an Executive
Vice President of a successor to any part of the Company's business or assets.
Notwithstanding anything whatsoever to the contrary contained in this Agreement
(or in the Amended Option Agreements or in the 1997 Option Agreement), if after
a Change of Control Transaction any of the events described in clause (A) or (B)
of the immediately preceding sentence occurs (without regard to the application
of the proviso in such sentence), Executive shall have the absolute right to
change his position with the Company to a position that has such work
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location, time commitment, duties, responsibilities and terms as shall be
specified by Executive in his sole and absolute discretion after consultation
with the Company, and the requirement of Section 2(a) that Executive devote his
full time and attention to the Telemundo Group shall cease to apply.
(iii) "Designated Relocation" means the
Company requiring Executive's work location to be other than the Company's
headquarters in the greater Los Angeles area or other than within thirty (30)
miles of the Company's current headquarters in Glendale, California.
(iv) "Other Good Reason Event" means any of
the following: (A) a material breach of this Agreement by the Company (which
shall include, without limitation, any reduction in the amount of any
compensation or benefits provided to Executive under this Agreement) or (B) any
termination or attempted termination by the Company of Executive's employment
other than as expressly permitted in this Agreement.
(e) OFFICER AND BOARD POSITIONS. Upon the termination
of employment with the Company for any reason, Executive shall be deemed to have
resigned any and all of his positions as an officer and a member of the Board of
Directors of the Company and any of its subsidiaries and as a member of any
committees of such Boards, effective on the date of termination.
(f) CERTAIN CONDITION. Notwithstanding anything to
the contrary contained in this Section 9, the obligations of the Company under
this Section 9 shall continue only so long as the Executive does not breach his
obligations under Section 10 and 11.
(g) CERTAIN EFFECT. As used in this Agreement,
termination of this Agreement shall also result in and mean termination of the
Employment Period hereunder.
(h) MITIGATION OF DAMAGES. Executive shall have no
duty to mitigate any of his damages in the event of any breach of or default or
failure in performance under this Agreement by the Company.
(i) STOCK OPTIONS. The references in Section 9(a),
9(b), 9(c) or 9(d) to Executive, other than as therein stated, not being
entitled to receive compensation or benefits upon termination of his employment
under any of such Sections shall not affect Executive's rights under the Amended
Option Agreements or the 1997 Stock Option Agreement.
10. CONFIDENTIALITY, ETC. Executive will not divulge, furnish
or make accessible to anyone (otherwise than in the regular course of business
of the Telemundo Group) any confidential information, plans or materials or
trade secrets of the Telemundo Group or with respect to any other confidential
or secret aspects of the business of the Telemundo Group; PROVIDED, HOWEVER,
that during his employment, Executive shall have the latitude customarily given
to an executive vice president to disclose information in good faith for the
benefit of the Company and its stockholders (taken as a whole). All memoranda,
notes, lists, records and other documents or papers (and all copies thereof),
including such items stored in computer memories, on microfiche or by any other
means, made or compiled by or on behalf of Executive, or made available to him
relating to the Telemundo Group are
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and shall be the Company's property and shall be delivered to the Company
promptly upon the termination of his employment with the Company; PROVIDED,
HOWEVER, that (i) this obligation shall not apply to information that (A) is not
confidential (other than as a result of Executive's breach of this Section) and
(B) does not contain certain trade secrets of the Company, (ii) Executive shall
have the right to retain such of the foregoing as shall be reasonably necessary
to enforce his rights under this Agreement and to comply with and enforce his
rights, including the right to defend himself against claims, provided copies of
such retained information are provided to the Company and the retained
information remain subject to the provision of this Section, and (iii) Executive
shall have no obligation to return information that is no longer in his
possession, custody or control. This Section 10 shall survive the expiration or
termination or termination of this Agreement, the Employment Period and the term
of employment; PROVIDED, HOWEVER, that if Executive's employment is terminated
pursuant to Section 9(c) or Section 9(d), then this Section 10 will terminate on
the Entitlement Date.
11. NO INTERFERENCE; AFFILIATE TRANSACTIONS.
(a) During the Employment Period and for one year
thereafter, Executive will not, directly or indirectly, for himself, or as agent
of or on behalf of, or in conjunction with, any person, firm, corporation, or
other entity, engage or participate in the Company Business (as hereinafter
defined), whether as employee, consultant, partner, principal, shareholder or
representative, or render advisory or other services to or for any person, firm,
corporation or other entity, which is engaged, directly or indirectly, in the
Company Business; PROVIDED, HOWEVER, that (i) Executive may own less than 5% of
the common stock of a publicly traded company that is engaged in the Company
Business and (ii) Executive may own Common Stock and securities convertible into
Common Stock (or securities into which Common Stock is converted in any business
combination transaction). For purposes of this Section 11(a), "Company Business"
shall mean and be limited to any of (x) the provision of Spanish language
television programming in the United States (which includes Puerto Rico), (y)
the ownership of television broadcast stations, networks or any over-the-air
television signal, and cable in the United States (which includes Puerto Rico)
that broadcast primarily Spanish language programming, and (z) the sale of
television advertising time and programs inside and outside the United States
(which includes Puerto Rico) for Spanish language television stations, cable and
networks.
(b) During the Employment Period and for one year
after such period, Executive agrees and covenants that he will not interfere
directly or indirectly in any way with the Company. "Interfere" means to
influence or attempt to influence, directly or indirectly, present or active
prospective customers, employees, suppliers, performers, directors,
representatives, agents or independent contractors of the Company, or any of its
network affiliates to restrict, reduce, sever or otherwise alter their
relationship with the Telemundo Group or any of its network affiliates.
(c) Executive agrees that during the Employment
Period, he will not at any time enter into, on behalf of the Telemundo Group, or
cause the Telemundo Group to enter into, directly or indirectly, any
transactions (each, a "Transaction") with any business organization in which he
or, to his knowledge after due inquiry, any member of his family may be
interested as a partner, trustee, director, officer, employee, shareholder,
lender of money or guarantor, except to the extent disclosed to the Company and
agreed to by the board of directors of the Company in writing. Executive will
use his best efforts to ensure
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that any Transaction is disclosed to the Board of Directors of the Company and
approved thereby prior to entering into a contract relating thereto and/or
consummation thereof, as contemplated by the preceding sentence.
(d) From and after the termination of Executive's
employment, the Executive shall not disparage the Company, its officers,
directors, employees or business, nor shall the Company or any of its officers,
directors, employees or agents disparage the Executive or members of his family,
and neither party shall disclose any facts relating to such termination;
provided, that nothing contained in this Section 11(d) shall restrict the
parties from making any statements or disclosure believed necessary to enforce
in any judicial or similar proceeding the provisions of this Agreement or as a
party believes may be required by applicable law.
(e) In the event any court having jurisdiction
determines that any part of this Section 11 is unenforceable, such court shall
have the power to reduce the duration or scope of such provision and such
provision, in its reduced form, shall be enforceable. This Section 11 shall
survive the expiration or termination of this Agreement, and the Employment
Period; PROVIDED, HOWEVER, that if Executive's employment is terminated pursuant
to Section 9(c) or Section 9(d), then this Section 11 will terminate on the
Entitlement Date.
12. INJUNCTIVE RELIEF. Executive acknowledges that the
provisions of Sections 10 and 11 herein are reasonable and necessary for the
protection of the Telemundo Group and the Telemundo Group will be irrevocably
damaged if such provisions are not specifically enforced. Accordingly, Executive
agrees that, in addition to any other relief to which the Company may be
entitled in the form of damages, the Company shall be entitled to seek and
obtain injunctive relief from a court of competent jurisdiction (without the
posting of a bond therefor) for the purposes of restraining Executive from any
actual or threatened breach of such provisions.
13. REMEDIES; SERVICE OF PROCESS.
(a) Except when a party is seeking an injunction or specific
performance hereunder, the parties agree to submit any dispute concerning this
Agreement to binding arbitration. The parties may agree to submit the matter to
a single arbitrator or to several arbitrators, may require that arbitrators
possess special qualifications or expertise or may agree to submit a matter to a
mutually acceptable firm of experts for decision. In the event the parties shall
fail to thus agree upon terms of arbitration within twenty (20) days from the
first written demand for arbitration, then such disputed matter shall be settled
by arbitration under the Rules of Employment Arbitration of the American
Arbitration Association, by three arbitrators appointed in accordance with such
Rules. Such arbitration shall be held in Los Angeles, California. Once a matter
has been submitted to arbitration pursuant to this section, the decision of the
arbitrators shall be final and binding upon all parties. The cost of arbitration
shall be shared equally by the parties and each party shall pay the expenses of
his/its attorneys, except that the arbitrators shall be entitled to award the
costs of arbitration, attorneys and accountants' fees, as well as costs, to the
party that they determine to be the prevailing party in any such arbitration.
(b) The Company and Executive hereby irrevocably consent to
the jurisdiction of the Courts of the State of California and of any Federal
Court located in
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such State in connection with any action or proceedings arising out of or
relating to the provisions of Sections 10 and 11 of this Agreement. Executive
further agrees that he will not commence or move to transfer any action or
proceeding arising out or relating to the provisions of Sections 10 and 11 of
this Agreement to any Court other than one located in the State of California.
In any such litigation, Executive waives personal service of any summons,
complaint or other process and agrees that the service thereof may be made by
certified mail directed to Executive at his address for purposes of notice under
Section 17(b) hereof.
14. SUCCESSORS. This Agreement and the rights and obligations
hereunder are personal to Executive and without the prior written consent of the
Company and Executive shall not be assignable.
15. SURVIVAL OF PROVISIONS. Notwithstanding anything to the
contrary contained herein, the provisions of Sections 5(b), 9, 10, 11, 12, 13,
14, 15, 16 and 17 hereof shall survive the termination or expiration of this
Agreement, irrespective of the reasons therefor.
16. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
Notwithstanding anything to the contrary contained
herein, if it shall be determined that any payment, distribution or benefit
received or to be received by Executive from the Company ("Payments"), whether
under this Agreement or otherwise (including, without limitation, the Amended
Option Agreements and the 1997 Option Agreement), would be subject to the excise
tax imposed by Section 4999 of the Code, or any successor or counterpart section
thereto (the "Excise Tax"), then Executive shall be entitled to receive an
additional payment (the "Excise Tax Gross-Up Payment") in an amount such that
the net amount retained by Executive, after the calculation and deduction of any
Excise Tax on the Payments and any federal, state and local income taxes,
employment taxes and excise tax on the Excise Tax Gross-Up Payment provided for
in this Section 16, shall be equal to the Payments. For the avoidance of doubt,
in determining the amount of the Excise Tax Gross-Up Payment attributable to
federal income taxes the Company shall take into account the maximum reduction
in federal income taxes that could be obtained by the deduction of the portion
of the Excise Tax Gross-Up Payment attributable to state and local income taxes.
Finally, the Excise Tax Gross-Up Payment shall be net of any income or excise
tax withholding payments made by the Company or any affiliate to any federal,
state or local taxing authority with respect to the Excise Tax Gross-Up Payment
that was not deducted from compensation payable to Executive.
(b) All determinations required to be made under this
Section 16, including whether and when an Excise Tax Gross-Up Payment is
required and the amount of such Excise Tax Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, except as specified in Section
16(a) above, shall be made by Deloitte & Touche LLP (the "Accounting Firm"),
which shall provide detailed supporting calculations both to the Company and
Executive within 15 business days after the Company becomes obligated to make
any Payments to Executive. The determination of tax liability made by the
Accounting Firm shall be subject to review by Executive's tax advisor and, if
Executive's tax advisor does not agree with the determination reached by the
Accounting Firm, then the Accounting Firm and Executive's tax advisor shall
jointly designate a nationally recognized public accounting firm, which shall
make the determination. All fees and expenses of the
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accountants and tax advisors retained by either Executive or the Company shall
be borne by the Company. Any Excise Tax Gross-Up Payment, as determined pursuant
to this Section 16 shall be paid by the Company to Executive within five days
after the receipt of the determination. Any determination by a jointly
designated public accounting firm shall be binding upon the Company and
Executive.
(c) As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the initial determination hereunder,
it is possible that Excise Tax Gross-Up Payments will not have been made by the
Company that should have been made consistent with the purpose of this Section
16 ("Underpayment"). In the event that Executive is required to make a payment
of any Excise Tax, any such Underpayment calculated in accordance with and in
the same manner as the Excise Tax Gross-Up Payment in Section 16 above shall be
promptly paid by the Company to or for the benefit of Executive. In the event
that the Excise Tax Gross-Up Payment exceeds the amount subsequently determined
to be due, such excess shall constitute a loan from the Company to Executive
payable on the fifth day after demand by the Company (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code).
17. MISCELLANEOUS. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of California, without
reference to principles of conflict of laws.
(b) All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered,
telecopied or mailed, certified or registered mail, return receipt requested:
If to Executive:
Stephen J. Levin
3223 Fond Drive
Encino, CA 91436
If to the Company:
Telemundo Group, Inc.
2290 West 8th Avenue
Hialeah, Florida 33010
Attention: Chairman
Phone: (305) 884-8200
Telecopy No.: (305) 889-7997
with a copy to:
Telemundo Group, Inc.
2290 West 8th Avenue
Hialeah, Florida 33010
Attention: General Counsel
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or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee or upon refusal if properly delivered.
(c) The Company may withhold from any amounts payable
under this Agreement such Federal, state or local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
(d) Executive represents and warrants that he is not
a party to any agreement, contract or under-standing, whether employment or
otherwise, which would in any way restrict or prohibit him from undertaking or
performing employment in accordance with the terms and conditions of this
Agreement.
(e) This Agreement, the Amended Option Agreements and
the 1997 Option Agreement set forth the entire understanding of the parties with
respect to the subject matter hereof, and no statement, representation, warranty
or covenant has been made by either party except as expressly set forth herein.
This Agreement shall not be changed or terminated orally. This Agreement amends
the Original Agreement and supersedes and cancels all other prior agreements
between the parties, whether written or oral, relating to the employment of
Executive. The headings and captions contained in this Agreement are for
convenience only and shall not be deemed to affect the meaning or construction
of any provision hereof.
(f) If, at any time subsequent to the date hereof,
any provision of this Agreement shall be held by any court of competent
jurisdiction to be illegal, void or unenforceable, such provision shall be of no
force and effect, but the illegality or unenforceability of such provision shall
have no effect upon and shall not impair the enforceability of any provision of
this Agreement.
(g) The Company's failure to insist upon strict
compliance with any provision hereof shall not be deemed to be a waiver of such
provision or any other provision hereof. Executive's failure to insist upon
strict compliance with any provision hereof shall not be deemed to be a waiver
of such provision or any other provision hereof.
(h) This Agreement shall inure to the benefit of and
be binding upon any successor to the Company and shall inure to the benefit of
Executive's successors, heirs and personal representatives.
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IN WITNESS WHEREOF, Executive has hereunto set his hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name and on its behalf, all as of
the day and year first above written.
/s/ STEPHEN J. LEVIN
---------------------------
Stephen J. Levin
TELEMUNDO GROUP, INC.
By: /s/ BRUCE SPECTOR
-----------------------
Name: Bruce Spector
Title: Chairman of the
Compensation Committee
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EXHIBIT A
TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT
BETWEEN TELEMUNDO GROUP, INC. AND
STEPHEN J. LEVIN
(dollars in thousands)
ADJUSTED NET CONTRIBUTION1
% OF SALARY IF
TARGET ACHIEVED 1997 TARGETS
- --------------- ------------
100% $47,789
75% $41,556
50% $35,322
- --------
1 "Adjusted Net Contribution" means operating income plus depreciation and
amortization determined in accordance with generally accepted accounting
principles, without giving effect to any income, gain or loss associated with
TeleNoticias del Mundo, L.P., but determined consistent with the accounting
method for determining "Net Contribution before TeleNoticias" on the Company's
internal financial statements in prior periods and adjusted to eliminate the
impact of changes in accounting principles after the date of this Agreement and
of acquisitions or divestitures of operating units after the date of this
Agreement if taking such operating units into account would either increase or
decrease the actual Net Contribution by at least 5% of the Adjusted Net
Contribution target in the year of acquisition or divestiture on an annualized
basis and also adjusted to eliminate: (i) all monetary compensation paid to
executive officers who are terminated during calendar year 1955 (but only such
compensation paid after such termination); (ii) any legal fees and costs paid by
the Company with respect to item (i); (iii) $95,000 of expenses in 1995; (iv)
the expense associated with the exercise of options to acquire common stock held
on March 7, 1995 by the executive officers of the Company, to the extent not in
the Company's budget; (v) the expense associated with the exercise of options
issued to those persons who are executive officers of the Company on March 7,
1995 in connection with their termination prior to July 1995, to the extent not
in the Company's budget; (vi) direct costs incurred in the Company's bankruptcy
reorganization, to the extent not included in the Company's budget; (vii) direct
costs incurred in settling the Blair litigation, to the extent not include in
the Company's budget; and (viii) certain contingent expenses relating to Puerto
Rico as discussed between the parties, to the extent not included in the
Company's budget. The adjustments set forth in clauses (i) - (viii) (other than
clause (iii)) shall occur only when and to the extent actually expensed by the
Company and to the extent considered in the calculation of Adjusted Net
Contribution.
<PAGE>
EXHIBIT B
TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT
BETWEEN TELEMUNDO GROUP, INC.
AND STEPHEN J. LEVIN
For the calendar year 1997, Executive shall be eligible for a bonus based on the
attainment of certain Broadcast Cash Flow1 by KVEA, Los Angeles as follows:
BONUS PAYMENT IF TARGET ACHIEVED 2
----------------------------------
TARGET 1997
- ------ ----
85% of Budget $76,667
Budget 3 $115,000
115% of Budget $153,333
- --------
1 "Broadcast Cash flow" is KVEA's operating income plus depreciation and
amortization determined in accordance with generally accepted
accounting principles and those used in preparing the Budget.
2 Each bonus payment shall be subject to required withholdings. Bonus
payments shall be made on a calendar year basis, with such bonus paid
at the time bonuses are customarily paid to the Company's executives.
The target is a threshold which must be achieved in order to eam the
bonus payment. Amounts between target levels 1997 are prorated. For
1997, bonus amounts set out at different target levels are not
cumulative. Calculations hereunder shall be based upon data provided by
the Company's Chief Financial Officer to the Chief Executive Offficer,
whose decision shall be final.
3 1997 "Budget" is the amount of Broadcast Cash Flow set forth on the
final approved budget for such year.
AMENDED AND RESTATED
NONQUALIFIED STOCK OPTION AGREEMENT
FOR CORPORATE OFFICERS
AGREEMENT made as of the 10th day of September, 1997 between Telemundo
Group, Inc., a Delaware corporation (the "Company"), and Stephen J. Levin (the
"Optionee").
WHEREAS, the Company has adopted the 1994 Stock Plan, as the same may
be amended from time to time (the "Plan") in order to provide additional
incentive to certain officers and employees of the Company and its Subsidiaries;
and
WHEREAS, the Optionee has entered into an employment agreement with the
Company, dated as of February 27, 1995, which agreement was amended pursuant to
a letter agreement entitled Amendment to Employment Agreement dated May 30, 1995
(collectively, the "Employment Agreement");
WHEREAS, the Committee responsible for administration of the Plan
granted an option to the Optionee, effective as of March 9, 1995 (the "Grant
Date"), pursuant to that certain Nonqualified Stock Option Agreement for
Corporate Officers (the "Original Agreement") dated as of the Grant Date;
WHEREAS, the Committee and the Optionee desire to amend and restate the
Original Agreement in its entirety, effective as of September 10, 1997, pursuant
to this Amended and Restated Nonqualified Stock Option Agreement for Officers
(the "Agreement") concurrently with the Company's amendment and restatement of
the Employment Agreement pursuant to that certain Amended and Restated
Employment Agreement (the "Amended Employment Agreement") between the Company
and Optionee dated concurrently herewith.
NOW, THEREFORE, the parties hereto agree that the Original Agreement
shall be amended and restated as follows:
1. OPTION.
1.1 This Agreement shall be construed in accordance and
consistent with, and subject to, the provisions of the Plan (the provisions of
which are incorporated herein by reference) and, except as otherwise expressly
set forth herein, the capitalized terms used in this Agreement shall have the
same definitions as set forth in the Plan.
1.2 The parties acknowledge and agree that pursuant to the
Original Agreement the Company has granted the Optionee the right and option
(the "Option") to purchase all or any part of an aggregate of 30,000 whole
shares of Stock and that they now desire for the Option to be subject to, and
governed in accordance with, the terms and conditions set forth in this
Agreement.
1.3 The Option is not intended to qualify as an Incentive
Stock Option within the meaning of Section 422 of the Code.
<PAGE>
2. PURCHASE PRICE.
The price at which the Optionee shall be entitled to purchase shares of
Stock upon the exercise of the Option shall be $10.00 per share.
3. DURATION OF OPTION.
Except as otherwise provided in this Agreement or the Plan, the Option
shall be exercisable to the extent and in the manner provided herein for a
period of ten years from the Grant Date (the "Exercise Term"); PROVIDED,
HOWEVER, that the Option may be earlier terminated as provided in Section 7
hereof.
4. COMPENSATION COMMITTEE. The Company represents and warrants to the
Optionee that this Agreement has been approved by the Committee.
5. VESTING AND EXERCISABILITY OF OPTION.
5.1 Unless otherwise provided in this Agreement or the Plan,
the Option shall entitle the Optionee, in whole at any time or in part from time
to time, to exercise the Option for shares of Stock to the extent the Option has
become "vested." The parties acknowledge that the Option has fully vested and
become immediately exercisable as to 15,000 Shares in accordance with the
Original Agreement. The remaining provisions of Section 5 shall govern the
vesting and exercisability of the remaining 15,000 Shares that are subject to
the Option (the "Remaining Option Shares").
5.2 The Option shall "vest" and become exercisable as to all
of the Remaining Option Shares on February 28, 2004 if, but only if, Optionee is
employed with the Company on such vesting date.
5.3 The Option shall "vest" and become exercisable as to 1,875
of the Remaining Option Shares on the effective date of this Agreement.
5.4 In addition, to the extent that the Option shall not have
previously "vested" and become exercisable pursuant to Sections 5.3 or 7.3, the
Option shall "vest" and become exercisable with respect to 5,000 of the
Remaining Option Shares on the day immediately after the date during the period
beginning on September 10, 1997 and ending on December 31, 1997 on which the
closing price of the Stock, on Nasdaq or the principal exchange on which shares
of Stock are then trading, has equaled or exceeded $32.00 per share for a period
of thirty (30) consecutive trading days, if, but only if, the Optionee is
employed with the Company on such vesting date.
5.5 In addition, to the extent that the Option shall not have
previously "vested" and become exercisable pursuant to Sections 5.3, 5.4 or 7.3,
the Option shall "vest" and become exercisable as to 1,875 of the Remaining
Option Shares on December 31, 1998, if, but only if, Optionee is employed with
the Company on such vesting date.
5.6 In addition, to the extent that the Option shall not have
previously "vested" and become exercisable pursuant to Sections 5.3, 5.4, 5.5 or
7.3, the Option shall "vest" and become exercisable as to 1,875 of the Remaining
Option Shares on December 31, 1999, if, but only if, Optionee is employed with
the Company on such vesting date.
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<PAGE>
5.7 In addition, to the extent that the Option shall not have
previously "vested" and become exercisable pursuant to Sections 5.3, 5.4, 5.5,
5.6 or 7.3, the Option shall "vest" and become exercisable as to 1,875 of the
Remaining Option Shares on December 31, 2000, if, but only if, Optionee is
employed with the Company on such vesting date.
5.8 In addition, to the extent the Option shall not have
previously "vested" and become exercisable pursuant to Sections 5.3, 5.4, 5.5,
5.6, 5.7 or 7.3, all of the Remaining Option Shares which have not previously
"vested" pursuant to such provisions, shall become "vested" and exercisable
immediately prior to the time at which a "Change of Control Transaction" occurs
if, but only if, the Optionee is employed with the Company immediately prior to
the occurrence of such Change of Control Transaction. A "Change of Control
Transaction" means any one or more of the following events: (A) an event or
series of events after the date of the Original Agreement as a result of which
any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of
the Exchange Act) who did not own at least 500,000 shares of the Company's
Series B Common Stock on September 1, 1997 becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of more
than 50% of the aggregate voting power of all of the capital stock of the
Company normally entitled to vote in the election of directors or (B) a sale,
transfer, conveyance or other disposition, directly or indirectly, in any single
transaction or series of related transactions, no matter how accomplished, which
results in more than 50%, in value, of (1) the capital stock (or other equity
interest in) or operating assets of Telemundo Network, Inc., a wholly-owned
subsidiary of the Company or (2) the aggregate capital stock (or other equity
interest in) or operating assets of all of the Company's subsidiaries (other
than Telemundo Network, Inc.), which currently comprise the Company's owned and
operated station group (including any special purpose license subsidiaries),
being owned (which term shall include "beneficial ownership" within the meaning
of Rule 13d-3 under the Exchange Act), directly or indirectly, by any "person"
or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange
Act) who did not own at least 500,000 shares of the Company's Series B Common
Stock on September 1, 1997 or (C) a transaction or series of related
transactions leading to at least an 80% reduction in the number of outstanding
shares of Stock held by "unaffiliated persons" (meaning any person other than
Hernandez Partners, Apollo Partners, L.P. or Bastion Capital Fund, L.P. or any
of their respective affiliates (as this term is defined in Rule 12b-2 under the
Exchange Act) on the date of this Agreement.
5.9 In the event of a subdivision or combination of the
outstanding shares of Stock (whether by stock split, stock dividend, reverse
stock split or otherwise), the per share prices specified in Sections 5.4, and
5.8 shall be proportionately adjusted.
6. MANNER OF EXERCISE AND PAYMENT.
6.1 Subject to the terms and conditions of this Agreement and
the Plan, the Option may be exercised by delivery of written notice to the
Company at its principal
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executive office. Such notice shall state that the Optionee is electing to
exercise the Option and the number of shares of Stock in respect of which the
Option is being exercised and shall be signed by the person or persons
exercising the Option. If requested by the Committee, such person or persons
shall (i) deliver this Agreement to the Secretary of the Company who shall
endorse thereon a notation of such exercise and (ii) provide satisfactory proof
as to the right of such person or persons to exercise the Option.
6.2 The notice, of exercise described in Section 6.1 shall be
accompanied by the full purchase price for the shares of Stock in respect of
which the Option is being exercised and by the Withholding Taxes, in cash, by
check or, in the discretion of the Committee, by transferring shares of Stock to
the Company held by the Optionee for more than six months and having a Fair
Market Value on the day preceding the day of exercise equal to the cash amount
for which such shares of Stock are substituted. Notwithstanding the preceding
sentence, the parties agree that, to the extent permitted by law, and to the
extent it would not, in the Company's judgment, result in any adverse legal,
financial or tax implications for the Company, it is their intention that
Optionee be able to effect a simultaneous exercise of this Option and sale of
shares of Stock issuable upon such exercise in the over-the-counter market or
any securities exchange on which the Stock is then listed, without Optionee
bearing any commission or brokerage expense (a "concurrent transaction"). To
this end, the Company and Optionee shall jointly agree upon a securities broker
to be used in such transactions and further to adopt such additional procedures
as may be necessary or advisable to accomplish concurrent transactions. In any
concurrent transaction, the Company shall not be required to deliver a share
certificate upon exercise of this Option unless it receives concurrent payment
of the exercise price and Withholding Taxes. The Company shall bear all
commission and brokerage expense associated with concurrent transactions, which
shall be treated as an adjustment in the purchase price of shares subject to
this Option.
6.3 Upon receipt of notice of exercise and full payment for
the shares of Stock in respect of which the Option is being exercised and of the
Withholding Taxes, the Company shall, subject to Section 14 of the Plan,
promptly take such action as may be necessary to effect the transfer to the
Optionee of the number of shares of Stock as to which such exercise was
effective, including issuing and delivering such shares of Stock and entering
the Optionee's name as a stockholder of record on the books of the Company
provided, that full payment of the exercise price and Withholding Taxes may be
made concurrently with such transfer and delivery in the case of a concurrent
transaction provided for in Section 6.2.
6.4 The Optionee shall not be deemed to be the holder of, or
to have any of the rights of a holder with respect, to any shares of Stock
subject to the option until (i) the Option shall have been exercised pursuant to
the terms of this Agreement and the Optionee shall have paid the full purchase
price for the number of shares of Stock in respect of which the Option was
exercised, (ii) the Company shall have issued and delivered the shares of Stock
to the Optionee, and (iii) the Optionee's name shall have been entered as a
stockholder
4
<PAGE>
of record on the books of the Company, whereupon the Optionee shall have full
voting and other ownership rights with respect to such shares.
6.5 The Company will use its reasonable efforts to permit
shares of Stock issued pursuant to this Option to be registered in a "piggy
back" registration in connection with a registration of shares of stock to be
issued by the Company pursuant to Form S-1, S-2, S-3 or S-8 under the Act, on
such customary terms and conditions as the Company shall reasonably specify. The
Optionee shall, in a manner customary for such a registration, cooperate with
the Company, as reasonably requested by it, in connection with such registration
and resale. To the extent the Company provides registration rights generally to
executive officers pursuant to benefit or stock plans of the Company, Optionee
will be provided with similar rights as are provided to other executive
officers.
7. TERMINATION OF EMPLOYMENT.
7.1 TERMINATION UNDER SECTION 9(A) OF AMENDED EMPLOYMENT
AGREEMENT. If the employment of the Optionee is terminated pursuant to Section
9(a) of the Amended Employment Agreement, the Optionee (or his personal
representative) may at any time within one year after such termination (but in
no event after the expiration of the Exercise Term) exercise the Option to the
extent, but only to the extent, that the Option or portion thereof was vested on
the date of such termination and the remainder of the Option, if any, shall
terminate.
7.2 TERMINATION UNDER SECTION 9(B) OF AMENDED EMPLOYMENT
AGREEMENT. If the employment of the Optionee is terminated for Cause or if the
Optionee resigns from his employment pursuant to a resignation that is without
Good Reason and is not a Specified Resignation, in either case as provided in
Section 9(b) of the Amended Employment Agreement, as finally determined pursuant
to the provisions of said Section 9(b), the Optionee (or his personal
representative) may at any time within one year after such termination or
resignation (but in no event after the expiration of the Exercise Term) exercise
the Option to the extent, but only to the extent, that the Option or portion
thereof was vested on the date of such termination or resignation and, subject
to Section 7.3, the remainder of the Option, if any, shall terminate.
7.3 TERMINATION UNDER SECTIONS 9(C) OR 9(D) OF THE AMENDED
EMPLOYMENT AGREEMENT. If the Optionee's employment is terminated pursuant to
Section 9(c) or 9(d) of the Amended Employment Agreement, the Option, to the
extent it has not vested with respect to any Remaining Option Shares, shall
immediately vest and become exercisable. The Optionee may at any time within one
year after the date of such termination of employment (but in no event after the
expiration of the Exercise Term) exercise any or all of the Option to the extent
not previously exercised.
8. NON-TRANSFERABILITY.
The Option shall not be transferable other than by will or by the laws
of descent and distribution. During the lifetime of the Optionee, the Option
shall be exercisable only by the Optionee.
9. NO RIGHT TO CONTINUED EMPLOYMENT.
Nothing in this Agreement or the Plan shall be interpreted or construed
to confer upon the Optionee any right with respect to continuance of employment
by the Company, nor shall this Agreement or the Plan interfere in any way with
the right of the Company to terminate the Optionee's employment at any time,
subject to all terms and conditions of the Amended Employment Agreement.
10. ADJUSTMENTS.
In the event of a Change in Capitalization, the Committee shall
conclusively determine the appropriate adjustments to the number and class of
shares of Stock subject to the Option and the purchase price for such shares of
Stock. The Committee's adjustment shall be made in accordance with the
provisions of Section 4.5 of the Plan and shall be effective and final, binding
and conclusive for all purposes of the Plan and this Agreement. Notwithstanding
either of the preceding two sentences, the vesting and exercisability provisions
in Sections 5 and 7.3 and the rights of the Optionee under Sections 6.5 and 11
shall not be adversely affected by any Change in Capitalization.
11. CERTAIN EVENTS.
Except as otherwise expressly provided herein, upon the effective date
of (i) the liquidation or dissolution of the Company or (ii) a merger or
consolidation of the Company (a "Transaction"), the Option shall continue in
effect in accordance with its terms and the Optionee shall be entitled to
receive in respect of all shares of Stock subject to the Option, upon exercise
of the Option, the same number and kind of stock, securities, cash, property or
other consideration that each holder of shares of Stock was entitled to receive
in the Transaction. In addition, if circumstances are such that unvested
Remaining Option Shares would vest under more than one provision of this
Agreement, the Optionee shall have the right to select the provision under which
the vesting occurs.
12. WITHHOLDING OF TAXES.
At such times as an Optionee recognizes taxable income in connection
with the receipt of shares of Stock, securities, cash or property hereunder (a
"Taxable Event"), the Optionee shall pay to the Company an amount equal to the
federal, state and local income taxes and other amounts as may be required by
law to be withheld by the Company in connection with the Taxable Event (the
"Withholding Taxes") prior to the issuance, or release from escrow, of such
shares of Stock or securities or the payment of such cash or
6
<PAGE>
such property. The Company shall have the right to deduct from any payment of
cash to an Optionee or Grantee an amount equal to the Withholding Taxes in
satisfaction of the obligation to pay Withholding Taxes. In satisfaction of the
obligation to pay Withholding Taxes to the Company, the Optionee may make a
written election (the "Tax Election"), which may be accepted or rejected in the
discretion of the Committee, to have withheld a portion of the shares then
issuable to him having an aggregate Fair Market Value, on the date preceding the
date of such issuance, equal to the Withholding Taxes.
13. OPTIONEE BOUND BY THE PLAN.
The Optionee hereby acknowledges receipt of a copy of the Plan as in
effect on the date hereof and agrees to be bound by all the terms and provisions
of the Plan.
14. MODIFICATION OF AGREEMENT.
This Agreement may be modified, amended, suspended or terminated, and
any terms or conditions may be waived, but only by a written instrument executed
by the parties hereto.
15. SEVERABILITY.
Should any provision of this Agreement be held by a court of competent
jurisdiction to be unenforceable or invalid for any reason, the remaining
provisions of this Agreement shall not be affected by such holding and shall
continue in full force in accordance with their terms.
16. GOVERNING LAW.
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of New York without giving
effect to the conflicts of laws principles thereof.
17. SUCCESSORS IN INTEREST.
This Agreement shall inure to the benefit of and be binding upon any
successor to the Company. This Agreement shall inure to the benefit of the
Optionee's legal representatives. All obligations imposed upon the Optionee and
all rights granted to the Company under this Agreement shall be final, binding
and conclusive upon the Optionee's heirs, executors, administrators and
successors.
7
<PAGE>
18. RESOLUTION OF DISPUTES.
Any dispute or disagreement which may arise under, or as a result of,
or in any way relate to, the interpretation, construction or application of this
Agreement shall be determined by binding arbitration. The parties may agree to
submit the matter to a single arbitrator or to several arbitrators, may require
that arbitrators possess special qualifications or expertise or may agree to
submit a matter to a mutually acceptable firm of experts for decision. In the
event the parties shall fail to thus agree upon terms of arbitration within
twenty (20) days from the first written demand for arbitration, then such
disputed matter shall be settled by arbitration under the Rules of Employment
Arbitration of the American Arbitration Association, by three arbitrators
appointed in accordance with such Rules. Such arbitration shall be held in Los
Angeles, California. Once a matter has been submitted to arbitration pursuant to
this section, the decision of the arbitrators reached and promulgated as a
result thereof shall be final and binding upon all parties. The cost of
arbitration shall be shared equally by the parties and each party shall pay the
expenses of his/its attorneys, except that the arbitrators shall be entitled to
award the costs of arbitration, attorneys and accountants' fees, as well as
costs, to the party that they determine to be the prevailing party in any such
arbitration.
19. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
TELEMUNDO GROUP, INC.
By: /s/ BRUCE SPECTOR
--------------------------------
Name: Bruce Spector
Title: Chairman of the
Compensation Committee
/s/ STEPHEN J. LEVIN
------------------------------------
Stephen J. Levin
8
NONQUALIFIED STOCK OPTION AGREEMENT
FOR CORPORATE OFFICERS
AGREEMENT made as of the 10th day of September, 1997 between Telemundo
Group, Inc., a Delaware corporation (the "Company"), and Stephen J. Levin (the
"Optionee").
WHEREAS, the Company has adopted the 1994 Stock Plan, as the same may
be amended from time to time (the "Plan") in order to provide additional
incentive to certain officers and employees of the Company and its Subsidiaries;
and
WHEREAS, the Optionee has entered into an employment agreement, dated
as of February 27, 1995 and letter agreement entitled Amendment to Employment
Agreement dated May 30, 1997 (collectively, the (the "Original Agreement");
WHEREAS, the Committee responsible for administration of the Plan has
determined to grant an option to the Optionee as provided herein, which grant
shall be made concurrently with the Company's amendment and restatement of the
Employment Agreement pursuant to that certain Amended and Restated Employment
Agreement (the "Amended Employment Agreement") between the Company and Optionee
dated concurrently herewith (the "Grant Date").
NOW, THEREFORE, the parties hereto agree as follows:
1. GRANT OF OPTION.
1.1 This Agreement shall be construed in accordance and
consistent with, and subject to, the provisions of the Plan (the provisions of
which are incorporated herein by reference) and, except as otherwise expressly
set forth herein, the capitalized terms used in this Agreement shall have the
same definitions as set forth in the Plan.
1.2 The Company hereby grants to the Optionee the right and
option (the "Option") to purchase all or any part of an aggregate of 30,000
whole shares of Stock (the "Option Shares") subject to, and in accordance with,
the terms and conditions set forth in this Agreement.
1.3 The Option is not intended to qualify as an Incentive
Stock Option within the meaning of Section 422 of the Code.
2. PURCHASE PRICE.
The price at which the Optionee shall be entitled to purchase shares of
Stock upon the exercise of the Option shall be $33.75 per share.
3. DURATION OF OPTION.
Except as otherwise provided in this Agreement or the Plan, the Option
shall be exercisable to the extent and in the manner provided herein for a
period of ten years from the
<PAGE>
Grant Date (the "Exercise Term"); PROVIDED, HOWEVER, that the Option may be
earlier terminated as provided in Section 7 hereof.
4. COMPENSATION COMMITTEE. The Company represents and warrants to the
Optionee that this Agreement has been approved by the Committee.
5. VESTING AND EXERCISABILITY OF OPTION.
5.1 Unless otherwise provided in this Agreement or the Plan,
the Option shall entitle the Optionee, in whole at any time or in part from time
to time, to exercise the Option for shares of Stock to the extent the Option has
become "vested."
5.2 The Option shall "vest" and become exercisable as to
10,000 of the Option Shares on each of February 28, 1999, February 28, 2000 and
February 28, 2001 if, but only if, Optionee is employed with the Company on each
applicable vesting date.
5.3 In addition, to the extent the Option shall not have
previously "vested" and become exercisable pursuant to Sections 5.2 or 7.3, all
of the Option Shares which have not previously "vested" pursuant to such
provisions, shall become "vested" and exercisable immediately prior to the time
at which a "Change of Control Transaction" occurs if, but only if, the Optionee
is employed with the Company immediately prior to the occurrence of such Change
of Control Transaction. A "Change of Control Transaction" means any one or more
of the following events: (A) an event or series of events after the date of this
Agreement as a result of which any "person" or "group" (as such terms are used
in Sections 13(d) and 14(d) of the Exchange Act) who did not own at least
500,000 shares of the Company's Series B Common Stock on September 1, 1997
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of more than 50% of the aggregate voting power of
all of the capital stock of the Company normally entitled to vote in the
election of directors or (B) a sale, transfer, conveyance or other disposition,
directly or indirectly, in any single transaction or series of related
transactions, no matter how accomplished, which results in more than 50%, in
value, of (1) the capital stock (or other equity interest in) or operating
assets of Telemundo Network, Inc., a wholly-owned subsidiary of the Company or
(2) the aggregate capital stock (or other equity interest in) or operating
assets of all of the Company's subsidiaries (other than Telemundo Network,
Inc.), which currently comprise the Company's owned and operated station group
(including any special purpose license subsidiaries), being owned (which term
shall include "beneficial ownership" within the meaning of Rule 13d-3 under the
Exchange Act), directly or indirectly, by any "person" or "group" (as such terms
are used in Sections 13(d) and 14(d) of the Exchange Act) who did not own at
least 500,000 shares of the Company's Series B Common Stock on September 1, 1997
or (C) a transaction or series of related transactions leading to at least an
80% reduction in the number of outstanding shares of Stock held by "unaffiliated
persons" (meaning any person other than Hernandez Partners, Apollo Partners,
L.P. or Bastion Capital Fund, L.P. or any of their respective affiliates (as
this term is defined in Rule 12b-2 under the Exchange Act) on the date of this
Agreement.
2
<PAGE>
5.4 In the event of a subdivision or combination of the
outstanding shares of Stock (whether by stock split, stock dividend, reverse
stock split or otherwise), the per share prices specified in Section 5.3 shall
be proportionately adjusted.
6. MANNER OF EXERCISE AND PAYMENt.
6.1 Subject to the terms and conditions of this Agreement and
the Plan, the Option may be exercised by delivery of written notice to the
Company at its principal executive office. Such notice shall state that the
Optionee is electing to exercise the Option and the number of shares of Stock in
respect of which the Option is being exercised and shall be signed by the person
or persons exercising the Option. If requested by the Committee, such person or
persons shall (i) deliver this Agreement to the Secretary of the Company who
shall endorse thereon a notation of such exercise and (ii) provide satisfactory
proof as to the right of such person or persons to exercise the Option.
6.2 The notice, of exercise described in Section 6.1 shall be
accompanied by the full purchase price for the shares of Stock in respect of
which the Option is being exercised and by the Withholding Taxes, in cash, by
check or, in the discretion of the Committee, by transferring shares of Stock to
the Company held by the Optionee for more than six months and having a Fair
Market Value on the day preceding the day of exercise equal to the cash amount
for which such shares of Stock are substituted. Notwithstanding the preceding
sentence, the parties agree that, to the extent permitted by law, and to the
extent it would not, in the Company's judgment, result in any adverse legal,
financial or tax implications for the Company, it is their intention that
Optionee be able to effect a simultaneous exercise of this Option and sale of
shares of Stock issuable upon such exercise in the over-the-counter market or
any securities exchange on which the Stock is then listed, without Optionee
bearing any commission or brokerage expense (a "concurrent transaction"). To
this end, the Company and Optionee shall jointly agree upon a securities broker
to be used in such transactions and further to adopt such additional procedures
as may be necessary or advisable to accomplish concurrent transactions. In any
concurrent transaction, the Company shall not be required to deliver a share
certificate upon exercise of this Option unless it receives concurrent payment
of the exercise price and Withholding Taxes. The Company shall bear all
commission and brokerage expense associated with concurrent transactions, which
shall be treated as an adjustment in the purchase price of shares subject to
this Option.
6.3 Upon receipt of notice of exercise and full payment for
the shares of Stock in respect of which the Option is being exercised and of the
Withholding Taxes, the Company shall, subject to Section 14 of the Plan,
promptly take such action as may be necessary to effect the transfer to the
Optionee of the number of shares of Stock as to which such exercise was
effective, including issuing and delivering such shares of Stock and entering
the Optionee's name as a stockholder of record on the books of the Company
provided, that full payment of the exercise price and Withholding Taxes may be
made concurrently with such transfer and delivery in the case of a concurrent
transaction provided for in Section 6.2.
3
<PAGE>
6.4 The Optionee shall not be deemed to be the holder of, or
to have any of the rights of a holder with respect, to any shares of Stock
subject to the option until (i) the Option shall have been exercised pursuant to
the terms of this Agreement and the Optionee shall have paid the full purchase
price for the number of shares of Stock in respect of which the Option was
exercised, (ii) the Company shall have issued and delivered the shares of Stock
to the Optionee, and (iii) the Optionee's name shall have been entered as a
stockholder of record on the books of the Company, whereupon the Optionee shall
have full voting and other ownership rights with respect to such shares.
6.5 The Company will use its reasonable efforts to permit
shares of Stock issued pursuant to this Option to be registered in a "piggy
back" registration in connection with a registration of shares of stock to be
issued by the Company pursuant to Form S-1, S-2, S-3 or S-8 under the Act, on
such customary terms and conditions as the Company shall reasonably specify. The
Optionee shall, in a manner customary for such a registration, cooperate with
the Company, as reasonably requested by it, in connection with such registration
and resale. To the extent the Company provides registration rights generally to
executive officers pursuant to benefit or stock plans of the Company, Optionee
will be provided with similar rights as are provided to other executive
officers.
7. TERMINATION OF EMPLOYMENT.
7.1 TERMINATION UNDER SECTION 9(A) OF AMENDED EMPLOYMENT
AGREEMENT. If the employment of the Optionee is terminated pursuant to Section
9(a) of the Amended Employment Agreement, the Optionee (or his personal
representative) may at any time within one year after such termination (but in
no event after the expiration of the Exercise Term) exercise the Option to the
extent, but only to the extent, that the Option or portion thereof was vested on
the date of such termination and the remainder of the Option, if any, shall
terminate.
7.2 TERMINATION UNDER SECTION 9(B) OF AMENDED EMPLOYMENT
AGREEMENT. If the employment of the Optionee is terminated for Cause or if the
Optionee resigns from his employment pursuant to a resignation that is without
Good Reason and is not a Specified Resignation, in either case as provided in
Section 9(b) of the Amended Employment Agreement, as finally determined pursuant
to the provisions of said Section 9(b), the Optionee (or his personal
representative) may at any time within one year after such termination or
resignation (but in no event after the expiration of the Exercise Term) exercise
the Option to the extent, but only to the extent, that the Option or portion
thereof was vested on the date of such termination or resignation and, subject
to Section 7.3, the remainder of the Option, if any, shall terminate.
7.3 TERMINATION UNDER SECTIONS 9(C) OR 9(D) OF THE AMENDED
EMPLOYMENT AGREEMENT. If the Optionee's employment is terminated pursuant to
Section 9(c) or 9(d) of the Amended Employment Agreement, the Option, to the
extent it has not vested with respect to any Option Shares, shall immediately
vest and become exercisable.
4
<PAGE>
The Optionee may at any time within one year after the date of such termination
of employment (but in no event after the expiration of the Exercise Term)
exercise any or all of the Option to the extent not previously exercised.
8. NON-TRANSFERABILITY.
The Option shall not be transferable other than by will or by the laws
of descent and distribution. During the lifetime of the Optionee, the Option
shall be exercisable only by the Optionee.
9. NO RIGHT TO CONTINUED EMPLOYMENT.
Nothing in this Agreement or the Plan shall be interpreted or construed
to confer upon the Optionee any right with respect to continuance of employment
by the Company, nor shall this Agreement or the Plan interfere in any way with
the right of the Company to terminate the Optionee's employment at any time,
subject to all terms and conditions of the Amended Employment Agreement.
10. ADJUSTMENTS.
In the event of a Change in Capitalization, the Committee shall
conclusively determine the appropriate adjustments to the number and class of
shares of Stock subject to the Option and the purchase price for such shares of
Stock. The Committee's adjustment shall be made in accordance with the
provisions of Section 4.5 of the Plan and shall be effective and final, binding
and conclusive for all purposes of the Plan and this Agreement. Notwithstanding
either of the preceding two sentences, the vesting and exercisability provisions
in Sections 5 and 7.3 and the rights of the Optionee under Sections 6.5 and 11
shall not be adversely affected by any Change in Capitalization.
11. CERTAIN EVENTS.
Except as otherwise expressly provided herein, upon the effective date
of (i) the liquidation or dissolution of the Company or (ii) a merger or
consolidation of the Company (a "Transaction"), the Option shall continue in
effect in accordance with its terms and the Optionee shall be entitled to
receive in respect of all shares of Stock subject to the Option, upon exercise
of the Option, the same number and kind of stock, securities, cash, property or
other consideration that each holder of shares of Stock was entitled to receive
in the Transaction. In addition, if circumstances are such that unvested
remaining Option Shares would vest under more than one provision of this
Agreement, the Optionee shall have the right to select the provision under which
the vesting occurs.
12. WITHHOLDING OF TAXES.
At such times as an Optionee recognizes taxable income in connection
with the receipt of shares of Stock, securities, cash or property hereunder (a
"Taxable Event"), the
5
<PAGE>
Optionee shall pay to the Company an amount equal to the federal, state and
local income taxes and other amounts as may be required by law to be withheld by
the Company in connection with the Taxable Event (the "Withholding Taxes") prior
to the issuance, or release from escrow, of such shares of Stock or securities
or the payment of such cash or such property. The Company shall have the right
to deduct from any payment of cash to an Optionee or Grantee an amount equal to
the Withholding Taxes in satisfaction of the obligation to pay Withholding
Taxes. In satisfaction of the obligation to pay Withholding Taxes to the
Company, the Optionee may make a written election (the "Tax Election"), which
may be accepted or rejected in the discretion of the Committee, to have withheld
a portion of the shares then issuable to him having an aggregate Fair Market
Value, on the date preceding the date of such issuance, equal to the Withholding
Taxes.
13. OPTIONEE BOUND BY THE PLAN.
The Optionee hereby acknowledges receipt of a copy of the Plan as in
effect on the date hereof and agrees to be bound by all the terms and provisions
of the Plan.
14. MODIFICATION OF AGREEMENT.
This Agreement may be modified, amended, suspended or terminated, and
any terms or conditions may be waived, but only by a written instrument executed
by the parties hereto.
15. SEVERABILITY.
Should any provision of this Agreement be held by a court of competent
jurisdiction to be unenforceable or invalid for any reason, the remaining
provisions of this Agreement shall not be affected by such holding and shall
continue in full force in accordance with their terms.
16. GOVERNING LAW.
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of New York without giving
effect to the conflicts of laws principles thereof.
17. SUCCESSORS IN INTEREST.
This Agreement shall inure to the benefit of and be binding upon any
successor to the Company. This Agreement shall inure to the benefit of the
Optionee's legal representatives. All obligations imposed upon the Optionee and
all rights granted to the Company under this Agreement shall be final, binding
and conclusive upon the Optionee's heirs, executors, administrators and
successors.
18. RESOLUTION OF DISPUTES.
6
<PAGE>
Any dispute or disagreement which may arise under, or as a result of,
or in any way relate to, the interpretation, construction or application of this
Agreement shall be determined by binding arbitration. The parties may agree to
submit the matter to a single arbitrator or to several arbitrators, may require
that arbitrators possess special qualifications or expertise or may agree to
submit a matter to a mutually acceptable firm of experts for decision. In the
event the parties shall fail to thus agree upon terms of arbitration within
twenty (20) days from the first written demand for arbitration, then such
disputed matter shall be settled by arbitration under the Rules of Employment
Arbitration of the American Arbitration Association, by three arbitrators
appointed in accordance with such Rules. Such arbitration shall be held in Los
Angeles, California. Once a matter has been submitted to arbitration pursuant to
this section, the decision of the arbitrators reached and promulgated as a
result thereof shall be final and binding upon all parties. The cost of
arbitration shall be shared equally by the parties and each party shall pay the
expenses of his/its attorneys, except that the arbitrators shall be entitled to
award the costs of arbitration, attorneys and accountants' fees, as well as
costs, to the party that they determine to be the prevailing party in any such
arbitration.
19. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
TELEMUNDO GROUP, INC.
By: /s/ BRUCE SPECTOR
--------------------------------
Name: Bruce Spector
Title: Chairman of the
Compensation Committee
/s/ STEPHEN J. LEVIN
------------------------------------
Stephen J. Levin
EXHIBIT 10.32
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, between Telemundo Group, Inc., a
Delaware corporation (the "Company"), and Osvaldo F. Torres (the "Executive"),
dated as of September 10, 1997.
1. EMPLOYMENT AND TERM. The Company hereby agrees to employ
Executive, and Executive hereby agrees to enter into such employment as Vice
President, General Counsel and Secretary of the Company reporting to the
President and Chief Executive Officer of the Corporation (or such executive or
senior vice president of the Company as the President and Chief Executive
Officer may designate) for the period commencing on November 15, 1997 and ending
on December 31, 1999; PROVIDED, HOWEVER, that effective on January 1, 2000 and
on each January 1 thereafter, the term of this Agreement shall be extended for
an additional period of one year from the then current expiration date unless
the Company or Executive shall have given written notice to the other of its or
his election not to so extend the term of this Agreement on or before the
immediately prior September 1, subject, however, to earlier termination as
provided in Section 9 herein (the "Employment Period"). The Executive also
agrees, during the Employment Period, to serve (without additional compensation)
on the Board of Directors (and appropriate committees thereof) of the Company,
if requested by the Company.
2. TERMS OF EMPLOYMENT. (a) During the Employment Period,
Executive agrees, subject to the provisions of Section 9(d)(ii) of this
Agreement, to devote all but a DE MINIMUS amount of his business time and
attention to the business and affairs of the "Telemundo Group" (as defined
below) and to use his best efforts to perform faithfully and efficiently such
responsibilities. For purposes of this Agreement, the term "Telemundo Group"
shall mean any and all of the Company and any of its current or future divisions
or subsidiaries.
(b) The principal place of employment of Executive shall be
Hialeah, Florida. Executive understands and agrees that in connection with his
employment hereunder, he may be required to travel extensively on behalf of the
Telemundo Group.
3. BASE SALARY. During the Employment Period Executive shall
receive a base salary (the "Base Salary") as follows. For the period of the
Employment Period beginning on November 15, 1997 and ending on May 13, 1998, the
Base Salary shall be payable to Executive at an annual rate of $150,000. For the
period of the Employment Period beginning on May 14, 1998 and ending on May 13,
1999, the Base Salary shall be payable to Executive at an annual rate to be
mutually agreed upon by Executive and the Company after negotiating in good
faith, but in no event shall the Base Salary be increased by an amount
equivalent to less than ten percent of the then current Base Salary. For the
period of the Employment Period beginning on May 14, 1999 and ending on December
31, 1999, the Base Salary shall be payable to Executive at an annual rate to be
mutually agreed upon by Executive and the Company after negotiating in good
faith, but in no event shall the then current Base Salary be increased by an
amount equivalent to less than ten percent of the then current Base Salary. The
Base Salary shall be payable consistent with the executive payroll practices of
the Company. Executive acknowledges and agrees that he has been paid in full his
Base Salary for periods prior to the effective date of this Agreement.
<PAGE>
4. BONUS. (a) For the 1997 fiscal year (or portion thereof)
during the Employment Period, Executive will be paid a performance bonus in an
amount equivalent to twenty percent of Executive's then current Base Salary
("Performance Bonus"). In addition, for each of the 1998 and 1999 fiscal years
and any subsequent fiscal years (or portion thereof) during the Employment
Period, Executive will be paid, in addition to the Budget Bonus described in
Section 4(b) below, a Performance Bonus in an amount equivalent to fifteen
percent of Executive's then current Base Salary. All Performance Bonuses shall
be awarded based solely upon an assessment of the Executive's performance of his
duties hereunder during the applicable fiscal year and without regard to the
financial condition or performance of the Company. Executive shall receive the
Performance Bonuses only if Executive is employed by the Company on the last day
of the fiscal year to which the Performance Bonus relates, subject to the
provisions of Sections 9(a), 9(c) and 9(d).
(b) For each of the 1998 and 1999 fiscal years and any
subsequent fiscal years (or portion thereof) during the Employment Period,
Executive will be paid an additional bonus (the "Budget Bonus") based upon the
Company's achievement of targets with respect to its earnings, before interest,
taxes, depreciation and amortization ("EBITDA") during such fiscal year (which
fiscal year target shall not be greater than the Company's budget for EBITDA for
such fiscal year), as follows (the Performance bonus and the Budget Bonus are
hereinafter collectively referred to as the "Bonus"). During the first quarter
of each such fiscal year, the Compensation Committee shall establish a budgeted
EBITDA target (the "EBITDA Target") for such fiscal year and notify Executive in
writing of the EBITDA Target. Pursuant to subsection (c), the Committee shall
determine the Company's EBITDA for such fiscal year and shall notify Executive
of its determination of the amount of the Company's EBITDA for such fiscal year
and of the amount of Executive's Budget Bonus for such year, which Budget Bonus
shall be equal to (i) no less than 15% of Executive's Base Salary for such
fiscal year if the Company's EBITDA is 100% or more of the EBITDA Target, (ii)
no less than 5% of Executive's Base Salary for such fiscal year if the Company's
EBITDA is 90% of the EBITDA Target and (iii) pro rated between 5% and 15% of
Executive's Base Salary for such fiscal year if the Company's EBITDA is more
than 90% of the EBITDA Target but less than 100% of the EBITDA Target. Executive
shall be paid no Budget Bonus for any such fiscal year in which the Company's
EBITDA is less than 90% of the EBITDA Target for such fiscal year; PROVIDED,
HOWEVER, that on each May 14 during the Employment Period, the Company and
Executive shall in good faith meet to negotiate an appropriate increase in the
percentage of Executive's Base Salary payable during the applicable fiscal year
upon the Company's achievement of the relevant EBITDA Targets.
(c) Each Budget Bonus shall be paid upon certification by
the Compensation Committee (which the Compensation Committee will make within 30
days after the certification by the Company's independent auditors of the
financial statements for such fiscal year) that the performance targets
entitling Executive to a Budget Bonus with respect to such fiscal year have been
met. If the Compensation Committee so certifies, the Budget Bonus will be paid
promptly but in no event later than ten days after such certification.
(d) For purposes of this Agreement, the "Compensation
Committee" shall mean a committee consisting of at least two (2) directors of
the Company, each of whom is a "non-employee director" within the meaning of
Rule 16b-3 under the Securities Exchange Act of 1934, as amended, and an
"outside director" within the meaning of Section 162(m) of the Internal Revenue
Code of 1986, as amended.
5. EMPLOYEE BENEFIT PLANS; ETC. (a) Executive shall be
entitled during the Employment Period to participate in all retirement,
disability, pension, savings, medical, insurance
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and other plans of the Company generally available to all senior executives
(other than any performance based bonus or option (or similar) plans). Executive
shall be entitled to paid vacations during each year of his employment
consistent with the Company's vacation policy for executive level employees
(which shall provide for at least 20 vacation days per year).
(b) The Company agrees that it will provide Executive, in
his capacity as an officer and, if applicable, as a director, with
indemnification rights which are not materially less favorable to the Executive,
in his capacity as an officer and as a director, than those provided as of the
date of this Agreement in the By-laws of the Company.
6. [Intentionally omitted]
7. STOCK OPTION AGREEMENTS. The parties hereto acknowledge
having heretofore entered into a Nonqualified Stock Option Agreement For
Corporate Officers dated June 12, 1997 (the "Initial Stock Option Agreement")
with respect to an aggregate of 5,000 shares of the Company's Series A Common
Stock, par value $.01 per share (the "Common Stock"). Contemporaneously with and
in connection with the execution of this Agreement, the parties hereto are
entering into a Nonqualified Stock Option Agreement for Corporate Officers,
dated September 10, 1997, with respect to an aggregate of 10,000 shares of
Common Stock (the "September Option Agreement") (the September Option Agreement
and the June Option Agreement are hereinafter collectively referred to as the
"Stock Option Agreements").
8. EXPENSES. The Company shall reimburse Executive for all
reasonable expenses properly incurred by him in accordance with the policies of
the Telemundo Group in effect from time to time, on behalf of the Telemundo
Group in the performance of his duties hereunder, provided that proper vouchers
are submitted to the Company by Executive evidencing such expenses and the
purposes for which the same were incurred.
9. TERMINATION. The Company shall have the right to terminate
Executive's employment only as expressly provided in this Agreement.
(a) DEATH OR DISABILITY. Except as otherwise provided
herein, this Agreement shall terminate automatically upon Executive's death.
The Company may terminate this Agreement after having
established Executive's "Disability" (as defined below), by giving Executive
written notice of its intention to terminate Executive's employment. For
purposes of this Agreement, "Disability" means Executive's inability to perform
substantially all his duties and responsibilities to the Telemundo Group by
reason of a physical or mental disability or infirmity (i) for a continuous
period of twelve consecutive months or (ii) at such earlier time as Executive
submits medical evidence satisfactory to the Company or the Board of Directors
determines in good faith and upon competent medical advice that Executive has a
physical or mental disability or infirmity that will likely prevent Executive
from substantially performing his duties and responsibilities for twelve
consecutive months or longer. The date of Disability shall be the day on which
Executive receives notice from the Company pursuant to this Section 9.
Upon termination of Executive's employment because of death
or Disability, the Company shall pay Executive or his estate or other personal
representative (i) within 60 days, the
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amount of Executive's Base Salary earned up to the date of death or Disability
as the case may be, through the date of termination, (ii) all benefits and other
items referred to in Sections 5 and 8 which are due up to the date of death or
Disability and (iii) when otherwise due in accordance with the provisions of
Section 4, the Bonus, if any, earned for the year in which such termination
occurred, without regard to whether Executive is an employee of the Company on
the last day of such fiscal year.
(b) CAUSE AND RESIGNATION WITHOUT GOOD REASON. The Company
shall have the right to terminate Executive's employment for "Cause" as defined
below. Except as provided in Section 15 herein, (i) upon termination of
Executive's employment for Cause or (ii) upon Executive's resigning as an
employee without Good Reason, this Agreement shall terminate and the Executive
shall not be entitled to receive any compensation or other benefits other than
(x) Base Salary earned up to the date of termination and (y) all benefits and
other items referred to in Sections 5 and 8 which are due up to the date of
termination or resignation. Notwithstanding anything herein to the contrary,
Executive shall have the right to resign without Good Reason and terminate this
Agreement at any time within six months after a Change of Control Transaction
(as defined in the June Option Agreement) occurs, without any obligation or
liability to the Company, effective upon thirty days' prior written notice to
the Company, in which event this Agreement shall terminate (including the
provisions of Section 10 and 11 hereof) and the Executive shall not be entitled
to receive any compensation or other benefits other than (x) Base Salary earned
up to the date of resignation and (y) all benefits and other items referred to
in Sections 5 and 8 which are due up to the date of resignation.
For purposes of this Agreement, "Cause" shall mean (i) the
willful and continued failure by Executive to perform substantially all his
duties to the Company or the failure by the Executive to comply with the
reasonable written policies, procedures and directives of the President and
Chief Executive Officer (other than any such failure resulting from his death or
Disability), in each case after being given written notice by the President and
Chief Executive Officer of a failure to perform or comply (which notice
specifically identifies the manner in which Executive has failed to perform or
comply) and a reasonable opportunity to cure such noncompliance or
nonperformance; (ii) the willful misconduct by Executive in the performance of
his duties to the Company, provided that (for purposes of this clause (ii) only
and not for any other purpose or interpretation of this Agreement) an act shall
be considered "willful" only if done in bad faith and not in the best interests
of the Company; (iii) the grossly negligent performance by Executive of his
duties to the Company; (iv) the conviction of Executive by a court of competent
jurisdiction of the commission of (x) a felony or (y) a crime involving moral
turpitude; or (v) a material breach by Executive of Sections 10 or 11 hereof.
Notwithstanding the foregoing, the Company shall not be
entitled to terminate Executive for any of the reasons specified in clause (i),
(ii), (iii) or (v) of the immediately preceding paragraph unless the Company
shall have provided at least five business days' prior written notice to
Executive, which prior written notice shall state the general facts,
circumstances or deficiencies supporting a claim for Cause termination and after
affording Executive an opportunity to be heard before the President and Chief
Executive Officer.
(c) TERMINATION WITHOUT CAUSE; NON-RENEWAL. Notwithstanding
anything to the contrary contained herein, the Company shall have the right to
terminate the employment of
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Executive at any time without Cause and the Company shall be entitled to
determine, in its sole and absolute discretion, not to extend the Employment
Period as provided in Section 1. Upon a termination without Cause, except as
provided in Section 15, this Agreement shall terminate and the Executive shall
not be entitled to receive any compensation or other benefits, except that the
Company shall (i) through the later of December 31, 1999 or the date which is
six months after the date of termination of Executive's employment (the
"Entitlement Date") continue to pay to Executive the Base Salary in effect
immediately prior to the date of termination, such payments to be made in
installments at the times such amounts would have been paid if the Agreement had
not been so terminated, and (ii) pay to the Executive, when otherwise due in
accordance with Section 4, the Bonus, if any, earned for the fiscal year in
which such termination occurs, without regard to whether Executive is employed
on the last day of such fiscal year, and (iii) through the Entitlement Date
continue Executive's benefits and other items referred to in Section 5 or, to
the extent the Company is legally unable to provide any such benefits or other
items as a result of Executive no longer being an employee, reimburse Executive
for his cost (not to exceed the actual cost to the Company if he were still an
employee) of obtaining the equivalent coverage and benefits. During the period
in which, Executive receives the payments required by the immediately preceding
sentence, Executive shall be subject to the provisions set forth in Sections 10
and 11 below. In the event that Company elects not to extend the Employment
Period, then, absent any termination pursuant to Section 9, the Company shall
continue paying to Executive his Base Salary during the period, if any,
beginning on the date Executive's employment terminates and ending on the date
which is six months after the date on which the Company gives its notice of
non-renewal to Executive. During the period in which Executive receives the
payments required by the immediately preceding sentence, Executive shall be
subject to the provisions set forth in Sections 10 and 11 below.
(d) TERMINATION FOR GOOD REASON.
(i) Executive shall have the right to terminate his
employment under this Agreement upon the occurrence of any event that
constitutes Good Reason by giving written notice to the Company. "Good Reason"
means any of the following: (A) a Diminution in Duty (as defined below), (B) a
Designated Relocation (as defined below) or (C) any Other Good Reason Event (as
defined below); PROVIDED, HOWEVER, that Good Reason shall not be deemed to have
occurred prior to the giving of written notice by the Executive to the Company
generally describing the alleged Good Reason, and the actions the Executive
believes are necessary to cure such alleged Good Reason, and the Company's
failure to so cure within 15 days of receipt of such notice. The giving of such
notice and the action or failure to take action by the Company shall be
irrelevant in determining whether a Good Reason has in fact occurred. Upon a
termination for Good Reason, except as provided in Section 15, this Agreement
shall terminate and the Executive shall not be entitled to receive any
compensation or other benefits other than the Company shall (i) through the
Entitlement Date continue to pay to Executive the Base Salary in effect
immediately prior to the date of termination, such payments to be made in
installments at the times such amounts would have been paid if the Agreement had
not been so terminated, (ii) pay to the Executive, when otherwise due in
accordance with Section 4, the Bonus, if any, earned for the fiscal year in
which such termination occurs, without regard to whether Executive is employed
on the last day of such fiscal year and (iii) through the Entitlement Date
continue Executive's benefits and other items referred to in Section 5 or, to
the extent the Company is legally unable to provide any such benefits or other
items as a result of Executive no longer being an employee, reimburse Executive
for his cost (not to exceed the actual cost to the Company if he were still an
employee) of obtaining the equivalent coverage and benefits.
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During such period, Executive shall be subject to the provisions set forth in
Sections 10 and 11 below.
(ii) A "Diminution in Duty" means, without Executive's
express prior written consent, (A) the assignment to Executive of any duties
inconsistent in any respect with Executive's position on the date of this
Agreement, or (B) any adverse change in Executive's status, offices, titles,
reporting requirements, authority, duties or responsibilities as in effect on
the date of this Agreement; PROVIDED, HOWEVER, that after a Change of Control
Transaction a "Diminution in Duty" shall not be deemed to have occurred if
Executive is offered a position with the Company or a successor to any material
part of the Company's business which otherwise meets the requirements of clauses
(A) and (B) of this Section 9(d)(ii).
(iii) "Designated Relocation" means the Company
requiring Executive's work location to be other than within thirty (30) miles of
the Company's current corporate offices in Hialeah, Florida.
(iv) "Other Good Reason Event" means any of the
following: (A) a material breach of this Agreement by the Company (which shall
include, without limitation, any reduction in the amount of any compensation or
benefits provided to Executive under this Agreement), or (B) any termination or
attempted termination by the Company of Executive's employment other than as
expressly permitted in this Agreement.
(e) OFFICER AND BOARD POSITIONS. Upon the termination of
employment with the Company for any reason, Executive shall be deemed to have
resigned any and all of his positions as an officer and a member of the Board of
Directors of the Company and any of its subsidiaries and as a member of any
committees of such Board, effective on the date of termination.
(f) CERTAIN CONDITION. Notwithstanding anything to the
contrary contained in this Section 9, the obligations of the Company under this
Section 9 shall continue only so long as the Executive does not breach his
obligations under Section 10 and 11.
(g) CERTAIN EFFECT. As used in this Agreement, termination
of this Agreement shall also result in and mean termination of the Employment
Period hereunder.
(h) MITIGATION OF DAMAGES. Executive shall have no duty to
mitigate any of his damages in the event of any breach of or default or failure
in performance under this Agreement by the Company.
(i) STOCK OPTIONS. The references in Section 9(a), 9(b),
9(c) or 9(d) to Executive, other than as therein stated, not being entitled to
receive compensation or benefits upon termination of his employment under any of
such Sections shall not affect Executive's rights under the Stock Option
Agreements.
10. CONFIDENTIALITY, ETC. Executive will not divulge, furnish
or make accessible to anyone (otherwise than in the regular course of business
of the Telemundo Group) any confidential information, plans or materials or
trade secrets of the Telemundo Group, or with respect to any other confidential
or secret aspects of the business of the Telemundo Group; PROVIDED, HOWEVER,
that during his employment, Executive shall have the latitude customarily given
a chief
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legal officer to disclose information in good faith for the benefit of
the Company and its stockholders (taken as a whole). All memoranda, notes,
lists, records and other documents or papers (and all copies thereof), including
such items stored in computer memories, on microfiche or by any other means,
made or compiled by or on behalf of Executive, or made available to him relating
to the Telemundo Group are and shall be the Company's property and shall be
delivered to the Company promptly upon the termination of his employment with
the Company; PROVIDED, HOWEVER, that (i) this obligation shall not apply to
information that (A) is not confidential (other than as a result of Executive's
breach of this Section) and (B) does not contain certain trade secrets of the
Company, (ii) Executive shall have the right to retain such of the foregoing as
shall be reasonably necessary to enforce his rights under this Agreement and to
comply with and enforce his rights, including the right to defend himself
against claims, provided copies of such retained information are provided to the
Company and the retained information remain subject to the provision of this
Section, and (iii) Executive shall have no obligation to return information that
is no longer in his possession, custody or control. This Section 10 shall
survive the expiration or termination of this Agreement, the Employment Period
and the term of employment; PROVIDED, HOWEVER, that if Executive's employment is
terminated pursuant to Section 9(c) or Section 9(d), then this Section 10 will
terminate on the Entitlement Date.
11. NO INTERFERENCE; AFFILIATE TRANSACTIONS. (a) During the
Employment Period, Executive will not, directly or indirectly, for himself, or
as agent of or on behalf of, or in conjunction with, any person, firm,
corporation, or other entity, engage or participate in the Company Business (as
hereinafter defined), whether as employee, consultant, partner, principal,
shareholder or representative, or render advisory or other services to or for
any person, firm, corporation or other entity, which is engaged, directly or
indirectly, in the Company Business; PROVIDED, HOWEVER, that (i) Executive may
own less than 5% of the common stock of a publicly traded company that is
engaged in the Company Business and (ii) Executive may own Common Stock and
securities convertible into Common Stock (or securities into which Common Stock
is converted in any business combination transaction). For purposes of this
Section 11(a), "Company Business" shall mean and be limited to any of (x) the
provision of Spanish language television programming in the United States (which
includes Puerto Rico), (y) the ownership of television broadcast stations,
networks or any over-the-air television signal, and cable in the United States
(which includes Puerto Rico) that broadcast primarily Spanish language
programming, and (z) the sale of television advertising time and programs inside
and outside the United States (which includes Puerto Rico) for Spanish language
television stations, cable and networks.
(b) During the Employment Period and for one year after
such period, Executive agrees and covenants that he will not interfere directly
or indirectly in any way with the Company. "Interfere" means to influence or
attempt to influence, directly or indirectly, present or active prospective
customers, employees, suppliers, performers, directors, representatives, agents
or independent contractors of the Company, or any of its network affiliates to
restrict, reduce, sever or otherwise alter their relationship with the Telemundo
Group or any of its network affiliates.
(c) Executive agrees that during the Employment Period, he
will not at any time enter into, on behalf of the Telemundo Group, or cause the
Telemundo Group to enter into, directly or indirectly, any transactions (each, a
"Transaction") with any business organization in which he or, to his knowledge
after due inquiry, any member of his family may be interested as a partner,
trustee, director, officer, employee, shareholder, lender of money or guarantor,
except to the
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extent disclosed to the Company and agreed to by the board of directors of the
Company in writing. Executive will use his best efforts to ensure that any
Transaction is disclosed to the Board of Directors of the Company and approved
thereby prior to entering into a contract relating thereto and/or consummation
thereof, as contemplated by the preceding sentence.
(d) From and after the termination of Executive's
employment, Executive shall not disparage the Company, its officers, directors,
employees or business, nor shall the Company or any of its officers, directors,
employees or agents disparage the Executive or members of his family, and
neither party shall disclose any facts relating to such termination; provided,
that nothing contained in this Section 11(d) shall restrict the parties from
making any statements or disclosure believed necessary to enforce in any
judicial or similar proceeding the provisions of this Agreement or as a party
believes may be required by applicable law.
(e) In the event any court having jurisdiction determines
that any part of this Section 11 is unenforceable, such court shall have the
power to reduce the duration or scope of such provision and such provision, in
its reduced form, shall be enforceable. This Section 11 shall survive the
expiration or termination of this Agreement and the Employment Period; PROVIDED,
HOWEVER, that if Executive's employment is terminated pursuant to Section 9(c)
or Section 9(d), then this Section 11 will terminate on the Entitlement Date.
12. INJUNCTIVE RELIEF. Executive acknowledges that the
provisions of Sections 10 and 11 herein are reasonable and necessary for the
protection of the Telemundo Group and that the Telemundo Group will be
irrevocably damaged if such provisions are not specifically enforced.
Accordingly, Executive agrees that, in addition to any other relief to which the
Company may be entitled in the form of damages, the Company shall be entitled to
seek and obtain injunctive relief from a court of competent jurisdiction
(without the posting of a bond therefor) for the purposes of restraining
Executive from any actual or threatened breach of such provisions.
13. REMEDIES; SERVICE OF PROCESS.
(a) Except when a party is seeking an injunction or
specific performance hereunder, the parties agree to submit any dispute
concerning this Agreement to binding arbitration. The parties may agree to
submit the matter to a single arbitrator or to several arbitrators, may require
that arbitrators possess special qualifications or expertise or may agree to
submit a matter to a mutually acceptable firm of experts for decision. In the
event the parties shall fail to thus agree upon terms of arbitration within
twenty (20) days from the first written demand for arbitration, then such
disputed matter shall be settled by arbitration under the Rules of Employment
Arbitration of the American Arbitration Association, by three arbitrators
appointed in accordance with such Rules. Such arbitration shall be held in
Miami, Florida. Once a matter has been submitted to arbitration pursuant to this
Section, the decision of the arbitrators shall be final and binding upon all
parties. The cost of arbitration shall be shared equally by the parties and each
party shall pay the expenses of his/its attorneys, except that the arbitrators
shall be entitled to award the costs of arbitration, attorneys and accountants'
fees, as well as costs, to the party that they determine to be the prevailing
party in any such arbitration.
(b) The Company and Executive hereby irrevocably consent to
the jurisdiction of the Courts of the State of Florida and of any Federal Court
located in such State in
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connection with any action or proceedings arising out of or relating to the
provisions of Sections 10 and 11 of this Agreement. Executive further agrees
that he will not commence or move to transfer any action or proceeding arising
out or relating to the provisions of Sections 10 and 11 of this Agreement to any
Court other than one located in the State of Florida. In any such litigation,
Executive waives personal service of any summons, complaint or other process and
agrees that the service thereof may be made by certified mail directed to
Executive at his address for purposes of notice under Section 17(b) hereof.
14. SUCCESSORS. This Agreement and the rights and obligations
hereunder are personal to Executive and without the prior written consent of the
Company and Executive shall not be assignable.
15. SURVIVAL OF PROVISIONS. Notwithstanding anything to the
contrary contained herein, the provisions of Sections 5(b), 9, 10, 11, 12, 13,
14, 15 and 17 hereof shall survive the termination or expiration of this
Agreement, irrespective of the reasons therefor.
16. [Intentionally omitted]
17. MISCELLANEOUS. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida, without reference
to principles of conflict of laws.
(b) All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given if delivered, telecopied
or mailed, certified or registered mail, return receipt requested:
If to Executive:
Osvaldo F. Torres
1078 Creekford Drive
Weston, Florida 33326
If to the Company:
Telemundo Group, Inc.
2290 West 8th Avenue
Hialeah, Florida 33010
Attention: Chief Financial Officer
Phone: (305) 884-8200
Telecopy No.: (305) 889-7997
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee or upon refusal if properly delivered.
(c) The Company may withhold from any amounts payable under
this Agreement such Federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
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(d) Executive represents and warrants that he is not a
party to any agreement, contract or understanding, whether employment or
otherwise, which would in any way restrict or prohibit him from undertaking or
performing employment in accordance with the terms and conditions of this
Agreement.
(e) This Agreement and the Stock Option Agreements set
forth the entire understanding of the parties with respect to the subject matter
hereof, and no statement, representation, warranty or covenant has been made by
either party except as expressly set forth herein. This Agreement shall not be
changed or terminated orally. This Agreement supersedes and cancels all prior
agreements between the parties, whether written or oral, relating to the
employment of Executive. The headings and captions contained in this Agreement
are for convenience only and shall not be deemed to affect the meaning or
construction of any provision hereof.
(f) If, at any time subsequent to the date hereof, any
provision of this Agreement shall be held by any court of competent jurisdiction
to be illegal, void or unenforceable, such provision shall be of no force and
effect, but the illegality or unenforceability of such provision shall have no
effect upon and shall not impair the enforceability of any provision of this
Agreement.
(g) The Company's failure to insist upon strict compliance
with any provision hereof shall not be deemed to be a waiver of such provision
or any other provision hereof. Executive's failure to insist upon strict
compliance with any provision hereof shall not be deemed to be a waiver of such
provision or any other provision hereof.
(h) This Agreement shall inure to the benefit of and be
binding upon any successor to the Company and shall inure to the benefit of
Executive's successors, heirs and personal representatives.
(SIGNATURE PAGE FOLLOWS)
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IN WITNESS WHEREOF, Executive has hereunto set his hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name and on its behalf, all as of
the day and year first above written.
/S/ OSVALDO F. TORRES
-----------------------------------
Osvaldo F. Torres
TELEMUNDO GROUP, INC.
By: /S/ ROLAND A. HERNANDEZ
---------------------------------
Name: Roland A. Hernandez
Title: President and Chief Executive Officer
11
EXHIBIT 10.33
NONQUALIFIED STOCK OPTION AGREEMENT
FOR CORPORATE OFFICERS
AGREEMENT made the 12th day of June 1997 (the "Grant Date")
between Telemundo Group, Inc., a Delaware corporation (the "Company"), and
Osvaldo F. Torres (the "Optionee").
WHEREAS, the Company has adopted the 1994 Stock Plan, as the
same may be amended from time to time (the "Plan") in order to provide
additional incentive to certain officers and employees of the Company and its
Subsidiaries; and
WHEREAS, the Committee responsible for administration of the
Plan has determined to grant an option to the Optionee as provided herein.
NOW, THEREFORE, the parties hereto agree as follows:
1. GRANT OF OPTION.
1.1 This Agreement shall be construed in accordance and
consistent with, and subject to, the provisions of the Plan (the provisions of
which are incorporated herein by reference) and, except as otherwise expressly
set forth herein, the capitalized terms used in this Agreement shall have the
same definitions as set forth in the Plan.
1.2 The Company hereby grants to the Optionee the right and
option (the "Option") to purchase all or any part of an aggregate of 5,000 whole
shares of Stock (the "Option Shares") subject to, and in accordance with, the
terms and conditions set forth in this Agreement.
1.3 The Option is not intended to qualify as an Incentive
Stock Option within the meaning of Section 422 of the Code.
2. PURCHASE PRICE.
The price at which the Optionee shall be entitled to purchase shares of
Stock upon the exercise of the Option shall be $24.375 per share.
3. DURATION OF OPTION.
Except as otherwise provided in this Agreement or the Plan, the Option
shall be exercisable to the extent and in the manner provided herein for a
period of ten years from the Grant Date (the "Exercise Term"); PROVIDED,
HOWEVER, that the Option may be earlier terminated as provided in Section 7
hereof.
<PAGE>
4. COMPENSATION COMMITTEE.
The Company represents and warrants to the Optionee that this Agreement
has been approved by the Committee.
5. VESTING AND EXERCISABILITY OF OPTION.
5.1 Unless otherwise provided in this Agreement or the Plan,
the Option shall entitle the Optionee, in whole at any time or in part from time
to time, to exercise the Option for shares of Stock to the extent the Option has
become "vested."
5.2 The Option shall "vest" and become exercisable as to 1,668
of the Option Shares on June 12, 1998, and the Option shall "vest" and become
exercisable as to 1,666 of the Option Shares on each of June 12, 1999 and June
12, 2000, in each case if, but only if, Optionee is employed with the Company on
each applicable vesting date.
5.3 In addition, to the extent the Option shall not have
previously "vested" and become exercisable pursuant to Sections 5.2 or 7.3, all
of the Option Shares which have not previously "vested" pursuant to such
provisions, shall become "vested" and exercisable immediately prior to the time
at which a "Change of Control Transaction" occurs if, but only if, the Optionee
is employed with the Company immediately prior to the occurrence of such Change
of Control Transaction. A "Change of Control Transaction" means any one or more
of the following events: (A) an event or series of events after the date of this
Agreement as a result of which any "person" or "group" (as such terms are used
in Sections 13(d) and 14(d) of the Exchange Act) who did not own at least
500,000 shares of the Company's Series B Common Stock on September 1, 1997
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of more than 50% of the aggregate voting power of
all of the capital stock of the Company normally entitled to vote in the
election of directors or (B) a sale, transfer, conveyance or other disposition,
directly or indirectly, in any single transaction or series of related
transactions, no matter how accomplished, which results in more than 50%, in
value, of (1) the capital stock (or other equity interest in) or operating
assets of Telemundo Network, Inc., a wholly-owned subsidiary of the Company or
(2) the aggregate capital stock (or other equity interest in) or operating
assets of all of the Company's subsidiaries (other than Telemundo Network,
Inc.), which currently comprise the Company's owned and operated station group
(including any special purpose license subsidiaries), being owned (which term
shall include "beneficial ownership" within the meaning of Rule 13d-3 under the
Exchange Act), directly or indirectly, by any "person" or "group" (as such terms
are used in Sections 13(d) and 14(d) of the Exchange Act) who did not own at
least 500,000 shares of the Company's Series B Common Stock on September 1, 1997
or (C) a transaction or series of related transactions leading to at least an
80% reduction in the number of outstanding shares of Stock held by "unaffiliated
persons" (meaning any person other than Hernandez Partners, Apollo Partners,
L.P. or Bastion Capital Fund, L.P. or any of their respective affiliates (as
this term is defined in Rule 12b-2 under the Exchange Act) on the date of this
Agreement.
5.4 In the event of a subdivision or combination of the
outstanding shares of Stock (whether by stock split, stock dividend, reverse
stock split or otherwise), the per share prices specified in Section 5.3 shall
be proportionately adjusted.
2
<PAGE>
6. MANNER OF EXERCISE AND PAYMENT.
6.1 Subject to the terms and conditions of this Agreement and
the Plan, the Option may be exercised by delivery of written notice to the
Company at its principal executive office. Such notice shall state that the
Optionee is electing to exercise the Option and the number of shares of Stock in
respect of which the Option is being exercised and shall be signed by the person
or persons exercising the Option. If requested by the Committee, such person or
persons shall (i) deliver this Agreement to the Secretary of the Company who
shall endorse thereon a notation of such exercise and (ii) provide satisfactory
proof as to the right of such person or persons to exercise the Option.
6.2 The notice of exercise described in Section 6.1 shall be
accompanied by the full purchase price for the shares of Stock in respect of
which the Option is being exercised and by the Withholding Taxes, in cash, by
check or, in the discretion of the Committee, by transferring shares of Stock to
the Company held by the Optionee for more than six months and having a Fair
Market Value on the day preceding the day of exercise equal to the cash amount
for which such shares of Stock are substituted. Notwithstanding the preceding
sentence, the parties agree that, to the extent permitted by law, and to the
extent it would not, in the Company's judgment, result in any adverse legal,
financial or tax implications for the Company, it is their intention that
Optionee be able to effect a simultaneous exercise of this Option and sale of
shares of Stock issuable upon such exercise in the over-the-counter market or
any securities exchange on which the Stock is then listed, without Optionee
bearing any commission or brokerage expense (a "concurrent transaction"). To
this end, the Company and Optionee shall jointly agree upon a securities broker
to be used in such transactions and further to adopt such additional procedures
as may be necessary or advisable to accomplish concurrent transactions. In any
concurrent transaction, the Company shall not be required to deliver a share
certificate upon exercise of this Option unless it receives concurrent payment
of the exercise price and Withholding Taxes. The Company shall bear all
commission and brokerage expense associated with concurrent transactions, which
shall be treated as an adjustment in the purchase price of shares subject to
this Option.
6.3 Upon receipt of notice of exercise and full payment for
the shares of Stock in respect of which the Option is being exercised and of the
Withholding Taxes, the Company shall, subject to Section 14 of the Plan,
promptly take such action as may be necessary to effect the transfer to the
Optionee of the number of shares of Stock as to which such exercise was
effective, including issuing and delivering such shares of Stock and entering
the Optionee's name as a stockholder of record on the books of the Company
provided, that full payment of the exercise price and Withholding Taxes may be
made concurrently with such transfer and delivery in the case of a concurrent
transaction provided for in Section 6.2.
6.4 The Optionee shall not be deemed to be the holder of, or
to have any of the rights of a holder with respect, to any shares of Stock
subject to the option until (i) the Option shall have been exercised pursuant to
the terms of this Agreement and the Optionee shall have paid the full purchase
price for the number of shares of Stock in respect of which the Option was
exercised, (ii) the Company shall have issued and delivered the shares of Stock
to the Optionee, and (iii) the Optionee's name shall have been entered as a
stockholder of record on the books of the Company, whereupon the Optionee shall
have full voting and other ownership rights with respect to such shares.
7. TERMINATION OF EMPLOYMENT.
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<PAGE>
7.1 TERMINATION OF EMPLOYMENT DUE TO DEATH OR DISABILITY. If
the employment of the Optionee is terminated due to the death or "Disability"
(as defined in Section 7.4.1 below) of the Optionee, the Optionee (or his
personal representative) may at any time within one year after such termination
(but in no event after the expiration of the Exercise Term) exercise the Option
to the extent, but only to the extent, that the Option or portion thereof was
vested on the date of such termination and the remainder of the Option, if any,
shall terminate.
7.2 TERMINATION OF EMPLOYMENT FOR CAUSE. If the employment of
the Optionee is terminated for Cause (as defined in Section 7.4.2 below) or the
Optionee resigns from the Company's employ for any reason (other than death or
Disability), the Optionee (or his personal representative) may at any time
within one year after such termination (but in no event after the expiration of
the Exercise Term) exercise the Option to the extent, but only to the extent,
that the Option or portion thereof was vested on the date of such termination
and, subject to Section 7.3, the remainder of the Option, if any, shall
terminate.
7.3 TERMINATION OF EMPLOYMENT WITHOUT CAUSE. If the Optionee's
employment is terminated without Cause, the Option, to the extent it has not
vested with respect to any Option Shares, shall immediately vest and become
exercisable. The Optionee may at any time within one year after the date of such
termination of employment (but in no event after the expiration of the Exercise
Term) exercise any or all of the Option to the extent not previously exercised.
7.4 CERTAIN DEFINITIONS APPLICABLE TO THIS SECTION 7.
7.4.1 DISABILITY. For purposes of this Agreement,
"Disability" means Optionee's inability to perform substantially all his duties
and responsibilities to the Company by reason of a physical or mental disability
or infirmity (i) for a continuous period of three consecutive months or (ii) at
such earlier time as Optionee submits medical evidence satisfactory to the
Company or the Company determines in good faith and upon competent medical
advice that Optionee has a physical or mental disability or infirmity that will
likely prevent Optionee from substantially performing his duties and
responsibilities for three consecutive months or longer. The date of Disability
shall be the day on which Optionee receives notice from the Company.
7.4.2 CAUSE. For purposes of this Agreement, "Cause" shall
mean (i) the willful and continued failure by Optionee to perform substantially
all his duties to the Company or the failure by the Optionee to comply with the
reasonable written policies, procedures and directives of the President and
Chief Executive Officer (other than any such failure resulting from his death or
Disability), in each case after being given written notice by the President and
Chief Executive Officer of a failure to perform or comply (which notice
specifically identifies the manner in which Optionee has failed to perform or
comply) and a reasonable opportunity to cure such noncompliance or
nonperformance; (ii) the willful misconduct by Optionee in the performance of
his duties to the Company, provided that (for purposes of this clause (ii) only
and not for any other purpose or interpretation of this Agreement) an act shall
be considered "willful" only if done in bad faith and not in the best interests
of the Company; (iii) the grossly negligent performance by Optionee of his
duties to the Company; or (iv) the conviction of Optionee by a court of
competent jurisdiction of the commission of (x) a felony or (y) a crime
involving moral turpitude.
8. NON-TRANSFERABILITY.
4
<PAGE>
The Option shall not be transferable other than by will or by the laws
of descent and distribution. During the lifetime of the Optionee, the Option
shall be exercisable only by the Optionee.
9. NO RIGHT TO CONTINUED EMPLOYMENT.
Nothing in this Agreement or the Plan shall be interpreted or construed
to confer upon the Optionee any right with respect to continuance of employment
by the Company, nor shall this Agreement or the Plan interfere in any way with
the right of the Company to terminate the Optionee's employment at any time.
10. ADJUSTMENTS.
In the event of a Change in Capitalization, the Committee shall
conclusively determine the appropriate adjustments to the number and class of
shares of Stock subject to the Option and the purchase price for such shares of
Stock. The Committee's adjustment shall be made in accordance with the
provisions of Section 4.5 of the Plan and shall be effective and final, binding
and conclusive for all purposes of the Plan and this Agreement. Notwithstanding
either of the preceding two sentences, the vesting and exercisability provisions
in Sections 5 and 7.3 and the rights of the Optionee under Section 11 shall not
be adversely affected by any Change in Capitalization.
11. CERTAIN EVENTS.
Except as otherwise expressly provided herein, upon the effective date
of (i) the liquidation or dissolution of the Company or (ii) a merger or
consolidation of the Company (a "Transaction"), the Option shall continue in
effect in accordance with its terms and the Optionee shall be entitled to
receive in respect of all shares of Stock subject to the Option, upon exercise
of the Option, the same number and kind of stock, securities, cash, property or
other consideration that each holder of shares of Stock was entitled to receive
in the Transaction. In addition, if circumstances are such that unvested
remaining Option Shares would vest under more than one provision of this
Agreement, the Optionee shall have the right to select the provision under which
the vesting occurs.
12. WITHHOLDING OF TAXES.
At such times as an Optionee recognizes taxable income in connection
with the receipt of shares of Stock, securities, cash or property hereunder (a
"Taxable Event"), the Optionee shall pay to the Company an amount equal to the
federal, state and local income taxes and other amounts as may be required by
law to be withheld by the Company in connection with the Taxable Event (the
"Withholding Taxes") prior to the issuance, or release from escrow, of such
shares of Stock or securities or the payment of such cash or such property. The
Company shall have the right to deduct from any payment of cash to an Optionee
or Grantee an amount equal to the Withholding Taxes in satisfaction of the
obligation to pay Withholding Taxes. In satisfaction of the obligation to pay
Withholding Taxes to the Company, the Optionee may make a written election (the
"Tax Election"), which may be accepted or rejected in the discretion of the
Committee, to have withheld a portion of the shares then issuable to him having
an aggregate Fair Market Value, on the date preceding the date of such issuance,
equal to the Withholding Taxes.
5
<PAGE>
13. OPTIONEE BOUND BY THE PLAN.
The Optionee hereby acknowledges receipt of a copy of the Plan as in
effect on the date hereof and agrees to be bound by all the terms and provisions
of the Plan.
14. MODIFICATION OF AGREEMENT.
This Agreement may be modified, amended, suspended or terminated, and
any terms or conditions may be waived, but only by a written instrument executed
by the parties hereto.
15. SEVERABILITY.
Should any provision of this Agreement be held by a court of competent
jurisdiction to be unenforceable or invalid for any reason, the remaining
provisions of this Agreement shall not be affected by such holding and shall
continue in full force in accordance with their terms.
16. GOVERNING LAW.
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of New York without giving
effect to the conflicts of laws principles thereof.
17. SUCCESSORS IN INTEREST.
This Agreement shall inure to the benefit of and be binding upon any
successor to the Company. This Agreement shall inure to the benefit of the
Optionee's legal representatives. All obligations imposed upon the Optionee and
all rights granted to the Company under this Agreement shall be final, binding
and conclusive upon the Optionee's heirs, executors, administrators and
successors.
18. RESOLUTION OF DISPUTES.
Any dispute or disagreement which may arise under, or as a result of,
or in any way relate to, the interpretation, construction or application of this
Agreement shall be determined by binding arbitration. The parties may agree to
submit the matter to a single arbitrator or to several arbitrators, may require
that arbitrators possess special qualifications or expertise or may agree to
submit a matter to a mutually acceptable firm of experts for decision. In the
event the parties shall fail to thus agree upon terms of arbitration within
twenty (20) days from the first written demand for arbitration, then such
disputed matter shall be settled by arbitration under the Rules of Employment
Arbitration of the American Arbitration Association, by three arbitrators
appointed in accordance with such Rules. Such arbitration shall be held in
Miami, Florida. Once a matter has been submitted to arbitration pursuant to this
section, the decision of the arbitrators reached and promulgated as a result
thereof shall be final and binding upon all parties. The cost of arbitration
shall be shared equally by the parties and each party shall pay the expenses of
his/its attorneys, except that the arbitrators shall be entitled to award the
costs of arbitration, attorneys and accountants' fees, as well as costs, to the
party that they determine to be the prevailing party in any such arbitration.
19. COUNTERPARTS.
6
<PAGE>
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(SIGNATURE PAGE FOLLOWS)
7
<PAGE>
TELEMUNDO GROUP, INC.
By: /S/ BRUCE H. SPECTOR
------------------------------------------------
Name: Bruce H. Spector
Title: Chairman of the Compensation
Committee
/S/ OSVALDO F. TORRES
-------------------------------
Osvaldo F. Torres
8
EXHIBIT 10.34
NONQUALIFIED STOCK OPTION AGREEMENT
FOR CORPORATE OFFICERS
AGREEMENT made the 10th day of September 1997 (the "Grant
Date") between Telemundo Group, Inc., a Delaware corporation (the "Company"),
and Osvaldo F. Torres (the "Optionee").
WHEREAS, the Company has adopted the 1994 Stock Plan, as the
same may be amended from time to time (the "Plan") in order to provide
additional incentive to certain officers and employees of the Company and its
Subsidiaries;
WHEREAS, the Optionee has entered into an employment
agreement, dated as of September 10, 1997, with the Company (the "Employment
Agreement"); and
WHEREAS, the Committee responsible for administration of the
Plan has determined to grant an option to the Optionee as provided herein.
NOW, THEREFORE, the parties hereto agree as follows:
1. GRANT OF OPTION.
1.1 This Agreement shall be construed in accordance and
consistent with, and subject to, the provisions of the Plan (the provisions of
which are incorporated herein by reference) and, except as otherwise expressly
set forth herein, the capitalized terms used in this Agreement shall have the
same definitions as set forth in the Plan.
1.2 The Company hereby grants to the Optionee the right and
option (the "Option") to purchase all or any part of an aggregate of 10,000
whole shares of Stock (the "Option Shares") subject to, and in accordance with,
the terms and conditions set forth in this Agreement.
1.3 The Option is not intended to qualify as an Incentive
Stock Option within the meaning of Section 422 of the Code.
2. PURCHASE PRICE.
The price at which the Optionee shall be entitled to purchase shares of
Stock upon the exercise of the Option shall be $33.75 per share.
3. DURATION OF OPTION.
Except as otherwise provided in this Agreement or the Plan, the Option
shall be exercisable to the extent and in the manner provided herein for a
period of ten years from the Grant Date (the "Exercise Term"); PROVIDED,
HOWEVER, that the Option may be earlier terminated as provided in Section 7
hereof.
4. COMPENSATION COMMITTEE.
<PAGE>
The Company represents and warrants to the Optionee that this Agreement
has been approved by the Committee.
5. VESTING AND EXERCISABILITY OF OPTION.
5.1 Unless otherwise provided in this Agreement or the Plan,
the Option shall entitle the Optionee, in whole at any time or in part from time
to time, to exercise the Option for shares of Stock to the extent the Option has
become "vested."
5.2 The Option shall "vest" and become exercisable as to 3,334
of the Option Shares on September 10, 1998 and the Option shall "vest" and
become exercisable as to 3,333 of the Option Shares on each of September 10,
1999 and September 10, 2000, in each case if, but only if, Optionee is employed
with the Company on each applicable vesting date.
5.3 In addition, to the extent the Option shall not have
previously "vested" and become exercisable pursuant to Sections 5.2 or 7.3, all
of the Option Shares which have not previously "vested" pursuant to such
provisions, shall become "vested" and exercisable immediately prior to the time
at which a "Change of Control Transaction" occurs if, but only if, the Optionee
is employed with the Company immediately prior to the occurrence of such Change
of Control Transaction. A "Change of Control Transaction" means any one or more
of the following events: (A) an event or series of events after the date of this
Agreement as a result of which any "person" or "group" (as such terms are used
in Sections 13(d) and 14(d) of the Exchange Act) who did not own at least
500,000 shares of the Company's Series B Common Stock on September 1, 1997
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of more than 50% of the aggregate voting power of
all of the capital stock of the Company normally entitled to vote in the
election of directors or (B) a sale, transfer, conveyance or other disposition,
directly or indirectly, in any single transaction or series of related
transactions, no matter how accomplished, which results in more than 50%, in
value, of (1) the capital stock (or other equity interest in) or operating
assets of Telemundo Network, Inc., a wholly-owned subsidiary of the Company or
(2) the aggregate capital stock (or other equity interest in) or operating
assets of all of the Company's subsidiaries (other than Telemundo Network,
Inc.), which currently comprise the Company's owned and operated station group
(including any special purpose license subsidiaries), being owned (which term
shall include "beneficial ownership" within the meaning of Rule 13d-3 under the
Exchange Act), directly or indirectly, by any "person" or "group" (as such terms
are used in Sections 13(d) and 14(d) of the Exchange Act) who did not own at
least 500,000 shares of the Company's Series B Common Stock on September 1, 1997
or (C) a transaction or series of related transactions leading to at least an
80% reduction in the number of outstanding shares of Stock held by "unaffiliated
persons" (meaning any person other than Hernandez Partners, Apollo Partners,
L.P. or Bastion Capital Fund, L.P. or any of their respective affiliates (as
this term is defined in Rule 12b-2 under the Exchange Act) on the date of this
Agreement.
5.4 In the event of a subdivision or combination of the
outstanding shares of Stock (whether by stock split, stock dividend, reverse
stock split or otherwise), the per share prices specified in Section 5.3 shall
be proportionately adjusted.
6. MANNER OF EXERCISE AND PAYMENt.
2
<PAGE>
6.1 Subject to the terms and conditions of this Agreement and
the Plan, the Option may be exercised by delivery of written notice to the
Company at its principal executive office. Such notice shall state that the
Optionee is electing to exercise the Option and the number of shares of Stock in
respect of which the Option is being exercised and shall be signed by the person
or persons exercising the Option. If requested by the Committee, such person or
persons shall (i) deliver this Agreement to the Secretary of the Company who
shall endorse thereon a notation of such exercise and (ii) provide satisfactory
proof as to the right of such person or persons to exercise the Option.
6.2 The notice, of exercise described in Section 6.1 shall be
accompanied by the full purchase price for the shares of Stock in respect of
which the Option is being exercised and by the Withholding Taxes, in cash, by
check or, in the discretion of the Committee, by transferring shares of Stock to
the Company held by the Optionee for more than six months and having a Fair
Market Value on the day preceding the day of exercise equal to the cash amount
for which such shares of Stock are substituted. Notwithstanding the preceding
sentence, the parties agree that, to the extent permitted by law, and to the
extent it would not, in the Company's judgment, result in any adverse legal,
financial or tax implications for the Company, it is their intention that
Optionee be able to effect a simultaneous exercise of this Option and sale of
shares of Stock issuable upon such exercise in the over-the-counter market or
any securities exchange on which the Stock is then listed, without Optionee
bearing any commission or brokerage expense (a "concurrent transaction"). To
this end, the Company and Optionee shall jointly agree upon a securities broker
to be used in such transactions and further to adopt such additional procedures
as may be necessary or advisable to accomplish concurrent transactions. In any
concurrent transaction, the Company shall not be required to deliver a share
certificate upon exercise of this Option unless it receives concurrent payment
of the exercise price and Withholding Taxes. The Company shall bear all
commission and brokerage expense associated with concurrent transactions, which
shall be treated as an adjustment in the purchase price of shares subject to
this Option.
6.3 Upon receipt of notice of exercise and full payment for
the shares of Stock in respect of which the Option is being exercised and of the
Withholding Taxes, the Company shall, subject to Section 14 of the Plan,
promptly take such action as may be necessary to effect the transfer to the
Optionee of the number of shares of Stock as to which such exercise was
effective, including issuing and delivering such shares of Stock and entering
the Optionee's name as a stockholder of record on the books of the Company
provided, that full payment of the exercise price and Withholding Taxes may be
made concurrently with such transfer and delivery in the case of a concurrent
transaction provided for in Section 6.2.
6.4 The Optionee shall not be deemed to be the holder of, or
to have any of the rights of a holder with respect, to any shares of Stock
subject to the option until (i) the Option shall have been exercised pursuant to
the terms of this Agreement and the Optionee shall have paid the full purchase
price for the number of shares of Stock in respect of which the Option was
exercised, (ii) the Company shall have issued and delivered the shares of Stock
to the Optionee, and (iii) the Optionee's name shall have been entered as a
stockholder of record on the books of the Company, whereupon the Optionee shall
have full voting and other ownership rights with respect to such shares.
7. TERMINATION OF EMPLOYMENT.
7.1 TERMINATION UNDER SECTION 9(A) OF EMPLOYMENT AGREEMENT. If
the employment of the Optionee is terminated pursuant to Section 9(a) of the
Employment Agreement, the
3
<PAGE>
Optionee (or his personal representative) may at any time within one year after
such termination (but in no event after the expiration of the Exercise Term)
exercise the Option to the extent, but only to the extent, that the Option or
portion thereof was vested on the date of such termination and the remainder of
the Option, if any, shall terminate.
7.2 TERMINATION UNDER SECTION 9(B) OF EMPLOYMENT AGREEMENT. If
the employment of the Optionee is terminated for Cause or if the Optionee
resigns from his employment pursuant to a resignation that is without Good
Reason, in either case as provided in Section 9(b) of the Employment Agreement,
as finally determined pursuant to the provisions of said Section 9(b), the
Optionee (or his personal representative) may at any time within one year after
such termination or resignation (but in no event after the expiration of the
Exercise Term) exercise the Option to the extent, but only to the extent, that
the Option or portion thereof was vested on the date of such termination or
resignation and, subject to Section 7.3, the remainder of the Option, if any,
shall terminate.
7.3 TERMINATION UNDER SECTIONS 9(C) OR 9(D) OF THE EMPLOYMENT
AGREEMENT. If the Optionee's employment is terminated pursuant to Section 9(c)
or 9(d) of the Employment Agreement, the Option, to the extent it has not vested
with respect to any Option Shares, shall immediately vest and become
exercisable. The Optionee may at any time within one year after the date of such
termination of employment (but in no event after the expiration of the Exercise
Term) exercise any or all of the Option to the extent not previously exercised.
8. NON-TRANSFERABILITY.
The Option shall not be transferable other than by will or by the laws
of descent and distribution. During the lifetime of the Optionee, the Option
shall be exercisable only by the Optionee.
9. NO RIGHT TO CONTINUED EMPLOYMENT.
Nothing in this Agreement or the Plan shall be interpreted or construed
to confer upon the Optionee any right with respect to continuance of employment
by the Company, nor shall this Agreement or the Plan interfere in any way with
the right of the Company to terminate the Optionee's employment at any time,
subject to all terms and conditions of the Employment Agreement.
10. ADJUSTMENTS.
In the event of a Change in Capitalization, the Committee shall
conclusively determine the appropriate adjustments to the number and class of
shares of Stock subject to the Option and the purchase price for such shares of
Stock. The Committee's adjustment shall be made in accordance with the
provisions of Section 4.5 of the Plan and shall be effective and final, binding
and conclusive for all purposes of the Plan and this Agreement. Notwithstanding
either of the preceding two sentences, the vesting and exercisability provisions
in Sections 5 and 7.3 and the rights of the Optionee under Section 11 shall not
be adversely affected by any Change in Capitalization.
11. CERTAIN EVENTS.
Except as otherwise expressly provided herein, upon the effective date
of (i) the liquidation or dissolution of the Company or (ii) a merger or
consolidation of the Company (a "Transaction"), the
4
<PAGE>
Option shall continue in effect in accordance with its terms and the Optionee
shall be entitled to receive in respect of all shares of Stock subject to the
Option, upon exercise of the Option, the same number and kind of stock,
securities, cash, property or other consideration that each holder of shares of
Stock was entitled to receive in the Transaction. In addition, if circumstances
are such that unvested remaining Option Shares would vest under more than one
provision of this Agreement, the Optionee shall have the right to select the
provision under which the vesting occurs.
12. WITHHOLDING OF TAXES.
At such times as an Optionee recognizes taxable income in connection
with the receipt of shares of Stock, securities, cash or property hereunder (a
"Taxable Event"), the Optionee shall pay to the Company an amount equal to the
federal, state and local income taxes and other amounts as may be required by
law to be withheld by the Company in connection with the Taxable Event (the
"Withholding Taxes") prior to the issuance, or release from escrow, of such
shares of Stock or securities or the payment of such cash or such property. The
Company shall have the right to deduct from any payment of cash to an Optionee
or Grantee an amount equal to the Withholding Taxes in satisfaction of the
obligation to pay Withholding Taxes. In satisfaction of the obligation to pay
Withholding Taxes to the Company, the Optionee may make a written election (the
"Tax Election"), which may be accepted or rejected in the discretion of the
Committee, to have withheld a portion of the shares then issuable to him having
an aggregate Fair Market Value, on the date preceding the date of such issuance,
equal to the Withholding Taxes.
13. OPTIONEE BOUND BY THE PLAN.
The Optionee hereby acknowledges receipt of a copy of the Plan as in
effect on the date hereof and agrees to be bound by all the terms and provisions
of the Plan.
14. MODIFICATION OF AGREEMENT.
This Agreement may be modified, amended, suspended or terminated, and
any terms or conditions may be waived, but only by a written instrument executed
by the parties hereto.
15. SEVERABILITY.
Should any provision of this Agreement be held by a court of competent
jurisdiction to be unenforceable or invalid for any reason, the remaining
provisions of this Agreement shall not be affected by such holding and shall
continue in full force in accordance with their terms.
16. GOVERNING LAW.
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of New York without giving
effect to the conflicts of laws principles thereof.
17. SUCCESSORS IN INTEREST.
5
<PAGE>
This Agreement shall inure to the benefit of and be binding upon any
successor to the Company. This Agreement shall inure to the benefit of the
Optionee's legal representatives. All obligations imposed upon the Optionee and
all rights granted to the Company under this Agreement shall be final, binding
and conclusive upon the Optionee's heirs, executors, administrators and
successors.
18. RESOLUTION OF DISPUTES.
Any dispute or disagreement which may arise under, or as a result of,
or in any way relate to, the interpretation, construction or application of this
Agreement shall be determined by binding arbitration. The parties may agree to
submit the matter to a single arbitrator or to several arbitrators, may require
that arbitrators possess special qualifications or expertise or may agree to
submit a matter to a mutually acceptable firm of experts for decision. In the
event the parties shall fail to thus agree upon terms of arbitration within
twenty (20) days from the first written demand for arbitration, then such
disputed matter shall be settled by arbitration under the Rules of Employment
Arbitration of the American Arbitration Association, by three arbitrators
appointed in accordance with such Rules. Such arbitration shall be held in
Miami, Florida. Once a matter has been submitted to arbitration pursuant to this
section, the decision of the arbitrators reached and promulgated as a result
thereof shall be final and binding upon all parties. The cost of arbitration
shall be shared equally by the parties and each party shall pay the expenses of
his/its attorneys, except that the arbitrators shall be entitled to award the
costs of arbitration, attorneys and accountants' fees, as well as costs, to the
party that they determine to be the prevailing party in any such arbitration.
19. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(SIGNATURE PAGE FOLLOWS)
6
<PAGE>
TELEMUNDO GROUP, INC.
By: /S/ BRUCE H. SPECTOR
-----------------------------------
Name: Bruce H. Spector
Title: Chairman of the Compensation
Committee
/S/ OSVALDO F. TORRES
------------------------
Osvaldo F. Torres
7
EXHIBIT 10.35
NONQUALIFIED STOCK OPTION AGREEMENT
FOR SENIOR PERSONNEL
AGREEMENT made as of the __ day of ________, 1997 (the "Grant Date"),
between Telemundo Group, Inc., a Delaware corporation (the "Company"), and
__________ (the "Optionee").
WHEREAS, the Company has adopted the 1994 Stock Plan (as the same may
be amended from time to time, the "Plan") in order to provide additional
incentive to certain officers and employees of the Company and its Subsidiaries;
and
WHEREAS, the Committee responsible for administration of the Plan has
determined to grant an option to the Optionee as provided herein;
NOW, THEREFORE, the parties hereto agree as follows:
1. GRANT OF OPTION.
1.1 The Company hereby grants to the Optionee the right and
option (the "Option") to purchase all or any part of an aggregate of [______]
whole shares of Stock subject to, and in accordance with, the terms and
conditions set forth in this Agreement.
1.2 The Option is not intended to qualify as an Incentive
Stock Option within the meaning of Section 422 of the Code.
1.3 This Agreement shall be construed in accordance and
consistent with, and subject to, the provisions of the Plan (the provisions of
which are incorporated herein by reference) and, except as otherwise expressly
set forth herein, the capitalized terms used in this Agreement shall have the
same definitions as set forth in the Plan.
2. PURCHASE PRICE.
The price at which the Optionee shall be entitled to purchase
shares of Stock upon the exercise of the Option shall be $______ per share.
3. DURATION OF OPTION.
Except as otherwise provided in this Agreement or the Plan, the
Option shall be exercisable to the extent and in the manner provided herein for
a period of ten years from the Grant Date (the "Exercise Term"); PROVIDED,
HOWEVER, that the Option may be earlier terminated as provided in Section 7
hereof.
4. EXERCISABILITY OF OPTION.
Unless otherwise provided in this Agreement or the Plan, the Option
shall entitle the Optionee to purchase, in whole at any time or in part from
time to time, shares of Stock covered by the Option to the extent the Option has
become "vested." Except as provided in
<PAGE>
Section 7, the Option shall "vest" and be exercisable by the Optionee in
accordance with the following schedule (any such date of vesting referred to as
the "Vesting Date"):
PORTION OF GRANT VESTED ANNIVERSARY OF GRANT DATE
1/3 First
1/3 Second
1/3 Third
Each right of purchase shall be cumulative and shall continue,
unless sooner exercised or terminated as herein provided, during the remaining
period of the Exercise Term.
5. EFFECT OF CHANGE IN CONTROL.
5.1 Except as specifically provided otherwise herein or in the
Plan and provided that the Optionee is employed with the Company on the day
immediately preceding the Effective Date (as defined below), (A) in the event of
a Change of Control Transaction (as defined below) on or before the first
anniversary of the Grant Date, fifty percent (50%) of the Option shall vest and
be exercisable as of the Effective Date, with the remainder of the Option
vesting in accordance with the original vesting schedule (i.e., in one-third
increments on each of the three anniversaries immediately following the Grant
Date), and (B) in the event of a Change of Control Transaction following the
first anniversary of the Grant Date, one hundred percent (100%) of the Option
shall vest and be exercisable as of the Effective Date.
5.2 For purposes hereof, a "Change of Control Transaction"
means any one or more of the following events: (A) an event or series of events
after the date of this Agreement as a result of which any "person" or "group"
(as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) who did
not own at least 500,000 shares of the Company's Series B Common Stock on
September 1, 1997 becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of more than 50% of the aggregate
voting power of all of the capital stock of the Company normally entitled to
vote in the election of directors or (B) a sale, transfer, conveyance or other
disposition, directly or indirectly, in any single transaction or series of
related transactions, no matter how accomplished, which results in more than
50%, in value, of (1) the capital stock (or other equity interest in) or
operating assets of Telemundo Network, Inc., a wholly-owned subsidiary of the
Company or (2) the aggregate capital stock (or other equity interest in) or
operating assets of all of the Company's subsidiaries (other than Telemundo
Network, Inc.), which currently comprise the Company's owned and operated
station group (including any special purpose license subsidiaries), being owned
(which term shall include "beneficial ownership" within the meaning of Rule
13d-3 under the Exchange Act), directly or indirectly, by any "person" or
"group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act)
who did not own at least 500,000 shares of the Company's Series B Common Stock
on September 1, 1997 or (C) a transaction or series of related transactions
leading to at least an 80% reduction in the number of outstanding shares of
Stock held by "unaffiliated persons" (meaning any person other than Hernandez
Partners, Apollo Partners, L.P. or Bastion Capital Fund, L.P. or any of their
respective affiliates (as this term is defined in Rule 12b-2 under the Exchange
Act) on the date of this Agreement.
2
<PAGE>
5.3 For purposes hereof, the "Effective Date" shall be the
first date on which a Change of Control Transaction occurs during the period of
time between the Grant Date and the third anniversary of the Grant Date;
provided that, if (1) the Optionee's employment with the Company is terminated
prior to the date on which a Change of Control Transaction occurs, (2) such
termination is not for Cause (as defined in that certain Change of Control
Severance Agreement, of even date herewith, between the Company, or a subsidiary
of the Company, and the Optionee and (3) it is reasonably demonstrated that such
termination of employment (A) was at the request of a third party who has taken
steps reasonably calculated to effect the Change of Control Transaction, or (B)
otherwise arose in connection with the Change of Control Transaction, then the
"Effective Date" shall mean the date immediately prior to the date of such
termination of employment.
5.4 Notwithstanding anything to the contrary contained herein,
if the Optionee is employed by the Company on the day immediately preceding the
Effective Date and, in connection with a Change of Control Transaction, (A) the
Company's Stock ceases to be listed for trading on the Nasdaq National Market or
on a national securities exchange AND (B) the Change of Control Transaction does
not involve (i) an exchange of the Company's Stock for common stock of the
acquiring company or the parent company of the acquiring company ("Acquirer
Stock"), (ii) the issuer of Acquirer Stock providing the Optionee with a
substitute option ("Substitute Option") to purchase Acquirer Stock, which
Substitute Option is substantially economically similar to the Option and (iii)
the Acquirer Stock being listed for trading on the Nasdaq National Market System
or on a national securities exchange, then one hundred percent (100%) of the
Option shall vest and be exercisable as of the Effective Date regardless of when
such Change of Control Transaction occurred. Additionally, in the case of a
Change of Control Transaction which also constitutes a Pooling Transaction, the
Board may take such actions which it determines, after consultation with its
advisors, are reasonably necessary in order to assure that the Pooling
Transaction will qualify as such, including, but not limited to, providing that
all Options specifically identified by the Committee shall not become
immediately and fully exercisable on the date of the Change of Control
Transaction but rather shall become immediately and fully exercisable on the
date following the last day of the Pooling Period (whether or not the Optionee
is then an employee of the Company).
6. MANNER OF EXERCISE AND PAYMENT.
6.1 Subject to the terms and conditions of this Agreement and
the Plan, the Option may be exercised by delivery of written notice to the
Company, at its principal executive office. Such notice shall state that the
Optionee is electing to exercise the Option and the number of shares of Stock in
respect of which the Option is being exercised and shall be signed by the person
or persons exercising the Option. If requested by the Committee, such person or
persons shall (i) deliver this Agreement to the Secretary of the Company who
shall endorse thereon a notation of such exercise and (ii) provide satisfactory
proof as to the right of such person or persons to exercise the Option.
6.2 The notice of exercise described in Section 6.1 shall be
accompanied by the full purchase price for the shares of Stock in respect of
which the Option is being exercised and by the Withholding Taxes, in cash, by
check or, in the discretion of the Committee, by transferring shares of Stock to
the Company held by the Optionee for more than six months and
3
<PAGE>
having a Fair Market Value on the day preceding the day of exercise equal to the
cash amount for which such shares of Stock are substituted. Notwithstanding the
preceding sentence, the parties agree that, to the extent permitted by law, and
to the extent it would not, in the Company's judgment, result in any adverse
legal, financial or tax implications for the Company, it is their intention that
Optionee be able to effect a simultaneous exercise of this Option and sale of
shares of Stock issuable upon such exercise in the over-the-counter market or
any securities exchange on which the Stock is then listed, without Optionee
bearing any commission or brokerage expense (a "concurrent transaction"). To
this end, the Company and Optionee shall jointly agree upon a securities broker
to be used in such transactions and further to adopt such additional procedures
as may be necessary or advisable to accomplish concurrent transactions. In any
concurrent transaction, the Company shall not be required to deliver a share
certificate upon exercise of this Option unless it receives concurrent payment
of the exercise price and Withholding Taxes. The Company shall bear all
commission and brokerage expense associated with concurrent transactions, which
shall be treated as an adjustment in the purchase price of shares subject to
this Option.
6.3 Upon receipt of notice of exercise and full payment for
the shares of Stock in respect of which the Option is being exercised and of the
Withholding Taxes, the Company shall, subject to Section 14 of the Plan,
promptly take such action as may be necessary to effect the transfer to the
Optionee of the number of shares of Stock as to which such exercise was
effective, including issuing and delivering such shares of Stock and entering
the Optionee's name as a stockholder of record on the books of the Company.
provided, that full payment of the exercise price and Withholding Taxes may be
made concurrently with such transfer and delivery in the case of a concurrent
transaction provided for in Section 6.2.
6.4 The Optionee shall not be deemed to be the holder of, or
to have any of the rights of a holder with respect to, any shares of Stock
subject to the Option until (i) the Option shall have been exercised pursuant to
the terms of this Agreement and the Optionee shall have paid the full purchase
price for the number of shares of Stock in respect of which the Option was
exercised, (ii) the Company shall have issued and delivered the shares of Stock
to the Optionee, and (iii) the Optionee's name shall have been entered as a
stockholder of record on the books of the Company, whereupon the Optionee shall
have full voting and other ownership rights with respect to such shares.
7. TERMINATION OF EMPLOYMENT.
If the Optionee's employment by the Company is terminated by
the Company or by the Optionee for any reason whatsoever, then the Optionee may
at any time within one year after such termination of employment (but in no
event after the expiration of the Exercise Term) exercise the Option to the
extent, but only to the extent, that the Option or portion thereof was
exercisable on the date of such termination of employment.
8. NONTRANSFERABILITY.
4
<PAGE>
The Option shall not be transferable other than by will or by the
laws of descent and distribution. During the lifetime of the Optionee, the
Option shall be exercisable only by the Optionee.
9. NO RIGHT TO CONTINUED EMPLOYMENT.
Nothing in this Agreement (as opposed to the Employee's employment
agreement, if any), or the Plan shall be interpreted or construed to confer upon
the Optionee any right with respect to continuance of employment by the Company,
nor shall this Agreement or the Plan interfere in any way with the right of the
Company to terminate the Optionee's employment at any time.
10. ADJUSTMENTS.
In the event of a Change in Capitalization, the Committee shall
conclusively determine the appropriate adjustments to the number and class of
shares of Stock subject to the Option and the purchase price for such shares of
Stock. The Committee's adjustment shall be made in accordance with the
provisions of Section 4.5 of the Plan and shall be effective and final, binding
and conclusive for all purposes of the Plan and this Agreement.
11. CERTAIN EVENTS.
Subject to Section 5 hereof, upon the effective date of (i) the
liquidation or dissolution of the Company or (ii) a merger or consolidation of
the Company (a "Transaction"), the Option shall continue in effect in accordance
with its terms and the Optionee shall be entitled to receive in respect of all
shares of Stock subject to the Option, upon exercise of the Option, the same
number and kind of stock, securities, cash, property or other consideration that
each holder of shares of Stock was entitled to receive in the Transaction.
12. WITHHOLDING OF TAXES.
At such times as an Optionee recognizes taxable income in connection
with the receipt of shares of Stock, securities, cash or property hereunder (a
"Taxable Event"), the Optionee shall pay to the Company an amount equal to the
federal, state and local income taxes and other amounts as may be required by
law to be withheld by the Company in connection with the Taxable Event (the
"Withholding Taxes") prior to the issuance, or release from escrow, of such
shares of Stock or securities or the payment of such cash or such property. The
Company shall have the right to deduct from any payment of cash to an Optionee
or Grantee an amount equal to the Withholding Taxes in satisfaction of the
obligation to pay Withholding Taxes. In satisfaction of the obligation to pay
Withholding Taxes to the Company, the Optionee may make a written election (the
"Tax Election"), which may be accepted or rejected in the discretion of the
Committee, to have withheld a portion of the shares then issuable to him having
an aggregate Fair Market Value, on the date preceding the date of such issuance,
equal to the Withholding Taxes.
13. OPTIONEE BOUND BY THE PLAN.
5
<PAGE>
The Optionee hereby acknowledges receipt of a copy of the Plan as
in effect on the date hereof and agrees to be bound by all the terms and
provisions of the Plan.
14. MODIFICATION OF AGREEMENT.
This Agreement may be modified, amended, suspended or terminated,
and any terms or conditions may be waived, but only by a written instrument
executed by the parties hereto.
15. SEVERABILITY.
Should any provision of this Agreement be held by a court of
competent jurisdiction to be unenforceable or invalid for any reason, the
remaining provisions of this Agreement shall not be affected by such holding and
shall continue in full force in accordance with their terms.
16. GOVERNING LAW.
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of New York without giving
effect to the conflicts of laws principles thereof.
17. SUCCESSORS IN INTEREST.
This Agreement shall inure to the benefit of and be binding upon
any successor to the Company. This Agreement shall inure to the benefit of the
Optionee's legal representatives. All obligations imposed upon the Optionee and
all rights granted to the Company under this Agreement shall be final, binding
and conclusive upon the Optionee's heirs, executors, administrators and
successors.
6
<PAGE>
18. RESOLUTION OF DISPUTES.
Any dispute or disagreement which may arise under, or as a result
of, or in any way relate to, the interpretation, construction or application of
this Agreement shall be determined by binding arbitration. The parties may agree
to submit the matter to a single arbitrator or to several arbitrators, may
require that arbitrators possess special qualifications or expertise or may
agree to submit a matter to a mutually acceptable firm of experts for decision.
In the event the parties shall fail to thus agree upon terms of arbitration
within twenty (20) days from the first written demand for arbitration, then such
disputed matter shall be settled by arbitration under the Rules of Employment
Arbitration of the American Arbitration Association, by three arbitrators
appointed in accordance with such Rules. Such arbitration shall be held in
Miami, Florida. Once a matter has been submitted to arbitration pursuant to this
Section 18, the decision of the arbitrators reached and promulgated as a result
thereof shall be final and binding upon all parties. The cost of arbitration
shall be shared equally by the parties and each party shall pay the expenses of
his/its attorneys, except that the arbitrators shall be entitled to award the
costs of arbitration, attorneys and accountants' fees, as well as costs, to the
party that they determine to be the prevailing party in any such arbitration.
19. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(SIGNATURE PAGE FOLLOWS)
7
<PAGE>
TELEMUNDO GROUP, INC.
By
-----------------------------------
Name:
Title:
OPTIONEE
--------------------------
8
EXHIBIT 10.36
CHANGE OF CONTROL
SEVERANCE AGREEMENT
THIS CHANGE OF CONTROL SEVERANCE AGREEMENT, dated as of the 15th day of
November 1997, is made between TELEMUNDO GROUP, INC., a Delaware corporation
(the "Company"), and __________________________ (the "Executive"). All
capitalized terms used herein shall have the meaning ascribed thereto in Section
2 of this Agreement.
WHEREAS, the Company is engaged in discussions with third parties
regarding potential transactions which could include a Change of Control (as
defined below) of the Company, and
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and its shareholders
to assure that the Company and its subsidiaries will have the continued
dedication of the Executive, free of distraction and concern regarding the
Executive's personal employment situation, in the event of an actual or
threatened Change of Control of the Company;
NOW, THEREFORE, the Company herein offers to Executive, and Executive
hereby accepts, subject to the conditions herein contained, certain additional
benefits and privileges governing Executive's rights in the event of a
termination of employment in certain situations.
1. TERM OF AGREEMENT.
This Agreement shall become effective as of the date hereof and shall
terminate after a Change of Control upon the occurrence of the earliest of the
events specified below (the "Term"):
(a) the last day of the Severance Period;
(b) the termination of the Executive's employment by the Company or its
subsidiaries for Cause;
(c) the death or disability of the Executive; or
(d) six (6) months after the Effective Date if Executive's employment
has not been terminated.
Provided, however, if a Change of Control has not occurred by November
14, 1998, and on or before each annual anniversary thereafter (the "Renewal
<PAGE>
Date"), then the Term shall be automatically extended for an additional year,
unless at least sixty (60) days prior to the Renewal Date the Company shall give
written notice to the Executive that the Term shall not be so extended.
2. CERTAIN DEFINITIONS.
(a) "Cause" means (i) the willful and continued failure by Executive to
perform substantially all of his or her duties to the Company or the failure by
the Executive to comply with the reasonable written policies, procedures and
directives of the Board of Directors (other than any such failure resulting from
his or her death or disability), in each case after being given written notice
by the Board of Directors of a failure to perform or comply (which notice
specifically identifies the manner in which the Executive has failed to perform
or comply) and a reasonable opportunity to cure such noncompliance or
nonperformance; (ii) the willful misconduct by the Executive in the performance
of his or her duties to the Company, provided that (for purposes of this clause
(ii) only and not for any other purpose or interpretation of this Agreement) an
act shall be considered "willful" only if done in bad faith and not in the best
interests of the Company; (iii) the grossly negligent performance by Executive
of his or her duties to the Company; or (iv) the conviction of Executive by a
court of competent jurisdiction of the commission of (x) a felony or (y) a crime
involving moral turpitude.
(b) "Change of Control" is defined in Appendix A.
(c) "Effective Date" means the first date on which a Change of Control
occurs during the Term. Anything in this Agreement to the contrary
notwithstanding, if the Executive's employment with the Company is terminated
prior to the date on which a Change of Control occurs, and it is reasonably
demonstrated that such termination of employment (i) was at the request of a
third party who has taken steps reasonably calculated to effect the Change of
Control, or (ii) otherwise arose in connection with or in anticipation of the
Change of Control, then for all purposes of this Agreement the "Effective Date"
shall mean the date immediately prior to the date of such termination of
employment.
(d) "Good Reason" means any one of the following events:
(i) the Company shall have failed to furnish to Executive the
total annual compensation and benefits in each case at least equal or otherwise
comparable to the level received by Executive during the six month period
immediately prior to the Change of Control; or
(ii) Executive shall have been required to perform his or her
principal duties at any site or location more than fifty miles from the site or
location at which Executive is based at the time of the Change of Control
(except for occasional duties performed at another site consistent with practice
during the six-month period preceding a Change of Control).
<PAGE>
For purposes of this Agreement, any good faith determination of "Good
Reason" made by the Executive shall be conclusive (unless determined by a court
to be manifestly unreasonable).
(e) "Notice of Termination" means the written notice sent by the
Company to the Executive indicating the reason for his or her termination and
the Termination Date for other than death or disability.
(f) "Severance Period" means the period beginning the day after the
Termination Date and lasting for six months.
(g) "Termination Date" means the actual date of Executive's
termination, however, the actual date of Executive's termination may not be more
than fifteen (15) days after the receipt of the Notice of Termination by the
Executive or the receipt by the Company of a notice from the Executive pursuant
to Section 4(a).
3. OBLIGATIONS OF THE COMPANY.
(a) If within a six month period commencing on the Effective Date, the
Executive's employment with the Company is terminated by the Company other than
for Cause, by the Company issuing a Notice of Termination, or the Executive
terminates his or her employment under this Agreement for Good Reason pursuant
to the procedures set forth in Section 4 of this Agreement, the Company agrees
to:
(i) continue to pay to Executive for the Severance Period the
base salary in effect immediately prior to the Termination Date (but in no event
may the base salary to be paid during the Severance Period be less than the base
salary paid to the Executive on the date of this Agreement), such payments to be
made in installments in accordance with the normal payroll policies in effect
immediately prior to the Termination Date;
(ii) pay to Executive all unused vacation entitlements earned
through the Termination Date;
<PAGE>
(iii) continue to provide to the Executive, for the Severance
Period, all benefits which the Executive and/or his or her family (including,
but without limitation, medical, prescription, dental, vision, disability, life,
accidental death, long term disability and travel accident insurance plans)
which are at least as favorable as the plans or policies of the Company in
effect during the 90-day period immediately preceding the Effective Date.
Notwithstanding anything to the contrary, if the Company is legally unable to
provide any such benefits as a result of Executive no longer being an employee,
then the Company shall reimburse Executive for his or her cost (not to exceed
the actual cost to the Company if he or she were still an employee) of obtaining
the equivalent coverage and benefits.
(b) If during the Term, the Executive's employment is terminated by the
Company for Cause, or is terminated by the Executive for other than Good Reason,
this Agreement shall terminate without further obligation to the Executive,
other than the obligation to pay to the Executive any amounts due through his or
her date of termination and the amounts described in Section 3(a)(ii) above.
(c) If during the Term, but before the Effective Date, the Executive's
employment is terminated by the Company because of the Executive's death or
disability, this Agreement shall terminate without further obligation to the
Executive. However, should Executive's death or disability occur following the
Termination Date and during the Severance Period, all remaining base salary
payments shall be paid in a lump sum to the Executive's beneficiary (or if no
beneficiary to the estate) but benefits shall continue to the end of the
Severance Period.
(d) Following the Termination Date, the Company shall execute the
mutual release agreement in the form attached as Appendix B.
4. OBLIGATIONS OF THE EXECUTIVE.
(a) Any termination of the Executive's employment by the Executive for
Good Reason pursuant to this Agreement shall be communicated by written notice
to the Company in accordance with Section 8(d) of this Agreement and shall not
be effective until 15 days after receipt by the Company; provided, however, that
such notice shall not be effective if at any time during such 15 day period the
Company cures the event or circumstance giving rise to such Good Reason event.
<PAGE>
(b) The Executive, as a condition of receiving any payments and
benefits contained in this Agreement, shall execute a release in favor of the
Company and its affiliates. A copy of the mutual release agreement the Executive
will be required to execute is set forth in Appendix B. Once the Executive
executes the mutual release agreement and delivers it to the Company, then the
Executive shall be entitled to receive any and all payments or benefits pursuant
to this Agreement.
5. MITIGATION.
The Executive shall not be obligated to seek other employment or take
any other action by way of mitigation of the amounts payable to the Executive
under any of the provisions of this Agreement, nor shall the amount of any
payment hereunder be reduced by any compensation earned by the Executive as a
result of employment by another employer.
6. NON-INTERFERENCE.
For so long as Executive is receiving payments and benefits during the
Severance Period, Executive agrees and covenants that he or she will not
interfere directly or indirectly in any way with the Company. "Interfere" means
to influence or attempt to influence, directly or indirectly, present or active
prospective customers, employees, suppliers, performers, directors,
representatives, agents or independent contractors of the Company, or any of its
network affiliates to restrict, reduce, sever or otherwise alter their
relationship with the Company or any of its network affiliates.
7. SUCCESSORS.
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
<PAGE>
(c) The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
As used in this Agreement, "Company" shall mean the Company as herein before
defined and any successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law or otherwise,
and the Company and such successor shall be jointly and severally liable
hereunder.
8. MISCELLANEOUS.
(a) Benefits payable under this Agreement shall not be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, execution or levy of any kind, either
voluntary or involuntary, prior to actually being received by the Executive, and
any such attempt to dispose of any right to benefits payable hereunder shall be
void.
(b) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(c) This Agreement shall not be altered, amended or modified except by
written instrument executed by the Company and Executive. A waiver of any term,
covenant, agreement or condition contained in this Agreement shall not be deemed
a waiver of any other term, covenant, agreement or condition, and any waiver of
any default in any such term, covenant, agreement or condition shall not be
deemed a waiver of any later default thereof or of any other term, covenant,
agreement or condition.
(d) All notices and other communications hereunder shall be in writing
and delivered by hand or by first class registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
IF TO THE EXECUTIVE:
<PAGE>
IF TO THE COMPANY:
Telemundo Group, Inc.
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: President and Chief Executive Officer
and
Telemundo Group, Inc.
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(e) This Agreement may be executed in multiple counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument originals.
(f) This Agreement shall be interpreted and construed in accordance
with the laws of the State of Florida, without regard to its choice of law
principles. The captions of this Agreement are not part of the provisions hereof
and shall have no force or effect.
(g) The Company may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(h) Neither the Company's nor the Executive's failure to insist upon
strict compliance with any provision hereof shall not be deemed to be a waiver
of such provision or any other provision thereof.
(i) This Agreement contains the entire understanding of the Company and
the Executive with respect to the subject matter hereof.
(j) Nothing in this Agreement shall constitute a promise of employment
and Executive remains an employee at will. Further, except as specifically set
forth in this Agreement, nothing herein modifies the terms or conditions of
Executive's employment relationship with the Company.
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set his or her hand and,
pursuant to the authorization from its Board, the Company has caused these
presents to be executed in its name on its behalf, all as of the day and year
first above written.
-------------------------
Executive
Telemundo Group, Inc.
By:
-----------------------
Name:________________________
Title:__________________________
<PAGE>
APPENDIX A
DEFINITION OF A CHANGE OF CONTROL
A "Change of Control" means any one or more of the following events: (A) an
event or series of events after the date of this Agreement as a result of which
any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of
the Exchange Act) who did not own at least 500,000 shares of the Company's
Series B Common Stock on September 1, 1997 becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of more
than 50% of the aggregate voting power of all of the capital stock of the
Company normally entitled to vote in the election of directors or (B) a sale,
transfer, conveyance or other disposition, directly or indirectly, in any single
transaction or series of related transactions, no matter how accomplished, which
results in more than 50%, in value, of (1) the capital stock (or other equity
interest in) or operating assets of Telemundo Network, Inc., a wholly-owned
subsidiary of the Company or (2) the aggregate capital stock (or other equity
interest in) or operating assets of all of the Company's subsidiaries (other
than Telemundo Network, Inc.), which currently comprise the Company's owned and
operated station group (including any special purpose license subsidiaries),
being owned (which term shall include "beneficial ownership" within the meaning
of Rule 13d-3 under the Exchange Act), directly or indirectly, by any "person"
or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange
Act) who did not own at least 500,000 shares of the Company's Series B Common
Stock on September 1, 1997 or (C) a transaction or series of related
transactions leading to at least an 80% reduction in the number of outstanding
shares of Stock held by "unaffiliated persons" (meaning any person other than
Hernandez Partners, Apollo Partners, L.P. or Bastion Capital Fund, L.P. or any
of their respective affiliates (as this term is defined in Rule 12b-2 under the
Exchange Act) on the date of this Agreement.
<PAGE>
APPENDIX B
MUTUAL RELEASE AGREEMENT
For and in consideration of (a) the payment to (EXECUTIVE'S NAME) of
the payments and benefits pursuant to the Change of Control Severance Agreement
between Telemundo Group, Inc. ("Company") and (EXECUTIVE'S NAME) dated September
11, 1997, and (b) the execution of this mutual release agreement by both Company
and Executive, with the execution of this agreement by Company and the delivery
thereof to (EXECUTIVE'S NAME), occurring within thirty (30) days of (EXECUTIVE'S
NAME)`s tender of this agreement to Company, (EXECUTIVE'S NAME), on behalf of
himself/herself, his/her heirs, successors and assigns, and Company, on behalf
of itself, and as agent for all of its subsidiaries, their agents, employees,
officers, directors, successors and assigns, hereby release and forever
discharge each other from any and all claims, demands, actions, and causes of
action, and all liability whatsoever, whether known or unknown, fixed or
contingent, which they have or may have against each other as a result of
Executive's employment by and subsequent termination as an employee of the
Company. This includes but is not limited to claims at law or equity sounding in
contract (express or implied) or tort arising under federal, state, or local
laws prohibiting discrimination (including the Age Discrimination in Employment
Act and Title VII of the Civil Rights Act of 1964) or claims growing out of any
legal restrictions on the Company's right to terminate its employees.
The Company and the Executive understand that this Agreement does not release
their current, future or ongoing obligations under the Change of Control
Severance Agreement, specifically including but not limited to cash payments and
benefits due the Executive in the case of the Company, and the obligation not to
interfere in the case of the Executive.
This Agreement shall be governed by and construed in accordance with the laws of
the state of Florida, without reference to principle of conflict of laws.
WE CERTIFY THAT WE HAVE FULLY READ, HAVE RECEIVED AN EXPLANATION OF, HAVE
NEGOTIATED AND COMPLETELY UNDERSTAND THE PROVISIONS OF THIS AGREEMENT, THAT WE
HAVE HAD SUFFICIENT
<PAGE>
TIME AND THE OPPORTUNITY TO SEEK LEGAL ADVICE FROM AN ATTORNEY BEFORE ENTERING
INTO THIS AGREEMENT, AND THAT WE ARE SIGNING THIS AGREEMENT FREELY AND
VOLUNTARILY, WITHOUT DURESS, COERCION OR UNDUE INFLUENCE.
Dated this ______ day of ___________, 19__.
-----------------------------
Executive
Telemundo Group, Inc.
-----------------------------
By:
Its:
Executive's Termination Date:______________________
APPENDIX A
1996 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
1. PURPOSE
The purpose of the Telemundo Group, Inc. 1996 Non-Employee Directors'
Stock Option Plan (the "Plan") is to secure for Telemundo Group, Inc. (the
"Corporation") and the stockholders the benefits of the incentive inherent in
increased ownership of the Corporation's Series A Common Stock, par value $.01
per share (the "Common Stock"), by the members of the Board of Directors (the
"Board") of the Corporation who are not employees of the Corporation or any of
its subsidiaries ("Non-Employee Directors" ). It is expected that such ownership
will provide such Non-Employee Directors with a more direct stake in the future
welfare of the Corporation and encourage them to remain directors of the
Corporation. It is also expected that the Plan will encourage qualified persons
to become directors of the Corporation.
2. ADMINISTRATION
The Plan shall be administered by the Board. The Board shall have all
the powers vested in it by the terms of the Plan, such powers to include
authority (within the limitations described herein) to prescribe the form of the
agreement embodying awards of stock options made under the Plan (the "Options").
Subject to the provisions of the Plan, the Board shall have the power to
construe the Plan, to determine all questions arising thereunder, and to adopt
and amend such rules and regulations for the administration of the Plan as it
may deem desirable. Any decision of the Board in the administration of the Plan,
as described herein, shall be final and conclusive. The Board may act only by a
majority of its members in office, except that the members thereof may authorize
any one or more of their number or the Secretary or any other officer of the
Corporation to execute and deliver documents on behalf of the Board. No member
of the Board shall be liable for anything done or omitted to be done by such
member or by any other member of the Board in connection with the Plan, except
for such member's own willful misconduct or as expressly provided by statute.
3. AMOUNT OF STOCK
The stock which may be issued and sold under the Plan shall not exceed
100,000 shares of Common Stock, subject to adjustment as provided in Section 8
hereof. The Common Stock to be issued may be either authorized and unissued
shares or issued shares acquired by the Corporation. If Options granted under
the Plan terminate or expire without being exercised in whole or in part, new
Options may be granted covering the shares not purchased under such lapsed
Options.
4. ELIGIBILITY
Each Non-Employee Director shall be eligible to receive an Option in
accordance with Section 5. Each Option granted under the Plan shall be evidenced
by an agreement in such form as the Board shall prescribe from time to time in
accordance with the Plan and shall comply with the terms and conditions set
forth in Sections 5, 6 and 7 hereof.
5. GRANT OF OPTIONS
Commencing on June 12, 1996, and, thereafter on each date on which the
Board holds its Annual Meeting of Directors, each Non-Employee Director shall
automatically receive an Option to purchase for ten years 2,500 shares of Common
Stock, subject to adjustment as provided in Section 8 hereof.
<PAGE>
6. EXERCISE PRICE
The Option exercise price per share shall be 100% of the fair market
value of a share of Common Stock, subject to adjustment as provided in Section 8
hereof. As used herein, fair market value shall be the closing price of the
Common Stock on the date of determination (if the Common Stock is then traded on
a national securities exchange or in the NASDAQ National Market System) or, if
not so traded, the average of the closing bid and asked prices thereof on such
day or, if the Common Stock is not traded on the date of determination, on the
last preceding date on which the Common Stock is traded.
7. TERMINATION OF OPTIONS; LIMITATIONS ON EXERCISE; CHANGE IN CONTROL
(a) No Option shall be exercisable until and unless the Plan is
approved by the Corporation's stockholders at the Corporation's 1997 Annual
Meeting of Stockholders, and, unless the Plan is so approved, all Options will
terminate and be of no further force or effect on the earlier to occur of (i)
the day after the Corporation's 1997 Annual Meeting of Stockholders and (ii)
December 31, 1997.
(b) One-third of the total number of shares of Common Stock covered by
an Option shall become exercisable on a cumulative basis on each anniversary of
the date of grant if the holder thereof has been a Non-Employee Director of the
Corporation at all times since such date of grant; provided, however, that if
the holder of an Option ceases to be a Non-Employee Director prior to the date
that an Option is fully exercisable by reason of (i) retirement after reaching
age 60 at least six months after the date of grant, (ii) death or (iii)
disability, in each case, if he has been a member of the Board for at least five
years prior to the date of such cessation, all of the shares of Common Stock
covered by the Option will become immediately exercisable.
(c) If a person shall cease to be a Non-Employee Director for any
reason while holding an Option that has not expired and has not been fully
exercised:
(i) such person, or in the case of his death or adjudication
of incompetency, his executors, administrators, distributees, guardian
or legal representative, as the case may be, may, at any time until the
earlier to occur of the (y) fifth anniversary of the date of cessation
and (z) termination of such Option pursuant to Section 7(d)(i) hereof,
exercise the Option with respect to any shares of Common Stock as to
which it was exercisable pursuant to Section 7(b) hereof on the date
the person ceased to be such a Non-Employee Director; and
(ii) The Option will thereupon terminate as to the number of
shares of Common Stock which are not exercisable pursuant to Section
7(b) hereof on the date of such cessation.
(d) No Option or any part of an Option shall be exercisable:
(i) after the expiration of 10 years from the date the Option
was granted; and
(ii) unless written notice of the exercise is delivered to the
Corporation specifying the number of shares to be purchased, and
payment in full by check or bank draft is made for the shares of Common
Stock being acquired thereunder at the time of exercise.
(e) An Option shall not be transferable by the optionee otherwise than
by will or the laws of descent and distribution and shall be exercisable during
his lifetime only by him or his guardian or legal representative.
(f) For purposes hereof, disability shall have the meaning provided in
Section 22(e)(3) of the Internal Revenue Code of 1986, as amended.
(g) Notwithstanding the foregoing provisions of this Section 7, the
Options granted hereunder shall immediately become exercisable in their entirety
at such time as there shall be a "Change in Control" of the Corporation. For
purposes hereof, a "Change in Control" shall be deemed to have occurred if any
"person" or "group" (as such terms are defined in Sections 3(a)(9) and 13(d)(3)
of the Securities Exchange
<PAGE>
Act of 1934, as amended), acquires, directly or indirectly, by virtue of the
consummation of any purchase, merger or other combination, securities of the
Corporation representing more than fifty percent (50%) of the combined voting
power of the Corporation's then outstanding voting securities with respect to
matters submitted to a vote of the stockholders generally.
8. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
(a) If the outstanding Common Stock is hereafter changed by reason of
reorganization, merger, consolidation, recapitalization, reclassification, stock
split-up, combination, exchange of shares, or the like, or dividends payable in
shares of the Common Stock, an appropriate adjustment shall be made by the Board
in the aggregate number of shares available under the Plan, in the number of
shares subject to Options to be granted thereafter pursuant to Sections 5(a) and
5(b) hereof, and in the number of shares and price per share subject to
outstanding Options. If the Corporation shall be reorganized, consolidated or
merged with another corporation, or if all or substantially all of the assets of
the Corporation shall be sold or exchanged, the holder of an Option shall, after
the occurrence of such a corporate event, be entitled to receive upon the
exercise of his Option the same number and kind of shares of stock or the same
amount of property, cash or securities as he would have been entitled to receive
upon the happening of any such corporate event as if he had exercised such
Option and had been, immediately prior to such event, the holder of the number
of shares covered by such Option.
(b) Any adjustment in the number of shares shall apply proportionately
to only the unexercised portion of any Option granted hereunder. If fractions of
a share would result from any such adjustment, the adjustment shall be revised
to the next higher whole number of shares.
9. MISCELLANEOUS PROVISIONS
(a) Except as expressly provided for in the Plan, no Non-Employee
Director or other person shall have any claim or right to be granted an Option
under the Plan. Neither the Plan nor any action taken hereunder shall be
construed as giving any Non-Employee Director any right to be retained in the
service of the Corporation.
(b) The Corporation shall not be obligated to deliver any shares of
Common Stock hereunder until they have been listed on each securities exchange
on which the Common Stock may then be listed, or until there has been
qualification under or compliance with such state or federal laws, rules or
regulations as the Corporation may deem applicable.
(c) It shall be a condition to the obligation of the Corporation to
issue shares of Common Stock upon exercise of an Option, that the optionee (or
any person entitled to act under Sections 7(c) and 7(e)) hereof pay to the
Corporation, upon its demand, such amount, if any, as may be requested by the
Corporation for the purpose of satisfying any liability to withhold federal,
state, local or foreign income or other taxes. If the amount requested is not
paid, the Corporation may refuse to issue shares of Common Stock.
(d) The expenses of the Plan shall be borne by the Corporation.
(e) If an Option is exercised by the executors, administrators,
legatees or distributees of the estate of a deceased optionee or by the guardian
or legal representative of an optionee, the Corporation shall be under no
obligation to issue stock thereunder unless and until the Corporation is
satisfied that the person or persons exercising the Option are the duly
appointed legal representatives of the optionee or of the deceased optionee's
estate or the proper legatees of distributees of such estate.
(f) If all or any part of the Plan is declared by any court or
governmental authority to be unlawful or invalid, such unlawfulness or
invalidity shall not serve to invalidate any portion of the Plan not declared
unlawful or invalid. Any section or part of a section so declared to be unlawful
or invalid shall, if possible, be construed in a manner which will give effect
to the terms and conditions of such section or part of a section to the fullest
extent possible.
<PAGE>
10. AMENDMENT OR DISCONTINUANCE
The Plan may be amended at any time and from time to time by the Board
as the Board shall deem advisable including, but not limited to amendments
necessary to qualify for any exemption or to comply with applicable law or
regulations; provided, however, that the Plan shall not be amended more than
once every six months, other than to comport with changes in the Internal
Revenue Code of 1986, as amended, or the regulations thereunder, or the Employee
Retirement Income Security Act of 1974, as amended, or the regulations
thereunder; and provided, further, that except as provided in Section 8 hereof,
the Board may not, without further approval by the stockholders of the
Corporation, increase the maximum number of shares of Common Stock as to which
Options may be granted under the Plan, increase the number of shares subject to
an Option, reduce the minimum Option exercise price described in Section 6
hereof, extend the period during which Options may be granted or exercised under
the Plan or change the class of persons eligible to receive Options under the
Plan. No amendment of the Plan shall materially and adversely affect any right
to any optionee with respect to any Option theretofore granted without such
optionee's written consent.
11. TERMINATION
The Plan shall terminate upon the earliest to occur of (a) the adoption
of a resolution of the Board terminating the Plan, (b) June 11, 2006 and (c)
December 31, 1997 if the Plan has not been approved by the Corporation's
stockholders at the Corporation's 1997 Annual Meeting of Stockholders.
12. EFFECTIVE DATE OF PLAN
The Plan shall become effective as of June 12, 1996, provided that the
Corporation's stockholders shall have approved the Plan at the Corporation's
1997 Annual Meeting of Stockholders.
THE TELEMUNDO GROUP, INC.
MANAGEMENT INCENTIVE COMPENSATION PLAN
1. PURPOSE AND DESIGN
This Management Incentive Compensation Plan (the "Incentive Plan") is
intended to tie the goals and interests of eligible officers of The Telemundo
Group, Inc. ("Telemundo") to those of Telemundo and its stockholders and to
enable Telemundo to attract and retain highly qualified employees. The Incentive
Plan is for the benefit Telemundo's President and Chief Executive Officer and up
to three additional top senior officers which senior officers may or may not be
Section 162(m) Employees (as defined below). The Incentive Plan is designed to
ensure that the bonuses paid hereunder to Section 162(m) Employees are
deductible without limit under Section 162(m) of the Internal Revenue Code of
1986, as amended, and the regulations and interpretations promulgated thereunder
(the "Code").
2. ELIGIBLE EMPLOYEES
The Bonus Committee (as described below) shall select Telemundo's President
and Chief Executive Officer and up to three additional key employees who are the
top three senior officers of Telemundo other than the President and Chief
Executive Officer and who hold the titles of Executive Vice President, Chief
Financial Officer and Treasurer or who hold other senior management positions
and who are or may be "covered employees" (as defined in Section 162(m)(3) of
the Code) (the "Section 162(m) Employees") to be eligible to receive bonuses
under this Plan. The employees covered by the Incentive Plan are hereinafter
referred to as the "Eligible Employees."
3. THE COMMITTEE
The "Bonus Committee" shall administer the Incentive Plan and shall consist
of a committee of the Board of Directors of Telemundo, which may be the
Compensation and Stock Option Committee of the Board of Directors, which
committee will be comprised solely of two or more members of Telemundo's Board
of Directors all of whom shall qualify as "outside directors" under Code Section
162(m). The Bonus Committee that is appointed to administer the Incentive Plan
shall have the sole discretion and authority to administer and interpret the
Incentive Plan.
4. BONUSES
An Eligible Employee may receive a bonus payment hereunder based upon the
attainment of performance objectives and targets established by the Bonus
Committee and related to the following corporate business criteria: cash flow
(which may be
<PAGE>
measured by earnings before interest, taxes, depreciation and amortization
("EBITDA")); provided, however, that EBITDA targets shall not be higher than
Telemundo's budget for EBITDA for the applicable fiscal year.
Any bonuses paid to Section 162(m) Employees shall be based upon bonus
formulas that tie such bonuses to Telemundo's cash flow. Bonus formulas for
Section 162(m) Employees shall be adopted in each performance period by the
Bonus Committee no later than the latest time permitted by Code Section 162(m).
No bonuses shall be paid to Section 162(m) Employees unless and until the Bonus
Committee makes a certification in writing with respect to the attainment of the
objective performance standards as required by Code Section 162(m). The Bonus
Committee shall have no discretion to increase the amount of a Section 162(m)
Employee's bonus.
The maximum bonus payable to a Section 162(m) Employee shall not exceed
100% of such Section 162(m) Employee's base salary with respect to any fiscal
year of Telemundo.
The Bonus Committee shall have the discretion to apply or not apply the
foregoing provisions of this Section 4 to bonuses payable to Eligible Employees,
if any, who are Non-Section 162(m) Employees.
The payment of a bonus to an Eligible Employee with respect to a
performance period shall be conditioned upon the Eligible Employee's employment
by Telemundo on the last day of the performance period; PROVIDED, HOWEVER, that
the Bonus Committee may make exceptions to this requirement, in its sole
discretion, in the case of an Eligible Employee's retirement, death or
disability; PROVIDED FURTHER, HOWEVER, that if an Eligible Employee has a
written employment agreement with Telemundo and such Eligible Employee's
employment by the Telemundo is terminated by Telemundo without "cause" or by the
Eligible Employee for "good reason" or by the Eligible Employee pursuant to
"specified resignation rights" available to such Eligible Employee after a
change of control transaction involving Telemundo (in each case as described in
the Eligible Employee's employment agreement), then such Eligible Employee shall
be entitled to his or her bonus for the year in which such termination of
employment occurred.
5. AMENDMENT AND TERMINATION
Telemundo reserves the right to amend or terminate this Incentive Plan at
any time in its sole discretion. Any amendments to the Incentive Plan shall
require stockholder approval only to the extent required by Code Section 162(m).
6. STOCKHOLDER APPROVAL
No bonuses shall be paid under this Incentive Plan to Section 162(m)
Employees unless and until Telemundo's stockholders shall have approved this
Incentive Plan as required by Section 162(m) of the Code.
NETWORK AFFILIATION AND REPRESENTATION AGREEMENT
THIS NETWORK AFFILIATION AND REPRESENTATION AGREEMENT is made as of
August 31, 1993 by and between TELEMUNDO GROUP, INC., a Delaware corporation
("Telemundo"), and INTERSPAN COMMUNICATIONS, A CALIFORNIA LIMITED PARTNERSHIP
(the "Affiliate").
WHEREAS, Telemundo provides Spanish-language television programming;
WHEREAS, the Affiliate owns and operates television broadcast station
KFWD, Channel 52, serving the Dallas-Fort Worth ADI (the "Station"), and wishes
to become affiliated with and obtain Spanish-language programming from Telemundo
for broadcast on the Station;
WHEREAS, the Affiliate wishes to engage Telemundo to act as its
national sales representative to market commercial advertising time available
during Spanish-language programming;
WHEREAS, Telemundo wishes to be affiliated with the Affiliate, to
supply Spanish-language programming to the Affiliate for broadcast on the
Station and to provide national sales representative services to the Affiliate,
all on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, the parties agree as follows:
1. PROGRAMMING PROVIDED
(a) Telemundo will provide Spanish-language programming
to the Affiliate for broadcast on the Station. Such
programming may include Spanish-language programming
designated and offered by Telemundo as Network
Programming to one or more of its owned and operated
or affiliated stations via satellite except as
provided in Section 2, and other Spanish-language
programming as to which it has distribution rights
and which shall be delivered via satellite except as
provided in Section 2 ("Additional Programming").
Telemundo shall provide the Affiliate with a written
schedule of the Network and Additional Programming,
and the terms and conditions upon which such
programming is offered, including, without
limitation, any restrictions, the required dates and
hours of broadcast, if any, and the availability of
advertising time within the programming for sale by
the Affiliate. Telemundo shall use its reasonable
efforts to give its schedule of programming at least
three weeks in advance of the scheduled broadcast
date. Notwithstanding anything to the contrary
contained herein, the Affiliate may not exhibit any
Network or Additional Programming as to which
Telemundo does not possess the exhibition rights in
the Station's market provided Telemundo has given the
Affiliate prior notice of an exhibition problem.
Except as otherwise provided herein, this Agreement
is not intended to cover any programming other than
Network and Additional Programming (collectively, the
"Programming"). The terms and conditions applicable
to any other programming to be supplied by Telemundo
to the Affiliate ("Special
<PAGE>
Programming") must be mutually agreed to by Telemundo
and the Affiliate. Unless otherwise agreed to by
Telemundo and the Affiliate, the general and
non-financial terms of this Agreement shall govern
such Special Programming. Notwithstanding anything to
the contrary contained herein, the Affiliate
acknowledges and confirms that, from time to time,
Telemundo may, in its discretion, sell block
programming time to other programmers ("Brokered
Time") and that such Brokered Time may preempt
Telemundo's regular Network Programming, provided
such amount of Brokered Time is not unreasonable. The
Affiliate further acknowledges and confirms that no
local advertising time may be available to the
Affiliate for sale within such Brokered Time.
(b) The Affiliate shall have a right of first refusal, as
against any other television station, cable system or
other television transmission entity licensed in
Dallas-Fort Worth or serving the Dallas-Fort Worth
ADI to broadcast the Programming. The Affiliate
shall-exercise the right of first refusal and shall
notify Telemundo in writing whether it will accept or
reject the Programming within 72 hours of receipt of
Telemundo's program schedule. Failure by the
Affiliate to respond in writing within such 72-hour
period shall be deemed to be an acceptance of such
Programming.
(c) Acceptance by the Affiliate of the Programming shall
constitute the Affiliate's agreement to broadcast the
Programming in accordance with the terms of this
Agreement and of the offer of the program schedule.
The Affiliate shall broadcast any Programming
accepted by the Affiliate in its entirety, including,
without limitation, all commercial announcements,
programming identification, program promotional
material and credit announcements contained therein,
without interruption or deletion or addition of any
kind (except for the insertion of advertisements,
promotions or PSA's during periods designated by
Telemundo as available for such insertions), at the
hours and on the days specified by Telemundo. Unless
otherwise agreed to by Telemundo in writing or as
otherwise provided herein, the Affiliate shall
broadcast programming delivered via satellite at the
time such programming is transmitted and may not
delay the broadcast of any of such programming except
for time zone adjustments as may be established by
Telemundo. Unless otherwise directed by Telemundo in
writing, at no time may the Affiliate broadcast any
Additional or Special Programming during Telemundo's
Network Programming schedule.
(d) With respect to programming provided pursuant to this
Agreement, nothing herein contained shall prevent or
hinder:
(i) the Affiliate from rejecting programming
which the Affiliate reasonably believes to
be contrary to the public interest or in
violation of good broadcasting practices, or
from substituting a program that, in its
reasonable opinion, is of greater local or
national importance; or
(ii) Telemundo from replacing one or more
programs with substitute programming (in
which event Telemundo shall provide the
substitute
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<PAGE>
programming to the Affiliate in
accordance with this Section 1) or from
canceling one or more programs.
If either party shall take any action specified in
this Section l(d), such party shall give prompt written notification thereof by
telecopier or telex to the other party.
(e) The Affiliate shall notify Telemundo promptly (but no
later than within 24 hours) if the Station goes off
the air (other than at its regular sign-off time) or
fails to broadcast for any reason any of the
Programming that it has otherwise accepted for
broadcast.
2. DELIVERY OF PROGRAMMING
It is presently anticipated that all Programming shall be
provided by satellite except in the case of a transmission
problem by Telemundo. In the event of a transmission problem
of the Programming and in the case of Special Programming,
Telemundo may provide any such programming in three-quarter
inch "U-Matic" format or such other format as Telemundo may
determine and which shall conform to accepted industry
standards. If the programming is provided by satellite,
Telemundo shall bear all expenses associated with the
transmission of the programming from Telemundo's facilities to
the satellite, and the Affiliate shall bear all expenses
associated with transmission of the programming from the
satellite to the Affiliate's facilities and associated with
the acquisition, maintenance and operation of the Affiliate's
facilities for receipt of such satellite transmission. Except
as otherwise provided herein, if any programming is provided
in "U-Matic" format or by other physical delivery methods, the
Affiliate shall pay for distribution costs by accepting C.O.D.
deliveries of tapes and other material, or by prepaying
shipping costs, and the Affiliate will prepay return shipping
costs to Telemundo's network distribution center, or to such
other destination named by Telemundo. In the event of a
satellite transmission problem of the Programming, Telemundo
shall bear the distribution costs of shipping the tapes to the
Affiliate. All tapes and other physical materials shall be
returned by the Affiliate to Telemundo at the Affiliate's
expense.
3. DISTRIBUTION PROHIBITIONS
The Affiliate shall broadcast the programming supplied by
Telemundo hereunder only at the hours and on the days
specified by Telemundo, unless Telemundo shall have agreed in
writing to any proposed additional or rescheduled broadcast of
such programming. The Affiliate shall not distribute or
authorize others to distribute any programming supplied by
Telemundo hereunder over the facilities of any station or
distribution system (including, without limitation,
satellites, booster, translator or repeater systems, cable
television systems, relay telecasts, pay cable systems,
subscription television systems, network simultaneous
transmission or special educational systems) other than the
Station, unless a specific right to do so is granted in
writing by Telemundo. "Station" as used herein shall include
cable systems within the Station's ADI that may carry the
Station's programming as a basic service (i.e., without any
separately allocable fees charged to subscribers above the fee
for basic cable television service). The
-3-
<PAGE>
Affiliate shall not, and shall not authorize others to,
sublicense or re-license any programming supplied by Telemundo
hereunder or copy, duplicate, record or transcribe any such
programming for any purpose.
4. USE OF TELEMUNDO NAME AND LOGO
The Affiliate shall identify itself as an affiliate of
Telemundo and display the Telemundo logo in conjunction with
the words "TM" in subscript and in bold face, together with
the words "Telemundo affiliate" in its on-air identifications
and, as practical, on all written materials, including without
limitation, stationery, business cards, billboard and other
promotional materials which shall identify the (collectively,
the "Station Identifications"). All displays of the Telemundo
name and logo, all Station Identifications and all Station
i.d. animations logos and Station signatures shall be in
strict compliance, as practical, with the official broadcast
and print element standards provided to the Affiliate by
Telemundo and as indicated in the Telemundo standards manual,
as updated from time to time by Telemundo. The Affiliate shall
have no rights whatsoever to use the Telemundo name or logo
except to identify itself as a Telemundo affiliate as
expressly provided in this Agreement and except as contained
in the Programming.
5. ADVERTISING AVAILABILITIES
(a) The parties intend that 60% of the total advertising
time within the Network Programming shall generally
be available to Telemundo for Network Advertising and
40% of the total advertising time within the Network
Programming shall generally be available to the
Affiliate for sale on a local or national spot
advertising basis ("Spot Advertising"). The split of
advertising time pursuant to the preceding sentence
shall be generally made on a proportionate basis in
order that each of Telemundo and the Affiliate have
access to similar time periods. The parties intend
that 100% of the total advertising time within the
Additional Programming shall generally be available
to the Affiliate for Spot Advertising. It is
Telemundo's intention to generally allocate the
advertising availabilities as described above within
each Program; provided, however, that the Affiliate
acknowledges that the percentages described in this
Section 5(a) may vary in any specific program
schedule provided by Telemundo pursuant to this
Agreement.
(b) Telemundo shall establish, in its sole discretion,
the prices for Network Advertising, and shall be
responsible for billing and collection with respect
to all Network Advertising. The Affiliate shall
establish, in its sole discretion, the prices for
Spot Advertising, and shall be responsible for
billing and collection with respect to all Spot
Advertising.
6. REPRESENTATIVE SERVICES
<PAGE>
(a) The Affiliate hereby appoints Telemundo as its
exclusive national sales representative, throughout
the United States, including U.S. territories and
possessions, for the sale of national Spot
Advertising time in the Spanish-language programming
broadcast by the Station. Telemundo shall exercise
its best efforts in the sale of time of the Station
and toward the national promotion of the Station's
market. All expenses incurred by Telemundo in
connection with its duties as national sales
representative shall be borne by Telemundo. Telemundo
shall not be responsible for payment of agency
commissions.
(b) The Affiliate shall list Telemundo as its national
sales representative for the Station in publications
that publish rates and technical information, such as
Standard Rate and Data, and in its own advertising
and promotional material.
(c) The Affiliate shall notify Telemundo in the event
either an advertiser or an advertising agency makes a
direct approach to the Station to place national
broadcast advertising, and shall cause the Station to
advise the advertiser or advertising agency, as the
case may be, that such national broadcast advertising
should be placed through Telemundo exclusively.
(d) The Affiliate shall not engage or use the services of
any person, firm or organization for the sale of
national broadcast advertising in respect of the
Station other than Telemundo prior to the expiration
of this Agreement. The Affiliate retains the right to
sell advertising to all accounts within the
Dallas-Fort Worth ADI. Telemundo will act as
Affiliate's exclusive sales representative for all
accounts outside the Dallas-Fort Worth ADI.
(e) The Affiliate will assist Telemundo in its efforts to
place national Spot Advertising on the Station,
including: developing and distributing appropriate
sales kits and/or tapes, and visiting agencies with
Telemundo account executives as appropriate.
(f) Telemundo shall share with the Affiliate such of its
market research, call reports and product research
relating to the Dallas-Fort Worth ADI as it deems
appropriate, subject to proprietary limitations.
(g) Notwithstanding anything to the contrary contained in
this Section 6, the Affiliate may deal directly with
the Winn-Dixie account and Telemundo shall not
receive any commissions from any such efforts by the
Affiliate.
7. COMPENSATION
(a) In consideration of Telemundo's sales of Spot
Advertising pursuant to the terms of this Agreement,
the Affiliate shall pay Telemundo 15% of all amounts
due to the Affiliate from national Spot Advertising
sold by Telemundo in Network Programming and
Additional Programming and in other Spanish-language
programming broadcast by the Station.
-5-
<PAGE>
(b) The Affiliate shall pay Telemundo in cash, based on a
statement furnished by Telemundo, the amount due
Telemundo for all Spot Advertising sold by Telemundo
pursuant to Section 7(a) within 60 days after the
close of each broadcast month, whether or not the
Affiliate has collected such monies. The commission
for any account receivable balance, relating to a
sale which had been previously included in amounts
due Telemundo, which is written off or remains
uncollected 120 days after billing, shall be deducted
from amounts due Telemundo. If such receivable
balance is subsequently collected, the balance
collected will be added to the current month's
amounts due Telemundo.
(c) In consideration of the Affiliate's obligations under
this Agreement and subject to Section l(b) hereof,
Telemundo agrees to further compensate the Affiliate
as set forth on Attachment A attached hereto.
8. TERM AND TERMINATION
This Agreement shall have a term of three years commencing on
September 1, 1993. Either party may terminate this Agreement
upon 24 hours' notice if the other party is in material
violation of its obligations hereunder after written notice of
such violation and failure to cure within 15 days. The
Affiliate acknowledges the importance to Telemundo of carrying
the Network Programming and understands that Telemundo sells
its Network Advertising based on the number of households
viewing Network Programming. Telemundo may terminate this
Agreement upon two weeks' notice if the Affiliate fails to
broadcast at least 75% of the Network Programming (measured by
broadcast hour) in any given month except as permitted by
Section l(d) and except with regard to any Network Programming
that Telemundo is unable to offer to the Affiliate. Certain
additional termination rights of Telemundo are set forth on
Attachment A.
9. INDEMNIFICATION
Telemundo shall indemnify, defend and hold the Affiliate and
its officers, directors, agents, stockholders, employees,
legal representatives, successors and assigns harmless from
and against any and all claims, damages, liabilities, costs
and expenses, including reasonable attorneys' fees, arising
from (i) the use by the Affiliate, in accordance with the
terms and conditions of this Agreement, of the
Spanish-language programming supplied by Telemundo hereunder,
and (ii) any breach by Telemundo of any of its obligations
under this Agreement, provided that the Affiliate has promptly
notified Telemundo after becoming aware of any claim to which
this indemnity shall apply, and that the Affiliate cooperate
fully with Telemundo in the defense of such claim at
Telemundo's request. The Affiliate similarly agrees to
indemnify, defend and hold Telemundo and its officers,
directors, agents, stockholders, employees, legal
representatives, successors and assigns harmless from and
against any and all claims, damages, liabilities, costs, and
expenses, including reasonable attorneys' fees, arising from
(i) the use by the Affiliate of the programming supplied
hereunder other than in accordance with the terms and
conditions of this Agreement and/or the terms of the offer of
such programming, and (ii) any breach by the Affiliate of any
of its obligations under this Agreement, provided that
Telemundo has promptly notified the Affiliate after
-6-
<PAGE>
becoming aware of any claim to which this indemnity shall
apply, and that Telemundo cooperate fully with the Affiliate
in the defense of such claim at the Affiliate's request.
Neither party may enter into or participate in any judgment or
settlement of any claim that binds the other party without the
prior written consent of such other party, which consent shall
not be unreasonably withheld or delayed. Notwithstanding
anything contained in this Agreement, Telemundo makes no
representation or warranty with respect to the music
performing rights of any programming supplied to the Affiliate
hereunder, and neither the scope of the indemnification by
Telemundo of the Affiliate contained herein, nor any
obligation of Telemundo hereunder, is intended to, or shall
exceed the scope of any indemnification to which Telemundo is
contractually entitled from Telemundo's producers or suppliers
with respect to the programming in question.
10. MISCELLANEOUS
(a) All notices, demands, requests or other
communications which may be or are required to be
given, served or sent by any party to any other party
pursuant to this Agreement shall be in writing and
shall be mailed by first-class, registered or
certified mail, return receipt requested, postage
prepaid, or transmitted by hand delivery, overnight
courier, telegram, telecopier or telex, addressed as
follows:
(i) If to the Affiliate:
Interspan Communications
900 South Garfield
Alhambra, California 91801
Attn: Roland A. Hernandez
Telecopier: (213) 283-2736
Telephone: (213) 283-2732
with a copy to:
Wayne Casa
General Manager
KFWD-TV
3000 West Story Road
Irving, Texas 75038
Telecopier: (214) 258-1770
Telephone: (214) 255-5200
(ii) If to Telemundo:
Telemundo Group, Inc.
1740 Broadway, 18th Floor
New York, New York 10019
Attn: Corporate Counsel
Telecopier: (212) 459-9498
Telephone: (212) 492-5500
-7-
<PAGE>
Each party may designate by notice in writing a new
address to which any notice, demand, request or
communication may thereafter be so given, served or
sent. Each notice, demand, request or communication
which shall be mailed, delivered or transmitted in
the manner described above shall be deemed
sufficiently given, served, sent and received for all
purposes at such time as it is delivered to the
addressee (with the return receipt, the affidavit of
messenger or the answerback being deemed conclusive
evidence of such delivery) or at such time as
delivery is refused by the addressee upon
presentation.
(b) This Agreement shall not be assignable by the
Affiliate without the prior written consent of
Telemundo. If any application is made to the FCC
concerning a transfer of the Station license or of
any interest in the Station license (a "Transfer"),
the Affiliate shall notify Telemundo forthwith, and
Telemundo shall have the right to terminate this
Agreement effective as of the effective date of any
such Transfer by giving notice thereof to the
Affiliate within 60 days after the date on which the
Affiliate gives Telemundo notice of the making of
such application. If Telemundo does not terminate
this Agreement, the Affiliate shall, prior to the
effective date of any such Transfer, obtain and
deliver to Telemundo, in a form satisfactory to
Telemundo, the agreement of the proposed transferee
expressly stating that the transferee will assume and
perform all of the Affiliate's obligations contained
in this Agreement on and after the effective date of
the Transfer. Effective on such date, the provisions
of this Agreement shall apply to such transferee.
(c) This Agreement, the rights and obligations of the
parties, and any claims or disputes relating thereto
shall be governed by and construed in accordance with
the laws of the State of New York (but not including
the choice of law rules thereof).
(d) This Agreement may be executed in counterparts, and
it shall not be necessary that the signatures on
behalf of each party appear on each counterpart. All
counterparts shall collectively constitute a single
agreement.
(e) This Agreement may not be amended or modified except
by a writing executed by both of the parties hereto.
(f) The Affiliate shall provide to Telemundo within 10
days after the end of each month during the term of
this Agreement notarized affidavits of performance
containing information concerning the broadcasts of
the network and national spot commercial
advertisements, including without limitation, the
length of the commercial, the exact time and date of
each broadcast, the advertiser, commercial and
program in which the commercial is broadcast. Unless
otherwise notified by Telemundo, the Affiliate shall
bill agencies directly for
-8-
<PAGE>
national spot advertising within 10 days after the
end of each month, and copies of bills shall be
promptly furnished by the Affiliate to Telemundo. The
Affiliate shall use its best efforts to collect all
revenues for national spot advertising. If the
Affiliate fails for whatever reason to broadcast a
commercial advertisement in accordance with
Telemundo's schedule, the Affiliate shall "make good"
such commercial advertisement during the same day
part in which the advertisement was originally
intended to be scheduled, or in accordance with the
advertiser's request, if different. The Affiliate
also agrees that it will not broadcast any commercial
advertisement that is competitive with a network or
spot advertisement placed by Telemundo within 15
minutes of the Telemundo advertisement, provided that
if Telemundo notifies the Affiliate in advance of a
greater separation requirement of an advertiser, the
Affiliate shall comply with any such requirement. The
Station further agrees that if Telemundo grants
exclusive sponsorship to one or more advertisers
during any Network Programming, the Station will not
broadcast commercials during such programming that
are competitive with the products or services that
are advertised by such sponsors. If Telemundo is
prohibited (by a third party or by its own policies)
from advertising certain products or services during
certain programming, the Affiliate agrees not to
advertise such products or services during any such
programming supplied by Telemundo. Telemundo shall
have the right to audit the books and records of the
Affiliate upon reasonable notice and during business
hours in order to verify the accuracy of the
affidavits of performance and to insure the
Affiliate's compliance with the terms of this
Agreement.
(g) To the extent that Telemundo obtains a network
license from ASCAP and/or BMI which, as it would
relate to network revenues, would cover Telemundo's
affiliates, the Affiliate hereby agrees to make all
necessary local filings and payments to ASCAP and/or
BMI with respect to the Station and to reimburse
Telemundo for network license fees paid by Telemundo
based primarily upon the average percentage of the
network's TV Hispanic Households delivered by the
Station. The Affiliate's share should not exceed what
the Affiliate would otherwise be required to pay in
ASCAP and BMI license fees if the Affiliate paid all
such fees directly and Telemundo paid no license fees
covering the Affiliate. This paragraph shall not in
any way obligate Telemundo to obtain a network ASCAP
or BMI license. Until such time, if any, as Telemundo
obtains a network license that would include the
Affiliate, the Affiliate acknowledges and agrees that
it is responsible for paying all applicable fees and
making all required filings with respect to the music
performing rights of any programming supplied to the
Affiliate by Telemundo.
(h) The Affiliate represents and warrants that it is the
licensee of the Station and that it is duly
authorized to enter into and perform this Agreement
and that it is not a party to any other agreement the
terms of which would be violated by the execution of
this Agreement.
(i) The Affiliate acknowledges that the local and
national reputation of Telemundo and its affiliates,
including but not limited to the reputation as
broadcasters of
-9-
<PAGE>
family-oriented programming, is of the highest
concern to Telemundo. Telemundo shall have the right
to terminate this Agreement if, as a result of any
action or situation involving the Affiliate or the
Station or the principals of either of them, the
reputation of Telemundo or any of its affiliates may
be adversely affected.
(j) The Affiliate agrees to have and maintain a
telecopier machine during the term of this Agreement
in order that Telemundo and the Affiliate may contact
one another by telecopier.
(k) The Affiliate agrees to maintain at its expense any
equipment reasonably required by Telemundo to be kept
at the Station in order to receive log information to
be delivered by Telemundo to its broadcast
affiliates. The Affiliate shall execute any necessary
leases and financing statements related to any such
equipment furnished by Telemundo provided that no
capital or leasing costs shall be imposed upon the
Affiliate.
(m) The Affiliate agrees that in connection with its
responsibilities and obligations as a Telemundo
affiliate and in order to maximize advertising
revenues, it will develop and implement local
promotions, meeting and advertising strategies, and
will use its best efforts to assist in localizing
Telemundo's network promotions (i.e. by advertising
the call letters of the Affiliate and the local times
at which the network program will air).
IN WITNESS WHEREOF, each of the undersigned has caused this Agreement
to be duly executed on its behalf as of the date first hereinabove set forth.
<TABLE>
<CAPTION>
<S> <C>
TELEMUNDO GROUP, INC. INTERSPAN COMMUNICATIONS,
A CALIFORNIA LIMITED PARTNERSHIP
(For itself and on behalf of Station KFWD, Dallas, Texas)
By: INTERSPAN COMMUNICATIONS CORP.,
Its General Partner
By: /s/ PETER J. HOUSMAN II By: /s/ ROLAND A. HERNANDEZ
-------------------------------- --------------------------------------
Peter J. Housman II Roland A. Hernandez
President - Business and President
Corporate Affairs
</TABLE>
-10-
<PAGE>
ATTACHMENT A
COMPENSATION - STATION KFWD, CHANNEL 52
DALLAS-FORT WORTH, TEXAS
Telemundo Group, Inc. will provide compensation to the Affiliate as
described herein.
1. NETWORK COMPENSATION
The Affiliate shall be entitled to receive network
compensation payments in the amount of $1,100,000 for the
first year of the term, $1,200,000 for the second year of the
term and $1,300,000 for the third year of the term. Within 15
days after the close of each calendar month of the term,
Telemundo shall pay the Affiliate one-twelfth of the
applicable compensation payment. The compensation payable
hereunder will be prorated for any partial months. If
Telemundo elects to terminate this Agreement in accordance
with the terms hereof, Telemundo shall only be required to pay
the Affiliate network compensation through the termination
date. Telemundo shall be entitled to deduct from network
compensation payable to the Affiliate hereunder amounts due
and owing to it from the Affiliate including, but not limited
to, the 15% representation fee payable pursuant to Section
7(a) of the Agreement, if not otherwise paid to Telemundo by
the Affiliate.
The parties agree that the full network compensation provided
for in this Attachment A is based upon the Affiliate
broadcasting all of the Network Programming and all of the
Brokered Time.
2. MINIMUM PERFORMANCE STANDARDS
Telemundo shall be entitled in its sole discretion to
terminate this Agreement upon 30 days prior written notice if
Station KFWD fails to achieve at least a 30% audience share
for any two consecutive ratings books during the term of this
Agreement, commencing with the November 1993 ratings book. The
Affiliate's audience share performance will be reviewed twice
each year, after the ratings become available, based on the
SRC (or alternate mutually acceptable ratings service) May and
November ratings for the Dallas-Fort Worth ADI, Monday through
Sunday, 1:00 PM to 10:00 PM, Central Time with the Affiliate's
rating expressed as a percentage of the combined rating for
the Affiliate and the local Univision affiliate ("Audience
Share").
3. BONUS COMPENSATION
In addition to the Network Payments, the Affiliate will be
eligible to receive a monthly bonus to be adjusted retroactive
to the first day of June and December based on Station KFWD's
Audience Share for the May and November ratings periods (as
described in Section 2 above) as set forth below:
-11-
<PAGE>
MONTHLY
BONUS AMOUNT AUDIENCE SHARE AUDIENCE SHARE
DURING YEAR 45%-50% ABOVE 50%
------------ --------------- --------------
1 $1,666.67 $2,250.00
2 $2,125.00 $2,833.34
3 $2,875.00 $3,833.34
Notwithstanding anything to the contrary contained in this
Section 3, until the November 1993 ratings book results become
available, the bonus eligibility for the period September 1993
through November 1993 shall be based on the May 1993 ratings
book. As soon as the November 1993 ratings book becomes
available, an adjustment shall be made retroactive to December
1, 1993 based on the bonus chart set forth above.
4. ADDITIONAL BONUS COMPENSATION.
In addition to the network and bonus compensation payable by
Telemundo to the Affiliate under this Agreement as set forth
above, the Affiliate will be eligible to receive a
supplementary monthly bonus to be adjusted retroactive to the
first day of June and December based on Station KFWD's
Audience Share for the May and November ratings periods Monday
through Friday, 1:00 pm to 10:00 pm, Central Time, as set
forth below:
MONTHLY
BONUS AMOUNT AUDIENCE SHARE
DURING YEAR ABOVE 45%
------------ --------------
1 $2,083.33
2 $2,916.66
3 $4,166.66
Notwithstanding anything to the contrary contained in this
Section 4, until the November 1993 ratings book results become
available, the bonus eligibility for the period September 1993
through December 1993 shall be based on the May 1993 ratings
book in which the Affiliate had a Audience Share of more than
45%, and the Affiliate shall be entitled to a supplementary
monthly bonus in the amount of $2,083.33 per month as of
September 1, 1993. As soon as the November 1993 ratings book
becomes available, an adjustment shall be made retroactive to
December 1, 1993 based on the bonus chart set forth above.
-12-
MODIFICATION AGREEMENT
MODIFICATION AGREEMENT (this "Modification"), dated as of September 10,
1997, between TELEMUNDO GROUP, INC., a Delaware corporation ("Telemundo") and
INTERSPAN COMMUNICATIONS, a California limited partnership ("Affiliate").
RECITALS
Telemundo and Affiliate are parties to that certain Network Affiliation
and Representation Agreement (the "Original Agreement"), dated as of August 31,
1993. Pursuant to the Original Agreement, Affiliate has the right to broadcast
certain Spanish-language programming transmitted by Telemundo.
Roland A. Hernandez ("Hernandez"), a principal of Affiliate, and
Telemundo entered into an Employment Agreement (the "Original Employment
Agreement"), dated as of March 9, 1995. In connection with the Original
Employment Agreement, Telemundo and Affiliate entered into an Agreement in
Principle (the "Agreement in Principle" and, together with the Original
Agreement, the "Existing Agreement"), dated as of April 7, 1995. The Agreement
in Principle modified the Original Agreement.
Concurrently with the execution of this Modification, Telemundo and
Hernandez will enter into an Amended and Restated Employment Agreement (the
"Employment Agreement"). In connection with the Employment Agreement, Telemundo
and Affiliate desire to modify the Existing Agreement as set forth herein (as so
modified, the Existing Agreement is the "Affiliation Agreement").
AGREEMENT
In consideration of the foregoing recitals, the mutual
covenants contained herein and other valuable consideration, the parties agree
as follows:
1. EXTENSION OF TERM. The term of the Existing Agreement is hereby extended
through February 28, 2001, subject to the terms of the Affiliation Agreement.
2. AFFILIATION COMPENSATION. Telemundo shall pay to Affiliate compensation in
the amounts, and on the terms, set forth in Exhibit A hereto (the "Affiliation
Compensation"). The amount of the Affiliation Compensation shall increase
annually in accordance with the escalation schedule included in Exhibit A.
3. TERMINATION RIGHT. In the event that Hernandez's employment pursuant to the
Employment Agreement terminates for any reason, Affiliate shall have the right
(the "Termination Right") to terminate the Affiliation Agreement. Affiliate may
exercise the Termination Right at any time by giving written notice of such
exercise to Telemundo; PROVIDED, HOWEVER, that such notice must be given during
the 12-month period following the termination of
<PAGE>
Hernandez's employment. The termination notice shall specify the effective date
of the Affiliation Agreement's termination, which date shall be no less than six
months after the date such notice is given. Upon the termination of the
Affiliation Agreement pursuant to the Termination Right, the parties' rights and
obligations under the Affiliation Agreement shall cease; PROVIDED, HOWEVER, that
such rights and obligations shall survive to the extent they arose (or relate
directly to events occurring) prior to the effective date of the Affiliation
Agreement's termination. In no event shall the term of the Affiliation Agreement
be extended as a result of the exercise of the Termination Right.
IN WITNESS WHEREOF, each of the undersigned has caused this
Modification to be duly executed on its behalf as of the date first set forth
herein.
TELEMUNDO GROUP, INC.
By: /s/ PETER J. HOUSMAN II
-------------------------------------
Name: Peter J. Housman II
Title: Chief Financial Officer & Treasurer
INTERSPAN COMMUNICATIONS
By: INTERSPAN COMMUNICATIONS CORPORATION
Its: General Partner
By: /s/ ROLAND A. HERNANDEZ
-------------------------------------
Name: Roland A. Hernandez
Title: Pres. GP
<PAGE>
EXHIBIT "A"
KFWD - Dallas
Renewal Terms
I. BASE COMPENSATION(1)
BASE
FISCAL YEAR COMPENSATION
9/1/97 - 8/31/98 $ 1,500,000
9/1/98 - 8/31/99 $ 1,612,500
9/1/99 - 8/31/2000 $ 1,733,438
9/1/2000-2/28/2001 $ 1,863,445(2)
(1) Represents annual base Affiliate Compensation to be paid in accordance
with Company's existing established practices.
(2) Represents Compensation for a full year. Affiliate entitled to pro rata
portion of the full fiscal year Compensation pursuant to number of
months Affiliate holds affiliation agreement with Company.
II. BONUS COMPENSATION(1)
<TABLE>
<CAPTION>
BASE BONUS AMOUNT (2) INCREMENTAL BONUS (3)
(M-F 9:00A-10P, SAT-SUN 1P-10P) (M-F 9:00A-10P)
----------------------------------------------------- ----------------------
AUDIENCE SHARE (4) AUDIENCE SHARE (4)
FISCAL YEAR 35%-40% % INCREASE ABOVE 40% ABOVE 35%
<S> <C> <C> <C>
Each Affiliate $ 42,750 N/A $ 57,750 $ 62,750
Contract Year
(1997 - 2001)
</TABLE>
(1) If earned, Bonus Compensation (which consists of the Base
Bonus and the Incremental Bonus) shall be payable to Affiliate
twice yearly. Bonus Compensation shall be based upon
respective May and November sweeps performance as measured by
A.C. Nielsen and published in a Nielsen "book." The bonus
amounts set forth in this Section II are the total attainable
bonus amounts for the Affiliate's annual performance.
Therefore, performance for each of the respective two Nielsen
sweep books will govern Affiliate's entitlement to earn for
each such sweep book 50% of the total available Bonus
Compensation.
(2) Base Bonus Amount is measured by two separate standards of
performance. Affiliate is entitled to earn only the highest
Base Bonus Amount, i.e., the amounts are not additive.
(3) If earned under applicable performance standards, the
Incremental Bonus shall be payable in addition to the Base
Bonus. The Incremental Bonus is independent of the Base Bonus
and can be earned whether or not a Base Bonus is earned.
(4) NHSI Household Audience share as measured by A.C. Nielsen
Company, with audience share to be determined by measuring
Telemundo and Univision station performance in the market as
the total universe.
III. MINIMUM PERFORMANCE STANDARDS
None.
EXHIBIT 13.1
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
Predecessor
----------------------
YEAR ENDED DECEMBER 31 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net revenue ........................................ $ 197,588 $ 202,713 $ 169,148 $ 183,894 $ 177,809
Operating income ................................... 16,114 29,292 14,379 13,176 16,597
Reorganization items ............................... - - - 76,255 (2,543)
Interest expense - net of interest income .......... (20,849) (18,920) (14,489) (645) (24,411)
Loss from investment in and disposal of TeleNoticias - (5,561) (6,355) (1,314) -
Income (loss) before extraordinary item ............ (13,444) (1,179) (10,088) 84,049 (14,059)
Extraordinary item - extinguishment of debt ........ - (17,243) - 130,482 -
Net income (loss) (a) .............................. (13,444) (18,422) (10,088) 214,531 (14,059)
Basic net loss per share:
Loss before extraordinary item ................. $ (1.32) $ (.12) $ (1.01)
Extraordinary item ............................. - (1.71) -
--------- --------- ---------
Net loss ....................................... $ (1.32) $ (1.83) $ (1.01) (a) (a)
========= ========= ========= ========= =========
Dividends declared on common shares ................ - - - - -
========= ========= ========= ========= =========
</TABLE>
<TABLE>
BALANCE SHEET DATA:
<CAPTION>
Predecessor
-----------
DECEMBER 31 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Working capital ................................. $ 44,576 $ 44,769 $ 35,541 $ 32,325 $ 65,691
Broadcast licenses and reorganization value
in excess of amounts allocable to identifiable
assets, net .................................. 128,366 132,831 90,200 92,792 -
Total assets .................................... 290,086 295,560 224,459 232,024 169,657
Long-term debt (liabilities subject to settlement
prior to 1994) .............................. 189,081 179,695 108,032 100,724 326,784
Common stockholders' equity (deficiency) ........ 29,909 42,893 60,251 70,000 (214,816)
</TABLE>
(a) Prior to 1995, net income (loss) was significantly impacted in certain
years by nonrecurring income and expense items related to the Company's
financial restructuring. The Company was recapitalized and adopted fresh
start reporting as of December 31, 1994. Consequently, for the years prior
to 1995, the Company is referred to as the Predecessor and net income
(loss) per share is not applicable.
2
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
- --------------------------------------------------------------------------------
The following discussion and analysis of financial condition and results of
operations should be read in conjunction with the Company's consolidated
financial statements and related notes. Except for historical information
contained herein, certain matters discussed are forward looking disclosures that
involve risks and uncertainties, including (without limitation) those risks
associated with the effect of economic conditions; the Company's outstanding
indebtedness and leverage; restrictions imposed by the terms of the Company's
indebtedness; changes in advertising revenue which are caused by changes in
national and local economic conditions, the relative popularity of the Company's
programming, the demographic characteristics of the Company's markets and other
factors outside the Company's control; future capital requirements; the impact
of competition, including its impact on market share and advertising revenue in
each of the Company's markets; the loss of key employees; the modification or
termination of network affiliation agreements; the availability of
cost-effective programming; the impact of litigation; the impact of current or
pending legislation and regulations, including Federal Communications Commission
("FCC") rulemaking proceedings; and other factors which may be described from
time to time in filings of the Company with the Securities and Exchange
Commission.
PROPOSED MERGER TRANSACTION
On July 17, 1997 the Company announced the retention of the investment banking
firm Lazard Freres & Co. LLC ("Lazard") to assist the Company in pursuing
discussions with potential strategic programming partners for purposes of
expanding its programming options and enhancing stockholder value. Lazard
contacted a number of parties whom it had identified as likely to have an
interest in a potential transaction with the Company, and over the next several
months information was exchanged with these parties, discussions with Company
management took place and negotiations with the Company's advisors ultimately
ensued. On November 24, 1997 the Company announced that it had entered into a
definitive agreement with a venture formed by Sony Pictures Entertainment Inc.,
Liberty Media Corporation, Apollo Investment Fund III, L.P. and Bastion Capital
Fund, L.P. (such venture, the "Purchaser") pursuant to which the Purchaser will
acquire all of the common stock of the Company in a cash merger transaction (the
"Merger") for $44 per share, plus, subject to certain conditions, an additional
amount if the Merger is not completed by July 30, 1998. The proposed
transaction, which is expected to close in the summer of 1998, is subject to the
approval of Company stockholders (for which a related preliminary proxy
statement was filed with the Securities and Exchange Commission on February 18,
1998) and the FCC, the expiration of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act, as well as the receipt by the
Purchaser of the financing required to consummate the Merger (the Purchaser has
received commitments from financial institutions and its stockholders in an
amount sufficient to fund the Merger). As a result of the various conditions to
the completion of the Merger, there can be no assurance that the Merger will be
consummated.
Under certain circumstances, the Company may terminate the Merger and accept a
proposal determined by its Board of Directors to be superior, from a financial
point of view to the stockholders of the Company (other than stockholders
affiliated with the Purchaser or their affiliates), to the Merger, subject to
the payment of a termination fee of $15 million to the Purchaser and the
reimbursement of up to an aggregate of $2.5 million in expenses incurred by the
Purchaser in connection with the Merger. The Purchaser will be required to pay a
termination fee of $17.5 million to the Company if, solely as a result of the
failure of the Purchaser to obtain an FCC order regarding the transfer of the
Company's broadcast licenses which is satisfactory to the Purchaser, the Merger
has not been consummated on or before December 31, 1998 and the Merger is at
such time or thereafter terminated by either the Company or the Purchaser.
3
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION (CONTINUED)
- --------------------------------------------------------------------------------
YEAR 2000 ISSUE
The Company has developed plans, utilizing internal resources, to ensure its
information systems are capable of properly utilizing dates beyond December 31,
1999 (the "Year 2000" issue). During the past year, the Company upgraded or
replaced many of its accounting and traffic computer systems, including the
conversion to new software which is Year 2000 compliant, at a total cost of
approximately $450,000. Additionally, the Company has evaluated its other
principal computer systems and determined they are substantially Year 2000
compliant. The Company is also seeking to work with its relevant customers,
suppliers and other service providers to ensure their systems are Year 2000
compliant. Although the impact on the Company caused by the failure of its
significant customers, suppliers and other service providers to achieve Year
2000 compliance in a timely and effective manner is uncertain, the Company's
business and results of operations could be materially adversely affected by
such failure.
TRANSACTIONS AFFECTING COMPARABILITY OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
On February 26, 1996, the Company completed the acquisition of a 74.5% interest
in Video 44, which owns WSNS-TV, Channel 44 in Chicago. The acquisition was
accounted for under the purchase method of accounting (see Note 3 of "Notes to
Consolidated Financial Statements").
RESULTS OF OPERATIONS
Net revenue for each of the three years in the period ended December 31, 1997
was as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31 DECEMBER 31
1997 CHANGE 1996 CHANGE 1995
--------------- ----------- ----------------- ----------- ----------------
<S> <C> <C> <C> <C>
Net Commercial Air Time:
Continental U.S.:
Network and National Spot........... $ 82,828,000 - % $ 82,741,000 22% $ 67,938,000
Local ............................... 41,572,000 (12)% 47,345,000 22% 38,888,000
------------- ------------- -------------
124,400,000 (4)% 130,086,000 22% 106,826,000
Puerto Rico ......................... 44,012,000 1 % 43,741,000 16% 37,830,000
------------- ------------- -------------
168,412,000 (3)% 173,827,000 20% 144,656,000
Other Revenue ....................... 29,176,000 1 % 28,886,000 18% 24,492,000
------------- ------------- -------------
$ 197,588,000 (3)% $ 202,713,000 20% $ 169,148,000
============= ============= =============
</TABLE>
The increase in network and national spot revenue in 1997 is the result of the
continued growth in the overall Spanish-language television market and the
acquisition of WSNS-TV in Chicago, offset by a decline in audience share.
Excluding the impact of WSNS, which is reflected in the financial statements
effective February 27, 1996, network and national spot revenue would have
decreased by 1% in 1997. The increase in network and national spot revenue in
1996 was the result of the growth in the overall Spanish-language television
market, the acquisition of WSNS-TV, and increases in audience share for the
relevant ratings periods. Excluding the impact of WSNS, network and national
spot revenue would have increased by 13% in 1996.
4
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION (CONTINUED)
- --------------------------------------------------------------------------------
The decrease in local revenue in 1997 is primarily the result of the decline in
audience share which impacted all stations, most significantly KVEA-Los Angeles
and WSCV-Miami. Local revenue was also impacted by the operations of WSNS being
included for the entire year in 1997. Excluding the impact of WSNS, local
revenue would have decreased by 14%. The increase in local revenue in 1996 was
the result of an increase at KVEA-Los Angeles and other major owned and operated
stations, related to increases in audience shares for the relevant ratings
periods, and the acquisition of WSNS. Excluding the impact of WSNS, local
revenue would have increased by 7% in 1996.
The Company's average share of the weekday Spanish-language television network
audience for each of the first through fourth quarters of 1997 was 18% and was
26%, 23%, 23% and 21%, respectively, for the first through fourth quarters of
1996. A change in audience share typically has a delayed impact on revenue.
The Company believes that the decline in audience share previously noted has
been in part the consequence of difficulties encountered in acquiring and
developing programming to compete effectively with its principal competitor's
prime-time programming. The Company determined that it would likely be able to
compete more effectively by allying itself with one or more strategic partners
who could provide it with the programming, capital and other resources to
aggressively pursue the U.S. Spanish-language television audience. This resulted
in the search for potential strategic programming partners for purposes of
expanding programming options and enhancing stockholder value as discussed under
"Proposed Merger Transaction".
The increase in commercial air time revenue in Puerto Rico in 1997 is the result
of WKAQ maintaining its dominant audience share in a market which grew slightly.
The increase in 1996 was the result of an increase in WKAQ's prime time audience
share and growth in the overall market, due in part to political advertising.
Other revenue increased in 1997 primarily as a result of an increase in
international program sales and the impact of WSNS, which was offset by the
decline in sales of blocks of broadcast time to independent programmers.
Excluding the impact of WSNS, other revenue would have decreased by 1%. Other
revenue increased in 1996 primarily due to sales of blocks of broadcast time and
the acquisition of WSNS. Excluding the impact of WSNS, other revenue would have
increased by 9% in 1996.
Direct operating costs increased $6.3 million or 7% in 1997, which primarily
reflects an increase in programming and production expenses, including those at
WKAQ, and the impact of including the costs of WSNS for the entire year.
Excluding the impact of WSNS, direct operating costs would have increased by 6%.
The $8.4 million or 11% increase in 1996 primarily reflected an increase in
programming costs, as well as costs attributable to WSNS. Excluding WSNS, direct
operating expenses would have increased by 8% in 1996.
Selling, general and administrative expenses, other than network and corporate,
decreased $1.2 million or 3% in 1997, which is primarily the result of the
Company undertaking cost reduction efforts, particularly at the station group,
and was offset in part by the impact of the acquisition of WSNS. Excluding WSNS,
selling, general and administrative expenses would have decreased by 4%. The
$5.6 million or 16% increase in 1996 primarily reflected the acquisition of
WSNS. Excluding WSNS, selling, general and administrative expenses would have
increased by 2% in 1996.
5
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION (CONTINUED)
- --------------------------------------------------------------------------------
Network expenses, which represent costs associated with the network operations
center as well as sales, marketing and other network costs not allocated to
specific television stations, increased by $1.8 million or 6% in 1997 which
primarily reflects increases in advertising and promotion costs. Network
expenses increased by $3.0 million or 12% in 1996 primarily as a result of an
increase to the allowance for doubtful accounts.
Corporate expenses increased by $511,000 in 1997 which is primarily a result of
a full year of compensation and operating expenses associated with an additional
corporate office and increased legal costs, offset in part by a decrease in
executive incentive compensation. Corporate expenses decreased by $29,000 in
1996, which was primarily a result of an increase in executive incentive
compensation more than offset by other expense savings.
Depreciation and amortization expense increased by $627,000 or 5% in 1997 which
reflects an increase in fixed asset additions and the impact of a full year of
WSNS. Depreciation and amortization expense increased $1.7 million or 14% in
1996 which was primarily the result of the addition of WSNS.
Merger related expenses include investment banking, legal, accounting and other
costs incurred through December 31, 1997 for services provided to the Company in
connection with the Merger.
Interest expense, net of interest income, in 1997 totaled $20.8 million as
compared to $18.9 million and $14.5 million in 1996 and 1995, respectively.
Interest expense in 1997 and 1996 includes (i) interest accrued and accreted on
the 10.5% Senior Notes due 2006 (the "10.5% Senior Notes"), which were issued on
February 26, 1996 at a discount and were structured to produce a yield to
maturity of 10.5% per annum, (ii) amortization of deferred issuance costs for
the 10.5% Notes, (iii) interest and fees associated with the Company's revolving
credit facility, and (iv) interest accrued and accreted on the 10.25% Senior
Notes (the "10.25% Notes") (approximately 99.8% of which were tendered in a
repurchase offer on February 26, 1996). Interest expense was offset by $303,000
and $304,000 of interest income in 1997 and 1996, respectively. Interest expense
in 1995 primarily represents interest on the Company's 10.25% Notes, and is
offset by $268,000 of interest income.
Net loss from investment in TeleNoticias of $3.1 million and $6.4 million in
1996 and 1995, respectively, represented the Company's 42% share of
TeleNoticias' net loss and related costs. In addition, the loss on disposal of
TeleNoticias of $2.4 million in 1996 resulted from the disposal of the Company's
interests in TeleNoticias on June 26, 1996 (see Note 4 of "Notes to Consolidated
Financial Statements").
The income tax provision recorded in each of the periods relates to WKAQ, which
is taxed separately under Puerto Rico income tax regulations, withholding taxes
related to foreign operations, and certain state income and franchise taxes. The
Company is in a net operating loss position for federal tax purposes. The
Company's use of its net operating and capital loss carryforwards, incurred
prior to December 31, 1994, are subject to certain limitations imposed by
Section 382 of the Internal Revenue Code and their use will be limited.
Minority interest represents distributions to the 25.5% partner in Video 44,
which is based on a minimum preferred distribution to such partner.
The extraordinary loss on extinguishment of debt in 1996 is related to the
repurchase of 10.25% Notes.
6
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION (CONTINUED)
- --------------------------------------------------------------------------------
LIQUIDITY AND SOURCES OF CAPITAL
The Company's cash flows from operating activities were $486,000 for 1997 as
compared to $24.7 million for 1996 and $11.6 million for 1995. The decrease in
1997 is the result of a decrease in operating income before depreciation and
amortization and the net effect of changes in certain asset and liability
accounts. The increase in 1996 was the result of the improvement in operating
income before depreciation and amortization and the net effect of changes in
certain asset and liability accounts, including WSNS's initial working capital
requirements.
The Company had working capital of $44.6 million at December 31, 1997, compared
to $44.8 million at December 31, 1996.
Capital expenditures of approximately $11.2 million were made during 1997 for
the replacement and upgrading of equipment, expanding production capabilities
and upgrading facilities.
The Company's principal sources of liquidity are cash from operations and a
revolving credit facility. The facility provides for borrowings of up to $20
million, subject to an accounts receivable borrowing base which was maintained
during all of 1997. At December 31, 1997, the Company had $3.8 million in
borrowings outstanding under the facility and a $1.2 million standby letter of
credit which was issued to secure an office lease, leaving $15.0 million
available. The Company plans on financing interim cash needs through cash
generated from operations and the revolving credit facility. The Company does
not anticipate the need to obtain any additional financing to fund operations.
7
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net revenue ............................................... $ 197,588,000 $ 202,713,000 $ 169,148,000
------------- ------------- -------------
Costs and expenses:
Direct operating costs ................................ 93,297,000 86,994,000 78,609,000
Selling, general and administrative expenses other than
network and corporate .............................. 38,707,000 39,910,000 34,270,000
Network expenses ...................................... 30,650,000 28,835,000 25,848,000
Corporate expenses .................................... 4,882,000 4,371,000 4,400,000
Depreciation and amortization ......................... 13,938,000 13,311,000 11,642,000
------------- ------------- -------------
181,474,000 173,421,000 154,769,000
------------- ------------- -------------
Operating income .......................................... 16,114,000 29,292,000 14,379,000
Merger related expenses ................................... (1,707,000) - -
Interest expense - net of interest income of $303,000 in
1997, $304,000 in 1996 and $268,000 in 1995 ............ (20,849,000) (18,920,000) (14,489,000)
Loss from investment in TeleNoticias ...................... - (3,120,000) (6,355,000)
Loss on disposal of TeleNoticias .......................... - (2,441,000) -
Other income (expense) .................................... 7,000 14,000 (104,000)
------------- ------------- -------------
Income (loss) before income taxes, minority interest and
extraordinary item .................................... (6,435,000) 4,825,000 (6,569,000)
Income tax provision ...................................... (4,201,000) (3,879,000) (3,519,000)
Minority interest ......................................... (2,808,000) (2,125,000) -
------------- ------------- -------------
Loss before extraordinary item ............................ (13,444,000) (1,179,000) (10,088,000)
Extraordinary item - extinguishment of debt ............... - (17,243,000) -
------------- ------------- -------------
Net loss .................................................. $ (13,444,000) $ (18,422,000) $ (10,088,000)
============= ============= =============
Net loss per share:
Loss before extraordinary item ..................... $(1.32) $ (.12) $(1.01)
Extraordinary item ................................. - (1.71) -
------ ------ ------
Net loss ........................................... $(1.32) $(1.83) $(1.01)
====== ====== ======
Weighted average shares outstanding ....................... 10,163,000 10,054,000 10,000,000
============= ============= =============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS DECEMBER 31 1997 1996
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents ................................................. $ 2,378,000 $ 12,587,000
Accounts receivable, less allowance for doubtful accounts of $7,583,000
and $5,943,000 ........................................................ 54,155,000 51,824,000
Television programming .................................................... 15,154,000 14,062,000
Prepaid expenses and other ................................................ 9,287,000 7,685,000
------------- -------------
Total current assets ............................................. 80,974,000 86,158,000
Property and equipment, net ................................................... 66,602,000 64,532,000
Television programming ........................................................ 6,779,000 4,588,000
Other assets .................................................................. 7,365,000 7,451,000
Broadcast licenses and reorganization value in excess of amounts allocable
to identifiable assets, net ............................................... 128,366,000 132,831,000
------------- -------------
$ 290,086,000 $ 295,560,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
- -----------------------------------------------------------------------------------------------------------------
Current liabilities:
Accounts payable .......................................................... $ 7,726,000 $ 8,831,000
Accrued expenses and other ................................................ 22,761,000 27,484,000
Television programming obligations ........................................ 5,911,000 5,074,000
------------- -------------
Total current liabilities ......................................... 36,398,000 41,389,000
Long-term debt ................................................................ 189,081,000 179,695,000
Capital lease obligations ..................................................... 5,120,000 5,945,000
Television programming obligations ............................................ 399,000 442,000
Other liabilities ............................................................. 23,845,000 19,950,000
------------- -------------
254,843,000 247,421,000
------------- -------------
Minority interest ............................................................. 5,334,000 5,246,000
------------- -------------
Contingencies and commitments
Common stockholders' equity:
Series A common stock, $.01 par value, 14,388,394 shares authorized, 7,129,614
and 6,621,983 shares outstanding at December 31, 1997 and 1996 ........... 71,000 66,000
Series B common stock, $.01 par value, 5,611,606 shares authorized, 3,088,341
and 3,530,232 shares outstanding at December 31, 1997 and 1996 ........... 31,000 36,000
Additional paid-in capital .................................................... 71,761,000 71,301,000
Accumulated deficit ........................................................... (41,954,000) (28,510,000)
------------- -------------
29,909,000 42,893,000
------------- -------------
$ 290,086,000 $ 295,560,000
============= =============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9
<PAGE>
<TABLE>
<CAPTION>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS' EQUITY
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES
OUTSTANDING COMMON STOCK
--------------------- ----------------------
SERIES A SERIES B SERIES A SERIES B ADDITIONAL COMMON
COMMON COMMON COMMON COMMON PAID-IN ACCUMULATED STOCKHOLDERS'
STOCK STOCK STOCK STOCK CAPITAL DEFICIT EQUITY
--------- --------- ------- ------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994...... 4,388,394 5,611,606 $44,000 $56,000 $69,900,000 $ - $70,000,000
Net loss........................ - - - - - (10,088,000) (10,088,000)
Stock option transactions (a)... - - - - 338,000 - 338,000
Warrant conversions............. 200 - - - 1,000 - 1,000
Stock conversions............... 1,545,271 (1,545,271) 15,000 (15,000) - - -
--------- --------- ------- ------- ----------- ------------ -----------
Balance, December 31, 1995...... 5,933,865 4,066,335 59,000 41,000 70,239,000 (10,088,000) 60,251,000
Net loss........................ - - - - - (18,422,000) (18,422,000)
Issuance of stock pursuant to
exercise of stock options..... 150,000 - 2,000 - 1,048,000 - 1,050,000
Warrant conversions............. 2,015 - - - 14,000 - 14,000
Stock conversions............... 536,103 (536,103) 5,000 (5,000) - - -
--------- --------- ------- ------- ----------- ------------ -----------
Balance, December 31, 1996...... 6,621,983 3,530,232 66,000 36,000 71,301,000 (28,510,000) 42,893,000
Net loss........................ - - - - - (13,444,000) (13,444,000)
Warrant conversions............. 65,740 - - - 460,000 - 460,000
Stock conversions............... 441,891 (441,891) 5,000 (5,000) - - -
--------- --------- ------- ------- ----------- ------------ -----------
Balance, December 31, 1997...... 7,129,614 3,088,341 $71,000 $31,000 $71,761,000 $(41,954,000) $29,909,000
========= ========= ======= ======= =========== ============ ===========
</TABLE>
(a) Effect of the cancellation and issuance of options to a former officer.
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10
<PAGE>
<TABLE>
<CAPTION>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.......................................................$(13,444,000) $(18,422,000) $(10,088,000)
Charges not affecting cash:
Depreciation and amortization.............................. 13,938,000 13,311,000 11,642,000
Interest accretion......................................... 5,557,000 4,559,000 1,511,000
Loss from investment in TeleNoticias ...................... - 3,120,000 6,355,000
Loss on disposal of TeleNoticias........................... - 2,441,000 -
Minority interest.......................................... 2,808,000 2,125,000 -
Extraordinary item - extinguishment of debt................ - 17,243,000 -
Changes in assets and liabilities, net of effect of Acquisition:
Accounts receivable........................................ (2,331,000) (6,023,000) 1,872,000
Television programming..................................... (3,283,000) (2,392,000) (676,000)
Television programming obligations......................... 794,000 594,000 (1,133,000)
Accounts payable and accrued expenses and other............ (3,553,000) 8,117,000 2,112,000
------------ ------------- ------------
Cash flows provided from operating activities............ 486,000 24,673,000 11,595,000
------------ ------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Video 44, net of cash acquired.................. - (43,973,000) -
Additions to property and equipment............................ (11,156,000) (9,125,000) (6,719,000)
Investment in TeleNoticias..................................... - (1,704,000) (3,104,000)
Disposal of TeleNoticias, net.................................. - (2,769,000) -
------------ ------------- ------------
Cash flows used in investing activities.................. (11,156,000) (57,571,000) (9,823,000)
------------ ------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of 10.5% Notes...................... - 169,981,000 -
Repurchase of 10.25% Notes, consent fee and related costs...... - (118,993,000) -
Proceeds from exercise of stock options and warrants........... 460,000 1,065,000 -
Payments of obligations under capital leases................... (727,000) (642,000) (517,000)
Borrowings under credit facility............................... 9,854,000 8,012,000 6,013,000
Payments under credit facility................................. (6,025,000) (13,993,000) (216,000)
Payments to minority interest partner.......................... (2,720,000) (2,061,000) -
Payments of reorganization items, liabilities subject to
settlement under Chapter 11 proceedings and other............ (381,000) (1,083,000) (5,703,000)
------------ ------------- ------------
Cash flows provided from (used in) financing activities.. 461,000 42,286,000 (423,000)
------------ ------------- ------------
Increase (decrease) in cash and cash equivalents............... (10,209,000) 9,388,000 1,349,000
Cash and cash equivalents, beginning of year................... 12,587,000 3,199,000 1,850,000
------------ ------------- ------------
Cash and cash equivalents, end of year.........................$ 2,378,000 $ 12,587,000 $ 3,199,000
============ ============= ============
Non-cash investing activities:
Note receivable and escrow deposit associated with
disposal of TeleNoticias, net of accrued liabilities.....$ - $ 879,000 $ -
============ ============= ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Telemundo Group, Inc. ("Telemundo"), together with its subsidiaries
(collectively, the "Company"), is one of two Spanish-language television
broadcast networks in the United States. The network provides programming
24-hours per day to its owned and operated stations and affiliates, which serve
61 markets in the United States, including the 37 largest Hispanic markets, and
reaches approximately 85% of all U.S. Hispanic households. The Company also owns
and operates the leading full-power television station and related production
facilities in Puerto Rico. The Company produces Spanish-language programming for
use on its network and for sale in foreign countries and sells advertising time
on behalf of its owned and operated television stations and affiliates.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Telemundo and its
subsidiaries. All significant intercompany balances and transactions have been
eliminated in consolidation. The Company's 42% investment in Telenoticias del
Mundo, L.P. ("TeleNoticias") had been accounted for by the equity method until
June 26, 1996, when substantially all of the assets and certain liabilities of
TeleNoticias were sold. (see Note 4).
USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect certain amounts reported in the consolidated
financial statements and accompanying notes. Actual results could differ from
those estimates.
CASH AND CASH EQUIVALENTS
The Company considers short-term investments with an original maturity of three
months or less to be cash equivalents. Such short-term investments are carried
at cost which approximates fair value.
TELEVISION PROGRAMMING
Television programming rights and the related obligations are recorded at gross
contract prices. The costs of the rights are amortized on varying bases related
to the license period, usage of the programs and management's estimate of
revenue to be realized from each airing of the programs.
12
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DEPRECIATION AND AMORTIZATION
Property and equipment is depreciated by the straight-line method over estimated
useful lives as follows:
Buildings........................ 40 Years
Antennas and transmitters........ 20 Years
Other broadcast equipment........ 3 to 7 Years
Furniture and fixtures........... 5 to 7 Years
Automobiles and trucks........... 4 Years
Leasehold improvements and
transponder.................. Shorter of Life of Lease or
Useful Life of Asset
BROADCAST LICENSES AND REORGANIZATION VALUE IN EXCESS OF AMOUNTS ALLOCABLE TO
IDENTIFIABLE ASSETS
Broadcast licenses and reorganization value in excess of amounts allocable to
identifiable assets represents the portions of reorganization value and Video 44
purchase price not attributable to specific tangible assets at the time of the
reorganization and the purchase, and are being amortized on a straight-line
basis over periods ranging from 10 to 40 years. Accumulated amortization was
$11.2 million at December 31, 1997. Broadcast licenses and reorganization value
in excess of amounts allocable to identifiable assets is attributable primarily
to FCC broadcast licenses ($115.3 million net of accumulated amortization at
December 31, 1997). The Company evaluates the recoverability of its investment
in such intangible assets in relation to anticipated cash flows on an
undiscounted basis. If the estimated future cash flows were projected to be less
than the carrying value, an impairment write-down would be recorded.
REVENUE RECOGNITION
Revenue is derived primarily from the sale of advertising time on a network,
national spot and local basis. In addition, the Company earns revenue from the
sale of blocks of broadcast time during non-network programming hours. Revenue
is recognized when earned, i.e., when the advertisement is aired or the block of
broadcast time is utilized. The Company reviews the collectibility of its
accounts receivable and adjusts its allowance for doubtful accounts accordingly.
During 1997, 1996 and 1995, no customer accounted for more than 10% of the
Company's revenue.
INCOME TAXES
Income taxes provided reflect the current and deferred tax consequences of
events that have been recognized in the Company's financial statements or tax
returns. A valuation allowance is recorded if it is more likely than not that a
deferred tax asset will not be realized.
13
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
PER COMMON SHARE INFORMATION
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
Earnings per Share ("FAS 128"). FAS 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Basic earnings per share excludes any dilutive effects of stock options,
warrants and convertible securities. Diluted earnings per share is not presented
as the effect of the 2,020,629 stock options and warrants is anti-dilutive.
RECLASSIFICATIONS
Certain reclassifications have been made in the prior years' financial
statements to conform with the current year's presentation.
2. PROPOSED MERGER TRANSACTION
On November 24, 1997 the Company announced that it had entered into a definitive
agreement with a venture to be formed by Sony Pictures Entertainment Inc.,
Liberty Media Corporation, Apollo Investment Fund III, L.P. and Bastion Capital
Fund, L.P. (such venture, the "Purchaser") pursuant to which the Purchaser will
acquire all of the common stock of the Company in a cash merger transaction (the
"Merger") for $44 per share, plus, subject to certain conditions, an additional
amount if the Merger is not completed by July 30, 1998. The proposed
transaction, which is expected to close in the summer of 1998, is subject to the
approval of Company stockholders (for which a related preliminary proxy
statement was filed with the Securities and Exchange Commission on February 18,
1998) and the Federal Communications Commission, the expiration of the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act, as well as the
receipt by the Purchaser of the financing required to consummate the Merger (the
Purchaser has received commitments from financial institutions and its
stockholders in an amount sufficient to fund the Merger). As a result of the
various conditions to the completion of the Merger, there can be no assurance
that the Merger will be consummated. Merger related costs incurred during 1997
were $1.7 million.
14
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------
In November 1997 after the announcement of the Merger, the Company and its
directors were named as defendants in six purported class actions filed on
behalf of Telemundo's public stockholders. The suits are virtually identical and
allege that Telemundo and its directors violated fiduciary duties owed to
Telemundo's public stockholders by entering into the merger agreement with the
Purchaser. The Company's board of directors, relying upon the unanimous
recommendation of a special committee of the board of directors comprised of
directors who have no financial interest in the Purchaser or its affiliates, has
determined that the Merger is fair to and in the best interests of the Company's
public stockholders. The Company and its directors intend to vigorously defend
the lawsuits, and believe that the outcome of the suits will not have a material
adverse effect on the Company's consolidated financial statements.
3. ACQUISITION AND REFINANCING
On February 26, 1996, Telemundo completed the acquisition of a 74.5% interest in
a joint venture ("Video 44"), which owns WSNS-TV, Channel 44 in Chicago, which
had been the Company's largest affiliated station (the "Acquisition"). The
purchase price for the Acquisition was approximately $44.6 million of cash and
$1.3 million of costs and liabilities associated with the Acquisition. The
allocation of the $45.9 million purchase price among property and equipment,
broadcast licenses and other assets was based upon estimated fair market values.
The operations of Video 44 are consolidated with those of the Company and the
interest, subject to a minimum preferred distribution, attributable to the
partner which owns the remaining 25.5% of the venture is reflected in the
accompanying financial statements as minority interest.
On February 26, 1996, the Company also completed the sale of $192 million in
aggregate principal amount of 10.5% Senior Notes due 2006 (the "10.5% Senior
Notes"), the proceeds of which were used primarily for the Acquisition and to
repurchase $116.7 million principal amount of its 10.25% Senior Notes (the
"10.25% Notes"). The repurchase resulted in an extraordinary loss of $17.2
million in 1996.
The following summarized, unaudited pro forma results of operations for the year
ended December 31, 1996, assumes the Acquisition, the repurchase of the 10.25%
Notes and the issuance of the 10.5% Senior Notes occurred as of the beginning of
the year. Items associated with TeleNoticias (see Note 4) are excluded from the
pro forma amounts, including the "Loss from investment in TeleNoticias" and the
"Loss on disposal of TeleNoticias" which are reflected in the Company's
Consolidated Statements of Operations.
YEAR ENDED DECEMBER 31 1996
- -----------------------------------------------------------------------
Net revenue............................................ $205,215,000
Income before extraordinary item....................... 3,764,000
Net loss............................................... (13,479,000)
Diluted earnings (loss) per share:
Income before extraordinary item................... $ .34
Net loss........................................... $(1.22)
15
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
4. INVESTMENT IN TELENOTICIAS
From July 1994 through June 1996, Telemundo held a 42% interest in TeleNoticias,
an international Spanish-language news service. On June 26, 1996, Telemundo
acquired the remaining 58% interest in TeleNoticias from its former partners for
approximately $5.1 million (the "Purchase"). Contemporaneous with the Purchase,
the Company sold substantially all of the assets and certain liabilities of
TeleNoticias for approximately $5.75 million, which resulted in a loss on
disposal of TeleNoticias of $2.4 million.
5. PROPERTY AND EQUIPMENT
DECEMBER 31 1997 1996
- -----------------------------------------------------------------
Land..................................$ 4,727,000 $ 4,727,000
Buildings............................. 19,333,000 18,965,000
Broadcast and other equipment......... 53,152,000 43,463,000
Satellite transponder................. 6,999,000 6,999,000
Leasehold improvements................ 10,846,000 9,436,000
------------ ------------
95,057,000 83,590,000
Less accumulated depreciation and
amortization...................... (28,455,000) (19,058,000)
------------ ------------
$ 66,602,000 $ 64,532,000
============ ============
6. ACCRUED EXPENSES AND OTHER
DECEMBER 31 1997 1996
- -----------------------------------------------------------------
Accrued compensation and commissions..$ 4,400,000 $ 6,495,000
Accrued agency commissions............ 5,969,000 6,164,000
Accrued reorganization costs.......... - 490,000
Accrued interest expense.............. 5,040,000 5,040,000
Other accrued expenses................ 7,352,000 9,295,000
------------ ------------
$ 22,761,000 $ 27,484,000
============ ============
7. LONG-TERM DEBT
DECEMBER 31 1997 1996
- ------------------------------------------------------------------
10.5% Senior Notes....................$185,073,000 $179,521,000
10.25% Notes.......................... 165,000 159,000
Revolving credit facility............. 3,843,000 15,000
------------ ------------
189,081,000 179,695,000
Less current portion.................. - -
------------ ------------
$189,081,000 $179,695,000
============ ============
16
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
Significant terms of the Company's debt agreements are as follows:
10.5% SENIOR NOTES: On February 26, 1996, the Company completed the
sale of $192 million in aggregate principal amount of the 10.5% Senior
Notes which are unsecured obligations of the Company. The 10.5% Senior
Notes were issued at a discount and were structured to produce a yield
to maturity of 10.5% per annum. The 10.5% Senior Notes require
semi-annual interest payments at the rate of 7% per annum on their
principal amount at maturity through and including February 15, 1999,
and after such date will bear interest at a rate of 10.5% per annum on
their principal amount at maturity. The principal balance is due in its
entirety on February 26, 2006.
10.25% NOTES: On December 30, 1994, the Company consummated a financial
restructuring pursuant to a plan of reorganization under chapter 11 of
the Bankruptcy Code (the "Plan") and issued the 10.25% Notes pursuant
to the Plan. The 10.25% Notes were recorded at their fair value of
$100,524,000 (principal amount of $116,889,000) at December 31, 1994,
reflecting an effective interest rate of 13.34%, based upon market
trading activity at the time of consummation of the Plan. The 10.25%
Notes are unsecured obligations of the Company bearing interest from
December 31, 1994, payable semi-annually, and maturing December 30,
2001. As discussed above, on February 26, 1996 the Company completed
the sale of $192 million in aggregate principal amount of 10.5% Senior
Notes, the proceeds of which were used primarily for the Acquisition
and to repurchase $116,705,500 principal amount of the 10.25% Notes
tendered in the repurchase offering, representing approximately 99.8%
of the aggregate outstanding principal amount of the 10.25% Notes.
REVOLVING CREDIT FACILITY: The Revolving Credit Facility ("Credit
Facility") provides for borrowings of up to $20 million, which is
subject to an accounts receivable borrowing base. Approximately $15.0
million was available at December 31, 1997 after giving effect to a
$1.2 million standby letter of credit which was issued to secure an
office lease. Interest accrues at a rate of prime plus 1.75% (10.25%
and 10% at December 31, 1997 and 1996, respectively, and averaged
10.19% for 1997 and 10% for 1996). The agreement expires December 30,
1999 and is cancelable at the Company's option prior to expiration upon
payment of an early termination fee, except under certain conditions.
The Company is required to pay a fee of 0.5% per annum based on the
average unborrowed portion of the Credit Facility and other annual fees
and expenses. The Credit Facility is secured by substantially all U.S.
assets of the Company and does not require compensating balances.
The 10.5% Senior Notes, 10.25% Notes, and Credit Facility agreements contain
certain covenants which, among other things, require the Company to maintain
certain financial ratios and impose on the Company certain limitations or
prohibitions on: (i) the incurrance of indebtedness or the guarantee or
assumption of indebtedness of another; (ii) the creation or incidence of
mortgages, pledges or security interests on the property or assets of the
Company or any of its subsidiaries; (iii) the sale of assets of the Company or
any of its subsidiaries; (iv) the merger or consolidation of the Company; (v)
the payment of dividends or the redemption or repurchase of any capital stock of
the Company; and (vi) investments and acquisitions.
The Purchaser has received commitments from financial institutions and its
stockholders in an amount sufficient to fund the Merger. Terms of any new
financing related to the Merger may require existing debt to be repaid. The
Purchaser has not yet determined whether it will refinance the 10.5% Senior
Notes and the 10.25% Notes. The Revolving Credit Facility will likely be
refinanced if the Merger is consummated.
Interest paid was $14,312,000, $8,667,000 and $12,810,000 for the years ended
1997, 1996 and 1995, respectively.
17
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
8. INCOME TAXES
The Company and its domestic subsidiaries file a consolidated federal income tax
return. The Company files a separate Puerto Rico income tax return for its
operations in Puerto Rico. The income tax provision consisted of:
YEAR ENDED DECEMBER 31 1997 1996 1995
- ------------------------------------------------------------------------------
Puerto Rico (a)................... $3,794,000 $3,473,000 $3,379,000
Federal, state and other.......... 407,000 406,000 140,000
---------- ---------- ----------
$4,201,000 $3,879,000 $3,519,000
========== ========== ==========
(a) Represents a provision for withholding tax related to intercompany interest.
The Company paid $708,000, $1,790,000 and $1,534,000 for withholding taxes
related to its operations in Puerto Rico in 1997, 1996 and 1995, respectively.
In addition, the Company paid federal and state income and franchise and foreign
withholding taxes of $289,000, $514,000 and $190,000 in 1997, 1996 and 1995,
respectively.
The tax effects comprising the Company's net deferred taxes as of December 31,
1997 and 1996 are as follows:
DECEMBER 31 1997 1996
- ------------------------------------------------------------------------------
Deferred Tax Assets:
Net operating loss carryforwards ("NOLs")....$ 88,449,000 $ 84,459,000
Capital loss carryforward.................... 8,827,000 8,827,000
Amortization of FCC broadcast licenses....... 27,009,000 28,948,000
Other........................................ 8,808,000 7,998,000
------------ ------------
133,093,000 130,232,000
------------ ------------
Deferred Tax Liabilities:
Amortization of FCC broadcast licenses....... (49,608,000) (50,443,000)
Accelerated depreciation..................... (303,000) (1,743,000)
------------ ------------
(49,911,000) (52,186,000)
------------ ------------
Net deferred tax asset......................... 83,182,000 78,046,000
Valuation allowance............................ (83,182,000) (78,046,000)
------------ ------------
Net deferred tax...............................$ - $ -
============ ============
Limitations imposed by Section 382 of the Internal Revenue Code limit the amount
of NOLs and capital loss carryforwards which will be available to offset future
U.S. taxable income to approximately $6,600,000 annually, or a total of
$72,600,000 from 1998 through 2008, except in certain circumstances. The
limitations only apply to $147,771,000 and $22,633,000 of the Company's U.S.
NOLs and capital loss carryforwards, respectively, incurred before December 31,
1994. The Company has approximately $61,707,000 of additional U.S. NOLs that are
not subject to limitations.
18
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
As there is no assurance that the Company will generate sufficient earnings to
utilize its available tax assets, including its NOLs, a valuation allowance has
been established to offset the existing net deferred tax asset.
The Company has NOLs expiring as follows:
COMMONWEALTH OF
U.S. PUERTO RICO
- ------------------------ -----------------------
2002..... $ 19,472,000 1998..... $ 5,973,000
2003..... 43,317,000 1999..... 5,657,000
2004..... 31,103,000 2000..... 3,402,000
2005..... 6,262,000 2001..... 1,931,000
2006..... 31,799,000 2002..... 313,000
2007..... 26,942,000 2004..... 39,000
2008..... 8,676,000 -----------
2010..... 12,334,000 $17,315,000
2011..... 22,444,000 ===========
2012..... 7,129,000
------------
$209,478,000
============
The Company also has state tax NOLs in various jurisdictions.
The Company's 1994 and 1995 federal income tax returns are currently under
examination by the Internal Revenue Service ("IRS"). To date, the IRS has not
communicated any proposed adjustments to the Company. Assessments, if any, are
not expected to have a material adverse effect on the Company's consolidated
financial position or results of operations.
9. COMMON STOCK AND WARRANTS
The Company has one class of Common Stock, $.01 par value, which is divided into
Series A Common Stock and Series B Common Stock. Each share of Common Stock
entitles the holder to one vote on all matters brought before the Annual Meeting
of Stockholders, except that, under the Company's Restated Certificate of
Incorporation, the majority of the Board of Directors will be elected by the
holders of the Series B Common Stock. Series B Common Stock converts to Series A
Common Stock upon sale to an unaffiliated party and upon certain other
conditions.
Pursuant to the Plan, 639,750 warrants were issued, entitling the holders of
each warrant to purchase one share of Series A common stock at $7 per share.
These warrants are exercisable from December 30, 1994 and expire on December 30,
1999. There were 571,795 warrants outstanding at December 31, 1997. Also
pursuant to the Plan, 416,667 warrants were issued to Reliance Group Holdings,
Inc. and its affiliates ("Reliance"), which are all outstanding. Each warrant
entitles the holder to purchase one share of Series A common stock at $7.19 per
share and the warrants are exercisable in three equal annual installments
commencing December 30, 1995, expiring five years from the date they become
exercisable and all are currently exercisable. A complaint was filed against the
Company by Reliance on March 2, 1998 alleging breach of a registration rights
agreement relating to the warrants issued to Reliance. The Company does not
believe it has breached the agreement and intends to contest the action
vigorously. The warrants contain certain antidilutive provisions in the event of
a change in the Company's capitalization. If the Merger is consummated, each
warrant holder will receive, subject to any required withholding of taxes, a
cash payment equal to the product of (i) the total number of shares then subject
to each warrant multiplied by (ii) the excess of the merger consideration over
the exercise price per share subject to each warrant. By virtue of the foregoing
treatment of the warrants, all these warrants will cease to exist.
19
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------
10. EMPLOYEE RETIREMENT AND INCENTIVE PLANS
The Company maintains qualified defined contribution retirement and savings
plans for its U.S. employees. The contributions to these plans totaled $549,000,
$527,000 and $520,000 in 1997, 1996 and 1995, respectively.
Pursuant to the Plan, the Company adopted a Stock Plan (the "Stock Plan")
whereby key employees may be granted restricted stock or options to acquire up
to 1,000,000 shares of Series A common stock, exercisable for a maximum term of
10 years. The Stock Plan is administered by a committee comprised of independent
members of the Company's board of directors.
During 1995, the Company issued options to purchase 672,500 shares of Series A
common stock, with exercise prices ranging from $10.00 to $14.625 per share,
which was their current fair market value, to officers of the Company. Also
during 1995, a former officer was issued separate options to purchase 150,000
shares of Series A common stock with an exercise price of $7.00 per share, which
were exercised on August 23, 1996.
During 1996, the Company issued options to purchase 90,000 shares of Series A
common stock, with exercise prices ranging from $19.125 to $29.875 per share,
which was their current fair market value to officers and a key employee of the
Company.
During 1997, the Company issued options to purchase an additional 235,500 shares
of Series A common stock, with exercise prices ranging from $24.375 to $33.75
per share, which was their current fair market value to officers and key
employees of the Company. The options vest over various periods, and in certain
cases, vesting is dependent on the Company achieving certain performance
targets.
In 1996, the Company adopted the 1996 Non-Employee Director Stock Option Plan
("Director Plan") whereby each non-management director will receive an annual
grant of options to purchase 2,500 shares of the Company's Series A Common
Stock. Stock issued pursuant to the Director Plan may not exceed 100,000 shares.
The exercise price shall be equal to the fair market value of the Company's
underlying common stock at the date of grant, one-third of the granted options
vest on each anniversary date and extend for a period of ten years. The Company
issued options to purchase 20,000 shares of Series A common stock on each of
June 12, 1996 and 1997 at an exercise price of $24.75 and $24.375, respectively.
Certain options issued pursuant to the Stock Plan and Director Plan will become
immediately exercisable upon a "change of control transaction" (as defined in
the respective stock option agreements). The consummation of the Merger would
constitute a "change of control transaction" under certain of these agreements.
If the Merger is consummated, each holder of a then outstanding and unexercised
option issued pursuant to the Company's Stock Plan or its Director Plan that
entitles the holder thereof to purchase shares of common stock, whether or not
such option is then presently exercisable, will be entitled to receive, in
settlement of such option, subject to any required withholding of taxes, a cash
payment equal to the product of (i) the total number of shares then subject to
each such option MULTIPLIED by (ii) the excess of the merger consideration over
the exercise price per share subject to each option. By virtue of the foregoing
treatment of such options, all these options will cease to exist.
20
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
The Company accounts for employee stock options under Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), and
related interpretations. However, pro forma information regarding net income and
earnings per share is required by Financial Accounting Standards Board Statement
No. 123, "Accounting for Stock-Based Compensation" ("FAS 123"), and accordingly
has been determined as if the Company had accounted for its employee stock
options under the fair value method of FAS 123. The fair value for these options
was estimated at the date of grant using a Black-Scholes option pricing model
with the following weighted-average assumptions for 1996, 2001, 2002 and 2003,
respectively: risk-free interest rates of 5.0%, 6.5%, 6.6% and 5.5%; no dividend
yields; a volatility factor of the expected market price of the Company's common
stock of .41 for options granted during 1995 and 1996, and .31 for options
granted during 1997; and a weighted-average expected life of the options of 6
years.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information assuming the implementation of the fair value method of FAS
123 follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ -----------
<S> <C> <C> <C>
Pro forma loss before extraordinary item.... $(15,672,000) $ (2,485,000) $(11,470,000)
Extraordinary item...................... - (17,243,000) -
------------ ------------ -----------
Net loss................................ $(15,672,000) $(19,728,000) $(11,470,000)
============ ============ ============
Pro forma net loss per share:
Loss before extraordinary item.......... $(1.54) $ (.25) $(1.15)
Extraordinary item...................... - (1.71) -
------ ------ ------
Net loss................................ $(1.54) $(1.96) $(1.15)
====== ====== ======
</TABLE>
A summary of the Company's stock option activity and related information for the
years ended December 31 follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------------------- ----------------------- ----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- -------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Shares under option
at beginning of year................... 782,500 $12.64 822,500 $10.09 600,000 $ 7.00
Granted.................................. 255,500 30.10 110,000 24.02 822,500 10.09
Exercised................................ - - (150,000) 7.00 - -
Canceled or lapsed....................... (5,833) 21.36 - - (600,000) 7.00
--------- ------- -------
Shares under option
at end of year......................... 1,032,167 $16.91 782,500 $12.64 822,500 $10.09
========= ======= =======
Exercisable at end of year............... 543,282 $11.98 143,125 $10.13 150,000 $ 7.00
Weighted-average fair value
of options granted
during the year........................ $12.48 $13.08 $ 5.44
</TABLE>
Exercise prices for options outstanding as of December 31, 1997 ranged from
$10.00 to $33.75 which represented the fair market value of the underlying
stock at the date of grant. The weighted average remaining contractual life of
those options is 8.0 years.
21
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
11. CONTINGENCIES AND COMMITMENTS
The Company and its subsidiaries are involved in a number of actions and are
contesting the allegations of the complaints in each pending action and believe,
based on current knowledge, that the outcome of all such actions will not have a
material adverse effect on the Company's consolidated financial statements (See
Note 2).
The Company is obligated under various leases, some of which contain renewal
options and provide for cost escalation payments. At December 31, 1997, future
minimum rental payments under such leases are as follows:
OPERATING CAPITAL
LEASES LEASES
----------- -----------
1998........................................... $ 3,720,000 $ 1,271,000
1999........................................... 3,327,000 1,380,000
2000........................................... 2,434,000 1,380,000
2001........................................... 1,650,000 1,380,000
2002........................................... 1,335,000 1,380,000
2003 and later................................. 4,849,000 575,000
----------- -----------
Total minimum lease payments................... $17,315,000 7,366,000
===========
Less amount representing interest.............. (1,423,000)
-----------
Present value of minimum lease payments
(includes current portion of $823,000)..... $ 5,943,000
===========
Rent expense was $3,881,000, $5,264,000 and $4,440,000 in 1997, 1996 and 1995,
respectively.
Certain of the Company's affiliation agreements, which typically last two to
five years, provide for compensation to affiliates.
The Company has employment agreements with certain officers pursuant to which
the Company has commitments for compensation aggregating $2,160,000, $2,175,000,
$2,000,000 and $333,000 for 1998, 1999, 2000 and 2001 respectively. These
agreements provide for additional compensation based upon the achievement of
certain performance targets. In addition, each employment agreement provides for
compensation in the event such officer's employment is terminated under certain
circumstances.
The Company has contracted for certain audience measurement services in the U.S.
and Puerto Rico. The Company is committed to pay $7,208,000, $7,625,000,
$7,308,000 and $230,000 in 1998, 1999, 2000 and 2001, respectively.
The Company has certain programming and news production contracts for which the
Company is committed to pay $10,989,000, $7,068,000, $6,964,000 and $1,750,000
in 1998, 1999, 2000 and 2001, respectively.
If, under certain conditions, the Company terminates the merger agreement with
the Purchaser, the Company may be required to pay a termination fee of $15
million to the Purchaser and reimburse the Purchaser up to an aggregate of $2.5
million in expenses.
22
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------
12. TRANSACTIONS WITH AFFILIATES
The Company paid compensation pursuant to an affiliation agreement of
approximately $1,433,000, $1,350,000 and $1,225,000 in 1997, 1996 and 1995,
respectively, to a broadcast television station affiliate, in which the
President and Chief Executive Officer of the Company has a financial interest.
In February 1996, the Company completed the offering of its 10.5% Senior Notes
in which BT Alex. Brown Incorporated was a co-manager and received an
underwriting fee. A director of the Company is a Managing Director of BT Alex.
Brown Incorporated.
Management believes that the transactions described above were on terms no less
favorable to the Company than could be obtained from unaffiliated parties.
Apollo Investment Fund III, L.P. and Bastion Capital Fund, L.P., along with
other entities, have ownership interests in the Purchaser in the proposed Merger
transaction. Certain directors of the Company are affiliated with Apollo
Investment Fund III, L.P. and Bastion Capital Fund, L.P., and these, or
affiliated entities, are significant stockholders in the Company. The Company's
board of directors, relying upon the unanimous recommendation of a special
committee of the board of directors comprised of directors who have no financial
interest in the Purchaser or its affiliates, has determined that the Merger is
fair to and in the best interests of the Company's public stockholders.
13. FINANCIAL INSTRUMENTS
Pursuant to the Financial Accounting Standards Board Statement No. 107,
"Disclosures about Fair Values of Financial Instruments," the estimated fair
values of the Company's financial instruments are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------------------ ----------------------------
CARRYING AMOUNT FAIR VALUE CARRYING AMOUNT FAIR VALUE
------------------------------ ----------------------------
<S> <C> <C> <C> <C>
Cash and cash equivalents.....$ 2,378,000 $ 2,378,000 $ 12,587,000 $ 12,587,000
Accounts receivable........... 54,155,000 54,155,000 51,824,000 51,824,000
Long-term debt:...............
10.5% Senior Notes........ 185,073,000 201,600,000 179,521,000 190,080,000
10.25% Notes.............. 165,000 183,000 159,000 183,000
Credit facility........... 3,843,000 3,843,000 15,000 15,000
</TABLE>
The carrying amount reported in the consolidated balance sheet for cash and cash
equivalents and accounts receivable approximates fair value because of the
short-term maturity of these financial instruments. The revolving credit
facility approximates fair value because it is a variable rate instrument.
Estimated fair value for the 10.5% Notes is based upon market prices at December
31, 1997. Estimated fair value for the 10.25% Notes is based upon the face
amount of such Notes.
23
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
14. SELECTED QUARTERLY FINANCIAL DATA (Unaudited)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1997 QUARTER
------------------------------------------------
FIRST SECOND THIRD FOURTH YEAR
--------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net revenue......................... $ 39,100 $ 51,681 $48,646 $58,161 $197,588
========= ======== ======= ======= ========
Operating income (loss)............. $ (5,254) $ 5,163 $ 3,674 $12,542 $ 16,114
========= ======== ======= ======= ========
Net income (loss)................... $ (12,057) $ (1,731) $(3,385) $ 3,729 $(13,444)
========= ======== ======= ======= ========
Net income (loss) per share (a)..... $ (1.19) $ (0.17) $ (0.33) $ .33 $ (1.32)
========= ======== ======= ======= ========
Common stock price range (b):
High........................... $ 32.625 $ 28.875 $ 36.50 $42.375
Low............................ $ 27.375 $ 18.50 $23.625 $31.375
</TABLE>
<TABLE>
<CAPTION>
1996 QUARTER
------------------------------------------------
FIRST SECOND THIRD FOURTH(c) YEAR
--------- -------- ------- --------- --------
<S> <C> <C> <C> <C> <C>
Net revenue......................... $ 38,267 $ 54,311 $51,002 $59,133 $202,713
========= ======== ======= ======= ========
Operating income (loss)............. $ (3,246) $ 8,474 $ 8,099 $15,965 $ 29,292
========= ======== ======= ======= ========
Income (loss) before extraordinary
item............................ $ (9,691) $ (2,190) $ 1,428 $ 9,274 $ (1,179)
========= ======== ======= ======= ========
Net income (loss)................... $ (26,934) $ (2,190) $ 1,428 $ 9,274 $(18,422)
========= ======== ======= ======= ========
Net income (loss) per share (a)..... $ (2.69) $ (.22) $ .13 $ .83 $ (1.83)
========= ======== ======= ======= ========
Common stock price range (b):
High........................... $ 21.00 $ 25.625 $35.375 $ 34.50
Low............................ $ 13.75 $ 17.00 $ 20.50 $ 26.375
</TABLE>
(a) Weighted average shares outstanding for the third and fourth quarters
of 1996 and the fourth quarter of 1997 is adjusted for the incremental
shares attributed to outstanding options and warrants to purchase
common stock. Basic earnings per share for the third and fourth
quarters of 1996 and the fourth quarter of 1997 was $.14, $.91 and
$.37, respectively. Net income per share for the third and fourth
quarters of 1996 have been restated to comply with FAS 128.
(b) The Company's Series A common stock trades on the Nasdaq National
Market tier of The Nasdaq Stock Market under the symbol TLMD. The
Company's warrants (exclusive of the warrants issued to Reliance)
trade on the Nasdaq SmallCap Market tier of The Nasdaq Stock Market
under the symbol TLMDW.
(c) Includes the impact of a significant additional provision to the
allowance for doubtful accounts and adjustments to certain expense
accruals. The net impact of these was a reduction in earnings of $1.0
million.
24
<PAGE>
TELEMUNDO GROUP, INC. AND SUBSIDIARIES
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Board of Directors and Stockholders of Telemundo Group, Inc.:
We have audited the accompanying consolidated balance sheets of Telemundo Group,
Inc. (the "Company") and its subsidiaries as of December 31, 1997 and 1996 and
the related consolidated statements of operations, changes in common
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1997. Our audit also included the consolidated financial
statement schedule listed in Item 14. These consolidated financial statements
and financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We did not audit the financial
statements of TeleNoticias del Mundo L.P. ("TeleNoticias"), the Company's
investment in which was accounted for by use of the equity method for 1996 and
1995. The Company's share of the net loss of $3,120,000 and $6,355,000 for the
year ended December 31, 1996 and 1995, respectively, are included in the
accompanying consolidated financial statements, see Note 4. The financial
statements of TeleNoticias for 1996 and 1995 were audited by other auditors
whose report (which as to 1995 contains substantial doubt as to TeleNoticias'
ability to continue as a going concern, the effect of which, in our opinion, was
not material in relation to the consolidated financial statements) has been
furnished to us, and our opinion insofar as it relates to the amount included
for TeleNoticias, was based solely on the report of such other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors, such
consolidated financial statements present fairly, in all material respects, the
financial position of the Company as of December 31, 1997 and 1996, and the
results of its operations and its cash flows for each of the three years in the
period December 31, 1997 in conformity with general accepted accounting
principles. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statement taken as a
whole, present fairly in all material respects, the information set forth
therein.
/s/ Deloitte & Touche LLP
New York, New York
March 19, 1998
25
<PAGE>
TELEMUNDO EXECUTIVE OFFICERS AND DIRECTORS
ROLAND A. HERNANDEZ LEON D. BLACK
President and Chairman of the Board
Chief Executive Officer, Director Apollo Management, L.P.
JOSE C. CANCELA GUILLERMO BRON
Executive Vice President Director
Bastion Capital Fund, L.P.
STEPHEN J. LEVIN ALAN KOLOD
Executive Vice President Director
Moses & Singer
DONALD J. TRINGALI BARRY W. RIDINGS
Executive Vice President Director
BT Alex. Brown Incorporated
PETER J. HOUSMAN II BRUCE H. SPECTOR
Chief Financial Officer and Treasurer Director
Apollo Management, L.P.
STUART LIVINGSTON DANIEL D. VILLANUEVA
Senior Vice President, Director
Operations and Business Affairs Bastion Capital Fund, L.P.
OSVALDO F. TORRES EDWARD M. YORKE
Vice President, General Counsel Director
and Secretary Apollo Management, L.P.
DAVID E. YURKERWICH
Director
Peterson Consulting LLC
26
<PAGE>
TELEMUNDO INVESTOR INFORMATION
FORM 10-K
A copy of the Company's 1997 Annual Report on Form 10-K filed with the
Securities and Exchange Commission will be furnished free of charge (except for
exhibits) to any security holder upon written request to:
Vincent L. Sadusky
Telemundo Group, Inc.
2290 West 8th Avenue
Hialeah, Florida 33010
or by calling (305) 889-7068
The Company's SEC filings are available to the public from commercial document
retrieval services and at the web site maintained by the SEC at
"http://www.sec.gov."
STOCK TRANSFER AGENT AND WARRANT AGENT INDEPENDENT AUDITORS
First Union National Bank of North Carolina Deloitte & Touche LLP
Charlotte, North Carolina New York, New York
10.25% SENIOR NOTES TRUSTEE 10.5% SENIOR NOTES TRUSTEE
Bankers Trust Company Bank of Montreal Trust Company
New York, New York New York, New York
As of March 26, 1998 there were approximately 100 holders of record of the
Company's Common Stock and (which does not include the number of stockholders
whose shares are held of record by brokerage houses, but includes each brokerage
house as one stockholder).
The Company has not paid cash dividends on any of its common stock and has no
present intention of doing so. Certain loan provisions prohibit or restrict the
amount of dividends that the Company may pay.
The Company's Series A common stock trades on the Nasdaq National Market tier of
the Nasdaq Stock Market under the symbol TLMD. The Company's warrants trade on
the Nasdaq SmallCap Market tier of The Nasdaq Stock Market under the symbol
TLMDW.
27
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,378
<SECURITIES> 0
<RECEIVABLES> 61,738
<ALLOWANCES> 7,583
<INVENTORY> 0
<CURRENT-ASSETS> 80,974
<PP&E> 95,057
<DEPRECIATION> 28,455
<TOTAL-ASSETS> 290,086
<CURRENT-LIABILITIES> 36,398
<BONDS> 189,081
0
0
<COMMON> 102
<OTHER-SE> 29,807
<TOTAL-LIABILITY-AND-EQUITY> 290,086
<SALES> 197,588
<TOTAL-REVENUES> 197,588
<CGS> 0
<TOTAL-COSTS> 167,536
<OTHER-EXPENSES> 1,700
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,849
<INCOME-PRETAX> (6,435)
<INCOME-TAX> 4,201
<INCOME-CONTINUING> (13,444)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,444)
<EPS-PRIMARY> (1.32)
<EPS-DILUTED> (1.32)
</TABLE>
